Law of Yachts and Yachting

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Yacht-Building Contracts

Yacht-Building Contracts

  • 1. Introduction 6
  • 2. The nature of a contract for the construction of a yacht 7
  • 3. Common terms and conditions of sale 15

1. Introduction

[1-001] Introduction. Whether devised for the construction of an oil supertanker or a much smaller—although not necessarily less expensive—superyacht,1 shipbuilding contracts are rather complex transactions, and the contractual framework under which they are commissioned reflects such complexity. It is very common in the commercial shipping world for the industry to use standard form contracts which the parties may adopt or amend at will. Indeed, for shipbuilding there are a number of standard forms widely used as templates on which individual agreements are negotiated.2 Alternatively, shipyards will produce their own forms of contract, based on one or other of the standard form contracts adapted to reflect the yard’s individual policy and practice. When it comes to yachts, the ship- or yacht-builders are usually much smaller than in the commercial shipping world. Moreover, the drive for individuality and the bespoke nature of the larger yacht projects make the use of standard printed forms of contract very rare indeed. As a result, individual yards or their lawyers will usually produce their own draft forms of contract. Such contracts may be presented to the buyer on a take it or leave it basis, particularly in the case of smaller production boats. In other cases, such contracts will be the subject of negotiation and revision by the parties or their respective legal advisors. Some yards may even be willing to

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negotiate a contract based on a draft submitted by a buyer’s lawyer. In most cases, such yacht-building contracts will stipulate that they shall be governed by the law of the country in which the yacht will be built. In some instances a foreign yacht-builder may be prepared to agree that English law, or another legal system, will apply. The main legal implication of such an individualistic approach is that specialist case law—if any—must be used with extreme care, as it will be based on wording tailor-made for the individual project concerned. Matters of construction and interpretation issues are therefore to be resolved according to the general rules on interpretation of contracts, a classic restatement of which is the Supreme Court decision in Rainy Sky SA v Kookmin Bank.3 In the yachting context, however, difficulties may arise, because the final agreement will invariably make reference to various external sources such as classification societies’ rules and regulations,4 flag state regulations such as the Large Yacht Code, or the Passenger Yacht Code, and the all-important technical specifications5 where the detailed regulatory requirements for the future yacht and her design are necessarily contained.

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