Shipbuilding Contract: Buyer and/or Nominee

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Letter of Intent

Updated 12 April 2022 A letter of intent (LOI), also called term sheet, expression or indication of interest in the commercial sectors is an informal offer or recap of the parties’ position on how they would proceed on a business proposal or venture. In the shipbuilding and offshore industry, where discussions on technical, commercial and legal matters leading up to a formal contract are complex and lengthy, letters of intent (LOIs) will often be used as prelude to the formation of a formal contract. Thus, LOIs will be used:   ·        Where the scope of work has been identified, but there are still outstanding items like selection of main engine suppliers, financing, guarantees, and board approvals that need to be finalised.   ·        At other times, LOI may be signed on condition that the parties will enter into a shipbuilding contract after the buyer’s bid for a shipbuilding project is successful, or where...
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Shipbuilding Contracts - COVID-19 and Excessive Delays

In an ideal scenario, shipbuilders will be entitled to relief because of the impact of COVID-19 provided they fulfil the following conditions; (a) Quarantines, epidemics, pandemics, infectious disease, requirements of governmental authorities, shortage of supply and manpower, for example, are covered in the force majeure clause of their shipbuilding contracts, (b) Shipbuilders have done everything right and comply with notice requirements in the force majeure clause to gain protection, and (c) Shipbuilders has done everything possible to mitigate such delays. However, such relief will only be temporary if the delays are protracted as the buyer may still have the right to terminate the shipbuilding contract for excessive delays. Bimco NEWBUILDCON. Clause 39(a) Buyer’s Termination , The Buyer shall have the right to terminate this Contract forthwith upon giving notice in the event that (iii) (1) the delivery of the Vessel is delayed by more than 180 days by virtue of events that...
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Shipbuilding : The Pre-Contract Phase

The inception of a shipbuilding project is usually preceded by a buyer’s visit to a selected shipyard for discussion and to assess its capability. The itinerary during such a visit will normally include an opening meeting, followed by a yard tour, and commercial and technical discussions. Before the visit, it is common for shipbuilders to prepare a shipyard information memo. The buyer will usually provide the shipbuilder with a meeting agenda and draft a confidentiality agreement, also known as a non-disclosure agreement (NDA ) .     The purpose of the NDA is to ensure that the shipbuilder maintains the secrecy of business and technical information supplied by the buyer for the purpose stated in the NDA. The elements of such NDA should comprise (a) the purpose of the agreement, (b) the definition of confidential information, (c) information excluded from confidential treatment, (d) the recipient’s obligations, (e) retention of title to information supplied, (f) the duration of...
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