Scope of LOI and LOU given to port for damaged vessel and containers
Analysis of the Yilport Konteyner Terminali Ve Liman Isletmeleri AS v Buxcliff KG and others case, which underlines the importance of careful drafting in the wording of documents creating obligations, such as letters of undertaking or indemnities.
The dispute in this case arose following a collision that caused damage to a vessel and a number of its containers while it was en route to Turkey. The vessel interests were required to, and gave, a letter of undertaking (LOU) and a letter of indemnity (LOI) to the Turkish discharge port authorities in view of the condition of the vessel and containers, but the parties subsequently disagreed as to the scope of both the LOI and the LOU. Given the frequency with which LOUs and LOIs are given in a shipping context and the tight timeframe within which they are normally negotiated and issued, this decision highlights the importance of giving careful consideration to the wording used to ensure that they achieve the effect intended by the parties and that they do not expose the party giving the LOI or LOU to any greater liability than originally expected…
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Where cargo is loaded into a carrier’s containers that are subsequently loaded onto the vessel it is unrealistic to treat this as anything other than a single loading process.
When a contract does not reflect the intention of the parties equitable relief can be sought from the court for the contract to be rectified. It is rarely granted, but in this case it was.