Five reasons for instructing a local superyacht lawyer when commissioning a new build or refit project

Five reasons for instructing a local superyacht lawyer when commissioning a new build or refit project

Arnold van Steenderen
Charlotte van Steenderen
12 April 2019

Instructing a superyacht lawyer early will save headaches and money 

In the last 15 - 20 years the importance of the legal profession in the superyacht industry has steadily grown. Drafting an agreement for the construction, refit or repair of a yacht, is a specialist job as shipbuilding and refit/repair contracts are complex transactions. In the yachting world shipyards will usually produce their own form of contract to the buyer after discussions about specifications have already progressed to reaching an agreement on material topics. By that time the room to negotiate a proper well-balanced contract is already limited. If such is the case the instructions a lawyer will receive are limited to conducting a health check, which certainly limits the legal fees but is not a proper way of conducting business.

  • 1.              A lawyer should be appointed in the earliest stages of a project as this will be of great benefit to the buyer. It is sometimes surprising to see that UHNWI’s seem to disregard their own interests, when it comes to ordering a new yacht or contracting for a major refit whereas in their daily business they would not take a step without consulting a specialist lawyer from the outset. What is the reason for not instructing a knowledgeable lawyer from the early stages onwards? The reputation of yachtbuilders will frequently be a factor in the potential buyer forgetting to take due precautions in assuring that the builders’ and owners’ rights are sufficiently balanced in the contract to be signed. Builders may present their own contract to the buyer on a straight take-it-or-leave-it-basis, but if a specialist lawyer is instructed from the outset these contracts will be the subject of negotiation and revision to suit each parties’ interest.
  • 2.              Although there is some pressure from certain brokers to accept English law jurisdiction clauses, in many jurisdictions the yachtbuilding contracts will stipulate that they shall be governed by the law of the country in which the yacht is built. And this is good. The English common law system is certainly less sophisticated when it comes to determining whether a yachtbuilding contract should be categorised as relating to the sale of goods or to the supply of workmanship and materials. When determining shipbuilding contracts English courts tend to look for guidance in the rules of underlying contracts for the sale of goods and this does not always give the most desirable outcome to a dispute. Dutch shipyards tend to prefer using the law of their own jurisdiction and this is where local support of a Dutch superyacht lawyer is advisable.
  • 3.              The buyer’s principle duty is to pay the contract price and a shipbuilding contract will typically provide for a deposit to be made by the buyer and the remainder of the contract price to be paid in instalments according to a progress schedule of milestones. It is important that the deposit and the instalments paid before passing of title over the yacht are sufficiently protected. Depending on the jurisdiction where the yacht is built the mechanisms available to protect the buyer of a yacht will considerably vary and therefore this is another good reason to instruct local lawyers familiar with these issues.
  • 4.              Another topic requiring legal support is in connection with the warranties available to the buyer after delivery of the yacht. Depending on the law applicable warranty clauses exclude claims for defective design if not expressly included in the warranty provisions.
  • 5.              A fifth topic of particular interest is the drafting skills required to draft proper exclusion clauses. Consequential damages, such as loss of charter hire, are usually excluded. If the yacht is not performing in accordance with the contractual performance criteria there may be a claim for liquidated damages and even a claim for rescission of the contract. All such clauses require careful attention as they have to be carefully designed.

Van Steenderen MainportLawyers, 12 April 2017