When taking delivery of a newbuild vessel, you are likely to assume that it complies with the specifications of the newbuilding contract. Nevertheless, we are regularly involved in disputes between the buyer and the contractor about the technical condition of the vessel after the buyer has taken delivery. There are a number of steps you can take to avoid such problems which we set out in more detail below.
A newbuild contract under Dutch law legally is considered to be an agreement for the acceptance of work. This is relevant because it means that the legal rules that apply to such contracts also apply to a newbuild contract, unless the parties have agreed differently.
Under the law, the buyer must inspect the vessel within a reasonable time after the contractor has indicated that the vessel is ready for delivery. Often general conditions are declared applicable to a newbuild contracts and these usually contain additional rules regarding the delivery of the vessel. For example, the VNSI conditions stipulate that once the ship leaves the yard, the ship is considered to have been delivered. They also state that any defects must be reported immediately upon delivery and confirmed in writing within 48 hours.
In order to safeguard your rights there are a number of measures you can take when concluding the contract and subsequently upon delivery to limit your risks. In this context, drawing on recent cases we have dealt with, we recommend that buyers:
- Properly review the terms and conditions and any general conditions when entering into a newbuild contract to ensure that they are acceptable to you and to get a good idea of the contractor’s rights and obligations when it comes to the condition in which the vessel must be delivered and your right to check their fulfilment of the contract;
- Ensure that the inspection and delivery of the vessel is carried out in accordance with the newbuild contract and record the condition of the vessel in a delivery report;
- To conduct a joint trial and thorough inspection with the builder prior to delivery;
- Appoint an independent expert to conduct the inspection on your behalf recording any defects submitting these to contractor. Arrangements should be made for the rectification of any defects; and
- Verify that the vessel is delivered with all necessary certificates and documents required by law or otherwise necessary for the operation of the vessel.
By taking these steps, you can avoid common pitfalls and reduce the risk of litigation. If you have any questions about the legal options when drafting an agreement or at the time of delivery, please feel free to contact us.