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What can go wrong in Shipbuilding Contracts?

Contractual risks in shipbuilding projects begin when the parties first make contact. Things that could go wrong at this stage could include disputes on whether a contract or letter of intent is binding. [1]. Also, issues could arise involving breach of confidentiality [2] and intellectual property rights. [3]  Upon the effective date of the contract, the parties may exchange refund and payment guarantees, which could be unenforceable [4], or there may be issues with the option agreement for additional vessels [5].  Throughout the production phase, arguments concerning the approval of plans and drawings could involve the buyer’s delays during the approval process and their comments on the plans and drawings [6]. Other disputes could concern variations, [7] delays [8], quality of workmanship, late inspection [9], over-inspection and interference. All this inevitably could lead to delays, and this will be compounded further if, to win the project, the shipbuilder had created an ...
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The Nature of English Shipbuilding Contracts: A Legal Evolution (Pre-1893 to 2026)

Introduction English shipbuilding contracts have transitioned from a common law agreement for "work and materials" to a statutory contract for the "sale of future goods," eventually arriving at its current 2026 status as a sophisticated hybrid agreement. This evolution is defined by three distinct eras: the pre-1893 Common Law era, the 1893 Codification Era, and the Modern Era following the 1979 Sale of Goods Act (SOGA). I. The Pre-1893 Era: Common Law and Physical Incorporation Before 1893, shipbuilding was governed by mercantile custom and a series of common law decisions rather than a single statute. The primary legal challenge during this period was determining when property in materials passed from the builder to the buyer. The Corpus Rule: In Seath & Co v Moore [1886], it was established that property in materials does not pass to the buyer until those materials are "affixed to or in a reasonable sense made part of the corpus" of the ship. Physic...
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Executive Summary : Draft Shipbuilding Contract

This document provides a comprehensive analysis of a draft Shipbuilding Contract for the construction of a single Floating Production & Storage Unit (FPSO), designated as Hull No. 123. The contract outlines a detailed framework governing the relationship, responsibilities, and liabilities of the two primary parties: the BUILDER and the OWNER.   Key takeaways from the contract include:   Project Framework : The BUILDER is contracted to construct one FPSO vessel over a thirteen (13) month period from the contract's effective date. A critical feature is that the vessel's basis design and overall engineering support are to be provided by the OWNER.   Financial Structure : The contract is based on a fixed price, payable in ten (10) distinct milestone instalments. To secure the OWNER's payments, the BUILDER is required to furnish a Performance Bond equivalent to 10% of the Contract Price upon receiving the first instalment.   Risk Allocation for Delays : The ...
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