FEATURE SPONSOR
LEGAL EAGLES
the vessel passes, which can either be upon delivery of the vessel or on the basis that the buyer gets title of the vessel as it is built. This is particularly important when it comes to payment, as the yard will almost certainly require stage payments. If title of the vessel rests with the buyer then there needs to be appropriate provision in the contract for the owner to be able to remove the vessel from the yard and complete it, where it is a relatively small build in the UK.
If it is a larger build in a foreign shipyard with title in the vessel passing on delivery, it would be necessary to arrange for refund guarantees to be in place to ensure that the buyer gets their money back if for any reason the shipyard is in default. Those guarantees need to properly worded and issued by a reputable bank.
If the build is being financed by the buyer’s bank then it would no doubt wish to have the contract scrutinised by its lawyers to ensure that the bank’s position is properly safeguarded. Other issues that need to be clearly stated in the ship build contract include the delivery date, penalties for
DUE DILIGENCE There are a number of key watch points with regard to the purchase of pre-owned vessels. The first is in relation to title and encumbrances. Appropriate due diligence must be carried out on the seller and a search should be made of the vessel’s registry to ensure that there are no registered encumbrances - and if there are, that these will be cleared upon the transfer of the vessel. In addition to the ship registry searches, appropriate searches should be made of Companies House in the UK if the vendor is a corporate body and similar searches should be carried out in foreign registries or Chambers of Commerce.
CONTRACT WARRANTIES The contract needs to include appropriate warranties with regards to the owner’s authority to sell the vessel. Generally the principle of buying second hand is “let the buyer beware” and therefore a thorough survey of the vessel, including if necessary a dive survey or dry docking, should always be considered. A check needs to be made as to the ownership of equipment on board. It may be that some safety equipment is hired
It is vital that legal advice is taken to ensure that the buyer is protected
late delivery or non-compliance with specifications and an appropriate dispute resolution clause.
An area which always causes some sort of dispute is ‘extras’. It’s recommended that a clear procedure is written into the ship build contract to provide how extras are agreed both in terms of price and their effect upon the delivery date.
PRE-OWNED VESSELS It is equally important for the purchase of pre-owned vessels to be properly recorded. Again there are a number of standard forms for the purpose, ranging from those issued by various ship design and surveying authorities through to the various versions of the ship sale agreement issued by BIMCO. If a ship broker is involved it will normally use its preferred form.
from third parties. If so, is the benefit of any hire contract going to be transferred and is the hirer prepared to transfer that benefit? A full inventory needs to be taken of what is included in the sale of the vessel, down to the contents of the galley, crockery, spare parts and engine room tools.
RECOMMENDATION
Any vessel transaction, whether for a new build or pre-owned vessel, can be fraught with potential pitfalls but with proper legal advice and common sense the process can be plain sailing.
Andrew Jackson Solicitors LLP
WEBSITE
www.windenergynetwork.co.uk 63
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