bottomry
A bottomry bond is a contract by which the master or owner of a ship borrows money for the needs of the voyage (repairs, supplies) and pledges the ship (its “bottom”) as security. The lender takes the risk of the voyage: if the ship is lost, the debt is lost too; if it arrives safely, he is repaid with a high marine interest.
When the cargo, rather than the ship, is pledged, the contract is called respondentia. Bottomry was common when masters were far from the owner and had no other way to raise money; modern banking and communications have made it largely obsolete, and it is now of mainly historical and exam interest in mercantile law.
Example
Stranded at a foreign port with a damaged mast, the master raised funds by a bottomry bond, so the lender could not recover if the ship sank on the way home.
See also
bill of lading · mortgage · pledge · insurable interest
Read more in the study notes
- Insurance: nature, history and classification (Insurance Law)
- Insurable interest (Insurance Law)
- Marine insurance: nature, interest, value and kinds of policies (Insurance Law)