Non-Legal Fine Points of Yacht New-Build and Refit Contracts - II
NEW-BUILD AND MAJOR REFIT CONTRACTS CAN BE LEGALLY BULLET-PROOF, YET STILL FAIL TO RESULT IN SUCCESSFUL PROJECT COMPLETION…
Understand that what follows is not in any way to be construed as legal advice. I do not pretend to be a lawyer. I have, however, spent significant time on both sides of the shipyard desk. Keep in mind, as well, that I highly recommend seeking the counsel of an experienced legal specialist before signing any new build or major refit contract.
And several critical, non-legal issues should be considered with an eye to improving such contracts and better protecting the interests of the buyer or owner...
Virtually every contract for new build and major refit relies on non-legal terms that are usually assumed to be well defined...
Unfortunately, very often such terms are not, in fact, clear. For example, a contract might call for a progress or “milestone” payment when the main propulsion engines are “set.” But what does the term “set” mean? Does it mean simply set down on the engine beds? Or does it mean permanently and properly affixed to the vessel, as per design, and only after all work customarily prerequisite to such installation has also been completed?
Yet, in too many cases, a shipyard, pressed for cash flow, “sets” the main propulsion engines in order to earn a milestone payment, only to pull those engines back out so that tankage piping and other bilge area work can be completed before permanently reinstalling them. How many follow this practice? More than you might think…or might want to admit — especially if you happen to be a shipyard operator.
Anyway, I think you get the point, namely, that key terms need to be defined very clearly and thoroughly. In the above example, the milestone definition should include, “…and completion of all work customarily and reasonably deemed prerequisite to permanently installing the engines.”
Next installment of this series will deal with developing and defining the SOW (Scope of Work). — Phil Friedman
Author's Notes: The information, opinions, tips and comments here are based on my 30 some years in the yachting industry, including my several year stint as president and CEO of a major, world-class megayacht builder.
If you find yachts and yacht building of interest, you may want to read some of my other marine industry related articles:
"App or Not, Garbage In Means Garbage Out"
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About me, Phil Friedman: With 30 some years background in the marine industry, I've worn numerous hats — as a yacht designer, boat builder, marine operations and business manager, marine industry consultant, marine marketing and communications specialist, yachting magazine writer and editor, yacht surveyor, and marine industry educator. I am also trained and experienced in interest-based negotiation and mediation. I am currently supervising, as owner's representative, a new yacht build in Taiwan. In a previous life, I taught logic and philosophy at university.
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Text Copyright © 2016 by Phil Friedman — All Rights Reserved
Images: Courtesy of Port Royal Group LLC and Phil Friedman
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