Differentiate between a Clean and Dirty B/L. What is a letter of indemnity (LOI) and what precaution must be used before accepting the same?

A clean B/L has no superimposed clauses stating a defective condition or shortage of the goods. It states that the goods are received in apparent good order and condition\without any remarks as to their condition.

A dirty B/L is also known as a ‘claused’ or ‘foul’ B/L. it is claused with remarks such as ‘torn bags’, ‘rusty drums’ or ‘three more cases in dispute – if found on board will be delivered’ etc.

A banker normally demands a full set of clean B/L as per the terms of the Letter of Credit (LoC).

Pressure will be exerted on the master to release a clean B/L even when the actual conditions do not justify doing so.

Letter of Indemnity (LoI) or a back letter as it is sometimes called is often offered by the shipper promising to indemnify the master or the carrier against any loss or liabilities as a consequence of signing a clean B/L.

However acceptance of a LoI for a clean B/L makes the master party to an act of deception or fraud on banks, consignee/buyer, and insurer, since it is an attempt to obtain payment for goods knowing them to be unsound.

This type of LoI has no legal standing in the courts of law and cannot be sued on if the shipper goes back on his promise of indemnity.

A master must consult his owners and the P & I club if he is in doubt. He must never accept a LoI without the written orders from his owners.manish-mayank


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