Shipbuilding Contract – Advance Payment Bond – Court’s position where there are two possible constructions
Facts The builder agreed to build one vessel for each of the buyers. Under the terms of the shipbuilding contracts, the builder was required provided the buyers with advance payment bonds relating to the first and subsequent instalments. Accordingly, the builder’s bank issued advance payment bonds in respect of six shipbuilding contracts. Under Article XII.3 of each shipbuilding contract, the buyer may require the builder to refund the full amount of all sums paid by the buyer to the builder in the event of the builder’s insolvency. Paragraph 2 of the advance payment bonds (bonds) states that in the event of “ termination, cancellation, or rescission of the contract or a total loss of the vessel” , the bank was on the buyers’ first demand, obligated to pay the pre-delivery instalments to the buyers. Paragraph 3 of the bonds provided that in consideration of buyers’ agreement to make the “…pre-delivery instalments under the Contract …”, the bank as primary...