Shipbuilding Law Blog

A recent case concerning advance payment bonds issued to secure repayment of instalments paid under shipbuilding contracts illustrate the need for clarity and precision when drafting such document. The issue before the Court of Appeal was whether the bond guarantees repayment of those instalments in all the circumstances specified by the shipbuilding contract or whether it is more limited than that.  The Bank’s case was that the guarantee covers the repayment of the instalments only in the circumstances described in paragraph (2) of the bond.  Significantly, four judges were at odds in their decision. The judge at first instance and Sir Simon Tuckey (the minority in the Court of Appeal) agreed with Buyers, but the majority in the Court of Appeal (Patten LJ and Thorpe LJ) were persuaded by the bank’s argument. Source: Kookmin Bank v Rainy Sky S.A. & 6 Others [2010] EWCA Civ 582 General Reading: Guarantees in Shipbuilding Agreement

Scope of Supply - Seller Provided Documents (Extract - Appendix of Purchase Contract for Seller’s Electrical/Automation Packages for Newbuilt Vessel) Certified dimension drawings schematic drawings (6 sets), or single line drawings, etc.  Installation drawings (6 sets), Test certificates /reports (6 sets), Testing and Commissioning Procedure & Record Form (6 sets), Operation and Maintenance Instruction Manuals (6 sets), Spare Parts Catalog (6 sets), Maker’s and Class Certificates (1 set). These documents must be sent contemporaneous with the delivery of the Equipment, unless otherwise stated or agreed upon between the Parties hereto.  Class certificates shall be given within one month after delivery of Equipment to Company's premises. This information shall also be supplied on CD-ROM together with the above-mentioned hard copies when available. Factory Acceptance Test Document - Seller shall submit test protocol/specification for the Equipment two months before official facto

The Scope of Supply will generally include the specification, description of the equipment, quality and quantity of the equipment, spare parts and optional items, services to be provided, deliverables, documents, certificates, manuals to be supplied, training or technical advice to be provided on storage, operation and maintenance of the equipment, scope of the warranty, all items that are excluded from the scope of supply, installation supervision (if applicable) and commissioning (if applicable). For relatively small or off-the-shelf items, it is usual to indicate the brief description of the equipment, its quality, quantity and price per unit. For complex equipment, more details will be needed and this is usually set out in the Specification. The Specification will where applicable include representations, capability, data, requirements and limitations relating to design, performance, functional guarantee and system integration, basic system hardware, system interfaces, peripheral

Contracting to supply equipment internationally requires a broad understanding of the issues involved and a comprehensive contracting strategy. Beside the usual contractual requirements applicable to domestic transaction, Parties will need to review and consider additional issues relating to: Country/Political Risk and Party Risk, Export and Import Requirements and Restrictions, Delivery and Shipping Terms, Price, Currency Exchange and Control, Payment Terms, Insurances, Documentation and Certificates, Taxes and Duties, Regulatory Requirements, Third Party Risks, Governing Laws and Jurisdiction, Enforceability of any Arbitration or Court Award and Warranty Issues. Contemporaneous with the issue of governing law, one will also need to consider any international or bilateral trade treaties or convention that may be applicable to their contract. This myriad of issues will certainly require a team effort comprising inputs and support from relevant personnel (estimators, commercial manager