LETTER OF UNDERTAKING

letter of undertaking. An agreement by which a shipowner — to avoid having creditors seize the ship and release it on bond — agrees to post security on the ship, and to enter an appearance, acknowledge ownership, and pay any final decree entered against the vessel whether it is lost or not. • A letter of undertaking is often issued by the shipowner’s liability insurer. [Cases: Admiralty 57. C.J.S. Admiralty §§ 162–168.]

“Such informal or extra-legal agreements save court costs and the marshal’s fees, avoid the annoyance of having the vessel even temporarily arrested and may well be cheaper than the usual surety bond …. In Continental Grain Co. v. Federal Barge Lines, Inc., [268 F.2d 240 (5th Cir. 1959), aff’d, 364 U.S. 19, 80 S.Ct. 1470 (1960)], Judge Brown commented that a letter of undertaking given by a shipowner would be treated ‘as though, upon the libel being filed, the vessel had actually been seized, a claim filed, a stipulation to abide decrees with sureties executed and filed by claimant, and the vessel formally released. Any other course would imperil the desirable avoidance of needless cost, time and inconvenience to litigants, counsel, ships, clerks, marshals, keepers and court personnel through the ready acceptance of such letters of undertakings.’ [268 F.2d at 243.] If, as Judge Brown suggests, the informal agreement is treated as having the same effect as a formal release under bond or stipulation, few questions relating to their use will ever have to be litigated.” Grant Gilmore & Charles L. Black Jr., The Law of Admiralty § 9-89, at 800–01 (2d ed. 1975).