Rajah & Tann Regional Round-Up
your snapshot of key legal developments in Asia
Issue 3 - Jul/Aug/Sep 2021

The Dividing Line between Indemnities and Guarantees

In GJ Consultancy Sdn Bhd v Gan Teck Lim [2021] MLJU 933, the facts pertained to a contractual dispute of a Fixture Note ("Principal Contract") between GJ Consultancy Sdn Bhd ("GJ Consultancy") and Detik Timur Sdn Bhd ("Detik Timur") where Detik Timur chartered a vessel from GJ Consultancy to transport a cargo shipment from Malaysia to China. Detik Timur failed to perform the Principal Contract and incurred dead freight and demurrage cost. Although the parties reached a settlement on the payment of dead freight and demurrage, Detik Timur failed to keep to the settlement terms. 

Relying on the Letter of Indemnity and Guarantee ("Letter") signed by the Chairman of Detik Timur ("Promisor") where the Promisor would bear personal liability for any loss or damage suffered by GJ Consultancy, GJ Consultancy initiated a claim against the Promisor in the Kuala Lumpur Admiralty Court.

The Promisor made an application to strike out GJ Consultancy's claim on the basis that the Letter was a guarantee and not an indemnity and therefore, Detik Timur's liability against GJ Consultancy must first be established before any claim could be made against the Promisor.

Pursuant to these facts, the Admiralty Court Judge undertook a detailed examination of the Letter by reviewing the scope of indemnities and guarantees as well as identifying the differences between the two. Following this, the Admiralty Court Judge dismissed the Promisor's application by deducing the parties' intentions based on the content and nature of the Letter rather than the heading of the Letter itself. 

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Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.


Christopher & Lee Ong
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