Ship Building Sale and Finance

Page 56


The application of the ‘prevention principle’ in the shipbuilding context

The application of the ‘prevention principle’ in the shipbuilding context

Simon Kverndal QC
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4.1 Introduction

All synallagmatic contracts which involve delivery against instalment payments are subject to a tension between the respective rights of buyer and seller arising out of the seller’s obligation to deliver by the contract date. Where time is or is made of the essence a failure to deliver on time may give rise to catastrophic consequences for the seller; equally, however, if the seller is relieved of his obligation to deliver by a particular date the consequences may be similarly drastic for the buyer: for this reason there is no presumption that time is of the essence in sale of goods cases unless the parties so agree. The gulf between the two extremes no doubt explains why so many shipbuilding cases are fought to a conclusion, especially since the severity of the consequences is so often exacerbated by the impact that time extensions may have on the validity of refund guarantees.

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