Shipbuilding Contract - Who is responsible for design errors?

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 infringement of third party intellectual property rights associated with the design provided by buyer. 

Despite the general rule above, when matters come to a head, there will inevitably be ample room for buyer’s lawyers to argue that (a) shipbuilder is under a duty to construct and deliver a seaworthy vessel in conformity with the contract and specification, (b) shipbuilder’s duty to construct a vessel per good workmanship will inevitably overlap between design and workmanship, thus attracting liability in cases of a design error, as design and workmanship cannot be easily separated, (c) reference in the contract to constructing the vessel to a specified quality standard, and (d) by a warranty of good quality without expressly excluding liability for consequences of buyer’s design errors. 








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