We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Friday, 20 May 16
SHIPBUILDING CONTRACTS: CAN I CANCEL? SHOULD I CANCEL? - THE SHIPOWNER CLUB
 KNOWLEDGE TO ELEVATE
There are many circumstances in which a buyer of a new-build vessel might want to terminate or cancel their contract with the yard. Perhaps the building work has been delayed. Maybe the market has dropped and the deal which looked like a good one a couple of years ago, when the contract was signed, no longer looks so favourable. Maybe the yard’s performance is lacking and another instalment is about to fall due, which means the buyer will have to decide between paying up and hoping the problems can be put right, or terminating and attempting to recover instalments that have already been paid.
Cancelling contracts isn’t straightforward; there are many traps for the unwary buyer who attempts to bring the contract to an end. If you get it wrong, you might lose the instalments you have already paid or you might face a claim from the yard for damages. Even if you get it right, you might find yourself having to deal with expensive and long running court or arbitration proceedings. This article aims to help you understand some of the pitfalls which face buyers who want to cancel shipbuilding contracts.
Termination, cancellation and rescission – what’s the difference?
Termination
‘Termination’ is a common law right. If a party breaches a condition of a contract or unequivocally communicates (by words or conduct) an intention not to perform, this is called a repudiatory breach. The innocent party can accept the repudiatory breach as terminating the contract and can claim damages. They also have the option of affirming the contract and continuing to perform, provided they have a legitimate interest in doing so.
But watch out! A condition is an important contractual term. If a party breaches a warranty – a less important term and not to be confused with the yard’s warranties regarding the quality of the build – the innocent party can only claim damages. They do not have the right to terminate. If the breach is of an innominate term (neither a condition nor a warranty) then the innocent party can claim damages but may only terminate if the breach goes to the root of the contract.
The contract may also explicitly allow a party to terminate in certain situations.
Cancellation
‘Cancellation’ is a contractual right. The contract may provide that a party may cancel in certain situations which means they can bring the contract to an end. The contract might also set out the consequences of that cancellation.
Rescission
Most standard-form shipbuilding contracts give both parties the right to ‘rescind’ in certain circumstances. Rescind means to bring the contract to an end and revert the parties back to the position they were in before the contract was signed. For example, a shipbuilding contract might provide that if the yard exceed their permissible and non-permissible delays to the delivery date, you can rescind the contract and you will therefore be put back in your original position by the yard, who will refund the installments you have already paid or allow you to claim under the refund guarantees.
Can I rescind?
Many shipbuilding contracts define a number of events which entitle the buyer to rescind. The most common are:
-
Delays in delivery beyond a certain number of permissible and/or non permissible delays.
-
Failure of the vessel to meet the technical requirements of the contract.
-
Insolvency of the yard.
-
Total loss of the vessel before delivery.
-
Failure to meet certain milestones.
But watch out! If you wish to terminate for the yard’s repudiatory breach, you must be confident that you can prove the yard has breached a condition or has indicated an intention not to perform. This is not always obvious. You also need to be very careful and strictly follow any procedure for rescission or cancellation. If you get it wrong (because, for example, the contract says that you must give ten working days written notice sent by courier to a particular address, and you give five days’ notice and send it by fax), you might find that the yard terminates the contract for your repudiatory breach and brings a damages claim against you!
What are the consequences of rescinding the contract?
Often, shipbuilding contracts provide that if the buyer rescinds, the yard must refund their instalments ‘promptly’ or otherwise start arbitration to suspend that obligation until an award has been published. Once the refund is made, all of the parties’ obligations to each other under the contract come to an end. If the refund is not paid and the yard does not start arbitration, the buyer can claim from the yard’s bank under the refund guarantees.
Can I claim under the refund guarantee?
There are two broad types of guarantee. Under an ‘on demand’ guarantee, the guarantor is the primary debtor and payment is made against a written demand by the buyer certifying that they are entitled to a refund. Provided the documents are in order and the demand is made in good faith, the bank must pay. Under a ‘performance’ or ‘see to it’ guarantee however, the guarantor’s liability is secondary. This means that you must first prove that the yard is liable under the shipbuilding contract before you can claim from the bank.
But watch out! Refund guarantees will not always respond to every event by which the contract is brought to an end. For example, if the refund guarantees require a valid rescission under a particular provision of the contract that does not necessarily mean that the bank must pay if you terminate for the yard’s unrelated repudiatory breach. If you can’t claim under the refund guarantees, think carefully about how you will enforce your claim against the yard.
Can I recover other losses?
Even if you get your instalments back, you might have also suffered other losses such as expenditure thrown away as a consequence of the ending of the project (called ‘reliance loss’) or, if you need to find an alternative vessel and the market has risen, the difference between the contract price and the market price of an equivalent newbuilding (called ‘loss of bargain’).
But watch out! It is usual for shipbuilding contracts to exclude such losses and limit the yard’s obligation to repayment of the pre-delivery instalments plus interest. It is possible to terminate for the yard’s repudiatory breach and claim damages as well as exercising your contractual right to rescind and claim repayment of your instalments of the contract price. This was decided by the Court of Appeal in Stocznia Gdynia S.A. v. Gearbulk Holdings Ltd (2009). However, this decision has been criticised and the relationship between contractual and common law rights is a complicated and developing one.
Should I rescind or terminate?
Ultimately, the decision to bring the contract to an end is the nuclear option. As well as irreparably damaging your commercial relationship with the yard, you might find yourself on the receiving end of expensive litigation if you get it wrong, and sometimes even if you get it right. As well as working out whether a right to rescind or terminate has arisen, you also need to consider carefully whether you can claim under the refund guarantees to recover your instalments and whether you can obtain the evidence needed to prove your other losses. For example, you might need expert evidence on market prices if you want to claim for loss of bargain.
Sometimes, terminating a contract is the best, or only, option. However, the law of shipbuilding is complex and fraught with ambiguities and the sums at stake are often large. Ending the contract is a drastic step and good legal advice is essential before you make the decision to terminate or rescind.
Source: The Shipowner Club (By Helen McCormick, Associate Director, CTRL Marine Solutions Ltd) | Hellenic Shipping News
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Monday, 04 July 16
BDI ROSE ON STRONGER DEMAND ACROSS ALL VESSEL SEGMENTS
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose this past week. The BDI was up 11.16 percent from la ...
Friday, 01 July 16
BREXIT SET TO HURT SHIPPING IN THE LONG-TERM AS IT WILL TAKE ITS TOLL IN THE GLOBAL ECONOMY'S GROWTH - HELLENIC SHIPPING
Setting aside the short-term negative impact of the Brexit, in terms of stock market and currency volatility, it’s more than evident that the ...
Friday, 01 July 16
U.S'S COAL EXPORTS HAVE DECLINED FOR TWELVE QUARTERS IN A ROW - EIA
COALspot.com – U.S, world’s one of the largest coal producers has produced approximately totalled an estimated 13.7 million short t ...
Thursday, 30 June 16
CAPE - THIS WEEK'S FREIGHT AND ACTIVITY LEVEL HAVE KEPT STABLE - FEARNLEYS
Cape
This week’s freight and activity level have kept stable. It is support at the present levels and despite a volatile market the freight ...
Thursday, 30 June 16
OIL PRODUCT TANKERS EARNINGS DECLINE AS STOCKBUILDING SLOWS DOWN - BIMCO
BIMCO’s expectations remain as the oil product tanker fleet continues to grow with earnings at the lowest since Q3 in 2014. But there is stil ...
|
|
|
Showing 2376 to 2380 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Riau Bara Harum - Indonesia
- Bhushan Steel Limited - India
- Bhatia International Limited - India
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Planning Commission, India
- Mjunction Services Limited - India
- Minerals Council of Australia
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- TeaM Sual Corporation - Philippines
- MS Steel International - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Power Finance Corporation Ltd., India
- Standard Chartered Bank - UAE
- Wilmar Investment Holdings
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Indika Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- OPG Power Generation Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Pendopo Energi Batubara - Indonesia
- Singapore Mercantile Exchange
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Alfred C Toepfer International GmbH - Germany
- Kideco Jaya Agung - Indonesia
- Dalmia Cement Bharat India
- Anglo American - United Kingdom
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Simpson Spence & Young - Indonesia
- Semirara Mining Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- India Bulls Power Limited - India
- Sakthi Sugars Limited - India
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Tamil Nadu electricity Board
- The University of Queensland
- Attock Cement Pakistan Limited
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- Borneo Indobara - Indonesia
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Holcim Trading Pte Ltd - Singapore
- London Commodity Brokers - England
- Straits Asia Resources Limited - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Tata Chemicals Ltd - India
- Sindya Power Generating Company Private Ltd
- Timah Investasi Mineral - Indoneisa
- Bhoruka Overseas - Indonesia
- Romanian Commodities Exchange
- Aboitiz Power Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Ind-Barath Power Infra Limited - India
- Mercuria Energy - Indonesia
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Indian Oil Corporation Limited
- Grasim Industreis Ltd - India
- Global Coal Blending Company Limited - Australia
- Jorong Barutama Greston.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Australian Coal Association
- SMG Consultants - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Goldman Sachs - Singapore
- Videocon Industries ltd - India
- Kaltim Prima Coal - Indonesia
- ASAPP Information Group - India
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Posco Energy - South Korea
- Bharathi Cement Corporation - India
- Global Business Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Directorate Of Revenue Intelligence - India
- Metalloyd Limited - United Kingdom
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- PTC India Limited - India
- Makarim & Taira - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- Meralco Power Generation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Essar Steel Hazira Ltd - India
- Antam Resourcindo - Indonesia
- Lanco Infratech Ltd - India
- Siam City Cement PLC, Thailand
- McConnell Dowell - Australia
- Orica Australia Pty. Ltd.
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cement Manufacturers Association - India
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Thiess Contractors Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Ministry of Transport, Egypt
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- Parry Sugars Refinery, India
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Petron Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- Marubeni Corporation - India
- Thai Mozambique Logistica
- Formosa Plastics Group - Taiwan
- Gujarat Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
|
| |
| |
|
