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When Indemnities Go Wrong

A client recently had a big problem with a little form. A consignee had sought delivery of goods against a bond of indemnity in the forwarder’s standard form. There were only two problems: the form was poorly drafted and improperly executed, and in any event the importers bond was worth no more than the importer – and the importer may have been worth no more than the goods being released!

These kinds of problems can go unnoticed, sometimes for years, until a problem arises. When the shipper came knocking with a claim in improper release, though, they were quickly revealed. In this case, in spite of the deficiencies, Gavin Magrath was able to negotiate a four-party resolution that saw the shipper recover over 97% of the loss, without a single penny of contribution by our client.

Such good outcomes will not always be attainable. Parties to all kinds of commercial transactions should have counsel review their standard documentation regularly to ensure they serve their intended purpose, otherwise they may find themselves on the receiving end of a claim. An ounce of prevention is worth a pound of cure, but either way you will need counsel experienced in your field!

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