Delivery without bills of lading. Enforceability of LOI.  


The Zagora (Oldendorff GmbH & Co KG v. Sea Powerful II Special Maritime Enterprises)  [2016] EWHC 3212.


Where bills of lading are not available at the discharge port, it is common practice for the cargo to be discharged to the receiver against a letter of indemnity which will be conditional on delivery of the cargo to the receiver specified therein. The Zagora involved an allegation that delivery had not been made to the nominated receiver and the LOI was therefore unenforceable.

A series of indemnities down the chartering chain were given in respect of delivery in China in December 2013. When the bank brought a claim for misdelivery the owners called on their indemnity from the charterers who made a similar claim on the indemnity from the receivers. The indemnities required delivery to Xiamen, the first buyer in a chain of sales, or “to such party as you believe to be or to represent Xiamen… or to be acting on behalf of Xiamen.” Delivery was made to the agent of Xiamen’s sub-purchaser, Sea Road, and it was argued that the indemnities were not enforceable as there had been no delivery to Xiamen.

Teare J held that the indemnities were enforceable and that the sub-purchaser’s agent was also Xiamen’s agent, and, if that were not the case, then the owners believed that they had been acting as such. The master’s recollection was that the representative of Sea-Road who boarded the vessel stated that he was there to handle discharge on behalf of Xiamen. The inevitable inference to be drawn from Xiamen naming itself as the person to whom the cargo should be delivered in the absence of an original bill of lading was that Xiamen intended that the nominated agent Sea-Road would take delivery of the cargo on its behalf. Conversely, the shipowners had no interest in discharging the cargo into the possession of Sea-Road as their own agent, as this would not provide the protection of the LOI because the owners would not have delivered the cargo to Xiamen, but would have retained possession of the cargo through Sea-Road.


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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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