A letter of indemnity is a letter used in the world of business to protect a party against financial losses in the event that an obligation is not upheld. For example in international shipping a carrier may take on the financial loss associated with the cargo becoming damaged before it reaches the importer, as a condition of doing business with the exporter.
Similarly an exporter may agree to take on any loss, should a carrier deliver the goods to somebody who does not have the required Bill of Lading and then makes a claim. This is somewhat of a formability as the Bill of Lading can often take longer to travel through the chain than the goods themselves, thus the exporter makes the assurance so the goods are released to the importer right away and the carrier is absolved of any loss in the process.
A letter of indemnity may also be required when purchasing services on a credit card (such as flights or hotel reservations) for somebody else, assuring the provider that you permit the purchase and will take on any charges associated with the service, such as damage to the hotel room or late flight cancelation.
Usually a letter of indemnity involves financial reparations or compensation, but may also involve other acts of value. For example if one party contracts to cut another party’s front lawn, but sometimes finds themselves with a lawnmower shortage, they might issue a letter of indemnity stating that they will subcontract the work to someone else if they are unable to do it.
These letters are also common within real estate and insurance. In the case that a property is damaged and the policy holder makes an insurance claim, the letter assures the mortgage provider that any payouts will go towards restoring the property and maintaining its market value.
If you are a shareholder and lose your certificate, you need to obtain a letter of indemnity from the registrar. This helps prevent financial loss for the company should the certificate be stolen and misused.
Be straightforward and specific about what loss you are protecting the recipient against. This is often used as a legal document, so do not propose or accept terms you cannot meet – you will be obligated regardless. In that sense it is also important to sign the letter to reassure all parties involved.
We are writing this letter to guarantee that the landscape job that we have contracted for with you will be completed. There has been a recent shortage of lawnmowers, so we may have trouble completing our obligations in regards to our contract. If we cannot locate an extra lawnmower to complete the job ourself, we will hire an outside contractor to complete the job for you at no additional expense to your company.
We apologize for the potential inconvenience, but your job will be completed as per the specifications laid out in our original contract.
Dear Sir or Madam,
I am writing to notify you that I have misplaced the original share certificate #8698445DRE44 for 500 shares in Fender Inc.
I further declare that I have not pledged or deposited by way of security, said original share certificate, nor sold any of the original shares, and if found I will return the original certificate to Fender Inc.
In consideration of the company issuing at my request a duplicate share certificate, I agree to indemnify them against all the proceedings, claims, demands, expenses, liabilities and damages, which may be made by or on behalf of any person holding the original share certificate.
To the Manager of India International Airlines,
I confirm that I have authorized the use of my credit card to purchase the flight(s), with the booking reference: FL232013ERT, and that I am NOT the traveling party.
I hereby declare and agree to indemnify IIA for the total price of the aforementioned tickets and any associated charges incurred by the traveling party.
Mr. Ivan Keen
To China Shipping,
I am writing this letter of indemnity instructing you to release the cargo of 500 Orange Polo Shirts, to Mr. Paul Skelton of American Shirts and Shorts, at New York port, without production of the Bill of Lading.
The document has yet to arrive due to admin errors, but I am confident that delivery to Mr. Skelton will not result in any concerns for any party involved. I have worked alongside ASS for several years.
I hereby agree to the following terms in consideration of you complying with this request:
– To indemnify you against any liability, loss or damage during the release of the goods to ASS.
– Should any legal proceedings be made against you in connection with this delivery, to provide you with adequate funds to defend.
– To deliver a copy of the Bill of Lading to you when it becomes available.
Mr. K. Cho
The China Clothes Store