Letter of Indemnity (LOI)

A letter of indemnity is the counter-promise a party gives so another will act outside the strict documentary rules: most often, so a carrier delivers cargo at the discharge port without an original bill of lading, taking the LOI in its place. P&I cover does not respond to mis-delivery against an LOI, so clubs recommend the LOI be countersigned by a first-class bank. The undertaking binds its giver but cannot defeat the rights of the lawful bill holder, and is unenforceable where its object is fraud.