RULE 4 - Indemnity
The agent should therefore also ask himself the questions set out in the following Rules:
Has your principal given written authority to release and agreed the wording and security?
An agent in Indonesia obtained his principal's authority to accept an indemnity, countersigned by a bank, for delivery of a cargo of timber without the original bill of lading. Unfortunately the ship agent did not use the shipowner's recommended wording and allowed the bank to use its own. The bank simply agreed to pass the original bill of lading to the agent, once it came into the bank's possession. There was no undertaking to indemnify any party for the consequences of delivering the cargo without the original bill of lading and, as the original bill of lading never came into the possession of the bank, it never had to honour its indemnity.
It is not only important that a ship agent obtain his principal's written authority to release cargo without bills of lading; he should also agree the wording and the security.