Sale and purchase of second-hand vessels
Sale and purchase of second-hand vessels

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Sale and purchase of second-hand vessels
  • Memorandum of Agreement
  • Standard forms
  • Anatomy of a ship sale transaction
  • Condition and quality at delivery
  • Transfer of title and risk
  • Freedom from encumbrances
  • Buyers and sellers—who are they?
  • Considerations for financiers

This Practice Note considers a typical transaction involving the sale and purchase of a second hand commercial ship and in particular covers:

  1. the main standard forms used in the market

  2. the delivery process

  3. transfer of title and risk

  4. delivery free from encumbrances

  5. the identity of the parties, and

  6. the key considerations for financiers

For further information on the steps to be taken and the documentation required when acting for the buyer of a vessel to be registered in the UK, see: Shipping finance closure—checklist.

There are certain aspects of the sale and purchase of superyachts that notably differ from similar transactions involving commercial ships. For further detail on these, see Practice Note: Superyacht finance—sale and purchase of superyachts.

Memorandum of Agreement

Many second hand ship sales are negotiated through sale and purchase brokers (widely known as 'S&P' brokers) on behalf of their principals. They will negotiate through a series of written exchanges culminating in what is commonly referred to as the 'recap'. Depending on its terms, the recap may or may not constitute a legally binding agreement. Either way, it is usual for the terms to be formally recorded in a contract between the owner of the ship (as seller) and the buyer. The contract is known as a memorandum of agreement (or MoA) and, as a matter of custom, the term