LOG/LOI/LOU

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Vincent Ding

#106189 Tue, 07 Jun 05 05:19 AM

letter of guarantee, letter of indemnity/ letter of undertaking

what are the differences among them? i'm so confused in making a choice in my writing.

tks

vincent

Vincent Ding

Joined on Fri, Apr 29 2005

Full Member (180)

Mister Micawber

#106868 Thu, 09 Jun 05 09:22 AM

Not an easy question, at least for me. The uses of these documents seem to vary with the fields/industries, but LOG and LOU seem to be essentially the same-- a promise to pay-- while a LOI seems to be an assumption of responsibility, with the bottom line being paying if that responsibility fails. It seems to me that your choice may depend on the field you are speaking of, Vincent.

Here are some gleaned definitions/examples:

'There are many types of LOGs but the underlying purpose is the same for all, that being a guarantee of payment to a supplier.'

'In certain exporting countries, the government levy a heavy tax on drafts. In such a circumstance, the exporter may request the importer to specify in his/her letter of credit (L/C) application that "No drafts be issued". When the documents are presented to the negotiating bank, the bank issues a letter of undertaking indicating when and where the money will be paid, instead of accepting a draft drawn by the exporter. '

'Letter of Indemnity--

1. A letter guaranteeing that contractual provisions will be met, otherwise financial reparations will be made.

2. A letter requesting replacements for lost shares from a company's treasury. '

Mister Micawber

Joined on Wed, Aug 4 2004

Yokohama

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'The question is,' said Humpty Dumpty, 'which is to be master-- that's all.'

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Forbes

#122394 Fri, 29 Jul 05 02:06 PM

I agree that the meaning can differ according to trade or industry and the words are not "terms of art".

I suggest the following general distincions can be made:

A guarantee implies that you will perform the contract if the party you are guaranteeing defaults.

An indemnity only implies that you will make good any losses suffered by the party you have agreed to indemnify.

An undertaking is simply an agreement to do something and it need not necessarily include any consideration on the part of the party to whom it is given. Generally it will be given as part of a larger transaction or in the course of court proceedings. In England undertakings are regularly given by property lawyers that they will, for example, discharge a mortgage or incumbrance on a property or account to a bank with the proceeds of sale.

Forbes

Joined on Thu, Jun 16 2005

Regular Member (834)

Whom

Anonymous

#221367 Mon, 01 May 06 12:10 AM

Yes, this is generally correct. Just keep in mind the difference between a guarantee and a suretyship. With the latter the surety is primarily liable. Which means that such party is equally responsible for the obligation upon default as the principal. In the former instance, the creditor must first seek fulfillment of the obligation from the principal and then turn to the guarantor.

Anonymous

Difference between