Charterers’ Letter Of Indemnity Enforceable By Shipowners

In the case of (1) Far East Chartering Ltd (Formerly Visa Comtrade Asia Ltd) (2) Binani Cement Ltd v Great Eastern Shipping Co Ltd [2012], the Court of Appeal had to examine whether a letter of indemnity issued in favour of one party (charterers) was enforceable by a different party (shipowners), on the strength of the Contracts (Rights of Third Parties) Act 1999.

The dispute in this matter arose out of the sale of a shipment of Indonesian coal where the Buyers, who were also the Charterers of the vessel, refused to pay the Indonesian Sellers the agreed full price, claiming the product was off-spec. In response, the Indonesian Sellers refused to release the bills of lading. Upon arrival at the discharge port in India, and in order to proceed with the discharge of the cargo without bills of lading, the Indian Receivers provided the Charterers with a letter of indemnity which was addressed to "The Owners / Disponent Owners / Charterers". In it, the Indian Receivers