Sale of Vessel – Implied terms as to satisfactory quality


Pursuant to a Memorandum of Agreement (“the MOA”) on the Norwegian Saleform 1993 (“Saleform 93”) the sellers agreed to sell the buyers a vessel [1].

Clause 11 of the MOA provides that “The Vessel shall be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. However, the Vessel shall be delivered with her class maintained extended to 30 September 2009 without condition/recommendation, free of average damage affecting the Vessels class. The Vessel's continuous survey cycles of machinery are to be as per current machinery continuous status attached hereto (attached "A"). Her International, National, Class and Trading Certificates clean, valid until 30 September 2009, except ISSC and SMC to be valid at time of delivery only,”

The buyers inspected the vessel and carried out an underwater survey (which revealed no bottom damage affecting class). They also, through their agents, inspected the class records. However, they failed to pick up a reference in the class records referring to damage to the no.1 crankpin of the main engine.

About a month after delivery, as the vessel departed to load a cargo of diesel, the main engine broke down due to failure of no.1 crankpin bearing. The buyers contended that the sellers were in breach of the MOA “either because the ovality was “average damage affecting class” within clause 11 (a contention which the tribunal rejected) or because there was a breach of the implied term as to satisfactory quality implied into the MOA by virtue of section 14(2) of the Sale of Goods Act 1979 (“SOGA”) as amended.” The Tribunal held that the implied term as to satisfactory quality was to be implied into the MOA.

On appeal, the Court dismissed the sellers’ application and concluded that the first sentence of clause 11 of the MOA does not exclude the implied term as to satisfactory quality and that the sellers were in breach of that implied term.

Point to note - The Court also inter alia agreed with buyers’ counsel submission that section 14 implied terms will apply to English law contract of sale as to any other, unless the parties have contracted out of section 14 by either expressly contracting out [2], or by a clear and unequivocal statement of an alternative regime as to quality which was wholly inconsistent with the section 14(2) implied term as to satisfactory quality, such as an entire agreement clause.


Reference:
[1] DALMARE SpA v (1) UNION MARITIME LIMITED, (2) VALOR SHIPPING LIMITED
[2012] EWHC 3537
[2] as in the case of the detailed clause considered by Cooke J in Air Transworld Ltd v Bombardier Inc [2012] EWHC 243 (Comm); [2012] 1 Lloyd’s Rep 349

Comments

navya said…

Thanks for sharing, I will bookmark and be back again
Ship Building
April 16, 2013 at 4:47 PM
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