Shipbuilding Law Blog

Background An FPSO conversion project between an FPSO owner and a shipyard from different jurisdictions is in progress. Under the terms of their contract, the shipyard must convert and modify a tanker into a fully classed and certified FPSO.  The scope of work includes demolition, relocation, repairs, replacements, modifications, addition or installations of new items.  Some examples include structural and hull modification, demolition and relocation of electrical, telecommunication, instrumentation, HVAC and piping systems, installation, integration and commissioning of modules and other items, fabrication of stools to support the modules, hull blasting, painting, disposal of scraps and others.  Under the contract, the FPSO owner has the right to supply the topside modules specified equipment and items fabricated by other contractors.  Separately, FPSO owner has also entered into a module construction agreement with a contractor, whose yard is located in a different locality

Generally, shipbuilder is responsible for the design if they assumed contractual liability for the design (partial or complete), the contract is silent on design responsibility, or where they agree to verify the adequacy of the buyer’s design. Design responsibility will be at the buyer’s risk if they expressly assumed contractual liability for the design provides the design or shipbuilder expressly excludes liability for design responsibility. Where shipbuilder assumes responsibility for buyer’s partially developed design or agrees to verify buyer’s design, shipbuilder must ensure that buyer or its designer grants to shipbuilder, at no cost, such licence to use the design for the construction and sale of the vessel to buyer.  The costs of verification should be for buyer’s account. Buyer should remain liable for consequences of design error that exist prior to date of design handover to shipbuilder. Additionally, buyer should also indemnify shipbuilder against all claims for infringeme