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.
|
|
Thursday, 28 April 16
PRICES OF POWER-STATION COAL IN INDONESIA IS INCREASING
COALspot.com: Inquiries for Indonesian 4200 - 4400 Kcal/kg GAR thermal coal cargoes from India suddenly increase recent days.
A Jakarta-based ...
Thursday, 28 April 16
KOMIPO TO IMPORT 710K MT OF BITUMINOUS COAL DURING JULY - SEPTEMBER 2016
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for 710,000 Metric Tons of Bituminous Coal for its B ...
Thursday, 28 April 16
CAPE: BIT MORE OPTIMISM IN THE MARKET; SUPRAMAX: FORWARD CURVE IS FALLING - FEARNLEYS
Cape
A bit of a slower week. Activity level has dropped, though the rates do still remain firm, says Fearnleys in its latest weekly report.
...
Wednesday, 27 April 16
THE OCEAN SHIPPING EXPERIENCED DRAMATIC VOLATILITY IN THE BEGINNING OF 2016 - PANOS TSILINGIRIS
Shipping’s new (ab)normal
The global economy and ocean shipping experienced dramatic volatility in the beginning of 2016 and as the glob ...
Wednesday, 27 April 16
INDONESIAN COAL MINER KIDECO REPORTED NET PROFIT OF US$138.1 MILLION IN 2015
COALspot.com: Kideco Jaya Agung, one of the Indonesia's leading coal miners has reported net profit of US$138.1 million on revenue of US$1.65 b ...
|
|
|
Showing 2456 to 2460 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Eastern Energy - Thailand
- Central Electricity Authority - India
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Salva Resources Pvt Ltd - India
- PowerSource Philippines DevCo
- Malabar Cements Ltd - India
- Cement Manufacturers Association - India
- Kohat Cement Company Ltd. - Pakistan
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Rashtriya Ispat Nigam Limited - India
- Tata Chemicals Ltd - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Baramulti Group, Indonesia
- Energy Development Corp, Philippines
- Bhatia International Limited - India
- Australian Coal Association
- Semirara Mining Corp, Philippines
- Bharathi Cement Corporation - India
- Carbofer General Trading SA - India
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- Globalindo Alam Lestari - Indonesia
- Indian Oil Corporation Limited
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
- Posco Energy - South Korea
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- GAC Shipping (India) Pvt Ltd
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Eastern Coal Council - USA
- AsiaOL BioFuels Corp., Philippines
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- IEA Clean Coal Centre - UK
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- Georgia Ports Authority, United States
- Simpson Spence & Young - Indonesia
- Renaissance Capital - South Africa
- Cigading International Bulk Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Mining Services - Indonesia
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Vizag Seaport Private Limited - India
- Merrill Lynch Commodities Europe
- Sical Logistics Limited - India
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Orica Australia Pty. Ltd.
- Mjunction Services Limited - India
- Power Finance Corporation Ltd., India
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Sarangani Energy Corporation, Philippines
- The University of Queensland
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Borneo Indobara - Indonesia
- Electricity Authority, New Zealand
- Singapore Mercantile Exchange
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- GN Power Mariveles Coal Plant, Philippines
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Economic Council, Georgia
- CNBM International Corporation - China
- Electricity Generating Authority of Thailand
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Xindia Steels Limited - India
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- CIMB Investment Bank - Malaysia
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- Samtan Co., Ltd - South Korea
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- Formosa Plastics Group - Taiwan
- Larsen & Toubro Limited - India
- PTC India Limited - India
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Mercator Lines Limited - India
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- The State Trading Corporation of India Ltd
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Wood Mackenzie - Singapore
- TeaM Sual Corporation - Philippines
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Agrawal Coal Company - India
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Indonesian Coal Mining Association
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Directorate General of MIneral and Coal - Indonesia
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- New Zealand Coal & Carbon
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
|
| |
| |
|
