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 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Sakthi Sugars Limited - India
- Wood Mackenzie - Singapore
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Electricity Generating Authority of Thailand
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Deloitte Consulting - India
- Asmin Koalindo Tuhup - Indonesia
- SMC Global Power, Philippines
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Bhushan Steel Limited - India
- GMR Energy Limited - India
- Siam City Cement - Thailand
- Mjunction Services Limited - India
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Kartika Selabumi Mining - Indonesia
- Goldman Sachs - Singapore
- IHS Mccloskey Coal Group - USA
- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Bulk Trading Sa - Switzerland
- Riau Bara Harum - Indonesia
- Romanian Commodities Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Power Finance Corporation Ltd., India
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Standard Chartered Bank - UAE
- Commonwealth Bank - Australia
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- ICICI Bank Limited - India
- Gujarat Sidhee Cement - India
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Gujarat Mineral Development Corp Ltd - India
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Semirara Mining and Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Independent Power Producers Association of India
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
- Bharathi Cement Corporation - India
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Rashtriya Ispat Nigam Limited - India
- Bhatia International Limited - India
- Mintek Dendrill Indonesia
- Carbofer General Trading SA - India
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- Videocon Industries ltd - India
- Parry Sugars Refinery, India
- Petrochimia International Co. Ltd.- Taiwan
- Petron Corporation, Philippines
- Therma Luzon, Inc, Philippines
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Salva Resources Pvt Ltd - India
- Posco Energy - South Korea
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Renaissance Capital - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Singapore Mercantile Exchange
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- Essar Steel Hazira Ltd - India
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Oldendorff Carriers - Singapore
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- Bukit Makmur.PT - Indonesia
- Tamil Nadu electricity Board
- Trasteel International SA, Italy
- Economic Council, Georgia
- Ministry of Transport, Egypt
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Altura Mining Limited, Indonesia
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Xindia Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Rio Tinto Coal - Australia
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- Larsen & Toubro Limited - India
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- AsiaOL BioFuels Corp., Philippines
- Jindal Steel & Power Ltd - India
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- PTC India Limited - India
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Thai Mozambique Logistica
- Indika Energy - Indonesia
- CNBM International Corporation - China
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- Sical Logistics Limited - India
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Indonesian Coal Mining Association
- Attock Cement Pakistan Limited
- Planning Commission, India
- Bangladesh Power Developement Board
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Heidelberg Cement - Germany
- PowerSource Philippines DevCo
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Holcim Trading Pte Ltd - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- Kepco SPC Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Semirara Mining Corp, Philippines
- Wilmar Investment Holdings
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
|
| |
| |
|
