Shipbuilding contracts

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

  • Shipbuilding contracts
  • The contract
  • Price
  • Title to the vessel
  • Supervision and trials
  • Delivery of the vessel
  • Builder's liability
  • Termination of the contract
  • Dispute resolution provisions
  • Issues for lenders

Shipbuilding contracts

This Practice Note considers the main terms included in standard form shipbuilding contracts. In particular, it looks at:

  1. standard forms of the shipbuilding contract

  2. price

  3. title to the vessel

  4. supervision and trials

  5. delivery of the vessel

  6. builder's liability

  7. termination of the shipbuilding contract

  8. dispute resolution provisions, and

  9. potential issues for lenders

This Practice Note considers the position in relation to commercial vessels in general. For information relating specifically to superyachts (a motor or sailing yacht greater than 30 metres in length), see Practice Note: Superyacht finance—sale and purchase of superyachts.

The contract

Standard form documentation has been developed across the world. The most commonly used forms are:

  1. the Shipbuilders' Association of Japan 1974 standard contract (SAJ form), which has also been used as a starting point for other standard forms of contract used in South Korea, Taiwan and Singapore

  2. the China Maritime Arbitration Commission's Standard Ship Building Contract published in 2011

  3. the BIMCO NEWBUILDCON published in 2007, and

  4. the Community of European Shipyards’ Associations 1999 form

Although, it should be recognised that these will often be subject to a significant amount of negotiation, amendments and deletions.

The main contractual terms will be found within the shipbuilding contract itself and the technical data (the specification), drawings and plans will be attached separately. The terms of the contract will prevail over the terms of the specification and the specification shall

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