ONBOARD Magazine autumn 2023

ADVERTORIAL
A growing number of superyachts are
being added to the global fleet every
year, but capacity for new builds is
running low and the waiting list is getting
longer. At the same time, many second-hand
yachts change ownership every year. As a
consequence, major refit projects become
more and more frequent.
The most common way of agreeing upon a
contractual framework with regard to refit
projects is to use a pre-drafted standard
contract. Standard contracts aim to speed
up the process of agreeing upon a contractual
framework. Depending on who issued the
draft, they also claim to reflect the current
industry standard.
Standard contracts provide a contractual
framework which contains stipulations for
the majority of issues that might arise
during the course of a refit project. However,
the parties usually have to add certain
particularities to the contract to cover
exceptional circumstances. Hence, it is
not unusual that the use of the standard
contract will not be possible without agreeing
on certain amendments.
In the past few years refit yards and
their customers have had to adapt to
extraordinary circumstances – the corona
pandemic and disruptions of supply chains.
THE SMALL PRINT
Tim Schommer asks whether standard contractual frameworks are always the right fit
As a consequence, parties have become
more alert to extraordinary events which
might impact the project.
Not only for this reason the parties of a
refit contract should ensure that certain
aspects which are of exceptional importance
are reflected in the contract. For example,
delay can cause problems in case the yacht
is offered for charter after the scheduled
completion of the refit project.
It is not unusual that
the use of the standard
contract will not be possible
without agreeing on certain
amendments.
Therefore, each party should make sure that
they understand exactly what is agreed upon
in case of delay and what the consequences
of such a delay might be. Can the shipowner
claim damages from the refit yard if and
when the charterer has a claim under the
charter party? Does the legal position change
in case a contractual penalty rather than
liquidated damages is agreed upon? Does
the refit contract differentiate between
permissible and non-permissible delay?
Which scenarios exactly are governed by
the force majeure clause?
Another issue that should be looked at closely
is that of warranties. Not only the scope of
warranty works but also the circumstances
under which these have to be completed.
What is the timeframe? Does the yacht have
to return to the same yard? Under which
circumstances can the yacht be repaired
at another shipyard and who takes over
the costs? Under which circumstances is
the customer entitled to further damages
in the context of warranty rights? How do
warranty rights differ from a guarantee?
Furthermore, refit yards and their customers
need a clear understanding of the dispute
resolution mechanism with regard to
technical as well as non-technical issues.
Where do proceedings need to be initiated?
How long will it take for a judgement to be
issued? What are the costs? How can the
judgement be enforced? Are there better
ways to find a solution than to litigate?
Often, extensive refit projects are too
complex for everything to go as planned.
Therefore, special attention should be given
to a careful drafting of the contract. After
all, both parties have one goal in common:
to avoid a legal dispute.
For more details:
Tel: +49 (0)40 809030 204
or email: tim.schommer@clydeco.com
ONBOARD | AUTUMN 2023 | 25