Ship Building Sale and Finance

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Contracting by numbers: the different characteristics of the main shipbuilding contracts

Contracting by numbers: the different characteristics of the main shipbuilding contracts

Professor Andrew Tettenborn

Safely corralled behind the heavy electronic glass doors of a large commercial law firm, one of the first things to strike a newbie lawyer is that a good deal of the law of contract that they are called on to practise is nothing like what they were meticulously taught as promising law students a few years earlier. Practical contract law is very often simply about the exegesis of welltried standard forms: it amounts not so much to an intellectual or academic endeavour as to a prosaic process of keeping checklists of what has and has not been altered from a template kept carefully unchanged on the firm’s mainframe computer. Understandably so. Time is money and shipping clients are increasingly tightfisted. Given the choice between negotiating from scratch and using a triedand-tested formula that everyone knows, practitioners understand and one’s predecessors have successfully employed on countless occasions, the answer is a no-brainer. Shipbuilding contracts, the subject of this chapter, are a classic example. Almost all vessels these days are built on the basis of one of five2 standard forms. On principle, each of these provide a complete workable formula, just leaving such mundane details as the specification, the price, when payable and so on to be filled in. However, as always, there remains the important possibility of more or less extensive mutations to the boilerplate according to the parties’ respective desires, bargaining strengths and legal nous. In order of age, the longeststanding, still used extensively in the Far East, is the SAJ3 Standard Shipbuilding Contract4 dating from 1974. This is followed by the AWES5 Standard Shipbuilding Contract from 1978, the Standard Form Norwegian Shipbuilding Contract 2000 (NSC),6 the BIMCO- sponsored Newbuildcon which appeared in 2007, and the CMAC7 Standard Newbuilding Contract8 launched in 2012 for the Chinese shipbuilding industry. Of these, the SAJ form is probably the most frequently used, though subject to fairly extensive alterations (as might be expected

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from a template currently celebrating its fortieth anniversary, quaintly assuming the fastest mode of communication between go-ahead businesses to be by ‘cable’ and referring to such mid-twentieth-century curiosities as the convertible Japanese yen). It is followed by the Norwegian form; the use of the AWES form, while still significant, has declined, partly in line with the reduction in European export buildings. Newbuildcon is fast gaining adherents; as regards the CMAC form, the most recent addition, it is fair to say that this has yet to establish itself. Within these templates, the governing law chosen of course varies, but whatever form is used, a healthy proportion of contracts signed are governed by English law, with provision for LMAA or other London arbitration if anything goes wrong. Hence the relevance of this chapter, which will discuss these forms largely in light of the rules of English law.

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