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.
|
|
Wednesday, 01 June 16
INDIA'S COAL IMPORTS IN APRIL 2016 DECLINED 15% Y/Y; COAL INDIA INCREASED COAL PRICES BY 6.2%
Coal India has approved raising weighted average coal prices by 6.2 per cent over the current price for both regulated and non-regulated sectors.
...
Wednesday, 01 June 16
ZERO SUPPLY TO FUEL GROWTH IN THE DRY BULK MARKET SAYS BIMCO PRESIDENT
The dry bulk market could become profitable again in 2019 – but only if a series of extremely tough and sustained measures are taken by shipo ...
Wednesday, 01 June 16
MARKET INSIGHT - LINOS KOGEVINAS
In another page from this year’s oil drama, oil has, after a series of gains, rebounded to ~$50 / barrel and immediately stopped climbing. &n ...
Tuesday, 31 May 16
CS50 INDONESIA COAL INDEX UP 0.28% COMPARED WITH A WEEK AGO
COALspot.com: Average 5000 GAR coal index of Indonesian origin was up 0.28 percent week over week to averaging $39.01 per ton this past week, shows ...
Monday, 30 May 16
BORYEONG POWER PLANT TO IMPORT HALF A MILLION TONS OF BITUMINOUS COAL
COALspot.com: South Korea’s state-owned utility Korea Midland Power (KOMIPO) issued a new tender for 500,000 Metric Tons of Bituminous Coal T ...
|
|
|
Showing 2411 to 2415 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Baiduri Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Videocon Industries ltd - India
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Deloitte Consulting - India
- PetroVietnam Power Coal Import and Supply Company
- CNBM International Corporation - China
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Thai Mozambique Logistica
- Barasentosa Lestari - Indonesia
- Anglo American - United Kingdom
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- GAC Shipping (India) Pvt Ltd
- Australian Coal Association
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Minerals Council of Australia
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Mjunction Services Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The University of Queensland
- Grasim Industreis Ltd - India
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Chettinad Cement Corporation Ltd - India
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- Savvy Resources Ltd - HongKong
- Economic Council, Georgia
- Wilmar Investment Holdings
- Maheswari Brothers Coal Limited - India
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Global Coal Blending Company Limited - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Tamil Nadu electricity Board
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- Rashtriya Ispat Nigam Limited - India
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Bhushan Steel Limited - India
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Jaiprakash Power Ventures ltd
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Eastern Energy - Thailand
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- Bulk Trading Sa - Switzerland
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Electricity Generating Authority of Thailand
- Gujarat Sidhee Cement - India
- Indika Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Coal and Oil Company - UAE
- Global Green Power PLC Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- VISA Power Limited - India
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Planning Commission, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Jindal Steel & Power Ltd - India
- Formosa Plastics Group - Taiwan
- Ind-Barath Power Infra Limited - India
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- India Bulls Power Limited - India
- Vizag Seaport Private Limited - India
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indogreen Group - Indonesia
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Baramulti Group, Indonesia
- Chamber of Mines of South Africa
- Larsen & Toubro Limited - India
- Edison Trading Spa - Italy
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Eastern Coal Council - USA
- Meralco Power Generation, Philippines
- Goldman Sachs - Singapore
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- Krishnapatnam Port Company Ltd. - India
- Kohat Cement Company Ltd. - Pakistan
- Australian Commodity Traders Exchange
- Makarim & Taira - Indonesia
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Interocean Group of Companies - India
- CIMB Investment Bank - Malaysia
- Iligan Light & Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sical Logistics Limited - India
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
|
| |
| |
|
