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, 25 May 16
DRY BULK SNP MARKET DISPLAYS SIGNS OF STRENGTH - GEORGE ILIOPOULOS
Only a couple of weeks away from the world’s most prominent maritime event, the market for tankers displays an evident lack of confidence in ...
Tuesday, 24 May 16
WEEKLY CS COAL INDICES NEGATIVE FOR ALL TYPES OF COAL EXCEPT 3800 GAR COAL
COALspot.com: Average 5000 GAR coal index of Indonesian origin was down 0.10 percent week over week to averaging $38.90 per ton this past week, sho ...
Monday, 23 May 16
A PERFECT STORM FOR INDONESIAN STEAM COAL EXPORTS - CLARKSON RESEARCH
Indonesia is the world’s leading steam coal exporter, accounting for over 40% of global seaborne steam coal exports since 2010. However in 20 ...
Monday, 23 May 16
THE PANAMAX INDEX WAS UP 17 POINTS W/W
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose this week.
The freight market was firm and all ...
Friday, 20 May 16
U.S COAL PRODUCTION FOR THE WEEK ENDED 14 MAY TOTALED 11.4 MMST; UP 3.8% W/W
COALspot.com – U.S the world’s second largest coal producer has produced approximately totaled an estimated 11.4 million short tons (mm ...
|
|
|
Showing 2421 to 2425 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- South Luzon Thermal Energy Corporation
- Gujarat Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Aditya Birla Group - India
- Rashtriya Ispat Nigam Limited - India
- Indogreen Group - Indonesia
- LBH Netherlands Bv - Netherlands
- Salva Resources Pvt Ltd - India
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
- Mintek Dendrill Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tamil Nadu electricity Board
- Australian Coal Association
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Marubeni Corporation - India
- Siam City Cement - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Baramulti Group, Indonesia
- Port Waratah Coal Services - Australia
- Aboitiz Power Corporation - Philippines
- Bangladesh Power Developement Board
- Intertek Mineral Services - Indonesia
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Mjunction Services Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Simpson Spence & Young - Indonesia
- Merrill Lynch Commodities Europe
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- Power Finance Corporation Ltd., India
- Kobexindo Tractors - Indoneisa
- Thai Mozambique Logistica
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Sarangani Energy Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Vizag Seaport Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- The University of Queensland
- Jorong Barutama Greston.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Interocean Group of Companies - India
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- PowerSource Philippines DevCo
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- IHS Mccloskey Coal Group - USA
- SMC Global Power, Philippines
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- International Coal Ventures Pvt Ltd - India
- Sojitz Corporation - Japan
- Africa Commodities Group - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Latin American Coal - Colombia
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining Corp, Philippines
- Bharathi Cement Corporation - India
- Australian Commodity Traders Exchange
- White Energy Company Limited
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Planning Commission, India
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Madhucon Powers Ltd - India
- Tata Chemicals Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement PLC, Thailand
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Finance - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Makarim & Taira - Indonesia
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Sakthi Sugars Limited - India
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Gujarat Sidhee Cement - India
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Chamber of Mines of South Africa
- Kideco Jaya Agung - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sical Logistics Limited - India
- Maharashtra Electricity Regulatory Commission - India
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- Independent Power Producers Association of India
- Bhushan Steel Limited - India
- Ministry of Transport, Egypt
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Energy Link Ltd, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Ambuja Cements Ltd - India
- Vedanta Resources Plc - India
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
|
| |
| |
|
