Boris Ignachkov Legal Principles and Key Points
- In the case of Laemthong International Lines Co Ltd v Artis (The Laemthong Glory) (No. 2) [2005] EWCA Civ 519, the courts ruled on where the burden of proof lies and the scope of third party rights when it comes to upholding benefits following contractual obligations.
- This contract case concerned shipping, contract construction, commercial practices and Indemnities.
- This case questioned the test of whether a reasonable contracting party could understand contract terms.
Facts of the Case
- C attempted to enforce a letter of indemnity against D after a third party claimed the goods of the ship and took possession of the ship itself.
Issues
- Were the shipowners entitled to enforce a letter of indemnity?
- Did the letter of indemnity confer benefit onto third parties?
Held by Court of Appeal
- Appeal dismissed – Burden of proof falls on D to prove the contracting parties did not intend to give the third party rights.
Clarke LJ
Letter of indemnity
- D did not prove that the intentions of the provision clauses more specifically whether they could be enforced in relation to the third parties. Thus it was reasonable to expect C to rely and act upon the clauses.
- “If the receivers’ letter of indemnity had been intended to protect the charterers from the consequences of issuing their LOI, clause 1 would have taken an entirely different form. The only liability of the charterers to which clause 1 could therefore refer in practice was that of delivery through the owners and, as the judge put it, the owners were therefore, within the context of the sale contract, the charterers’ agents for this purpose.” [28]
- “First, it reinforces the point that the parties envisaged the charterers delivering through the agency of the owners. Secondly, it indicates that the only way in which the charterers could become liable would be on the basis that they were treated as responsible for the acts of the owners in effecting the delivery, which reinforces the contention that the parties to the receivers’ LOI envisaged that the owners would be treated as the agents of the charterers.” [36]