Ship Sale & Purchase

Ship Sale & Purchase
Institute of Chartered Shipbrokers 2014Edition

SHIP SALE AND PURCHASE
Published by the
Institute o f Chartered Shipbrokers
85 Gracechurch Street
London EC3V OAA
United Kingdom
Telephone: +44 20 7623 I I I I
Email: [email protected]
Web: www.ics.org.uk
2014 edition
iSBN 978-1-908833-39-6
© Institute o f Chartered Shipbrokers 2014
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w ithout the prior permission o f the publisher and Copyright owner:
Terms o f use
W hile the advice given in this docurnent, Ship Sale and Purchase, has been developed using the
best iníormation currently available, it is intended purely as guidance to be used at the users
own risk. N o responsibility is accepted by the Institưte o f Chartered Shipbrokers (ICS), the
membership oflC S o rb y any person,fìrm ,corporation ororganisation (who orvvhich has been in
any way concerned with the íurnishing o f iníormation o r data, the compilation o r any translation,
publishing, supply o r sale o f the document) ío rth e accuracy o f any iníormation o r advice given in
the document o r any omission from the document o r fo r any consequence whatsoever resulting
directly o r indirectỉy íronn compliance with o r adoption o f guidance contained in the document
even if caused by a íailure to exercise reasonable care.
Printed and bound in Great Britain by CPI
Design and book production by Jacamar (www.jacamanco.uk)
Front Cover Image: Portpictures.nl
li Institute of Chartered Shipbrokers

Dedication
William'Biir V. Packard ( 1946 - 2 0 1 I )
During the research and preparation o f his book, Sơle and Purchase, Bill Packard, a shipbroker and respected
maritime arbitrator, sought the advice and input o f a number o f professionals in the shipping industry.
Am ong these was Michael Drayton, the sale and purchase director at Galbraiths, w ho kindly w rote the
forew ord to this edition. It was therefore an easy step when Michael was approached by the Institute o f
Chartered Ship brokers last year fo r him to suggest the adoption o f BilTs book as an alternative te x t fo r
the next generation o f shipping students.
The Institute was delighted that BilTs family immediately saw the m erit in allovving us to adopt his book and
we are grateíul to his son, Paul Packard, fo r overseeing the transíer.This means that Bill Packards books,
having th e ir origins when first published by Fairplay as affordable texts fo r maritime students, will have
served the shipping community fo r more than 40 years.There are thousands o f practitioners throughout
the w orld o f shipping w ho owe a debt o f gratitude to Bill, having used his books when taking their íìrst
lessons in maritime education.
And so, since the parentage o f this w o rk can fairly be laid at Bill Packards doon we dedicate it to him.
Ship Sale and Purchase iii

Fo rew o rd
Foreword
I feel honoured to be asked to w rite the forew ord to this latest edition
o f Ship Sale and Purchase, not only because the Institute o f Chartered
Shipbrokers (ICS) is a professional body that I have admired and
respected throughout my career in shipping but also because the origin
o f this edition has its roots in a book by the late W illiam 'B iir Packard,
published in 2006.
A ndrew Lansdale has now done a íirst-class job o f editing and bringing
BilTs book fully up to date. Its readers are taken through the various ship
types, their trades and characteristics. Terminology is explained and a
chapter on ship registry lists the certification that a modern ship must
carry.The diíĩerent classification societies are listed and their role in maritinne saíety is highlighted beíore
the te x t moves on to its Central theme o f the o ffe rto purchase.the negotiation that ensues, and the final
contract íorms. Addressing both ends o f a ship's life cycle there are sections on newbuilding contracts
as well as contracts fo r demolition.The all-important area o f ship íìnance is explained in detail as well as
the role o f the ship valuer on whom both banks and insurers rely. Shipping law has its own chapter but,
tellingly, A n d re w stresses that ethics are a necessary part o f our business fo r which there is no substitute,
As we all know the m otto o f the Baltic Exchange is 'O u r word, our bond'; violate this and a brokers
reputation will never recover
For all students o f our industry I commend this book to you and congratulate the Institute o f
C hartered Shipbrokers on the initiative they have taken in keeping abreast o f the ever-changing w orld o f
maritim e commerce.
Michael K. Drayton
Chairman
The Baltic Exchange
2007-2009
The Institute o f Chartered Shipbrokers (iCS) is the only internationaiỉy recognised professional body in
the íìeld o f maritime education and represents shipbrokers, ship managers and agents throughout the
w orld. Pounded in 1911 and awarded a Royal C harter in 1920, the ICS has throughout its history set a
m aritim e syllabus, provided training and examined candidates fo r entry to its membership.
iv Institute of Chartered Shipbrokers

A ckn o w le d g em en ts
Acknowledgements
Pirst and forem ost we would like to thank Michael Drayton fo r his support and encouragement in the
revision o f this book and fo r writing its foreword. He retired as a sale and purchase director o f Galbraiths
and vvent to the Baltic Exchange as its chairman from 2007 to 2009. But we must also acknowledge
the contribution o f several industry proíessionals. Each chapter was studied by the sale and purchase
departments o f several London shipbrokers. O u r thanks thereíore go to Braemar Seascope, Clarksons,
Galbraiths, Howe Robinson, SSY and Traíalgar. Special thanks are due to Bridget Hogan, A ndrew Lansdale
and numerous members o f the Institute o f Chartered Shipbrokers ío rth e ir essential suggestions.
Also special thanks to Stephen Spark fo r his efforts to update the contents o f the book.
The illustrations have been sourced from across the industry, but particular thanks are due to Danny
Cornelissen o f Port Pictures NL and Alexander Kopylov o f Indehlit Ltd.The artistry o f their images raises
the stakes in the appearance and presentation o f maritime te x t books.
Andrevv Lansdale
Technical Editor
A ndrew Lansdale comes from a seafaring íamily. His father served in

Capital ships in th e Royal Navy in th e Second W o rld W ar.A ndrew s ta rte d
his 54 years in the maritime industry in 1960 when he left school and
joined the three-masted training ship HMS Worcester.
He w ent to sea as a cadet at the age o f 17 in ships o f the British India

Steam Navigation Company, part o f the p&o Group. A fte r second mates,
he joined John Swire & Co (China Navigation Company) as third officer
and after sitting his mate‘s certiíicate in Sydney, second oíTìcer He sat his
master's certiíìcate in Hong Kong.
Corning ashore he w ent into the shipbroking industry, fìrst in ship management and subsequently tanker
and dry cargo broking. He has worked in London, Tokyo and Hong Kong. His shipping career to o k a
íu rth e r tu rn when he became markets e d ito r at the international shipping magazine Fairplay. He was
avvarded the Journalist o f the Year award in 2007 and was among those nominated in 2 0 13.
In his spare time he sails his wooden sailing cutter in the Solent, but only when the sea is calm and the
winds light!
Ship Sale and Purchase

C o n ten ts
Contents
Foreword IV
Acknowledgements V
Technical Editor V
T h e Ship
I.I Introduction 2
1.2 History 2
1.3 Modern Shipping andTrade 2
1.4 Crude Oil and Products 3
1.5 Gas Carriers 3
1.6 Oíĩshore 4
1.7 Development o f the Container Ship 5
1.8 Tonnage and Capacity 6
1.8.1 Tonnage 6
1.8.2 Capacity 7
1.9 Cargo Categories 9
I.IO ShipTypes 11
i.io .l Bulk Cargo Carriers -Tankers 11
1.10.2 Tankers and Oil Poỉlution 17
1.10.3 Buik Carriers - D ry Cargo 19
1,10.4 General Cargo Ships 20
1.10.5 Reírigerated Cargo Ships 21
1.10.6 Container Ships 22
1.10.7 Ro-ro Cargo Ships 23
1.10.8 Passenger Ships 24
1.10.9 The Short Life o f the Combination Carrier 24
1.10.10 MisceilaneousTypes 24
l.l 1 Machinery and Consumables 27
l.l l.l Fuel 27
l.l 1.2 Main Ppropulsion 27
l.l 1.3 Auxiliary Power 27
1.12 General Arrangement Plans 29
G e o g ra p h y
2.1 SeabourneTrade 32
2.2 Commodities 32
vi Institute of Chartered Shipbrokers

C o n te n ts
2.2.1 Oil 32
222 Gas 33
2.2.3 Coal 33
2.2.4 Ores 33
2.2.5 Grains 34
2.2.6 O th e r bulk d ry cargoes 34
2.2.7 Containerised cargo 34
2.3 Natural Phenomena and Navigation 35
2.3.1 Tides 35
2.3.2 Ocean currents 36
2.3.3 Cyclones 36
2.3.4 Ice 38
2.3.5 VVeather routeing 39
2.3.6 Salinity o f the oceans 39
2.4 Navigational and Seasonal Zones 40
S h ip R e g i s t r a t i o n 47
3.1 The N eed fo r Registration 48
3.2 The G row th o f'O p e n ’ Registries 49
3.3 The C urren t Scene 50
3.4 The Positive and Negative Aspects o f Open Registries 51
3.5 The Response byTraditional Maritime Countries 53
3.6 Registration and the Ship Sale and Purchase Broker 54
3.7 Call Sign 57
3.8 Trading Certiíicates 57
C la s s if ic a t io n 59
4.1 Classiíication Societies 60
4.2 H istory 61
4.3 R egisters 62
4.4 Safety 63
4.5 Special Surveys 65
4.6 O th e r Punctions o f Classiíìcation Societies 66
4.7 Certificates 66
4.8 ISPS Code 67
4.9 Tonnage Measurement Regulations 68
4.10 Practical Application ío rth e Sale and Purchase Broker 68
4.1 1 Classification Society Records 69
Ship Sale and Purchase vii

C o n te n ts
4.1 l.l Inspection and Surveys 69
4.1 1.2 Certification 70
4 .12 Change o f Ships Name 71
T h e Ship Sale 73
5 .1 The O íĩer 74
5.2 The Structure o f an O ffer 75
5.3 Commission 76
5.4 Inspection and Inspection o f Records 77
5.4.1 Records Inspection 77
5.4.2 ReplyTime fo r Inspection ofVessel andRecords 78
5.5 D e liv e ry -W h e re andVVhen 78
5.6 D ry Docking o r Diver‘s Inspection 79
5.7 W h at is Included in the Price 79
5.8 Bunkers and Lubricating Oils 80
5.9 Buyer‘s Crew on Board Beíore Delivery 8i
5.10 Same Condition as W hen Inspected 82
5 .1I Subject Purther Details Basis NSF 1993o r NSF 2 0 12 82
5 .12 English Lavv/Arbitration London 82
5 .13 W ith Class Maintained Free o f Recommendations and

Free o f Average Damage Affecting Class 83
5.14 The O ffer and Counter-offer 83
5. i 4 .1 The Pirst Counter-offer 84
5. i4.2 Negotiations Proceeding 86
Ship Sale C ontracts and Clauses 87

6.1 Introduction 88
6.2 Concluding the Sale 88
6.3 Differences Between NSF 1987 and NSF 1993 91
6.4 BIM COs Analysis o f Differences Betvveen NSF 93 and NSF 2012 97
6.5 NSF Additional Rider Clauses 102
6.6 Signature on Contracts 103
6.7 O th er Sale Contract Forms 103
6.8 Summary 103
6.9 Brokers' Commissions 104
víll Institute of Chartered Shipbrokers

C o n te n ts
N ipponsale Form 105

7 .1 Front-page Boxes 106
N ew buildings I 15
8 .1 Introduction 116
8.2 Naval Architects I 16
8.3 Ship Builders I 16
8.4 The Shipyard C ontract I 18
8.5 Letters o f Intent I 19
8.6 Building Supervision I 19
8.7 Plans I 19
8.8 Yard o r Hull N u m be r 120
8.9 Launching 120
8 .10 Trials and Delivery 120
8 .1 I Stores and Provisions 121
8.12 Auxiliary Equipment 121
8 .13 Spare Parts 122
8 .14 Guarantee Period 122
8 .15 Insurance 122
8.16 JH143 122
8.17 Ship Builders Stability 123
8 .18 Builder‘s C ertificate 123
D e m o litio n 125
9.1 Introduction 126
9.2 The Shipbreaker‘s VVorkplace 126
9.3 Environmental Pressure 127
9.4 Basic Principles o f a D em olition Contract 128
9.5 Selecting the Right Buyer 1/8
9.6 The D em olition M arket 129
tlishcon 2004 131

lO.I PART 1 Boxes 132
10.2 PART II Printed Clauses 134
10.3 Delays 143
10.4 Additional Rider Clauses 150
10.5 Letters o f C redit 150
Ship Sale and Purchase ix

C o ntents
Pinance
c e , N e w b u i i d i n g s a n d In s u r a n c e 15 3
11.I Introduction 154
11.2 Punding the Purchase From O w n Resources 154
i 1.3 Borrowed Money 154
11.4 Basel II 156
11.5 Money Laundering 156
11.6 Loan Documentation 157
11.7 Mortgages 159
11.8 Recording the Mortgage 159
11.9 Assignment o f Earnings 159
1I.IO Incentives to Borrowers and Lenders 160
11.10.1 Government Schemes 160
11.10.2 Leasing 161
11.10.3 Bareboat Chartering 161
1l.l 1 O th er Methods o f Pinance 162
1l.l l.l Bond Issues 162
11.1 1.2 Mezzanine Pinance 162
i l.l 1.3 Sellers Credit 162
11.1 i .4 Export Credit 162
1i. 1i .5 Yard Credit 162
1i.l i.6 Private Placement 162
11.12 Nevvbuildings 162
11.13 Insurance 163
11.14 Insurance ío rth e s&p Broker 164
Legai A s p e c t s 165
12.1 Introduction 166
12.2 The Ship Sale and Purchase Broker 166

12.3 The Broker‘s Commission 167
Ị 2.4 The Law and the Saleíorm 167
I24.I VVhen Does a Binding Contract Exist? 168
1242 Identifying the Parties 168
124,3 The Price and Payment 169

124.4 Inspections i69
1245 Cancelling Date 169
12.5 Spares, Bunken and so Forth 170
12.6 Maritime Liens and Encumbrances 170
126.1 A t Place o f Delivery 171
Institute of Chartered Shipbrokers

C o n ten ts
126.2 Default by Either o f the Parties 171
12.7 Dispute Resolution 172
12,8 The s&p Broker‘s Role W hen Principals are in Dispute 173
12.9 Ethics and the s&p Broker 173
T h e M arkets and th e Parties 175

13.1 Ship O w n er Personalities 176
13.2 D ry Bulk Carriers 178
13.3 Tankers 178
13.4 Multi Purpose Ships 179
13.5 Small Ships 179
13.6 Passenger Ships and Perries 180
13.7 ObsoleteTonnage 180
13.8 W h o Should an s&p Broker Know? 180
13.9 W h at Should an s&p Broker Know? 182
Ship Valuatíon 189

14.1 W h o Needs an Oíĩical Valuation? 190
14.2 Ships Age 191
D elive ry 195
15.1 Bill o f Sale 196
15.2 Deletion Certificate 196
15.3 Board Resolution 196
15.4 Protocol o f Delivery and Acceptance 197
15.5 Variations 198
15.6 Bunkers on Delivery 198
Ship Sale and Purchase xl

C o n ten ts
Appendices Contents
Appendix I N orêgian Sale Pornn 1987 203
Appendix 2 Norwegian Sale Form 1993 209
Appendix 3 NoiAA/egian Saie Form 2 0 12 217
Appendix 4 Ince and Co.’s comparison between NSF93 and NSFi 2 225
Appendix 5 Nipponsale 99 229
Appendix 6 Brokers sales re p o rt 233
Appendix 7 Demolishcon sale form 237
Appendix 8 Newbuildcon 243
xii Institute of Chartered Shipbrokers

C h a p te r I
l.l IN T R O D U C T IO N
The sale and purchase broker is employed as an intermediary, acting fo r the principal in the
selling and buying o f ships. Anyone intending to pursue a career in this area o f shipping, o r to
understand how it operates, must have a strong knowledge o f the process involved. A proper
understanding o f ship details and types oftrades is essential ío rth e sale and purchase broker
1.2 H IS TO R Y
Seaborne trade traditionally comprised raw materials and agricultural products being
transported one way and manufactured goods the other Cargo volumes in each direction
were restricted by the sizes o f the sailing vessels o f the time, although this changed with the
introduction o f steamships.
W ith the discovery o f oil in both Baku, on the Caspian Sea, and in the USA, kerosene lamps
replaced candles and the oil trade was born.The oil was initially transported in barrels, then in
square tins.This mode o f transport gave way to dedicated ships, o f specialised design, carrying
oii in bulk.
1.3M O D E R N S H IP P IN G A N D TR A D E
The dawn o f the 20th century heralded an unprecedented expansion o f the maritime
industry, stimulated by global industrialisation, vvhich produced enormous demand fo r raw
materials. Shipments o f iron ore and other minerals essential fo r the production o f specialist
steels increased. Coking coal fo r steelmaking and steam coal fo r electricity generation was
widely traded.
VVheat, corn, barley, rice and soya beans were shipped in huge quantities. Livestock was shipped
on the hoof. James Galbraith had pioneered the trade in chilled and frozen meat and thus
another ship design, the reírigerated vessel, was developed.
Millions o f bales o f cotton from Egypt and the USA were transported by sea as well as wool
and flax, Industrial fibres such as Manila hemp and sisal fo r rope-making were shipped out from
the Philippines and East Africa.Tea from India and Kenya, rubber from Malaya and coATee from
Brazil were among the commodities filling the w orld’s cargo ships.
The introduction and rapid spread o f railways generated a new trade in Steel rails, locomotives,
carriages and goods wagons. To load and discharge these cargoes, ships needed heavy-lift
derricks.This posed the question: if it was possible with railvvay equipment, why not aiso with
tugs, barges and íerries? As w orld trade expanded, nothing seemed impossible.
Aíram ax tanker Minerva Libra

T h e Ship
British battleship HMS Dreadnought marked the íirst use o f steam turbines in large ships. Steam
turbines gradually replaced steam reciprocating engines in merchant ships, but beíore long they
in turn were replaced by more economical marine diesel engines. Their output increased as
more cylinders were added and engine bore and stroke were enlarged.
Ships continued to grow in size but reached a plateau as p o rt íacilities placed a constraint on
any íurther expansion.
1.4 CRUDE O IL A N D P R O D U C TS
The oil trade changed from moving cargoes o f crude oil to reíineries situated nearthe main end-
user markets, to a mixed trade encompassing both crude oils and refined Products. Scientists
discovered that oil was an extremely versatile raw material,from which an almost limitless range
o f products could be manuíactured - from plastics to íertilisers and chemical gases.
Crude oil tankers were o f a íairly simple design capable o f carrying only tw o o r three grades.
By contrast, clean product tankers grew in sophistication in response to demands fo r a greater
variety o f cargo grades.
Growth o f the w orld economy prom pted a widening in scope and size fo r clean product tankers.
Standard-design product carriers were developed in the l960s.These have tanks coated both
to prevent tank corrosion and cargo contamination.Tankers that carry fuel oils are íitted with
heating coils to keep the cargoes viscous.
Tankers engaged in crude oil trades load in the Middle East, N o rth and W est Aírica, Indonesia,
North-vvest Europe, the Black Sea and the north coast o f South America. They discharge in
the Far East, Australia and N ew Zealand, India, Southern and N o rth e rn Europe, the USA and
South America.
Oil P ro d u cts are loaded at refineries in Europe and discharged in west Aírica and the USA.
Reíìneries in the Middle East supply Europe and many other places in the w orld. Singapore
supplies oil products around the Far Eastern areas and reíìneries are being built in China and
South Korea.Japanese reíineries supply their domestic market, although chemical íeedstocks are
brought in from the Middle East.
1.5 G A SC A R R IER S
In the same decade, a need was seen fo r hydrocarbon gas carriers.There were tw o varieties
o f gas to be transported. One group was produced by the refìning process and was broadly
classified as Petroleum gases, chiefly butane and propane. The other was natural gas, a
com ponent o f crude oil extraction. Each needs to be handled in a different way.
LPG tanker under way

C h a p te r I
Carriers fo r liquid Petroleum gas (LPG) incorporate a series o f pressurised gas containers. Some
carry the gas under pressure, which causes it to iiquefy. In others, the cargo is semi-reírigerated,
thereby reducing the volume o f the liquid. In later designs the cargo is fully reírigerated, which
reduces the volume o f the cargo even more. The semi- and fully reírigerated vessels are
insulated to allow temperatures to be maintained cn voyage w ith a liítle ăssistance from on-
board machinery.
Natural gas, usually methane, is transported in liqueíìed natural gas (LNG) carriers. By lovvering
the tem perature o f the gas substantially, it is possible to reduce the volume accordingly.The
gas is liqueíìed at the loading terminal - a process that uses roughly 12% o f the cargo's energy,
Taking the temperature down to - 165°c reduces the volume 500-fold, although this demands
heavy and effìcient insulation. Modern ships have a capacity o f more than 180,000m^ and the
equivalent deadvveight fo r an LNG ship is betvveen 0.48 and 0.52 o f the cubic cargo capacity. A
pioneer LNG carrier was the 27,400m^ M ethane Princess, which remained in Service fo r nearly
35 years.
Pioneers o f the LN G trade
N o insulation material is totaily eíĩicient, so the cargo does warm up slightly on passage, which
results in vvhat is term ed cargo boil-otĩ. In older designs o f ship, this was captured at the tank
to p and burned to produce steam fo r propulsion. More modern ships are íìtted with dual-fuel
propulsion systems that use both diesel fuel and LNG.
These ships discharge into a regasification plant from where the cargo, now at ambient
temperature, can be pumped straight into the countrys domestic gas pipeline grid.
See page 32 and 33 fo r LNG ship with Moss spherical tank design diagram and specification table.
1.6 OFFSHORE
The discovery o f oil in the N o rth Sea in the Porties field in the i 960s accelerated the vvorld-
wide spread o f the otTshore industxy and the associated development o f oíTshore support
vessels (OSVs).
The first recognisable and dedícated osv is generally considered to have been the Ebb Tide,
b u ilt in 1956 to Service th e u s G ulf o tĩs h o re oil and gas industry, vvhich is vvhere th e osv
industry began.
InAuences on o sv designs came from many areas, principally fìshing, tovvage and salvage, the
barge industry and the heavy-lift industry.The speciíìc challenges o f discharging and back-loading
cargoes betvveen an installation and a vessel, often in adverse weather conditions, have also
determined design standards.
In the early years, all o f these inAuences created a vessel with more pow er than its size would
normally warrant, with its accommodation and wheelhouse well fo w a rd and with a large,

T h e Ship
clear, vvood-sheathed main deck aft o f the accommodation block on vvhich deck cargo could
be carried.
Possessing tw o main engines, tw o shafts, tw in propellers and bow thrusters, the emphasis in
these ships was on manoeuvrability. VVithin the hull were cargo tanks fo r fuel, potable water;
liquid mud and cement and a range o f pumps fo r discharging these cargoes.
Some 50 years laten this is still the basic configuration o f almost all OSVs, although the vessels
are larger and more complex.
o s v l-T U M A M servicing a lackup ng
The support requirements o f the oíĩshore oil and gas industry have developed continuously.The
growth in the use o f semi-submersible drilling rigs produced a demand fo r specialist anchor-
handling vessels. For platíorms that are semi-submersible and rely on anchors to maintain
station, anchor-handling tugs have been developed, which, among their tasks, deploy anchors and
cables fo r the rigs.
Rigs employed in deeper waters rely on dynamic positioning (DP), using bow and stern thrusters,
to maintain position.The same technology is used on support vessels.The development o f new
drilling techniques meant that a w ider variety o f drilling fluids needed to be carried out to
ofFshore platíorms on platíorm supply vessels (PSVs).
Improvements in onshore logistics, as vvell as increased pipelaying capability, created a demand

fo r larger PSVs, while the increase in subsea construction and inspection, repair and maintenance
(IRM) operations drove the need fo r efficient remotely operated vehicles (ROVs), diving support
vessels and a host o f other specialist ships.
1.7 D E V E LO P M E N T OF T H E C O N T A IN E R SH IP
By the 1960s the restrictions on ships' sizes in the liner trades were beginning to ease. Loading
and discharging o f general cargo was looking increasingly labour-intensive and time-consuming,

C h a p te r I
metric units, this is one o f the surviving imperial measurements in the maritinne vvorld.
Preight containers continue to be measured in feet and inches. Except fo r specialist units,
containers are either 20ft o r 40ft long by 8ft wide and 8ft 6 in high. A 20ft Container is
one teu and a 40ft Container; one feu (40ft equivalent unit) or tw o teu.
Lơne-metres (UV\). A measurement fo r the carrying capacity o f ships designed to carry
wheeled cargo, such as car carriers and roll-on/roll-off (ro-ro) ships. As the name implies,
it is the measure o f the length o f the lanes on the cargo decks. For a car carrier it is also
necessary t o State th e h e a d ro o m available t o g e t a m eaningíul m easure o f th e sh ip s
carrying capacity.
Freeboard. International safety authorities are particularly concerned with íreeboard, as

it is the vertical distance between the vvaterline and the uppermost continuous deck
equipped with permanent means o f closing all those openings that are exposed to the
elements.
Loadline. By international convention, all merchant ships must be marked with a loadline.
The upper edge o f this line indicates the minimum permissible íreeboard.The loadlines
- often known as the Plimsoll Mark - are set o fĩ amidshíps, on both sides o f the ship, at
specified distances below a deck line, as shown here.
DECKUNE
^ J L ĨL
LT.
LS_
LW 290 mm
w
LWNA_ .WNA
4S0m m
S40mmAft S40 m m Fofword 230 m m
ALL LINES ARE 25 mm IN THICKNESS
Plimsoll Mark to shovv loading ievcls In vanous climatic conditions
The reason fo r the variations is that the more severe the expected vveathen the greater the
amount o f íreeboard that is needed fo r saíety.W NA is an abbreviation oíVVinter N o rth Atlantic,
which is the area o f the most treacherous weather where the greatest íreeboard is required.
The upper edge o f the summer line, if continued, passes through the centre o f the loadline disc
and is the base line.
8 Institute of Chartered Shipbrokers

T h e Ship
On the line you will see the initials relating to the classiíication society that surveyed the ship to
determine the positioning o f the m arkThe LR in this dravving refers to Lloyds Registen Others
include AB fo r American Bureau o f Shipping, BV fo r Bureau Veritas, and RI fo r Registro Italiano.
• Light draughtThe vessels draught at iight displacement is called its light draught.
• Suez and Panama Canal tonnage. Both o f these canal authorities have their own rules for
the measurement o f gross and net tonnage and ships using the canals are charged on
these tonnages.
• M oulded dep&i.The vertical distance amidships from the to p o f the keel to the to p o f the
upper deck beam at the side.
• Lengíh overơll ('LOA^The extreme length o f the ship.When the overall length is followed by
the notation (BB) it indicates that the ship has a bulbous bow and the overall length
includes that bow.
• Leng&i between perpendiculars (LBP).The distance on the summer load waterline from the
fore side o f the stem to the after side o f the rudder-post, o r to the centre o f the rudder
stock if there is no rudder-post.
• Extreme breadth.The maximunn breadth to the outside o f the ships structure.
• M oulded breadứì. The greatest breadth amidships from heel o f írame to heel o f írame.
• Scantlings. All structural parts such as frames, beams, Shell piating and bulkheads used
in the construction o f ships are covered under this heading and it reíers to their size
o r thickness.The classiíication societies have íìxed rules and tables fo r the construction
o f Steel ships, which must be observed by shipbuilders in order to obtain the required
certificates.
• Air draught. s&p brokers may encounter this measurement, which runs from the vvaterline
to the ships highest point, usually the to p o f a mast. It is o f importance fo r trades that
necessitate passing under bridges o r overhead cables.
• Ice c/ơss.This is a notation in classifìcation that shows a ships capabilities while navigating
in ice. It usually comprises Classes 1, 2 o r 3, vvhich bear diíĩerent names depending upon
the classiíìcation society. ice Class IA is the highest notation.
1.9 C A RG O CATEGORIES
A general understanding o f diíĩerent cargo categories and the cargo-handling modes should
be considered before a study is made o f the various types o f merchant ships involved in
th eir carriage.
The following are definitions o f the main cargo categories.
• General cargo. Diverse types and forms o f cargo. General cargo often involves
manuíactured o r semi-manuíactured goods.
• Contơinerised cargo. Cargo carried in purpose-built cargo containers constructed

according to ISO Container Standard dimensions and strength requirements.
• Ro-ro cargo. General cargo that can be loaded and unloaded to o r from cargo decks, on
wheeled vehicles.These can be trucks, forklifts o rtra c to r units.
• Bulk cargo. Liquid o r loose cargo o f a homogeneous nature - oil, iron ore, grain o r
coal, fo r e x a m p le - th a t is n o t c a rrie d in any fo r m o f packaging w ith in th e sh ip s tanks
o r holds.

C h a p te r I
A ship such as this can carry containers, ro -ro as well as general cargo
Cargo-handling modes may be deíìned as follows:
• Lifi-on/lift-off. The loading and unloading o f dry cargo by the ship's own cargo gear such as
cranes, o r by shore-based cranes o r gantries.
• Roll-on/roll-off.The loading and unioading o f cargo through the ships doors o r over ramps,
in conịunction vvith shore-based cargo-handling facilities.
• Pum p-on/pum p-off.The loading/unloading o f liquid cargo by means o f shore-based and

ship-based pumping and purnping equipment. Alm ost invariably the shore facility pumps
the cargo into the ship and the ship pumps the cargo out.
• Floơt-in/float-out.The loading and unloading o f Aoating cargo via either the ships bow
d o o r o r th e ship's stern d o o r o r ram p, w h ile th e ship is in a se m i-su b m e rg e d State.
• Floơt-on/floơt-off.Jhe loading/unloading o f íloating cargo to and from the ships weather

deck cargo space while the ship is semi-submerged. It is oílen used to load heavy cargoes
such as oil rigs o r barges.
Semi-submersible heavy-lift ship

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• Cranes. Bulk carriers o f less than Panamax size may be equipped with cranes so they can
discharge at ports that lack suitable cargo-handling equipment.They are often also grab-
íìtted.These can have a safe vvorking load (SWL) as high as 40 tonnes.
• Spedalised hơndling. A wide variety o f highly specialised equipment has e v o lv e d that

may include one o r more o f the main modes o f cargo handling. For example, coal
and ore may be discharged by an unloader that feeds a conveyor b e lt Bulk grain
may be discharged by suction o r by a system o f dredger-type buckets íeeding a
conveyer into shore-based grain elevators. Some modern bulk carriers designed fo r a
p a rtic u la r tra d e are self-unloaders, having discharging e q u ip m e n t fitte d as p a rt o f th e o n -
board equipment.
I.IO S H IP T Y P E S
W hen considering ship types it is im portant to have a clear mental picture o f the vessel
concerned and the best way to do this is to develop the skill o f producing basic box-shaped
sketches o f the difFerent types.
I.IO .I Bulk cargo carriers - tankers

Tankers are designed fo r the carriage o f oils, chemicals, liqueíied gases and edible liquids such
as vegetable oil, molasses, wine, orange juice and so on.They are usually described in ternns o f
deadweight tonnage, o r DWT^ because this is the basis on which they are chartered.
The cargo-handling mode fo r tankers is pump-on/pump ofĩ. Shore pumps are used fo r loading
and the ships own pumps fo r discharging.This is because pumps are less eíĩìcient at sucking
liquid than they are at pushing it.The ships pumps lift the cargo a short way from the tank
bottom , then pump it through a long pipeline to a shore tank.
Oil tankers are used fo r the carriage o f crude oil, reíined petroieum products and similar
Aammable liquids.The traditional pattern o f the oil trade is fo rth e crude oil to be loaded near
the point o f production and taken to reíineries near the areas o f consumption. Oil companies
have taken advantage o f economies o f scale when it comes to the size o f crude carriers, many
o f which are categorised as very large crude carriers (VLCC). Even larger is the ultra large
crude carrier (ULCC), but only tw o are currently trading.
A typical large modern tanker is double-skinned, has all machinery and accommodation aft and
a small crane amidships to handle the hoses used fo r loading and discharging.
The cargo space is divided athwartships oracrossthe ship.typically into fìve o r six compartments,
each o f which is in turn divided by a longitudinal bulkhead along the midship line, which runs the
length o f the ship.This eíĩectively provides 10-12 tanks. Each tank is connected by pipelines to
the discharging maniíold via the cargo pumps, enabling the cargo to be handled safely. Loading
and discharging is a skilled operation: emptying some tanks completely while leaving others full
would result in potentially catastrophic bending stresses to the hull.
Ship Sale and Purchase I I

C h a p te r I
A typicalVLCC
In addition to cargo tanks there are segregated ballast compartments. Ballast water is carried in
the double bottom and in the side spaces.This segregation ensures that no oil becomes mixed
with ballast vvaten preventing any risk o f pollution when discharging ballast. In the same way as
cargo, ballast vvater has to be taken on and discharged evenly across the ship to avoid creating
undue stresses. Ballast is essential on the non cargo-carrying part o f the voyage to ensure the
ship is deep enough in the w a te rto be stable and ío rth e p ro p e lle rto be submerged.
Between the cargo section and the accommodation/machinery space there wili be a space calied
a cofferdam.This ensures complete separation o f the cargo (with its potential fo r inAammable
gases) from the iiving quarters and machinery space; it also provides space ío rth e cargo pumps.
VLCC. Very large crude carriers are the workhorses o f the crude oil trade and range from
285,000dwt to 320,000dwt.They are designed fo r a cargo capacity o f 2m barrels o f cargo. A
barrel is 42 u s galions o r about 162 litres.Traditionally oil has been traded and priced in barrels.
T he b arrel is a m easure o f v o lu m e r a th e rth a n One o f w e ig h t
Typical dimensions o f aVLCC would be: length overall (LOA) 330-340m, beam 58-60m, draught
2 0 - 2 Im: deadweight 310,000 tonnes; Service speed 12-14 knots w ith a fuel consumption o f
about 50-60 tonnes a day.
Suezmax. Ranging from 155,000dwt to 165,000dwt, the original dimensions enabled this type o f
ship to transit the Suez Canal fully laden. Since their inception, the canal has been deepened and
Widened, but they are still reíerred to as Suezmax and also dubbed the ‘million barrel tanker'.
Tanker traíĩic through the Suez Canal is actually not as great as may be expected because
,many Mediterranean destinations are served by pipeiines.Also.the economies o f scale achieved
through using VLCCs often produce a lower delivered cost, after the payment o f Suez Canal
dues is taken into account
A Suezmax tanker would have the same basic coníiguration as a VLCC, but typical dimensions
would be: length overall (LOA) 275m, beam 45m, draught I6 -I7 m ; deadvveight 155,000-
165,000 tonnes, Service speed 14-15 knots.
P anam ax.A ị 55,000-70,OOOdvvt it is able to transit the Panama Canal in a part-iaden condition.
Unlike the Suez Canal which traverses flat country.the Panama Canal incorporates a difFerence

T h e Ship
in land height o f around 26m, which is achieved by negotiating locks.The size o f these locks
governs the size o f ships that can pass through the canal.
A typical Panamax tankers dimensions would be: LO A 225-240m , beam 32.2m, draught 12 -
13m. Some Panamax tankers are traded with clean P roducts, in which case they are reíerred to
as LRI s.
Hondỵs/ze.This loose expression covers ships from 30,000dwt up to 60,000dwt that are more
like ly t o be fo u n d in th e P ro d u cts' tra d e s th a n in th e c ru d e oil business.
Afram ax. Pormerly set at 79,999dwt, the terrn is now applied to ships between 70,000dwt and
I l9,999dw t.Afram axtankers usually have a speed o f around 14-15 knots.
AFRA isth e acronym íorAverage Preight Rate Assessment.These are rates assessed periodically
by the London Tanker Brokers Panel at the behest o f the m ajor oil companies. The majors
use AFRA as a source o f unbiased market rates when they buy seaborne cargoes o f oil from
each other.
Although Aframax ships have been included here in the crude section, the term reíers only to
th e size and such ships m ay also be fo u n d in th e P ro d u cts tra d e , b o th clean and d irty, and in th e
chemical trades, although their specifications differ
A íram ax tanker Stena Alexitơ, employed as a shuttle tanker loading at offshore terminals
C rude oil and fuel oil tankers are equipped w ith heating coils, heated by steam írorn the ships
b o ile rto ensure that the cargo does not become to o viscous to be pumpable.
Because crude oíl includes all the different íractions from light unstable gases to thick ta rry
material, any empty space in a tank would soon be íìlled with a mixture o f gas and air, an
explosive combination. The same risk applies when the cargo has been discharged but oily
residues remain.To reduce such a risk,the em pty space is íilled w ith an inert gas, which is usually
generated from the engine exhaust, suitably treated. The treatm ent device and the pipeline
system is cailed the inert gas system (IGS).
Ship Sale and Purchase 13

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A fte r normal discharge, the sides and bottom s o f the tanks are coated with oil residues. In the
past, these residues were cleaned w ith w ater sprayed around the tank by a device rather like a
giant lawn sprinkler called a Butten/vorth system.This produced an oily vvater emulsion that had
to be dealt w ith separately by the refinery. More recently it was discovered that cleaning could
be done just as effectively by spraying some o f the ship’s own oil cargo under pressure, hence
modern crude carriers are equipped with a crude oil washing (C O W ) system.
T h e size o f ta n k e rs designed fo r c a rry in g re íìne d P e tro le u m P ro d u cts varies vvidely d e p e n d in g

upon the trade fo r which they are intended.A common size ío rth is trade, reíerred to as Lơrge
Range I (LRI), is 45,000-55,000dw t.A largertype, Lơrge Range 2 (LR2), is regularly traded.
s&p brokers will encounter the expressions ‘clean’ and ‘d irty’ in descnptions o f product carriers.
This indicates the type o f trade in which the ships have been. Gasoline o r petrol, kerosene o r
paraíĩìn and other light-coloured products are termed clean, whereas dark-coloured products,
such as heavy fuel oil, are dirty.Tankers regularly in the d irty trades usually have heating coils.
Although it is possible to clean a tanker from dirty to clean, it is an expensive business and
seldom happens.
A lm ost all the cargoes carried in product tankers are intended fo r use w ithout íu rth e r reíìning,
vvhich makes cleanliness and avoidance o f contamination particularly im portant.The tanks are
thereíore coated with an epoxy o r similar inert plastic layer to avoid any risk o fth e cargo Corning
into contact vvith bare Steel and to make cleaning easienTank cleaning in product carriers is by
high-pressure vvashing with water.There is no equivalent o f C O W in product carriers.
Product cơrríers, especially those in clean trades, are abie to segregate grades o f cargoes; the
ability to carry four o r more separate grades is not uncommon.
Chemical tơnkers. Crude oil yields many more materiais than those simply used fo r burning.
There is a wide variety o f by-products, many o f which have fire hazards greater than those o f
gasoline and simiỊar Aammable liquids. There are also major hazards apart from Aammability,
such as reactivity, o r corrosive o rto x ic properties.The tanks o f chemical carriers are invanably
treated w ith some form o f coating so that the cargo never comes into contact vvith the bare
Steel. Sophisticated vessels have stainless Steel tanks, lines and pumps, vvith a deepwell pump in
each ta n k to ensure absolutely uncontaminated and segregated carriage.
The coatings vary because no single coating is impervious to all the likely cargoes, s&p brokers
intending to specialise in the chemical tanker'trades need to be avvare o f the different types o f
coating and the cargoes fo r which they are intended. A principal would not thank a broker fo r
wasting tim e proposing ships w ith a coating incompatible with the buyer’s intended business.
Parcel tankers are a highly specialised ship designed, as the name impiies, fo r the carriage o f
several p a rt-c a rg o e s o r parcels, usually o f chem icals o r P ro d u cts o f a high d e g re e o f p u rity
dennanding scrupulous care in handiing to ensure there is no contamination.The segregation o f
the tanks and pumping systems is especially complex. Four pump rooms are not unusual and in
many cases the pumps, which are hydrauiically driven, are submerged in the tanks themselves.

T h e Ship
Chemical carners load sophisticated and com plex chemicals requinng strict segregation
Liquefied natural gas (LNG) cơrriers. LNG is gas, usually methane, that is íound in its natural State
and is used as a fuel. In some places such as the N o rth Sea, natural gas is pumped straight from
the gas vvells to the gas mains fo r home and industrial heating. As mentioned earlier, to be
transportable in liquid form, LNG has to be reírigerated down to -160°C.This involves special
tanks, otten o f spherical design, quite separate and insulated from the ship's hull, vvhich w ould
o th e w is e become brittle at such low temperatures.
Liquid peưoleum gas (LPG) carriers. LPG is a product o f the reíining o f crude oil, mainly butane o r
propane. It will be fam iliarto smokers as fuel in cigarette lighters o r t o campers in th e ir portable
cooking stoves.There are, o f course, many other industrial uses fo r LPG such as a chemical
íeedstock and in the production o f íertiliser O ther cargoes include ethylene and polyvinyl
chloride (PVC).
LPG carriers are o f various designs: some carry their cargo under pressure to keep it in liquid
form ; others semi-refrigerate the cargo; some are semi-pressurised o r fully reírigerated. The
design depends upon the type o f cargo fo r vvhich the ship is intended.
O th e r bulk liquid carriers may carry special chemicals, acids, vegetable oils, fruit juice o r vvines. In
many o f these cases the containment system does not form part o f the hull structure.

C h a p te r I
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T h e Ship
1.10.2 Tankers and oil pollution

Tanker owners are responsible people and their trade association, Intertanko, has made an
undisputed claim that do-it-yourself m o to r enthusiasts cause more pollution by discarding old
engine oil than is caused by Intertanko members. Howeven a tankers sheer size means that
should it become a casualty, the resulting oil pollution can cause considerable environmental
damage. Any incident is guaranteed to attract signiíìcant press coverage.
Most tankers were designed to carry cargoes in a containment system that form ed part o f the
hull structure. In response to global concern aboưt pollution o f oceans and coastlines by spilled
oil, tankers are now built with double hulls so that if the outer hull is pierced as a result o f a
collision o r grounding.there is less likelihood o f oil leaking out.
In 1990, the USA introduced its Oil Pollution A ct (OPA90), which requires all tankers
entering its territorial vvaters to be double-hulled.This followed several serious oil spills, but
it was particularly a response to the 1989 grounding in Alaska O ÍVLCC Exxon Valdez, vvhich
necessitated a massive, and very costly, clean-up. OPA90 also requires any ship trading w ith the
USA to have a certiíìcate o f íìnancial responsibility (COFR), which ensures that the ow n e r has
the íinancial resources to pay fo r a clean-up should the vessel be involved in a pollution incident.
In Europe, concern - and demand fo r stricter legislation - was intensified after oil spills íronn
the Ehka, o ff the west coast o f Prance in 1999, and from the Prestige, o fí northern Spain in 2002.
The International Maritime Organization (IM O ) to o k up the challenge and agreed to introduce
a revised Regulation 13G o f Annex I o f the International Convention fo r the Prevention o f
Pollution from Ships - universally known as Marpol.
The revised convention decrees that by 2 0 15 all single-hulled tankers will have to be taken o u t
o f S ervice. The trade reíers to 2015 as the 'drop-dead phase-out date’.To ease the impact on
the industry, IM O phased the withdrawal schedule, so that in 2003 tankers built beíore 1973
had to go, in 2004 those built in 1974 and 1975 had to be scrapped, and so on. In the meantime,
most countries have already banned the use o f single-skin tankers and few remain in Service.
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C h a p te r I
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T h e Ship
1.10.3 Bulk carriers - d ry cargo

These are ships designed specifically ío rth e bulk carriage o f loose dry cargo o f a homogeneous
nature such as coal and grain. D ry cargo bulkers are rarely as large as tankers, although Brazilian
mining giant Vale ordered 35 bulkers o f 400,000dwt, most o f which had been delivered by
D ecem ber 2013.
All ships w ithin the bulk carrier category are single-decked w ith machinery and accomm odation
aữ.They have w ide hatches to allow direct vertical loading w ithout the need fo r trim m ing o r
the levelling o f the to p o f the cargo mound.The interior o f the holds is unobstructed to allow
free use o f grabs fo r discharging. Ballast w ater is retained in wing tanks.These have a triangular
cross-section along the bottom s o f the holds and under the deck to act like a hopper, which
aids discharge. The tanks extend the whole length o f the ship, enabling excessive bending
stresses to be avoided w h e th er full, partly loaded o r empty o f cargo. High-capacity pumps and a
comprehensive pipeline system help in the taking on o f ballast and its discharge.
The hopper-shaped holds in bulkers are a saíety feature in the carriage o f grain cargoes. Grain
can flo w like a liquid under the pendulum-like movement o f a ship rolling. The effect is like
carrying a w ide bowl o f w ater: the w ater eventually takes charge and causes the bowl to
become unstable.The same thing can happen to a ship, severely reducing its stability.The upper
wing tanks reduce the free surface at the to p o f the load and so help maintain ship stability.
A buyer w h o plans to use a bulker in the iron ore trade as well as fo r coal and grain, fo r
example, should ensure that the ship is properly strengthened, because the carriage o f iron ore
is an unforgiving trade.
The cargo-handling m ode fo r bulk carriers is lift-on/lift-off, usually by grabs. Loading and
discharging grain, howeven m ore generally involves conveyors and suction. The larger classes
o f bulk carrier are usually gearless, so they are dependent upon shore-based equipm ent fo r
fast loading and discharging.The exception is a class o f sophisticated specialist ships that have
conveyor systems on board and are known as self-unloaders.
Cơpes/'ze.These are ships usually in the 175,000dwt-plus range. Because they are to o large to
negotiate the Suez o r Panama canals they have to be routed either via the Cape o f G ood Hope,
South Aírica, o r Cape H orn, Chile. Recent newbuildings are more than 230,000dwt, w hile Vale's
bulkers, knovvn as Valemaxes, are 400,000dwt.
Panơm ơx/Kơm sarm ơx.Their 60,000-90,000dwt range IS a popular size because such vessels can
carry the m aximum am ount o f cargo within the constraints imposed by the locks in the Panama
Canal; fo r the larger ones the constraint is the W est Afncan bauxite p o rt o f Kamsar, in Guinea.
The Panama Canal locks are being enlarged and vvill be operational in m id-2015. Ships designed
ío rth e new dimensions are known as Nevv Panamax.
Supramax is the name used fo r ships in the 45,000-60,OOOdvvt range.
Hơndym ax are ships in the 3 8 ,0 0 0 ^ 5 ,000dw t range.
Hơndysize.This category covers bulk carriers fronn about 20,000dwt up to 38,000dwt. Many o f
these smaller ships 'írom Supramax downwards' have their own cargo gear, usually cranes.
Ore carriers are designed w ith centre holds and wing ballast tanks and weather-deck hatches
speciíically ío rth e bulk carriage o f ore.The density o f metallic ores means that such ships have a
relatively low cubic capacity. Because o f the rough treatm ent they receive from loading and grab
discharge, ore carriers are generally o f more robust construction than other bulk carriers.

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Naval architect's cross-section drawing o f a bulk cacner
1.10.4 G eneral cargo ships

Containerisation has severely reduced demand íorthis type o f ship, which incorporates holds and
w eather deck hatches fo r carrying a wide variety o f cargoes. Such ships are generally reíerred to
as tramps, because they call wherever they take on and discharge cargoes, as opposed to sailing
on a fìxed route (iiner Service).The cargo-handling mode is lift-on,/lift-ofĩ.Theirtrade is gradually
being taken over by multipurpose vessels (MPVs) and many o f the following features can be
found in MPVs.
Designs may include one o r more o f the following íeatures:
• holds dividecl by one o r more tweendecks with openings giving access to the
lovver spaces
• cargo carried on the vveather deck and hatch covers
• íacilities fo r carrying speciíìc typ e s o f cargo, such as a heavy-lift derrick o r crane, Container
securing arrangements, hoistable vehicle decks, o r deck pens fo r livestock
• strengthening fo r the carriage o f heavy cargo
• a section o f th e ship fo r re írig e ra te d cargo space fo r th e carriage o f perishable ca rgo
• holds o r deep tanks fo r liquid cargo, usually vegetable oil o r latex
• side doors with side loading

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• flush tweendecks to be used by forklift trucks
• a weather-deck ramp
• a ste rn o r q u a rte r d o o r ra m p t o th e tvvee nd e ck (vvhere a d d ition a l ca rgo se g re g a tio n is

provided by hinged d oor openings)
• accommodation fo r up to 12 passengers (the maximum p erm itted vvithout special

íacilities)
• if designed as a passenger general cargo ship it may have accommodation fo r m ore than
12 fare-paying passengers, all in cabins o r berths.
1.10.5 Refrígerated cargo ships

Included in this category are ships having a fully reírigerated cargo space, comprising m ulti-
tv/eendecked holds, specifically fo r perishable cargo.
A reírigerated cargo bhip
The cargo-handling mode may be lift-on/lift-ofĩby way o f weather-deck and tweendeck hatches
or via a side-loading system. Given the wide use o f reírigerated containers, fully refrigerated
ships are largely coníined to specialised trades.
O ther íeatures may include one o r more o f the following:
• the additional carriage o f refhgerated o r chilled liquid cargo in specially designed holds
o r tanks
• the alternative carriage o f othen non-refrigerated types and íorms o f cargo.

C h a p te r I
l.iO .6 C o ntain er shíps

These are designed w ith holds and w eather deck hatches speciíìcally fo r the carriage o f
containers.
The cargo-handling mode is lift-on/lift-off. O th e r íeatures may include holds with cellular guides
and weather-deck-mounted guides to make it easier to position the containers and to restrain
them duringtransit.The most recent desígns are w ithout hatch covers to facilitate uninterrupted
cell guides. Large bilge pumps to prevent a build-up o f w ater in the holds are essential.
Most large Container ships can carry reírigerated containers, which usualiy incorporate their
own cooling machinery and so need to be connected to an electricity supply. A few have vents
that are connected to the ships own reírigerating plant.
Rather than tonnage, Container ship size is invariably expressed in term s o f the number o f
containers that can be carried. As explained earlier in this chapten the great majority o f cargo
containers are either 20ft (one teu) o r 40ft long (tw o teu).
A 9,500teu Container ship
Super post-Panamax is the te rm used fo r the larger Container carriers up to 15,400teu - and
even bigger designs o f up to 18,000teu ane now being delivered. These are used on major
ro u te s and are gearless, so th e v d e p e n d o n so p h istica te d sh o re e q u ip m e n t fo r loading and
discharging. However, they are to o w ide fo r existing shore Container cranes at many ports,
so th e ir trade IS restricted to only a few calling-points. Thev are serviced by cranes vvith an
outreach o f ‘23 across’, m e aning they can lift containers up to 23 Container widths away from
the quayside. Turnround times in p o rt are generally less than 12 hours, but longer for the
iarger vessels.
Containers destined for smaller ports are transhipped into feeder ships, which are often around
1,500teu to 2,000teu, but can be as small as 200teu. Because they tend to serve unsophisticated
ports w ithout cranes, these small íeeder ships often have their own liẾing gean

T h e Ship
1.10.7 R o-ro cargo ships

These are designed w ith decks speciíìcally fo r the carriage o f road vehicles and trailers, and
cargo in pallet form o r in containers loaded and unloaded by wheeled transport. The cargo-
handling mode is roll-on/roll-off (ro-ro).
Some o f the common íeatures o f ro -ro ships are listed below.
® cargo is carried on the w eather deck by way o f an internal ramp o r lift, side ramp, o r lift-
on/lift-ofr
• othertypes and forms o f cargo may be accommodated in holds ortanks underthe main
cargo deck and accessed via deck panels
• cargo-handling may also include lift-on/lift-ofT to and íroiTì the main cargo deck via
weather-deck hatches, with additional cargo segregation provided by hinged o r hoistable
deck panels
• passenger ro-ro cargo ships can carry m ore than 12 fare-paying passengers including the
drivers o f vehicles, w ith all o r m ost being accommodated in cabins
• ro-ro Container ships have an aft section like that o f a ro-ro cargo ship and a segregated
fore section similar to a Container ship fo r the carriage o f containers.The vessel can thus
carry a mix o f containers and ro -ro cargoes
• pure car carriers are a specialised type o f ro-ro. The superstructure o r garage section
c on ta ins several decks o f lig h t c o n s tru c tio n able t o c a rry n e w unladen ro a d vehicles.
PCCs are characterised by slab sides and have the bridge sited high up and well forv/ard
o f the centre line.
A ro il-o n /ro ll-o ff ship

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1.10.8 Passenger ships

Cruise ships are the to p o f this range and are the speciality o f shipyards in Italy, Prance, Germany
and Pinland. Along with the normal w o rk o fth e naval architect, these vessels require know -how
akin to that o f the luxury hotel industry.
Passenger liners, referred to as Class-1 passenger ships, operate on the few remaining scheduled
services.They have multiple decks vvithin the huil and superstructure, and accommodate more
than 12 fare-paying passengers, all vvithin cabins.
O ther íeatures may include one o r more o f the following:
• carriage o f a limited am o un t o f cargo in one o r more holds;
• carriage o f passengers in dorm itory-type accommodation.
The following are included in this category:
Passenger (erries have one o r more decks and superstructure decks speciíìcally fo r the carriage
o f numerous fare-paying passengers on a regular scheduled Service o f relatively short duration.
There may be no cabin accommodation at all, o r cabins may be available fo r only some o f the
passengers. Passengers w ithout cabins are often provided w ith reclining seats.
General cargo pơssenger [erries have the same function as passenger íerries but include one o r
more holds fo r general cargo, the cargo-handling mode fo r which is lift-on/lift-off.
Vehide passenger (erries have a similar íunction to passenger íerries with the addition o f one o r
more cargo decks ío rth e additional carnage o f passenger and íreight road vehicles.The cargo-
handling mode is roll-on/roil-ofĩ.The passengers themselves drive their own vehicles on and o ff
th e ship.
A limited amount o f other types o f ro-ro cargo may be carried. O u t o f season, some o f the
vessels are converted fo r cruising.
Train/vehide/pơssenger [erries operate in a similar way to vehicle passenger íerries but have a
cargo d e c k íitte d vvith fix e d ra ilw a y tra cks t o c a rry passenger coaches a n d /c r raiivvay wagons.
1.10.9 T h e short life of th e com bination c arríer

Ore/bulkỉoil (OBO), combinơtion carriers, ore/oil ( 0 /0 ) carriers all come underthis heading. In the
late I960s an idea was put íorv/ard to reduce the bailast legs períormed by both bulk carriers
and oil tankers. Ships tended to carry bulk cargoes in one direction only and fo r the journey to
the next loading p o rt had to take on vvater ballast. Combination carriers vvere designed to carry
bu lk cargoes such as iro n o re in One d ire c tio n th en , a fte r th e ca rg o spaces had been cleaned.
load oil at a nearby instailation and take ít backto as close as possible to another bulk ore port.
An example míght be a cargo o f oil from the N o rth Sea to the USA and a cargo o f coal o r iron
ore írorn N o rth America back to Europe. Ultimately, safety concerns and ensuring cargo quaiity
kept these vessels in just one trade, either w et o r dry.
In recent years, Taivvanese com panyTM T ordered some very large combination carriers, but
they have not proved a success and the company filed fo r bankruptcy in June 2 0 13.
1.10.10 M is c e lla n e o u s t y p e s
Livestock carriers are designed with hull and superstructure multi-deck pens and sanitation
arrangements speciíìcally fo r the carriage o f livestock. Livestock is walked on and walked off, via
ram pSpto and fr o m th e c o n ta in m e n t areas.
Fishing vessels include trawlers, íactory ships and live fìsh carriers. There are still a few whale
catchers and whale íactory ships.

T h e Ship
Offshore vessels include the following specialised types:
• supply ships have a weather-deck cargo space and carry stores and cargo to offshore oil
and gas exploration and production installations
• support ships are o f similar design to supply ships but are fitted with equipment for well
stimulation, pipeline and cable trencher support, well maintenance and search and rescue.
O th er activities may include anchor handling, fire-fighting, oil dispersal and standby safety
• drilling ships fo r ofFshore oil and gas drilling operations
• pipelaying ships are e q u ip p e d fo r pipelaying and re p a ir o p e ra tio n s associated w ith o íĩs h o re

oil and gas production
• of[shore well-production ships are designed fo r th e extraction, Processing and storage in

integral tanks o f oil from offshore vvells
Tugs to w o r push ships and non-self-propelled units such as barges o r other íloating structures.
They may also undertake salvage, fire-fighting, ice-breaking, oil dispersal and similartasks.
The 80 tonne bollard pull tug Anglian Monarch
Pusher tugs propel barges and pontoons, and are widely used in such rivers as the Rhine and
the Mississippi.
Dredgers are sophisticated vessels designed to raise material from the seabed by means o f cutter
suction equipment, grab (known as a backhoe), bucket o r ladder.The material is deposited into
the vessels own cargo space o rth e cargo space o fa n o th e r vessel alongside. Some dredgers can
discharge sand o r mud by'rainbowing' (spraying) slurry from vessel-mounted nozzles.

C h a p te r I
LN G ship w ith Moss spherical ta n k design
Typical Vessel Specifìcations
Size 66,500 dw t
Length 290 metres
Beam 42 metres
Draught 10.7 metres
Capacity I30,000m '
Cargo tanks 5 reírldgerated tanks
Pumps 10 X 1,1 OOm^ (2 pumps per tank)
Main engine 45,000 bhp

Chapter 2
Geography
Corinth Canol
The cơnơl’s construction started in 18 8 1 and was completed in 1893. But soon the
canal vvơs too narrow to handle the increơsing size o f m erchant ships.
C h a p te r 2
Shipping is an international business. Ship owners, operators, brokers, managers, agents and o th e r
specialists within the business are ultimately concerned with transporting materials, equipm ent
and people from one part o f the w orld to anothen It is vital, thereíore, fo r all those engaged in
the business o f shipping to have a good working knowledge o f maritime geography.
You will find it useíul in this context to have access to a maritime atlas such as Lỉoyds M aritim e
Atlas o rth e ShipsAtíơs.
It is, o f course, im portant to know vvhere oceans, seas, canals, continents, countries, ports and
waterways are situated and the best way to do that is by írequent reíerence to atlases.Try to
develop an interest in maps, and always look up places vvhen you are unsure where they are.
TutorShip vvorkbooks published by the Institute o f Chartered Shipbrokers include a w orld map.
2.1 SEABO RNE T R A D E

Moving goods by sea o r watenA/ay is by ía rth e most economic method o f transport in term s o f
the cost per ton-m ile o r tonne-kilom etre (cargo volume multiplied by distance carried). M ore
than 95% o f the w o rld ’s trade is carried by sea and that trade increases by about 4% annually. In
2 0 12 seaborne trade amounted to 5,674.02m tonnes, an increase o f 4.3% over 2 0 1 I .
Clearly sea transport plays a crucial part in international trade and improved effìciency in ships
and cargo handling has helped to reduce the overall cost o f sea transport in real term s year on
yearThe cost reduction has stimulated w orld trade and contributed to the steady increase in
the volume o f cargo shipped.
The commodities that are moved in the largest volumes across the vvorlds oceans are crude
oii and oil Products, coal, metal ores, grains and gas. In this c h a p te r we shall look at these
commodities and the trading patterns associated with them.
2.2 C O M M O D IT IE S
2.2.1 O il
C rude oil is undoubtediy the single most im portant com m odity traded in the w orld today.
W e depend on oil Products to povver every form o f transport, fo r heating, povver generation
and countless other uses.The w orld demand fo r oil continues to increase and in 2012 ships
transported 2,067.21 million tonnes o f crude oil and more than 885.78m tonnes o f oil products,
an increase o f 1.7% over 2 0 1 I .
C rude oil is a natural product, and major oiifields have been discovered and exploited in various
parts o f the w orld - principally in the Middle East, the Caspian Sea, equatorial W est Aírica, the
Caribbean and u s Gulf,the N o rth and East o f South America, the N o rth Sea and other smaller
production areas. Production in China and the USA has also increased.
Economics dictate that the most cost-effective system is to transport the crude product to
reíineries close to the end-users.The largest ships are usually the crude oil carriefs, vvhich aiso
tend to travel the greatest distances.
(See page 4 1 fo r map).
The size o f crude oil carriers is limited principally by the restrictions at the main loading and
discharging points.These are not necessarily ports, as both loading and discharge terminals are
often located oATshore. One such íacility is the Louisiana Offshore Oil Port (LOO P) in the u s
Gulf. Crude oil tankers are specifically designed fo r this purpose and are rarely, if ever; used in
any other trades because o f their size.

G e o g rap h y
2.2.2 Gas
Liquefied natural gas is the main type o f gas transported by sea. In 2 0 12 LNG cargoes totalled
288.3 I m tonnes, an increase o f 5% over 2 0 1 I T h e main sources o f LNG are Qatan Abu Dhabi,
Nigeria, Angola, Australia, Brunei, Malaysia.Tnnidad and the USA.
(See page 43 fo r map).
2.2.3 Coal
Coal is used fo r both pow er generation and as a heat source fo r industrial processes such as
steel-making. A bout 7,678m tonnes o f coal a year are mined, o f which 1,1 13.45 million tonnes
were transported by sea in 2 0 12, an increase o f 9.9% over 2 0 1 1. Coal is shipped from the
sources o f p ro d u c tio n to m a jo r in d u stria l ce n tre s w h e re m o s t o f th e Steel is m ad e and p o w e r is
consumed. Although burning coal is not a very environment-fhendly process, it is nevertheless
used to generate around 40% o fth e vvorlds electricity.
Coal is transported by bulk carriers that are usually loaded by conveyor from shore and
discharged by grab-fìtted cranes, often at specialised terminals that serve steelworks o r pow er
stations. Alternatively, a geared ship may discharge using íts own cranes.
W here deep w ater is available at both loading and discharging ports, Capesize vessels
o f over 150,000dwt can be used to take advantage o f economies o f scaie. W h e re size o r
other restrictions apply, Panamax ships o f 60,000-80,000dw t o r smaller handymax bulkers
are employed.
2.2.4 Ores
Most o f the world's metals are produced from smelting mineral ores, such as iron ore o r
bauxite, which produces aluminium. In most cases the smelting is carried out at some distance
from the mine.
Iron ore, used fo rth e production o f iron and Steel, is the single largest product traded w ithin this
group. In 2 0 12 about 1,092bn tonnes o f iron ore was moved in ships, an increase o f 6.5% over
201 I.
Most ores are far more dense than coal. Coal has a stovvage íactor o f around 50 cubic feet per
tonne compared w ith about 14 cubic feet per tonne fo r a typical iron ore. A t one tim e ore was
carried in specialised bulk carriers w ith relatively small holds on to p o f deep double-bottom
ballast tanks to cope with this characteristic.
Nowadays, ores are carried fo r the most part in general-purpose bulk carriers, m ost o f which
have Aexible ballasting arrangements and strengthened bulkheads to allow them to carry a
much w ider range o f bulk cargoes.
Ores are normally loaded and discharged at specialised terminals. Typically, an ore-loading
terminal will have deep w ater alongside.to ailow large bulk carriers to be loaded, and extensive
stocking areas íeeding cargo into the ship by a series o f high-volume conveyors.
Specialised gantry-type grab-fitted cranes will usually carry out discharging, with cargo being
removed from the quay by conveyor belt to storage compounds.

C h a p te r 2
2.2.5 Grains
Most grains traded in bulk are destined fo r human o r animal consumption, and include vvheat,
sorghum, soya, rice and the seeds o f such crops as rape, sunflower; flax and cotton. Some are
íu rth e r processed into pellets o r meal.
In 2 0 12, annual carriage by sea amounted to some 227.06m tonnes, an increase o f 2 .1% over
2 0 1 I , in bulk carriers very similar to those used in the coal and ore trades.
M ost grains have a similar stowage ía c to rto that o f coal. Bulk vvheat stovvs at about 4 5 -5 0 cu ft
p e rton ne .T h e details o f reported fixtures in the grain market often describe cargoes as ‘HSS’.
The te rm reíers to heavy grains, soyabeans and sorghums, which have a bulk stowage factor of
about 50 cu ft pertonne.
Some grains and seeds carried in bulk can be dangerous because they are prone to shifting
at sea.To avoid this problem, some ships have self-trimming íacilities o r special wing tanks that
bleed cargo into the main hold to ensure that there is no space left in the hold to allovv the
cargo to shift.
Alternatively, the free surTace o f bulk grain cargoes may be over-stowed with bagged grain to
stabilise it.
Loading is usually by grain elevators from shore silos. As with all cargo handiing, tim e is money,
and sophisticated grain-loading equipment is capable o f loading ships at a rate in excess o f
30,000 tonnes per day. Discharging facilities may vary considerably.the íastest and most efficient
being the pneumatic suction systems employed at most o f the m ajor grain im porting ports,
though other methods include mechanical bucket o r screw elevators and, in some cases, simply
grabbing out with shore cranes.
Production o f grain fo r e x p o rt is concentrated in íertile agricultural areas, such as the N o rth

Amencan grain belt, Argentina, Uruguay and Brazil in South America, Australia, N e w Zealand,
Thailand and its neighbours in the Far East, and Russia. Grains and seeds are purchased by the
industrialised countries but are also shipped to developing countries as seed fo r planting, human
o r anima! consumption, o r as famine relieí.
Like all agricuitural products.the volume o f grain available ío rtra d in g w orldw ide depends on the
quality o f the Harvest around the world, vvhich aíĩects volumes, prices, availability and, to some
extent, even trading patterns.
2.2.6 O th e r bulk dry cargoes

In addition to the commodities mentioned above, more than i bn tonnes o f o th e r d ry bulk cargo
is moved by sea every year.These cargoes include Steel, minerals, íertilisers, building materials,
tim b e r and manuíactured goods.
Some o f these P ro d u cts require specialised ships, such as reíngei-ated (‘reeíer’) carriers for
fru it, vegetables, ír u it juices and m e a t P ro d ucts.T he se ships have insu la ted h o ld s e q u ip p e d w ith
reírigeration equipment to keep the high-value cargoes vvithin the correct tem perature range.
They are also iikely to be designed fo r a relatively high speed. so that the produce can be
delivered quickly and in good condition.
O th e rtyp e s o f specialised vessels include those íortransporting m o to r vehicles and livestock.
2.2.7 Containerised cargo

Q uite separate from the bulk and liquid trades identified above is the sector o f unitised o r
containerised cargo. In its vvidest sense, unitised cargo includes palletised goods, packaged timben
34 institute of Chartered Shipbrokers

G e o g rap h y
'jumbo' bags and pre-slung cargo, plus the specially designed lighters and barges used in lighter
aboard ship (LASH) systems.
The íreight Container revolutionised the general cargo trade. Steady advances in technology in
ship design and cargo-handling equipment, heavy investment in terminals, and the adaptation
o f road, railvvay and inland watenA/ay transport to enable transportation o f the now íamiliar
20ft and 40ft containers have created a globally standardised multimodal transport system.The
ability to fill and em pty containers at points remote from ports and terminals, the reduction in
theft and damage, and the use o f multiple transport modes to allow a true door-to-door Service
have benefited many trades, especially in manufactured goods. Pierce competition in the m ajor
Container routes has reduced íreight rates in real terms and encouraged eíĩìciency.
(See page X X X fo r map).
Establishing an in te g ra te d C o n ta ine r Service re q u ire s a v e ry large Capital in ve s tm e n t in specialised

ships, berth íacilities, terminals and depots, handling equipment, road, rail and watenây
connections, and, o f course.the actual containers. As a result, such services from the very outset
involved deepsea Container vessels trading between major terminals supplemented by smaller
Container íeeder vessels that provide the links to smaller ports and terminals in the area.
This hub-and-spoke system has developed to the stage where Container transit times are now
very fast and reliable. There are few parts o f the w orld from which d oor-to-doo r Container
services cannot be offered, and even these are catching up fast. The Chinese inAuence on
Container trades cannot be over-emphasised.
2.3 N A T U R A L P H E N O M E N A A N D N A V IG A T IO N
2.3.1 Tides
Tides have a considerable eíTect on merchant shipping, as they determine available draughts
and, in some cases, define periods o f maximum and minimum p o rt use.Tides are caused by
the gravitational attraction o f the sun and the moon. Although the sun is much bigger than the
m o o n.the m oon is much closer so it has more than twice the tidal eíTect o f the sun.VVhen the
m oon is new o r full, the gravitational attractions o f the Sun and Moon combine to provide an
extra-high tide called a spring tide. During a half m oon.the tw o gravitational pulls cancel o u t to
give more nearly equal neap tides. As the moon's orbit is not quite circulan its distance and tide-
íorm ing capacity continuaily vary and tidal predictions are published to assist navigation at many
locations.The follow ing diagram shows spring and neap tides.
Spring
Tides
<s>
This diagram dem onstrates the solar and lunar gravitational pulls inAuencing tides

C h a p te r 2
It is useful to know how long reasonable tidal levels will remain so that cargo can be discharged
and vessels remain always afloat. In some ports it is impossible ío rth e vessel to remain alvvays
aíloat, so the terms 'not alvvays afloat but saíely aground' (NAABSA) may be negotiated.
2.3.2 Ocean currents

Ocean currents may be divided into:
• th o s e caused by th e w in d ;
• those caused by the distribution o f water masses o f varying te m p e ra tu re s , salinity

and density;
• tidal currents.
Currents flow at all depths in all the oceans, but mariners and shipbrokers are usuaily only
interested in suríace currents and the effect they have on ships.The main cause o f currents in
the open ocean is the direction o f winds blowing on the sea suríace.
W arm currents fiowing from the tropics, such as the G ulf Stream, not only ensure a tem perate
climate ío rth e British Isles but even keep ports as far north as Narvik in Nonây ice-free all the
year round. Conversely, currents from the poles, such as the one sweeping down to the north
o f Japan, result in severe w inters on the island o f Hokkaido even though it is several degrees o f
latitude íarther South than England.
Sea fogs occur where warm, moist winds blow over cold currents, lowering the tem perature and
causing condensation. One o fth e most íamous areas fo r sea fog is o ffth e coast o f Newfoundland,
vvhere the vvarm N o rth Atlantic d rift meets the cold Labrador current. It is most apparent from
May to SeptembenThe same phenomenon occurs o ff the coast o f Caliíornia between June and
December, in the Bering Sea betvveen June and August, the Baltic region between N ovem ber
and January and the Hudson Bay betvveen June and September
Cold currents from the polar regions also carry one great hazard to shipping during the
summer thaw: icebergs.These giant sections o f the polar ice cap o r glaciers break away and are
carried into shipping lanes by currents. Icebergs carned by the Labrador current are found in
the Newfoundland area beíore breakíng up when they meet w arm er seas. A combination o f sea
fog and icebergs, as found o ff the coast o f Newfoundland, makes navigation extremely diíĩìcult
and only nelatively recently has new technology helped Masters o f vessels to detect and avoid such nsks.
2.3.3 Cyciones
These regions o f low atmospheric pressure split into tw o types. The íirst is a depression
characteristic o f temperate iatitudes and the second IS a much more violent phenomenon,
though generally covering a smaller area and typical o f the tropics, usually called a tropical
cycione.The tw o types are similar in that the winds in the N o rth e rn Hemisphere circulate in an
anti-clockwise direction around its centre (o r eye) and in the Southern Hemisphere they revolve
in a clockvvise direction. Ovei" north-w est Australia.the tropical cycìones experienced are called
VViliy-VVillies and occur between January and A pril during the late summer period.They then
v e e rto the south-east, cross the coast and bring heavy rain overland through Australia, affecting
ports such as Dai-v/in and Port Hediand.
In the China Seas a tropical cyclone is term ed a typhoon and is generally experienced between
May and Decemben although the maximum írequency is betvveen July and SeptembenThe
Philippines are directly affected, as is Southern China. Like all tropical cyclones, typhoons have
winds o f tremendous strength and torrential rain and may generate tidal waves affecting ports
such as Shanghai and Manila.
The term 'monsoon' is generally applied to a wind system where there is a complete, o r almost
complete, reversal o f prevailing direction írom season to season. It is especially prevalent vvithin

G eograph y
the tropics on the eastern side o f the great landmasses, although monsoons do occur outside
the tropics. In East Asia the monsoon belt reaches as far north as about 60°N. South-east Asia
is pre-eminently a monsoon region. M onsoon gales in the Arabian Sea occur generally from
June to August, although tropical storms in the same area may occur any tim e betvveen May and
Novem ber Extremely heavy rains are experienced and also strong winds and heavy seas. Ports
affected include Mumbai and Bedi on the w est coast o f India.
rh is image shows the size and íorm o f HutTÌcane Katrina as it revolves around the 'eye'
The tropical cyclones o r revolving storm s o f the W est Indies and G ulf o f Mexico are known
as hurricanes.They usually originate east o f the islands, occasionally as far east as Cape Verde
and take a westwards course, sometimes causing extensive destruction on one island after
another before generally heading north-east. The G ulf coasts o f the United States and the
eastern side o f Central America, as far as the M osquito Coast o f Nicaragua, are also affected
by hurricanes. Havana (Cuba) and Miami (Plorida) are among the ports affected. Costa Rica,
Panama and the northern coast o f South America, however, lie oưtside the hurricane region.
The hurricane season runs from June to November, w ith a maximum írequency from August to
October:'Hurricane’ is also the te rm given to the tropical cyclone experienced o ff the coast o f
Queensland, Australia. Hurricane winds have a mean velocity o f more than 75 miies per houn
equivalent to a wind íorce 12 on the Beauíort Scale.
The Beaufort Scale was devised by Prancis Beauíort in Ị 805 as a standardised assessment o f
wind conditions. For example, 0 on the Beauíort Scale represents calm, the air being practically
motionless, while 12 represents a hurricane.the sutface wind speed being greaterthan 75 miles
per hour.The various wind velocities to vvhich numbers on the Beaufort Scale relate have been
internationally agreed.
W ith;n the term s o f a tim e charter; the speed o f a vessel will be related to a certain number
on the Beauíort scale, usually 3 o r 4.The object is to lay down a petformance Standard ío rth e
vessel at the prescribed speed w ith prevailing winds up to a maximum o f force 3 o r íorce 4.
Should it not períorm at this speed, then the charterer may make a speed claim against the
ovvner fo r non-períormance.
A nother scale used fo r reporting conditions at sea and sometimes used in vessel períormance
descriptions - and sometimes in subsequent disputes - is the Dougias Sea State Scale. This
describes th e State o f th e sea in te r m s o f w a ve h e ig ht. If aíĩected by s to rm y w e a th e r several
miles away,the suríace o f the sea can be sufficiently rough to affect a vessel’s speed even though
the wind in the immediate vicinity is not particularly high.
Between latitudes 40°s and 60°s, where there are very few landmasses, the winds are very
strong and are known as the Roaring Porties.

C h a p te r 2
2.3.4 Ice
Shipping can also be seriously aíĩected by ice. Certain ports freeze fo r varying periods o f
time during w inter and it is im portant to know where and when ice conditions are likely to be
encountered.
A pa rt from Arctic and Antarctic regions, the main areas where ice affects shipping are:
• the Baltic Sea betvveen Novem ber I and March 3 1, affecting the ports o f St Petersburg,
Helsinki, Luleâ and Stockholm
• the St Lavvrence River between December 3 1 and March 3 1 - Montreal, Baie Comeau,
Port C artier
• the St Lawrence Seavvay b e tw e e n December 15 and A pril I.The op e n in g and closing

dates fo r vessels transiting the Seaway vary from year to year depending on the severity
o f the winter.To avoid vessels beingtrapped in the Great Lakes, the St Lavvrence Seavvay
A uthority publishes the proposed ciosing date well in advance. VVhile it may still allow
vessels to pass through the Seaway aíter the oíĩicial closing date, subject to weather
conditions, the authority will impose a heavy fine fo r each day the vessel delays.
Ice poses a serious risk to ships
The te rm Tirst open water' (FO W ) means the íirst date at vvhich vessels can enter an area o f ice
in relative saíety. However; additional Insurance premiums vvould still have to be paid over and
above normal rates.
In addition, ice conditions are prevalent in Albany, situated on the Hudson River Churchill,
situated in remote Hudson Bay, is open fo r navigation only between the end ofJuly and Octoben
O the r areas affected are the coast o f British Columbia, the east coast o f Russia, northern China
and N o rth Korea betvveen O ctober and May, and the Black Sea ports o f Russia and Romania.
The main means o f keeping ice-restricted ports open during the w inter is the icebreaker.This
is especially so in the Baltic and the G ulf o f St Lawrence. During severe w inter conditions,
however; even these specialist vessels are unable to operate totally successíully. Pinland
and Russia lead the w orld in the development o f icebreakers, including the use o f nuclear-
powered vessels.

G eo g rap h y
Reports and íorecasts about ice conditions in the N orthern Hemisphere are available every
winten BIMCO publish these fo r N orth-w est Europe and Scandinavia, and the Canadian
government does the same fo r its vvaters,
Merchants whose usual ports and routes are closed by ice must use aiternative means o f
transport (such as rail) to connect w ith ports that are free from ice, such as Narvik and the
Atlantic seaboard ports o f Canada.
Severe vveather conditions do not merely intetfere with safe navigation. Cargo-handling
operations in ports and interior transport routes may also face diíĩiculties. In severe cold, fo r
e xa m p le , Steel b e co m e s m o re b rittle and m a c h in e ry can fail. Diesel oil becomes w a x y o r freezes,
and, o f course, human beings cannot function properly fo r long in extremes o f tem perature.
Monsoon rain is bound to disrupt cargo handling and may well cause delays to inland transport.
Tropical stornns can similarly wreak havoc by damaging p o rt installations, warehouses, road and
rail transport as well as ships in port.
2.3.5 W e a th e r routeing
Sophisticated weather reporting and íorecasting technology have enabled specialist companies
to offer ‘vveather routeing' services to ships' Masters. O n contracting with a vveather routeing
providen the master receives iníormation about the weather likely to prevail on the voyage
and is given advice on the course to take to avoid the w orst conditions. During the voyage
th e ship keeps in to u c h w ith th e ro u te in g Service b o th t o r e p o r t o n th e w e a th e r th e ship is
actually experiencing and to receive any amendments to the suggested route as a result o f the
updated forecast. N o t only can this Service make fo r saíer and quicker passages but also the
data recorded by the routeing company can provide expert evidence when a dispute arises
about the eíĩect o f vveather on a voyage.
Even w ithout actual vveather routeing advice, satellite communication systems enable ships to
receive up-to-the-m inute weather iníormation including íorecasts, charts and satellite images.
Nevertheless, casualty reports still contain reíerences to ships sunk vvithout trace and often the
suspected underlying cause is the weathen
Insurers take account o fth e increased risks caused by climatic conditions and increase premiums
to be paid by ship ovvners if they intend to trade outside the International Navigating Conditions
( I / 1 I /2003) - clause 32 o f hull clauses.
2.3.6 Salinity of th e oceans

Oceans make up 70.8% o f the Earths suríace so cover a far greater area than the land. All the
world's oceans are saline o r consist o f salt waten but the concentration o f salt, which afFects the
density o f the vvater, is not uniíorm.The variations in salinity are caused by:
• changes caused by mixing and circulation;
• w ater evaporation rates;
• supplies o f íresh w ater
W a te r w ith the highest salinity is found near the tropics as a result o f the high evaporation. It
is low er at the equator because o f the heavy rain and lovver evaporation. Towards the poles,
melting ice supplies íresh w ater and hence salinity levels are lower.

C h a p te r 1
2.4 N A V IG A T IO N A L A N D SEASONAL Z O N E S
Ciimatic conditions aíĩect even todays highly sophisticated ships.Thanks to the efforts o f social
reíorm er Samuel Plimsoll at the end o f the 19th century, a system o f marking the position o f the
minimum íreeboard (the distance íroin the waterline to the main deck) on all British ships was
introduced. In the early I930s a reíìnement o f this system became an international convention.
The Plimsoil Mark takes into account the diữerence in vvater density around the w orld and
prescribes a greater íreeboard in areas vvhere severe vveather is prevalent Some loadline zones
are permanent whereas others are seasonal.
The depth to vvhich a ship is allovved to load determines the w eight o f cargo it can carry, and
this in turn affects the íreight payable. It is im portant to take this íactor into account when
calculating voyage estimates. During a voyage, a ship may cross írom one loadline zone to
another more than once, and its draught must not exceed the maximum limits fo r each zone.
This is com plicated by the changing seasonal limits in some zones, so the dates o f Crossing such
zones must also be considered.

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Chapter 3
Ship Registration
PLA building
N um ber lOTrinity Square was built in 1922 and was the form er heơdquơrters o f
the Port o f London Authority. It overlooks the RiverThames and in 1946, it hosted the
inơugural meeting o f the General Assembly o f the United Nơtions. It also stơrred in the
jam es Bond film Skỵfơll.
C h a p te r 3
3 .1 T H E NEED FOR R E G IS T R A TIO N

Every ship must have a name and also an established identity, p o rt o f registration and nationality
beíore it sets forth on the oceans o f the world. The ow ner must declare to the registrar o f
shipping, o r other appropriate authority, their interest according to the flag under which the
vessel is intended to trade. Details o f the ship, with plans and other data, have to be filed.W hen
íormalities are completed and the ship's tonnage veriíìed by the registry's government-appointed
surveyonthe ow ner will receive a certiíìcate o f registration. On this certificate will appearthe
oAHcial number allotted to the ship together with its p o rt o f registry, details o f tonnage and
construction with the name o f its ow nerThe registration certificate is the most im portant o f
the ships papers and must be kept aboard in the custody o fth e Master
Registration o f merchant tonnage is compulsory throughout the world. Only small coasters and
íishing vessels that never venture out o f territorial waters, o r small pleasure boats in private
ovvnership, may, in some countries, be exempt from compulsory official registration. A ship on
the open ocean is considered part o f the te rrito ry o f the country under whose flag it sails. Its
name must appear on both sides o f its bow and also at its stern, where the p o rt o f registry
must also appeanTraditionally.the merchant marine flag o fth e country o f registration is flow n at
the stern. Howeven the certiíìcate o f registry is the only acceptable evidence o f identity and its
production to people at sea o r ashore entitles those on board to the protection and assistance
from its country and its representatives. In tim e o f wan provided it is not violating neutrality o r
trying to run a blockade, it is entitled to full protection under international law and should be
free from seizure o r arrest. But it may be requisitioned by a government in times o f emergency.
A ship that is not oíĩiciaily registered and vvithout identity papers IS eữectively stateless, and
might even be regarded as a pirate ship.
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A page from a 19''’ century Lloyds Register o f Shipping
There IS no consistency o f qualiíìcation required for the bodies o r people entitled to register
ships to, and claim the protection of, a particular country. It follows that the degree o f control
over ship ovvners and the conditions under vvhich their ships trade differ from flag to flag. N ot

Ship R e g is tra tio n
only does this apply to their civic and tax liabilities but also to minimum manning levels, living
conditions and general maintenance o f the ships themselves.The extremes lie betvveen, on the
one hand.those flags whose only requirement ís a modest registration fee in return fo r a listing in
the national register and the painting o f the shipowner’s name on the oíĩìce door o f an attorney
and on the other hand.the demands and regulations o f the traditional maritime countries.
O n the vvhole, traditional maritime countries require owners to have a permanent place o f
business vvithin the national te rrito ry and to be nationals o f the country.
Taking the UK as an example, originally none but British subjects were perm itted to register
the ovvnership o f merchant ships in their own names underthe Red Ensign (the UK's merchant
shipping flag). Now, with the open borders o f the European Union, a citizen o f any EU m em ber
State with an otĩìce in the UK may register under the British flag. Nationals o f o ther countries
may share in the ownership by investing in a limited company o r other corporate body that has
its place o f business in the te rrito ry where the ships are registered.These overseas investors
may be subịect to taxation by the country o f registration.
It is a long-held tradition that ownership o f a British ship is considered to be divided into 64

individual shares.as íorm erly merchants would c lu b to g e th e rto íinance a ship-owning enterprise.
Should a single person own the entire ship.they will be registered as the possessor o f 64/64ths.
Today, though, British ships are invariably owned by limited companies so the 64ths rule is largely
irrelevant.The p o rt o f registry may not be the same as the business address o f the owners, w ho
may have their place o f business anywhere within the United Kingdom. In such cases the p o rt o f
registry will probably be the one most frequently used by the ship o r simply a commercial p o rt
w ith a long maritime tradition.
O th e r maritime countries have their own rules, laws and traditions in connection w ith
registering ships.
3.2 T H E G R O W T H OF *O P EN ’ REGISTRIES
Traditional maritime countries have tended to impose stringent safety and employment rules on
ships registered undertheirílags.The num berand proíìciency o f personnel employed on board
ship are strictly regulated, and often íu rth e r reiníorced by powerful trade unions, vvhich also
impose minimunn wage levels.As many oíthese developed countries have high rates o f taxation,
registration under a traditional flag has become increasingly expensive and, as a consequence,
less populan
Some decades ago, a handíul o f countries established far less stringent maritime laws, imposed
little o r no taxation beyond the actual cost o f ship registration and as a nationality qualiíìcation
required nothing more than a small brass plate on the entrance to an a tto rn e /s ofFice. O w ners
soon saw the benefits o f trading under these flags and they have developed into a m ajor force
in w orld shipping.
Traditional maritime countries countered the threat posed by these cheaper flags by ensuring
tha t preíerence fo r cargoes w ent to locally registered ships. The profit motive is o f prim ary
im portance and ship owners naturally consider the incentives available when deciding under
vvhich flag th e ir vessel should trade.
Im portant íactors in the ship-owner's decision-making are the diíĩerence between wage levels
in one country compared with another and the presence o f powerful trade unions.To attract
seaíarers, a ship ow ner in a high-cost country will be expected to match shore-based wages,
which vvill result in a correspondingly higher wage bill. The United States was among the
earliest countries to fìnd that ships Aagged in a high-cost country become uncompetitive in the
international market o f shipping business.
Since the early 20th century there have been close links between the USA and the Republic
o f Panama, and Panamas registry fo r overseas-owned ships thus became the first to gain full

C h a p te r 3
international legal recognition in the l920s.The incentive was cheap laboun and in 1939 a treaty
was signed between the United States and Panama that allowed profits from shipping to be
exempted írom taxes.This made it attractive fo r us owners to take advantage o f íreedom o f
employment while obtaining tax beneíìts.
Panamas neutrality was an additional encouragement fo r us and o ther ship owners as it

permitted them to trade under the Panamanian flag in vvartime. Honduras was similarly
attractive at that time, because it was considered safe fo r us investment. M ore than 100 US-
controlled vessels traded under the fiags o f Panama and Honduras during the Second W o rld W ar
%
The flag o f Panama, one o f the onginal open registnes
Liberia, in west Aírica, was created in 1847 as a homeland fo r íreed American slaves; liber being
Latin f o r ‘free'. Its Capital, Monrovia, was named after u s President Monro. It became the third
o f the original trio o f free ílags. Liberiấs close links with the USA made it another country
especially favoured by u s ship owners.
Because o f the relaxed regulations and minimum taxation regime, a registry o f this kind is
often called a ‘flag o f convenience' (FOC), Howeven the flags themselves consider this to be
a derogatory term and preíer the term ‘open registry' (because it is open to ships owned by
non-nationals).
They attracted many ship owners w ho felt their own nationai flag had become uncompetitive.
Uníortunately, they not only attracted reliable ship ovvners seeking competitive rates, but also
less experienced owners that vvanted to take advantage o f relatively lax saíety rules. A much
used tactic is to establish a separate limited company fo r each ship, which limits liabiiity and
tends to shield the ultimate ovvner from legal action, financial investigation and media scrutiny.
Owners exploited the fact that their ships rarely needed to visit hom eports o r meet acceptable
standards o f maintenance, crew welfare and saíety. Unscrupulous owners and the most lax o f
the FOCs have damaged the reputatíon o f open registries.
3.3 T H E C U R R E N T SCENE
The list o f countries oíTering open registration has grovvn considerably and today includes
Comoros, Costa Rica, Cyprus, Haiti, Lebanon, Marshall Islands, Mongoiia, Oman, San Marino,
Sierra Leone, Somalia and Vanuatu, in addition to the trio o f pioneers.
The newer open registries have followed the example o f Panama and Liberia in establishing íìscal
incentives to encourage ship ovvnersto registertheir vessels under their Aags.The incentives are
continuously reviewed to suit the current market situation and include;
• n o ta xe s o n p ro íìts, n o fìscal c o n tro l; th e o n ly ta x is a s u b s c rip tio n ta x p e r net

registered ton;
• no labour restrictions; vvage rates are Aexible;
• limited liability;
• no political restrictions on íreedom o f tra d e ;

Ship R e g istratio n
• ílexible corporate laws;
• easy financing because o f simple mortgage laws;
• no risk o f political instability o r nationalisation;
• simplified regulations and saíety rules.
In the past, lax control and a íailure to eníorce saíety standards characterised open registries,
pertiaps uníairly in some cases. It has been said that there are no bad flags, only bad ship owners.
3.4 T H E P O S IT IV E A N D N E G A T IV E ASPECTS
OF O P E N REGISTRIES
Shipping is surely the most international o f industries. A charterer seeking a ship to carry its
cargo places its business on a market that economists describe as the nearest one can get to
períect com petition.
In this context, a shipping company vvith a low vvages bill, little o r zero taxation on income, and
a minimum o f regulation affecting its operations can otĩer a much lower íreight rate than one
th a t has t o pay w ages t o m a tch a high Standard o f living ashore, is ta x e d o n p ro íits , c o n trib u te s
to social security beneíìts and has its operations dictated by government and trade unions.
However, there are down sides to opting fo r a cheaper registry.
HS Schubert registered in Monrovia, Liberia
Many vvell-maintained ships that are under the control o f a full complement o f com petent
officers and crew do trade under what some considerto be FOCs. However,the w orst oíthese
flags attract ovvners o f severely sub-standard ships.
Some p o rt authorities reportedly distrust tonnage measurements o f open registry ships and
either insist on the shipowner obtaining a local tonnage certiíìcate at extra cost, o r require the
ship to pay higher p o rt dues.

C h a p te r 3
The strongest resistance to flags o f convenience has come from trade unions.The transport
unions o f most traditional maritime countries are affiliated to the International Transport
VVorkers Pederation (ITF). The w orst cases o f lax maintenance, inadequate saíety and poor
working conditions prom pted the ITF to start targeting FOC ships fo r inspection. It has long
campaigned against the employment o f crevys at low Vvâges, even if these are comparable to
Standard wage rates ashore in developing countries.The ITF may blacklist a ship - meaning that
d o c k la b o u r w ill n o t load o r unload it in p o rts w h e re th e u n io n has a s tro n g presence - until th e
ow ner agrees to increase wages to an appropriate level.
Charterers o f tonnage trading to ITF-dominated ports are likely to avoid using vessels registered
in the most notorious FOCs, as they stand a strong chance o f being detained in port.
In an ideal world, every country o f registration would closely control and scrutinise the ships
Aying its ílag.The vvorld is not ideal in this respect, hovveven so many countries impose p o rt
State control (PSC).VVhen a ship arrives in a port, inspectors have the right to board and check
that saíety, seavvorthiness and crew welfare meet national and international standards. If the ship
is seriously deficient, PSC can insist that the ship is immobilised until the deíects are put right.
Unsurprisingly.the FOCs w ith the poorest reputations are those that keep appearing on the lists
o f deíìcient and detained ships.
The more reputable open registries are quick to sign up to the international conventions fo r
maritime saíety and security devised by the International Maritime Organization (IMO). Liberia
claims to be the leader among the open registries in this regard. O th e r registries have also
tightened standards and ensure they are maintained throughout the ships trading life. Malta, fo r
example, carries out a pre-purchase inspection o f a ship beíore registration.
The IMO is a branch o f the United Nations, headquartered in London,that íocuses on seaíarers’
safety and pollution at sea. Some o f its most far-reaching stipulations are contained in the
International Convention fo r the Saíety o f Life at Sea (SOư^S), the International Convention
on Standards o f Training, Certiíìcation and Watchkeeping fo r Seaíarers (STCVV) and the
International Safety Management (ISM) Code. Its chieí piece o f environmental w o rk is the
International Convention fo r the Prevention o f Pollution from Ships (Marpol), which has since
been reiníorced by other agreements.
In all cases, countries have to transpose IMO conventions into their ow n nationai laws.The USA
and the European Union also produce their own standalone legislation, sometimes in advance
o f IMO rule-making and sometimes applying stricter Controls, An environmental example IS
the USA's Oil Pollution A ct (OPA90), which introduced the double hull requirem ent On ship-
breaking, the European Commission Ship Recycling Regulation is designed to act as a stopgap
measure unti! the lMO's Hong Kong International Convention ío rth e Safe and Environmentaliy
Sound Recyciing o f Ships comes into force.
Despite the measures taken to protect national registnes, more ships are registered under the
Liberian flag than any othen with Panama a close second. Cyprus is among the to p 10 open
registries, but argues that it ensures strict compliance with international saíety conventions by all
the ships on its registen
Greek ship owners were once among the largest users o f flags o f convenience, particularly
during the tim e o f military rule in that country. Subsequently.the Greek government recognised
that their nationals were the world's most proliíic ship owners and modifìed their fiscal
regulations radically.This has put the Greek nationai fiag well up in the world's to p 10 merchant
fleets, close behind Liberia and Panama.

Ship R egistratio n
The International Maritime Organization, London
3.5 T H E RESPONSE BY
T R A D IT IO N A L M A R IT IM E C O U N T R IE S
There is another fo rm o f open registry from those mentioned above. Some o f the industrialised
countries, keen to retain th eir national merchant Aeets, have devised systems o f registration
that retain the strict rules on saíety and maintenance but allow ship ovvners more íreedom in
crevving and ofĩer a m ildertaxation regime.
The United Kingdom is well placed in this regard because it has the option o f registering ships in
seif-governing overseas territories, such as Bermuda and Gibraltar. A ship registered in Bermuda
can fly the Red Ensign yet avoid the financial and other constraints normally associated w ith
the UK. Such ships comply w ith international saíety standards and the registrations are equal to
those o f the UK itself but operating costs are considerably lovven
Britains crow n dependencies - Jersey, Guernsey,Alderney and S ark- have self-governing status
in all m atters except international relations and deíence. None has membership o r associate
membership o f the European Union.They can be used fo r registration in a similar way to British
overseas territories.
The Isle o f Man has become popular among ship ovvners - notably including oil major BP - as
a means o f ílagging out while retaining the British flag. In many cases, the owners register th e ir
ships in the Isle o f Man, bưt only contract with Manx companies fo r crew matters, retaining
all o the r aspects o f ship management themselves. One fleet o f UK-flagged mini-bulk carriers
svvitched to the Isle o f Man flag and re-recruited most o f the original crews.The ovvner pointed
o u t that simply being able to close down the departm ent that dealt with the crews' income
tax, social security payments and allotments to seaíarers' íamilies, and saving the cost o f social
security payments, made the difference between proíìt and loss fo rth e fleet.

C h a p te r 3
Some European countries that lack overseas territories and dependencies have established
open registries that enable ships to retain the national flag and adhere to international saíety
standards but avoid the restrictions on the nationality o f crew members. N o w a y has been
particularly successíul vvith its NonAêgian International Ship Register (NIS), vvhich was launched
in 1987 and has helped move the NoPAíegian flag into the to p 10 merchant íleets o f the world.
The European Commission has proposed a European Union register and flag, but this has not
attracted much interest from ship owners.
Reducing the burden o f taxation is another way o f making the national flag more attractive. One
way this has been done is by introducing a low rate o f tax, known as a tonnage tax, based on
the size o f the fleet ratherthan on the income the ships generate.Tonnage tax systems operate
in the USA and 22 countries in Europe and the Far East. Some countries attach conditions
to this concession. For example, the UK requires the ship ow ner to recruit one new trainee
every year fo r every 15 oíĩicers em ployed.The condition is aimed at increasing the number o f
British seafarers.
The downside is that tax is payable even if the fleet suíĩers an overall loss. O n the other hand,
Corporation tax is set at a low level and in m ost years ship ovvners will be able to retain the
majority o f the ir p ro fit It is a form o f State aid but is allowed as a way o f prom oting shipping as
an environment-íriendly form o f transport.
3.6 R E G IS T R A T IO N A N D T H E S H IP SALE
A N D PU R C HA SE B R O K ER
The sale and purchase broker may need to arrange fo r a client’s newly purchased ship to be
registered under the flag o f the buyer’s choice. Pamiliarity with the registration procedure is an
obvious advantage. A broker will need contacts fo r all the likely flags a Client may seek to use. In
most cases the íirst contact will be through the embassy, high commission o r consulate o f the
country concerned.
As discussed in the preceding section, shipping registries can be divided into national flags, such
as the UK flag; open registries (o r FOCs), such as Liberia; and offshore registries, such as the
NoiAvegian International Ship Registen Each country has its own rules, so intending purchasers
should obtain legal advice beíore registering a ship o r company, so that they can make an
informed choice about the registry, the type o f company that should be íormed, choice o f
directors and managers, and o th e r essential saíeguards.
Ovvnership o f ships is usually divided into shareholdings

Ship R egistratío n
O wnership o f merchant ships is usually divided into shareholdings, although most are owned
by single, limited liability corporations that hold all the shares in a ship. Some countries allow
one o r m ore non-national residents to becom e officers, directors and shareholders o f a legally
resident company, entitled to own shares in national vessels. In some cases, the non-nationals
can only have a m inority shareholding; in others they may be allowed to hold a majority
stake. Certain countries perm it the entire shares o f a resident ship-owning Corporation to be
held abroad.
To register a ship, the new ovvner needs to produce evidence o f title. For a newbuilding, title
to ownership is proved through a builders certifìcate on in the case o f a secondhand vessel, a
bill o f sale issued by the form er ownen A Bhtish bill o f sale form, x s 79A, is often used fo r ship
transfers between international corporations even if no British company is involved. Also used is
the all-purpose BIMCO bill o f sale íorm . For sales between individuals o r partnerships there is
the British x s 79 form.
The o w n e r; w hether a person o r a C o rp o ra tio n , also needs to shovv p r o o f o f e n title m e n t t o

registerthe vessel underthe desired flag. For a person, such p ro o í should be merely a m atter o f
providing satisfactory nationality o r residential documentation, but company requirements are
m ore involved.
Pirst, it will be necessary t o p ro v e the e x is te n c e and currency o f th e Corporation by providing

such documents as a valid certifìcate o f incorporation, and perhaps p ro o f that corporate taxes
and fees have been paid up to date.
Second, it is possible that the registrar will w ant to see a legally attested copy o f a resolution,
signed by a majority, if not all, o f a companys oíTicers o r shareholders,to show that agreement
has been reached to acquire the ship.
Pinally, w hoever is claiming to represent the Corporation will have to prove their identity,
perhaps by producing a povver o f attorney docum ent that gives them the right to act on the
corporations behalíThe document will spell o u t the limits o f their powers, which will include
the povver to sell a vessel.
It should be mentioned that although the bill o f sale evidences a change o f ownership, it does
not guarantee clean title.There is a need fo r a transcript o f registry in a secondhand sale from
the form er owner, which will offer greater security to a buyer o f clean title.This transcript will
show registered mortgages on the vessel and a buyers registry will deíìnitely wish to have the
original o f this beíore issuing new registration to a buyer on delivery o fth e vessel.
Registration o f merchant ships can be a complicated procedure and there is no margin fo r

error, since it is necessary to act swiftly before a vessel is delivered and to ensure registration
is correctly accomplished immediately upon delivery. A prospective ow ner should thoroughly
investigate the requirements o f the intended registration authority well before the day o f
handover.The ovvner vvill need to keep that authority iníormed o f the expected date and tim e
o f registration and have all the necessary docum ents prepared vvell ahead o f time. It is far
simpler if the transíer o f ownership takes place under the same flag. However, there still may be
a delay in obtaining approval ío r th e change o f ship's name, vvhich has particular consequences
when arranging charters, and changing markings ío r a newly acquired ship. It is unrealistic to
arrive at a registrars office unannounced and unexpected, hoping ío r immediate attention.
Each maritime country maintains ship registry oíĩìces in most o f its main commercial centres
and ports, often closely linked w ith customs authorities. If the ow ner is outside the flag country,
then registration can also be arranged through a commercial attaché at the countrys consulate
o r embassy. Such íoreign registrations are commonplace, especially fo r open registry countries
w here few o f the owners are resident. It is also a írequent occurrence in m ajor maritime
centres such as London that see a high volum e o f s&p transactions betvveen íoreign parties.
Nevertheless, if it is necessary to register a ship abroad, even more care should be taken, given
the distances and time diíĩerentials involved.

C h a p te r 3
Seemingly mundane tasks should not be overlooked. It is im portant to check that the registrar
will perm it the use o f the chosen name. Most authorities will not perm it the use o f a name
that has already been entered on that countrys register o f shipping, o r even a name that could
be coníused with an existing entry. It is im portant to leave enough tim e fo r the consulate-
based commercial attaché to ccntact the responsible registrar in his home country to receive
authority fo r the intended use o f the new name.
VVhereverthe registration operation is enacted, each place maintains its own register book and
enters the following details o f the vessel:
1. Names and addresses o f the owners, and their sharehoiding if more than One ovvner
2. Details o f the vessel, including a brief description o f its type, age, builderanddimensions
3. Gross and net tonnage
4. Record o f any mortgages on the ship
5. The vessels name, its official number (allotted by the registrar), p o rt and date o f registry.
Having entered these relevant details in the registenthe registrar will issue a certiíìcate o f registry
containing the basic iníormation above. As this is the owner's evidence o f the registration o f the
ship under the flag o f choice, the document must be kept in a safe place aboard the vessel,
together w ith its other trading certification.
A great deal o f tim e has been spent at ship deliveries attempting to make delivery simultaneous.
A seller with a mortgage against a vessel will inevitably not wish to pay its ovvn cash to clearthe
mortgage when it knovvs that the buyers cash will settle the outstanding amount on its loan.
The buyers mortgagee will not loan it íunds until it is able to register its mortgage on the new
buyers registry. In practice, a buyer can usually pre-register the vessel so long as it can provide
the required registry documentation - application forms, fees and registry identification - but
this will be subject to the provision o f the bill o f sale from the seller alongside the deletion o r
closure from the seiler’s registry.
In the vast majority o f cases today, the seller vvill keep registration until actual delivery and will
only apply fo r deletion once the sale has been completed and the ship delivered.
Panama provides an electronic version o f deletion quickly after delivery, but many registries only
issue formal documentation against the sellers application after delivery.
The buyer's registry will be íamiliar with this process because ít will operate on the same basis
itselí. It will therefore issue a provisional certiíicate o f registration to the buyer pending receipt
o fth e deletion from the sellers registration.
A registry surveyor can be expected to check the vessel's spaces, to ensure that these are
consistent w ith its dravvings and plans. A t a later date, a naval architect o r another surveyor
acting fo r the national authority will check the plans and if necessary amend gross and net
to n n a g e s in a ccordance w ith th e flag State's to n n a g e m e a s u re m e n t rules.
Once the visiting surveyor has completed theirtasks.íhe carving note is retur ned to the registrar
at the p o rt o f registry and the vessel is now free to trade.
3.7 C A LL SIG N
Compliance with all the appropriate registration íormalities, hovveven does not automatically
entitle a vessel to commence trading. In fact, beíore a merchant ship can proceed to sea, the
ow n e r is required to attend to various other matters, including obtaining its call sign, which is the
vessel’s exclusive radio communication identity.
The call sign letters are also allotted by the registran and comprise a group o f four o r five letters
o r a mixed group o f letters and numerals, in some examples nationally identifiable from the

Ship R e g is tra tío n
fìrst characten For example, a group commencing with the letter G indicates a British vessel, s a
Greek ship, and so on.
As in the case o f allotting a vessel an approved name, the new registry will assign the vessel a
new call sign on registration. The ow ner must ensure that an application is íotAvarded to the
hom eport authorities either directly, o r via the registrar o r commercial attaché, in o rd e r to
obtain the radio station identification letters by the registration day.
Prequently the new owners will obtain such details vvell ahead o f the registration day.They will
then be in a position to arrange w ith a commercial radio company to send a local representative
on board the vessel on the day o f its purchase and registration.This person will adapt o r replace
the radio station keying device to operate w ith the new letters, and if necessary will liaise w ith
the flag authority surveyor attending to carving-note o r documentary íormalities.The ovvner
normally uses the same company they engage to handle the ships communication accounts, o r
from w hom they hire their shipboard communication equipment.
3.8 T R A D IN G CERTIPICATES
N o ship is meant to sail from a p o rt vvithout its Master being in possession o f valid trading
certiíìcates, otherAA/ise customs will not clear its papers. It is thereíore vital to have a full, current,
valid set o f these documents aboard at o r shortly aíler its handoven Arrangements are usually
made w ith class on behalí o f the flag State to re-endorse the existing trading certiíicates. It is
normal practice vvhen a secondhand ship transíers from one flag to another fo r the ío rm e r
ow ner to be contractually bound to supply a full set o f current trading certificates. N e w flag
authorities will usually recognise and accept the validity o f these foreign documents, especially
if the new ovvner retains the same class.The m atter is simpler in the case o f newbuilding o r fo r
the transíer o f a trading vessel to a new ow ner w ithout any change o f flag.
Nevertheless, it is as well that prospective owners are fully aware o f the documentation they
are obliged to provide.
Trading certiíìcates can be divided into the following three categories;
(i) National
(ii) International
(iii) General certifìcates.
National flag certiíicates are issued under the authority o f a vessels national registry and cover
items such as the measuring and painting o f a ships loadline.the issuing o f a radio station licence
and the mandatory inspection o f saíety equipment. Classiíìcation society staff often act as agents
o f the flag states maritime administration. If certiíìcates are out o f date, only in exceptional
circumstances should the vessel concerned be put to sea.
Some flag states, such as Liberia, regularly inspect vessels ílying their flag. Should the visiting
surveyor discover a serious discrepancy, such as sub-standard navigational charts o r a lack o f
properly certified oARcers, the vessel may be prevented from trading until the m atter has been
put right.
The usual flag certiíìcate requirements, and the period o f validity o f the individual documents,
are as follows:
International LoadLine 5 years

Loadline Endorsement I year
Saíety Construction 5 years
Saíety Equipment 2 years
Radio Station Licence Various (sometimes continuous)
Saíety Radiotelegraphy I year

C h a p te r 3
Sometimes, small extensions o f tim e can be arranged. For example, to enable a vessel to
perform a saíety construction survey during a scheduled d ry docking, the certiíicate may be
extended tw o months beyond the expiry date. In this case.the flag states maritime authority, o r
a classification society acting on its behalí, is likely to insist on a brief provisional survey.to satisfy
itselí th at leniency is not being given to a sub-standard vessei.

Chapter 4
Classification
Geirơnger Fjord
The Geirangerfjorden is ơ fjord in northern Norwơy. It is a 9.3 mile long brơnch o f the
Storf}orden or Great Fjord.
C h a p te r 4
4.1 C LA S S IP IC A TIO N SOCIETIES

In previous chapters we explained how a ship had to be registered in order to have an identity.
In addition, ships need to be ciassiíìed, because international convention demands that an
approved classification society verity the ship is in a sound and seaworthy condition.This is vital
fo r a prospective buyer.
In most countries ships are compelled by law to be classiíìed by a recognised society fo r the
purposes o f saíety, Insurance and suchlike, Several countries sub-contract the registration o f
the ship to a classiíication society. A flag State may also give a ciass society the responsibility fo r
surveying and issuing saíety and other certifìcates.
Alm ost every maritime country has its own classiíìcation society.They vary in quality, but those
that meet the most demanding international standards are members o f the International
Association o f Classiíìcation Societies (lACS).This corporate body is based in London and is
recognised by the International Maritime Organization (IM O ),th e mahtime arm o f the United
Nations, where it has observer status.
Members Symbol
American Bureau o f Shipping ABS
BureauVeritas BV
Chinese Classiíìcation Society CCS
D e t NorskeVeritas DNV
Germanischer Lloyd GL
Indian Register o f Shipping IRS
Korean Register KR
Lloyds Register LR
Nippon Kaiji Kyokai NK
Registro Italiano RI N A
Russian Maritime Register o f Shipping RS
The many other classification societies range from small private companies to subsidised or
government organisations.
Although most classification societies are non proíìt-making there is a degree o f competition
among them to attract ship owners. lACS strives to ensure that com petition between societies
does not lead to a lovvering o f standards.
Classifìcation societies have strong links with ship builders, marine undeoA^nters and employ
naval architects, engineers and metallurgists. Increasingly, they also employ IT specialists to
produce software programs fo r ship design, strength and stability calculations.

Ciassification
Lloyd's Register IS one o f the largest classiíìcation societies
The status o f a ships classification society needs careíul consideration by a prospective buyer. It is
especially im portant to read the shipping journals fo r news o f any changes in lACS membership.
It has been alleged that some recent catastrophic oil spills were caused by the ships involved
being in a sehously sub-standard condition.The incidents led to co u rt action being taken against
the vessels’ classification societies. Aíĩected parties, such as fishermen and holiday resorts, claim
that the spills and the damage that resulted could have been prevented had the classiíìcation
society been more vigilant and insisted that deíects be put right.
The following summary history o f Lloyds, the w o rld ’s prem ier classiíìcation society, helps
illustrate the development o f classitìcation societies.
4.2 H IS T O R Y
In the early I7th century, Londons ship owners, shippers, masters and insurers chose Edward
Lloyd's coffee house as a convenient location fo r doing business.The coffee house was eventually
transíormed into a íormal society concerned with the Insurance o f ships and th e ir cargoes.
From these beginnings emerged both the Insurance organisation Lloyds o f London and Lloyds
Register o f Shipping. Although they sprang írorn the same roots they are entirely separate
entities.
The enterprising Edward Lloyds o ther claim to fame was the íounding in 1694 o f Lloyds News,
which is reputed to be the second-oldest newspaper in existence. In 1734, the title changed
to Lloyds List and it is under this banner that it has been published ever since, although from
Decem ber 2 0 13 it has only been produced as a digital edition.

C h a p te r 4
It was suggested that there should be a proper register o f ships that vvould be acceptable to
all interested parties. Ships to be listed in the register should be surveyed by experts.The first
Register ofVessels was produced in 1760, which was recognised as the birth o f Lloyds Register
o f Shipping. N o copies o f the 1760 Register are known to exist, but the 1764 Register can stiil
be seen.
Originally, the hulls were classed A, E, I, o , u according to the m erit o f th e ir construction and
continuing soundness. Equipment on such vessels was described as G, M o r B, vvhich stood fo r
good, middling o r bad. By examining the lists o f vessels, an u n d e w rite r couid decide on the
premiums to be charged fo r insuring either a vessel o r its cargo.
This system o f grading existed until 1775, when equipment was categorised as 1, 2 o r 3. From
this sprang the expression “ A I at Lioyds'.
A fte r a dispute over classiíìcation methods in 1799, shipowners published th e ir own book fo r
35 years. In 1834 a common problem o f íìnance brought about a reconciliation, vvhich resulted
in the offìcial íormation o f Lloyds Register o f Shipping.
O v e rth e years,the Register has reílected developments in construction, from w ood in the 18th
century to w ood and iron ships in i 866 and the íìrst all-welded vessel in 1920.
Similar changes have taken place in propulsion systems from sail only to sail and steam, steam
oniy íuelled by coal, steam íuelled by oil, steam turbines, and eventually the near-universal
adoption o f diesel engines. Gas turbines have been experimented with but gained little popularity
outside fast íerry services, although a series o f gas-turbine powered super-fast Container ships is
under consideration. In the past, nuclear-powered ships have been built fo r the USA, Japan and
Germany, but nowadays th e ir use has tended to be restricted to icebreakers and warships.
w ^ T '
Nuclear povver IS restrirted to warshịps and icebreakers
4.3 REGISTERS
All classiíìcation societies publish a register o f the ships that they have classiíìed, but Lloyds
Register, vvhich is currently issued in four volumes, is unique in that it provides details o f all ships

Classification
o f m ore than lOOgt regardless o f the society with which they are classiíìed. Supplements are
issued monthly, giving an update on all changes to the Reg/ster since publìcation.
Lloyds Register produces many other publications fo r the shipping industry and some o fth o se
that are particularly useíul to s&p brokers are listed below:
List o f Shipowners. This contains details o f 40,000 owners, managers and managing agents
w orldw ide, providing details o f th eir addresses and contact details, together w ith brief but
iníormative fleet details cross-referenced to the Register ofShips.
M aritim e Guide. A unique colỉection o f diverse maritime iníormation, with sections covering
p o rt íacilities, call signs, ship builders, ship breakers, postal and Communications addresses and a
gazetteer with maps.
Register o f Offshore Units, Submersibles and Diving Systems. Included in this listing are mobile
drilling rigs, submersibles, selected w o rk units and diving systems, where classed with o r certiíìed
by Lloyd's Registen It also gives details o f ovvners o f equipment in these sectors.
M erchơnt Shipbuilding Reíurns.This quarterly statistical summary o f w orld ship buiiding fo r all self-
propelled ships o f I OOgt and above that are under construction o r on order includes analyses
by country o f build, size, ship-type, registration and progress.
Annual Summary o f M erchant Ships Completed. A statistical summary o f vvorỉd ship building based
on the same criteria as the M erchơnt Shipbuilding Returns, with tables covering completions and
launches by country o f build, size, ship-type and registration.
Casualtỵ Return. An annual statistical summary o f all merchant ships totally lost o r reported
broken up duringthe calendar yean Individual ships are also listed with brief details o f casualty o r
disposal, and a íurthe r section lists ships sold fo r breaking up.
Shipỵơrd Orders WeekJy Report. This list o f coníìrmed orders reported during the week shovvs
selected items o f iníornnation.Also included are lists o f reported cancellations and completions.
Lloyd’s Register is a non-profit distributing organisation, governed by a board o f governors and

a general com m ittee.The head office is in the City o f London, but it has many national and
area committees around the world. Represented among the committees are the Corporation
o f Lioyds, undenA/riters, p&l clubs and specially elected members. The technical committee
comprises representatives o f ship builders, marine engineers, electhcal engineers, steel-makers,
engine-builders, makers o f other ship components and government organisations.
The day-to-day aíĩairs are controlled by a management com mittee chosen from the senior
members o f its stafĩ w ho co-ordinate the activities o f some 4,500 employees in 120 countries.
Lloyd’s may have a unique history, but the obịective o f all classification societies is the same: to
ensure the safety at sea o f seaíarers, passengers and merchandise. It is equally im portant that
undenA/riters have the data to allovv them to assess w ith reasonable accuracy the risks involved
againstthe hazards o f maritime adventures and so provide adequate Insurance coven
It follow s,therefore,that ships need to be designed and built with the besttechniques and highest
speciíications available at the tim e o f construction. Subsequently, they need to be maintained
in fìrst-class condition throughout their lives and should never be put to sea w ith deíects o r
unrepaired damage that may afĩect their class. Ballast arrangements and cargo stowage must
never be allowed to impair stability and a ship must never sail w ith a greater weight than is
perm itted according to its loadline.
4.4 SAPETY
O ve r the years international and national legislation has proliíerated with the objective o f
improving safety standards, but credit is due to Lloỵds Register o f Shipping fo r its pioneering role

C h a p te r 4
in introducing such rules. As far back as 1835, Lloyd's Load Line Rules we''e íorm ulated in an
attem pt to prevent overloading.They therefore anticipated by 41 years the Merchant Shipping
Act o f 1876 that Samuel Plimsoll steered through the British Parliament, making the marking o f
the maximum loadline compulsory.
In the ỵellovv square IS a typical loadline
Ships, with the ir machinery and equipment, are classed fo r a period o f four o r fìve years on the
understanding that maintenance is adequate and no major íailures take place during the period.
The main part o f the ciassiíìcation concerns the hull, with the propulsion machinery, electrical
systems and other materials used in construction being taken into account.
For full classification, a ship and its machinery should be built in accordance w ith the society’s
rules, using materials from an approved steelvvorks under the survey o f one o r more o f the
societys surveyors.
For a new ship seeking classification, the plans must be submitted beíore building starts and
examined to ensure that they coníorm to the societys rules. The attending surveyor checks
the vessel against the plans to ensure that it has been built to the Standard required by the
classiíìcation society. A fte r vvorking tests, ail equipment and the vessel itself should comply with
the rules. A similar close inspection is undertaken in the case o f a ship seeking to change its
classiíìcation from One society to another Such a change o f society is not unusual when a ship
changes ownership and the w o rk vvill inevitably involve the s&p broker.
Rapid changes in technology mean that rules often need to be revised and updated.
Suggestions ío r changes may come from industry o r may be made by the societies’ surveyors
fo r consideration by the technical committee, which represents all branches o f the industry.
The saíety factor o f any amendment is the prime consideration so the society will undertake
consultation to ensure that no rule is introduced that would put the vessel at risk o r require
solưtions that were beyond the means o f the industry.
In April 2006, fo r example, the lACS introduced tw o sets o f common structurai rules: one for
tankers and One fo r bulk carriers o f more than 150m LOA. lACS members ịointly developed
the rules aíter consultation w ith other interested parties. In effect all ships contracted after April
1,2006 have to be buiit to the same constructional standards regardless o f vvhich lACS member
societies are responsible ío rth e ir classification.

Classification
In the case o f Lloyds Register, the highest possible category is given to those ships that are
continuously surveyed while being built.Those ships built under Lioyds special survey will have
a Symbol s im iia r to th e Maltese cross ( * ) placed b e fo re th e lOOAI in th e re g is te r b o o k (o fte n
reíerred to as ‘Plus IOOAI' when spoken).
The precise explanation o f the symbols in the Register that combine to make up the í* IOOAI are:
This distinguishing mark denotes that the ship was constructed under the Societys
special survey, in compliance with the societies rules.
100 Character íigure assigned to ships considered suitable fo r seagoing Service.
A Character letter assigned to ships that have been constructed o r accepted into class in
accordance w ith the societys rules and regulations and that are maintained in good and
efficient condition.
I This character íìgure is assigned to:
a) ships having on board, in good and effìcient condition, anchoring and mooring
equipment in accordance with the rules
b) ships classed fo r special Service, fo r which no speciíìc anchoring and mooring

rules have been published, having on board, in good and effìcient condition,
anchoring and m ooring equipment considered suitable and suíĩicient by the
society fo rth e particular Service.
All the other major classiíìcation societies use similar systems although they employ diffenent symbols.
The rules require that certain items are inspected at prescribed intervals, but all items must
have a major survey once every four o r five years. Annual surveys are mainly concerned w ith
the ability o f the hull and deck to maintain a watertight ‘envelope' to protect the cargo.
A t regularly prescribed intervals the ships must enter dry dock fo r the inspection o f all
underwater parts including tailshaft, rudders, propellers, side valves etc. Alternatively, this work,
except for the tailshaít, may be carried out by suitably qualiíìed divers in vvhich event the
inspection has to be conducted in an approved iocation.
A ll the major classiíìcation societies hold their data on computers, which means that the societys
staff can gain instant access to up-to-the-minưte iníormation almost anywhere in the vvorld.
Societies’ rules have to embrace, in addition to ships, such things as Aoating docks, inland
waten/vay vessels, mobile and oATshore units, submersibles, diving systems, yachts, small craft
and the carriage o f all the commodities carried in bulk such as oíls, liquid gas, ore, grain and
reírigerated stores.
Should a vessel sustain severe damage, classification society surveyors must inspect the vessel
and may insist upon certain repairs. If these are not carried o u tth e ship’s class will be withdrawn.
Alternatively, the surveyors may make recommendations, which usually include a requirement
fo r remedial action to be taken within a given period.
The question o f damage atĩecting class and recommendations by classification societies will be
reíerred to fully in chapters 6 and 7.
4.5 SPECIAL SURVEYS

Mentỉon has been made o f inspection every four years. The initial four-year period can be
extendec to five by carrying out a modiíìed survey after four years. Alternatively, an ow ner
may o p t to keep his vessel under continuous survey, so instead o f carrying out a major survey
once every four years, the vessel is examined incrementally throughout the survey period.The
additional year is called a 'year o f grace’.

C h a p te r 4
An ow ner is provided regularly with a computerised listing that indicates the survey situation
and vvhat outstanding w o rk is to be done o r must be undertaken at the next major survey.
Classification societies now provide certiíìcates fo r many otherthings besides ships. For example,
in 1967 Lloyds Register introduced an initial approval scheme fo r containers and the fìrst type
o f approval certiíicate was issued in l968.Their Container certification scheme, which covers
the approval o f all types o f containers including refrigerated and tank containers ío r th e carriage
o f liquid cargoes, is co-ordinated by Lloyds Register Industrial Services.
4.6 O T H E R P U N C T IO N S OF C LA S S IP IC A TIO N SO CIETIES

Most classification societies have an international conventions departm ent that carries oưt
statutory surveys exclusively on behalí o f the flag State. A bout 120 governments assign a variety
o f certiíicates fo r compliance with international conventions.
The principal concern o f such departments is the International Convention on Load Lines
1966, which came into íorce in July 1968. Alm ost all w o rk concerned with the assignment o f
loadlines is conducted by classification societies. In general.the internationally supported loadline
convention ensures that a ship is not overloaded, provides a w atertight containment system, has
an adequate margin o f reserve buoyancy and a suitable range o f intact stability according to
international criteria.
4.7 CERTIPICATES
A loadline certificate is issued fo r a period o f fìve years and requires an annual survey o f hatches,
ventilators, closing appliances and similar equipment. For specialised ships such as bulk carriers
and tankers.the assigning authority must also be satisíied that the damage stability is satisíactory.
Reíer back to Chapter 1.8 to see the way the society appends its initials to the Plimsoil Mark,
Alm ost ali certifìcates issued by ciassification societies are concerned with the International
Convention fo r the Saíety o f Life at Sea (SOƯ^S).There have been fìve SO ư\S conventions:
1929, i 948, 1960, 1974 and 1988 and íurther amendments in 2 0 1 I , each updating and improving
safety rules fo r passenger vessels initially and later dry cargo ships and tankers.
The following are among the saíety certiíìcates issued by classiíication societies:
Cơrgo Ship Safetỵ Consữuction CertiỊicate. Under the terms o f the 1960, 1974 and 1988
conventions, any cargo ship o f 500gt o r more engaged on international voyages must be issued
w ith a cargo ship saíety construction certiíicate. Beíore this can be issued a survey o f the hull,
machinery and equipment must be carried out to ensure compliance with the requirements o f
the conventions. A bout 80 countries have authorised ciassification societies to undertake these
surveys and issue the certificate on their behaií.
Cargo Ship Safety Equipm ent Sơfety Rơdio CertiỊicates, Survey o f Rơdio and Radơr Instơllơtions.
The 1960 and 1974 conventions require that all cargo ships o f SOOgt o r more engaged on
international voyages be provided w ith a cargo ship saíety equipment certiíicate.
Passenger Ship Safety Certificates. Many leading maritime c o u n trie s carry out initial and periodic
inspection and surveys o f passenger ships in order to issue a passenger ship safety certiíìcate.
This is to meet the requirements o f the 1974 s o ư ^ s Convention. Government bodies may
authorise classification societies to conduct these surveys on th e ir behalf and issue certificates
after a satisfactory report, although this is exceptional.
Internơtíonơl Convention (orth e Preventíon ofPollution from Ships 1973, as modiíied by the protocol
o f 1988 (Marpol 1973, l978).This convention, which came into being on O ctober 2, 1988,
aims to minimise and eventually to eliminate completely pollution o f the seas.The regulations
are grouped in six annexes covehng oil, noxious liquid substances in bulk, harmíul substances
in packaged forms, sevvage, exhaust and garbage. All ships engaged in international trade are
required to have on board the international polỊution prevention certiíìcate.

Classífication
Chemical tankers and other ships engaged in the carriage o f noxious liquid substances in
bulk must have an international pollution certiíicate in compliance with the IM O C ode for
the Construction and Equipment o f Ships Carrying Dangerous Chemicals in BulkThis code is
mandatory and requires ships carrying noxious liquid substances and dangerous chemicals in
bulk to be designed, constructed, equipped and operated so as to minimise the uncontrolled
discharge o f cargo into the sea.
The IM O Code fo rth e Construction and Equipment o f Ships Carrying Liqueíìed Gases in Bulk,
commonly known as the International Gas C arrier Code, requires that the design, constructional
íeatures and equipment o f new ships minimise the ris k to the ship, its crew and the environm ent
having regard to the nature o f the Products carried.
4.8 ISPS CODE

The International Ship and Port Facilities Security (ISPS) Code is a part o f the SOƯ\S Convention
and was devised by the IMO in response to concerns over security and terrorism.
As with the ISM certificate, it is a company’s procedures that are the focus o f this code, not the
construction o r physical condition o f its ships. If a ship is being sold then almost certainly the ship
management company and crew will also change and the International ship security certiíìcate
(ISSC) will have to be returned to the approving recognised security organisation (RSO).The
new ship ow ner will then have to reapply to the same RSO fo r a new ISSC to be issued o r iíth e
flag State has been changed.to the RSO that has been approved by that particular government.
The ISPS Code applies to ports as well as ships
The ISPS Code came into force on July I, 2004. The code was very much a reaction to the
te rrorist attacks on the USA in September 2 0 0 1, but it includes elements o f tw o o ther problems,
piracy and stowaways, that have been o f concern fo r many years.
As the fuil name suggests, the ISPS Code vvorks on tw o levels: ships (all ships over SOOgt) and
ports.The governments o r maritime administration must appoint an RSO to certiíy the security

C h a p te r 4
arrangements that have been made in ports, on ships and in the shore oíĩices o f shipping
companies.The government itselí decides what sort o f organisation can become an RSO.VVithin
the UK, only the Maritime and Coastguard Agency (M C A) has the povverto vet ships, but many
fiag states have delegated the w o r k to classification societies.
Ships and ports have to undergo a risk assessment, after which a security plan is drawn up.The
RSO reviews the plan and carries out an inspection and audit o f the p o rt o r ship. If all is well,
the RSO then issues a certiíicate. Once the code is in force, a p o rt State can deny entry to any
ship that does not have a certiíìcate o rth a t has come from a p o rt that is not in compliance with
the code.
O n a practical level, both ports and ships operate on a three-stage security alert, with the
precautions being increased in line with the threat assessment. For the most part, ships and
ports operate a tth e lowest level until some intelligence received makes a higher level desirable.
4.9 T O N N A G E M E A S U R E M E N T R EG U LA TIO N S
Many governments authorise classiíìcation societies to carry out tonnage measurement surveys
and issue tonnage certificates on their behalf.
The International Convention on Tonnơge Measurement o f Ships 1969 came into íorce on July 18,
1982. It applies to ships ílying the flag o f contracting parties to this convention.
Certain administrations such as the canal companies have developed their own systems o f
measurement based loosely on one o r nnore o f the main systerns o f measurement. Lloyds
Register is among the societies authorised to prepare and issue Suez and Panama Canal
tonnage certificates.
4 . 10 P R A C T IC A L A P P L IC A T IO N FOR T H E SALE
A N D PU R C HA SE BROKER
Each classiíìcation society issues and pubiishes its own register book, and these are the essential
tools o f the s&p broker. For this reason, no sale and purchase offìce is complete without
possession o f at least one register o f a m em ber o f the lACS,
As mentioned beíore, Lloyds Register is particularly useíul because it contains details o f all
known self-propelled seagoing merchant ships in the vvorld o f I OOgt and above, w hether they
are classed w ith Lloyd's o r not.
Each classiíìcation society records ship details in its own íormat. Symbols vary and some provide
details that will not be found in other registers. The s&p broker should be fully conversant
vvith the layout and iníormation available in the register in th e ir possession so that the details
required can be obtained quickly and accurately.
W hen trying to obtain the interest o f a prospective Client, the m ore iníormation aboưt a vessel
the betten N o t all details will appear in a classiíìcation society register; fo r example, the latest
speed and íuel consumption o f a vessel can o n i/ be obtained from an ow ner’s office and
perhaps checked with logbooks aboard the ship. Ship plans can also only be obtained from an
owner, and these wili usually be required should the prospect o f a saie become serious.

Classìfication
Initially.the following iníormation is essential when placing a ship on the market fo r sale:
• type - Such as tanken bulk carrier; dry cargo, Container ship;
• deadweight;
• year o f construction;
• ship builders name, including name and location o f yard;
• class/survey position;
• number o f decks/tanks;
• type and number o f holds and hatches (for dry cargo ships);
• number o f cranes (for dry cargo ships);
• capacity - grain, bale, insulated, liquid cargo space.TEUs;
• m ake and ty p e o f m ain engine;
• povver (bhp o r kW ) o f the engine;
• speed and consumption,
Most o fth e details above can be obtained from Lloyds Register, vvhich allows seven columns fo r
each ship.
In the case o f a ship to be sold fo r demolition, the following information is required by

a scrapyard:
• light displacement, vvhich indicates, in long tons o r metric tonnes, the amount o f scrap
metal the ship contains;
• materials o f vvorking and spare propellers, fo r instance, bronze o r iron;
• if a spare propeller ortailshaíl is included in the sale.
4.1 I C L A S S IP IC A TIO N S O C IE TY RECORDS
4.1 l.l Inspection and surveys

It is rare fo r a vessel to be purchased fo r íu rth e r trading w ithout the records being inspected.
The records that are kept by the classification society provide a history o f the ship since being
classed by that society. Records o f all the special surveys, notations and recommendations will
be noted and recorded by a prospective buyer so that when the physical inspection o f the
vessel occurs, any areas vvhere recurring problems exist may be given special attention.
s&p brokers are not expected to be qualiíìed engineers, naval architects o r technical specialists.
They do not therefore inspect ship records on behalf o f their clients nor do they inspect ships
f o r th e p u rp o s e o f giving an e x p e r t o p in io n . It is p a rt o f th e ir íu n c tio n t o fa cilitate in s p e c tio n o f
records and ships on behalí o f th e ir clients and this they may do w ith the consent o f a sellen
Classiíìcation societies will not authorise the inspection o f a ship’s records vvithout permission
íroiTi the ow ner o f the vessel. It is therefore part o f an s&p brokers íunction to arrange such
inspections when a request has been made.
A broker should be capable o f suggesting the services o f a reliable independent surveyor ío rth e
vessel o r its records. A buyer vvould expect to see much more from the class records than just
its surveys.The records list recommendations, both past and current, which will provide strong
indications to a prospective purchaser o f long-term deterioration o r other recurring issues. It
will also show how quickly a seller has dealt with class issues on the vessel and provide a clue to
the sellers approach to maintenance standards.

C h a p te r 4
It iS im portant to investigate a ships history
lf the buyer does not have someone available to inspect the vessel o r its records, the s&p
broker should be able to suggest qualiíìed consultants who can act on the buyers behalíThe
broker must be careíul to provide several names rather than recommend any particular One.
Should only one name be put fonAârd and then that consultant carries out the inspection in a
way that adversely affects the principal, the broker may face a claim fo r negligence.
Classiíìcation society registers and records play an im portant part in the process o f buying and
selling ships. It is recommended that readers study one o r more registers to understand the
iníormation they contain and where It can be found,
Class membership may be suspended tem porarily o r withdrawn fo r various reasons including:
• non-payment o f classification fees;
• sinking/total loss;
• failure to carry out period surveys;
• íailure to attend to conditions o f ciass.
Every four years, a classified ship must undergo a special survey o f its hull and machinery. Special
surveys become increasingly rigorous as a vessel ages. Occasionally, and if the ships condition
permits it, an ow ner is granted a year o f grace, to a maximum period o f five years between
special surveys.
Because o f the time-consuming and expensive nature o f special survey work, and o f the repairs
that ensue, many ovvners elect to place their ships on a continuous survey fo r either the hull, the
machinerỵ o r both. In such cases the classiíìcation society sets out a programme o f inspections
in conjunction with the ovvnerThe inspection w ork is spread as evenly as possible over four
yearsThis can only w o rk if trading allovvs such routine survey and repair w o rk to be petform ed
at reguiar d ry dockings and in p o rt w ithout interTering with voyage schedules o r cargo handling.
4.11.2 C ertification
The classification society may single out speciíìc areas and items o f equipment fo r attention
and issue separate certiíicates fo r them. For example, a vessel may have reírigerated cargo
space that the ow ner vvishes to be classed as being in good condition in order to attract
potential charterers. Also the tailshaft may need particular inspection to ensure that it remains
in good condition.

Classiíication
The normal classification certiíìcates required íortrading purposes fo r conventional tonnage are
listed belovv, along with their validity periods:
Hull and machinery special surveys 4 years
D ry docking survey 2 years
Survey aíloat 1 year
Tailshaít inspection 3 years
Boiler survey 2 years until eighth yeanthen annually.
Q uite apart from having certiíicates required by the flag State o r classification society, a ship also
needs to prove it is in conform ity in other respects beíore it can put to sea and trade w ithout
interíerence, as noted belovv.
Cơrgo gear. For reasons o f saíety, a ships cargo-handling derricks o r cranes should be írequently
inspected and maintained to the highest standards. Classiíication societies o r specialised cargo-
gear surveying organisations carry out detailed surveys every four years, with m ore curtailed
annual inspections in between. Provided they are satisfied, these organisations issue certiíìcates
attesting to the good condition o f this equipmentThese documents should be retained w ith the
vessels other papers, otherwise shore labour will probably refuse to use the equipment.
Life rơfts.The maker usually recommends that an approved dealer inspect this vital life saving
equipm ent at least once a yean Inspections must be períormed conscientiously, w hether o r
not the inspection date coincides with a scheduled survey o f a ships other safety equipment.
Inspections can often be carried out during p o rt calls.
Deratisation (exemption) certiỊicate. To ensure there is no vermin iníestation on board, all

merchant vessels are subject to six-monthly inspections. These are usually períorm ed by
commercial concerns at the ship ow ner’s expense at a convenient p o rt o f call. If no trace o f
verm in is discovered, a deratisation exemption certiíìcate is issued by, o r on behalí, o f the p o rt
authority. Othen/vise fumigation is carried out to eradicate any iníestation, and a deratisation
certificate issued once the problem has been brought under control.
4 . 12 C H A N G E OF S H IP ’S N A M E
Should the ow ner decide to a lte rth e name o f a ship.they will need to follow similar procedures
as when registering a newly acquired vessel. Application has to be made to the registrars
otĩìce. In some cases (British ships, fo r example), the intended change must be advertised in a
suitable international medium such as Lloyds List and one other newspaper in circulation at the
vessels p o rt o f registry. Provided no valid objections are received, permission should eventually
be granted.
Traditionally, and still in some areas o f the vvorld, it was believed that changing the name o f a
ship brought ill-fortune.Today, sentiment plays little part in merchant ship trading. It is rare fo r
a ship to retain its name aíter its sale, and sellers often insist that the name be changed as part
o f the memorandum o f agreement Moreoven disponent ovvners - those taking a ship on long-
te rm charter o r on bareboat charter o r a charterer employing a vessel to serve a particular
liner operation - may insist on a name change, even though the vessel remains throughout in
the original ovvnership.

C h a p te r 4

Chapter 5
The Ship Sale
Rock of Gibraltơr
The Rock o f G braltar forms a peninsulơ sticking out into the Strơit o f Gibraltar from
the Southern coast o f Spơin.The Rock’s Central peơk, Signơl Hill, hơs ơn elevơtion o f
ơbout 390m.
C h a p te r 5
5.1 THEOFFER
This chapter examines the terms o f a fìrm ofFer to purchase a ship together with some o f the
potential implications and problems.
There is no set pattern in putting forv/ard an o ffe rto purchase because this is dependent upon
the requirements o f the individual buyer and also on the particular ship to be purchased.There
are, however; certain íeatures that any offer must contain. As the eventual deal will be based on
one o f the Standard íorms such as the NoiAvegian Saleíorm, it is usual to follow the same logical
sequence as in the form. Standard saleíorms will be dealt w ith in chapters 6 and 7.
The majority o f vvork carried out by s&p brokers involves the sale o f secondhand ships intended
fo r íu rth e r trading. As w ith any contract, there has to be an offer, a consideration (the price to
be paid fo rth e ship) and an acceptance. In real life this will involve negotiation, that is to say by
oATer and counter-offer Negotiation vvill continue until the tw o parties to the deal.the buyer and
the seller, are satisíìed they have obtained the best transaction fo r their particular interests in
the prevailing m arketThe negotiations usually conclude when agreement is reached in principle,
but subject to contract details, when it will normally be the task o f the sellers broker to draft a
w ritten contract fo r approval and eventual signature.
The seller's broken appointed to sell a ship, will drculate its details by email to a íull list o f
buyers o r their s&p brokers. It is usual fo r the opening offer to be made by the broker acting
fo r the potential buyer and the ofFer will be based upon details that have been provided by the
sellers broken
Provided it is suíĩiciently interesting to the seller, the offer will generate a counter-ofĩer It is most
unusual ío rth e first o ffe rto be accepted outright. It is im portant to rem em berthat legally each
counter-offer is actually saying "I decline your offer and now make you the following firm offer” .
Even if negotiations have reached the stage where, fo r convenience, the loose expression used
when making the counter-ofĩer is accept except, it is still the case that either party can break o ff
negotiations at any time.
Occasionally, ships are sold at auctìon.This particularly occurs where an official body has seized
the ship because o f the íinancial íailure o f the owner A t an auction, the successíul buyer is
usually the highest bidden so brokers are rareiy involved except as advisers before the day o f
the auction.
O f course, an s&p brokers duty is alvvays that o f an adviser to the principal and it should at
all times be the aim to obtain fo r the principal the best term s and price on any transaction.
The broker must always take care not to place their own interests (such as the desire to
conclude a deal) before those o f the buyer o r seller fo r w hom they are acting. In this, ílexibiiity,
determination, integrity and hard w o rk are essential fo r success.
VVhatever the variations by which an offer is pưt togethen the basics o f any firnn offer remain the
same, namely;
• name o f the ship concerned;
• repiytim e;
• price;
• place and tim e o f delivery;
conditions o f sale o r the type o f saleíorm to be used.
There will be many other requirements depending on individual circumstances and these must
be studied and understood. Some o f the main ones are set out in the rest o f this chapten
In most cases there will be both a buyers and a seller’s broker VVhere a large brokerage is
involved, both brokers may be employed by the same company. However, it is not uncommon

T h e Ship Sale
fo r one broker to act fo r both the buyer and the seller, Occasionally, there is a Chain involving
tw o or more brokers on one side o r the other, each requiring a share o f the total commission,
vvhich must be divided.
5.2 T H E S T R U C T U R E OF A N OFFER
Buyers nome. W hen an o íĩe rto purchase is received, the seller needs to have some idea with
whom they are dealing. If the buyers name is well known and o f good repute it is usually an
assurance that when the tim e comes there will be no problem o f payment lf the buyer is not
vvidely known o r is new to the industry, the buyers broker shouid submit as much iníornnation
as possible, even including bank references, to ensure that the oATer being pưt forw ard is taken
seriously. Reputations also extend to brokers. An offer put forward by awell-known broker is
Ịikely to be on behalf o f a reliable principal, so a broker should always acquire as much knowledge
as possible about the principals fo r w hom they are working. A reputation can be damaged very
easily, but repairing it can take a very long time.
Reply tíme, All offers must have a tim e lim itT h e broker should make quite sure fo r how long
the authority they have been given extends.The limit o f this authority needs to be expressed
w ith o u t ambiguity o r possible misinterpretation. Date and tim e must be clearly expressed.Times
ditTer from continent to continent and there are differing ti me zones within continents. A broker
has to be clean thereíore, when the authority he has been given by his principal expires and
should put fonA/ard the ofĩer he has been given stating the day o f the month and the time,
indicating clearly where in the w orld this tim e o f the day applies.
A typical oíĩer will be put fonA/ard in this style:
Offer firm ................ for reply here 14.00 hours BST London time Tuesday 25th June 2005.
Always use the 24-hour clock to avoid coníusion betvveen am and pm. Adding 'BST' to ‘London
tinne' may seem excessive, but it reminds the other party that British Summer Tim e is in
operation. BST is one hour ahead o f Greenwich Mean Time, which is used between O ctober
and March in the UK. The same proviso would apply anywhere else in the w orld where a
daylight saving sỵstem operates, such as N o rth America.
Try not to use such loose expressions as for prom pt reply o r for immediate reply, they mean
difíerent things to diíĩerent people. One might be quite surprised at just how the law interprets
imm ediate reply and it should be avoided at all costs. Always establish an exact time.
Price. The currency to be used fo r the vessel's purchase needs to be stated clearly, giving the
actual am ount in both íìgures and w ords.W hen ships change hands in the international market,
the currency adopted is almost always expressed in u s dollars.The use o f a com m on currency
is useful in making comparisons between similar ships in the same market by obviating the
necessity fo r currency conversion with its attendant íluctuations.
Deposit. It is almost invariable fo r 10% o f the agreed purchase price to be lodged by the buyer
in a jo in t interest-bearing account in the names o f the seller and the buyer o r th e ir agents.This
deposit is released to the seller at tim e o f deiivery o f the ship. Should the buyer wilfully deíault
on the contract the deposit is fotfeit to the sellen
Payment It IS usual fo r payment to be demanded either on delivery o r within a certain number

o f (usually three) banking days o f delivery. Strict deadlines fo r payment are essential when such
large sums are involved.The $ I Om used in the example in this and the next chapter is a relatively
modest price, but a day’s delay in payment even at moderate rates o f interest could mean a
considerable loss.

C h a p te r 5
5.3 C O M M IS S IO N
Unless stated othenAîse, it is the seller - that is, the one w ho receives the payment - vvho pays
all the brokers’ commissions from the actual sale price. It is customary in secondhand ship sales
fo r there to be 1% commission fo r the buyers broker and 1% fo r the sellers. W hen taking
authority to make a firm oíĩer on behalf o f the buyer; its broker should clearly establish that the
phce being oữered does include \% commission.Thus an offer o f $IO m is put fonA/ard as Price
$ 10,000,000 less 1% total commission.
The sellers broken however; will also require a commission so a íurther \% o f the sale price
is added and the ofĩer put forward to his principal wili be: Price $10,000,000 less 2% total
comm;ss/on.This means that the seller would receive a net price fo r his ship o f $ 10,000,000 less
$200,000 = $9,800,000.
Should there be more than tw o brokers, each broker will, in turn, add his commission to that
put íonAârd to him beíore passing on the offer to the next broker or the sellen
lf there happened to be fo ur brokers in a deal (this is an unusual circumstance), the fìrm offer
w ould reach the seller w ith 4% total commission. Occasionally, a seller may resist such a high
am ount and try to force the brokers to share commissions, even to the extent o f agreeing a
total percentage and letting the brokers íìght it out among themselves. Only the circumstances
at the tim e will dictate what is eventually agreed.
The amount o f commission in s&p deals is not Standard. Much will depend on the circumstances
and the price.There can be just as much, if not more, vvork in concluding a $5m deal as in a
$50m negotiation.
O n each deal.thereíore, a broker should consider what is reasonably compatible with the tim e
likely to be involved in reaching a successíul conclusion as well as the price involved when
adding commission to the price put íoPvvard.
For mcst deals, I % o fth e total purchase price fo r each broker is considered the norm. However,
to ensure the deals stand the best chance o f success the broker must alvvays be prepared to
make a sacrifice.
O n occasions it is the seller w ho states their price fo r a ship, net o f commission. Either the
broker must decide to try and arrange with the seller an agreed fee o r a íigure must be
w orked oưt inathematicaily to establish what the price o f the vessel must be to provide the
commissions required.
Let us say a ship is sold fo r $975,000 net o f commission.To earn \% o fth e fìnal purchase price,
the broker must divide $975,000 by 99 and add to the net price as íollovvs:
$975,000 - 99 = $9,848,48 + $975,000 = $984,848.48
A t this price the seller will receive their $975,000 net o f commission and the b rokerw ill obtain
I % provided buyer and seller agree a contract price o f $984,848.48.
However, if 2% is required by brokers where the seller has speciíìed a íinal price o f $975,000
net o f commission the calculation is as íoliovvs:
$975,000 - 98 = $9,948.97 X 2 = $19,897.94 + $975,000 = $994,897.94.
Needless to say, if 3% commission is required 97 is divided into the net price and the quotient
is multiplied by 3, the product o f which is added to $975,000. If 4% the divisor is 96 and the
m ultiplier 4, and so on.
Such equations are rarely necessary, but it is im portant to know how to carry out the calculation
should the occasion arise.
The buyers brokerm ay fìnd th a tth e principal has already stipulated an address commission,which
is retained by the buyenThe most common reason ío rth e inclusion o f an address commission

T h e Ship Sale
is to satisty the buyers internal accounting procedures where the address commission becomes
the income o f the departm ent in the buyers company negotiating the sale.
5.4 IN S P E C T IO N A N D IN S P E C T IO N OF RECORDS
Except fo r vessels intended fo r demolition, ships are rarely purchased w ithout being inspected
by the buyers superintendent engineer o r other qualified surveyon It would be like buying a
house w ith ou t even a cursory inspection.
This inspection should not be coníused with the inspection carried out by the ships classiíication
society at the tim e o f delivery.That inspection at one tim e always involved the ship going into
dry dock, but now it may be carried out by specially qualiíìed divers.
To clarity the difference between the tw o types o f inspection the one carried out before
coníìrming the purchase is often reíerred to as a superTicial inspection.
Because a ship purchase is a large Capital transaction the buyer will always seek to eliminate
margins o f error.They will wish to see as much as possible in the tim e available so as to be sure
that the vessel is in sound working order
Ideally, it is better to see the holds clean swept on in a tanker; to have tanks free o f gas, but this
may not alvvays be possible. It will depend upon the movements o f the ship and the seller will
be reluctant to hold up the vessel unless it is very likely that a positive deal is in prospect.
Occasionaily a buyer may request the opening up o f closed areas such as ballast tanks, wing tanks
and suchlike to satisíy themselves there has been no detehoration, but this is time-consuming
and the seller may resist something likely to cause delay to the ship. Any request to open up
should be clearly stated before starting the inspection so that there is no misunderstanding
when the inspection begins.
Buyers often ask to inspect the logbooks vvhile aboard.This is so the inspector can check if the
ship is performing to its deschption o f speed and consumption.This is o f vital im portance to
enable the b u y e rto calculate the ship’s future earnings. It also provides a record o f any incident
o r damage that may have occurred during a recent voyage, such as hitting an undet>/ater object
o r superficial damage that has not yet been notified to the classification society and is thereíore
absent írom th e ir records.
The location where the proposed inspection is to take place must be speciíìed. Since it is in the
interest o f buyer and sellerto find out w hether o r not the ship is likely to be sold, it is im portant
to State a tim e by which the ship will be inspected and a decision made on the purchase.
5 .4 .1 Records inspection
The inspection o f classitìcation society records is a routine s&p activity. Brokers are not expected
to be technical specialists o r marine surveyors so they do not inspect records themselves and
do not express opinions in the matter. Nevertheless, brokers do need to arrange an inspection
o f the classiíìcation society records, on the principals' behalí.The classitìcation society will not
perm it such an inspection w ith ou t w ritten authority from the sellen
An experienced mahne superintendent o r surveyor can determine, from an inspection o f a

ships records at a classiíìcation society, a fairly accurate idea o f its condition.They will note
recurring problems and areas o f continuing concern.
Inspection o f records usually takes place beíore the ship inspection because the records will
have revealed the parts o f the vessel where any trouble has occurred and thereíore where
examination should be concentrated.
To arrange an examination o f the classification society records the broker íìrst needs to obtain
permission from the seller o f the vessel, either directly o r through their brokenVVhen permission

C h a p te r 5
has been granted, they then arrange with the society a tim e and date fo r inspecting the records
and give the name o f the inspector
Should an s&p broker be asked to nominate o r recommend a surveyor to inspect a ship

o r records on behalí o f a buyen great care should be taken in case the recommended
inspector laterturns out to have been negligent. A broker should thereíore make a suggestion
w ith o u t guarantee.
5.4.2 Reply tim e fo r inspection of vessel and records

At o ne tim e s&p negotiations often proceeded subjectto supertìcial inspection and inspection o f
records. As a result, buyers and sellers, and o f course their respective brokers, found themselves
devoting a lot o f tim e right up to completing all the details o f an intended sale, only to have the
vvhole exercise collapse when e ith e rth e records o r th e ship inspections to o k place.There was
no redress; in fact,the buyer was not even obliged to give a reason fo r refusing. It was the cause
o f severe írustration to brokers at that time.
Lately, selỊers have been able to reíuse to negotiate on a ‘subjectto inspection’ basis.This means
the intending buyer must carry out a proper inspection o f records and superíìcial inspection o f
the ship itself and then make the oíĩer on an outright basis.
Circumstances could change, and if ever a ‘subject to inspection’ pattern o f negotiatíons were
to return it would be vital to speciíy dates and times fo r the inspections along w ith a deadline
fo r an eventual decision to be declared by the buyer. If a deal is concluded subject to inspection
o f records and ship, the seller cannot deal vvith other buyers in the meantime, so unambiguous
tim e limits are essential.
5.5 DELIVER Y - W H E R E A N D W H E N
The place and tiiTie o f delivery must be clearly indicated beíore agreement can be reached
on a ship sale, Buyer and selỉer will each wish delivery to take place at a p o rt and time most
convenient to themselves compatible with the movements o f the ship.
But once a deal is agreed, both parties will seekto expedite matters to th e ir mutual satisíartion.
In any discussion that may follow on this issue, comm on sense ought to be the prevailing íacton
It is clearly better fo r both parties if delivery takes place at a safe piace that is accessible for
taking o ff and signing on a ship’s crew. A safe berth alongside a quay o r jetty is ideal for this
purpose and it is usually íound more convenient if this can be arranged at the vessels last p o rt
o f discharge. If dry docking at the delivery p o tt has been agreed, then It is essential to know
in advance that the p o rt has available suitable dry-docking íacilities. If appropriate, the íaciiities
needed fo r a divers inspection will have to be checked.
The date o f delivery is im portant so the buyer can sign on a crew and make the necessary
arrangements fo r transíer by the seller such as 'stemming', o r reserving, a dry dock, if this has
been agreed. Also to be included in the advance planning are financial arrangements, Insurance
and documentation.
The buyer wiil have pưt down a deposit on the vessel they intend to purchase. If, for some
reason beyond the sellers control, the vessel is not ready, it is oniy right that the buyer has the
option to cancel the deal.This might occur ifth e ship has been declared an actual o r constructive
total loss.The buyer will require the return o f the deposit, plus accrued interest, and it is for this
purpose that a cancelling date fo r completion o f the sale should be incorporated.
However, having inspected and accepted the vessel and placed a deposit w ith the clear intention
o f a purchase.the buyer may not wish to lose the ship simply because it was deỉayed in reaching
its p o rt o f destination.The broker acting on behalí o f the buyer should thereíore make it clear
th at the cancelling date o f the contract is in the buyers option.This means that should the vessel

T h e Ship Sale
miss its cancelling date.the sale may still be maintained by the buyen it is in their interest and if
they feel there is a reasonable assurance that delivery can take place vvithout much íu rth e r delay.
This situation is clearly covered in the Non/vegian Saleíorm 1993, vvhich is examined in chapter
6.3.5.The cancelling date is essentially an option;the contract is not automatically cancelled if the
ship is laterthan its cancelling date.
5.6 DRY D O C K IN G OR D IV E R ’S IN S P E C T IO N
The full implications o f the ciause covering the inspection at the tim e o f delivery will be reíerred
to in chapter 6.2.6. It is an im portant clause o f most s&p contracts, ensuring that the vessel
is in full compliance vvith classifìcation rules.The only occasion where such a clause vvould be
om itted would be when a ship was sold ơs is, where is, which means that the buyer is agreeing to
take the ship exactly in its current condition and location. Also excluded from dry docking are
ships sold fo r demolition.
The purpose o f the dry-docking clause is to enable inspection o f the parts o f the vessel below
the vvaterline. If anything undenA/ater is damaged so as to affect the vessels class, it must be
put right by the seller to the classification societys satisíaction. It is quite usual now fo r the
classiíìcation society to use specially qualified divers to inspect the underwater parts and this is a
method írequently used especially where no dry docks are available.
Chapter 6 covers the various versions o f the Norwegian Saleíornn, which is the form most
commonly used today. It has been revised many times, most recently in 2 0 12, so is known as
NSF 2012. Such is the conservatism o f ship ovvners, its immediate predecesson NSF 93, is still
widely used. s&p brokers need to know about both forms, because it may be many years beíore
the N5F 93 becomes obsolete o r NSF 2012 becomes widely accepted.
There is no such document as a perfect sale contract. A buyer may well argue that the contract
placed before them by the seller is to o much in the sellers íavour and vice versa, but experience
has shown that the NotAvegian Saieíorm is as equitable as can be devised. Most importantly, it is
known throughout the world, which íacilitates the drawing up o f the íinal contract fo r signature
once agreement on term s has been reached.
5.7 W H A T IS IN C L U D E D IN T H E PRICE
Just what is included in the sale price causes possibly more argument than any other item when a
ship is delivered. It is o f prime importance to deíine as clearly as possible the intentions o f buyer
and seller in this respect. W hen a buyer negotiates a deal they expect everything belonging to
the ship to be included in the sale price. N o t only do they expect all items on board the vessel,
but also any items ashore o r on order if they are the ship’s property.The exceptions are bunkers
and lubricating oils, which are dealt with separately. Items involved may include a spare propeller
o r tailshaữ.
During negotiations, the broker should do the utmost to establish what is the ships property.
W here there are more ships o f the same class, it is common fo r a seller to exclude from a
sale certain items on hire, which may be regarded as fleet spares. Also likely to be excluded
are bottles, tank-cleaning machines and objects o f a personal o r individual nature such as a gift
from the ships sponsor when it was launched, pictures that decorate saloons.the ships bell, and
crockery and cutlery bearing the seilers flag o r name.
To avoid difficulties, the broker should anticipate such contingencies and try to find o u t what
the seller intends to exclude when handing over a vessel. On delivery, the buyer will expect the
ship to come w ith all the items o f equipment that were aboard the vessel when inspected. If the
buyer noted a spare propeller and a spare tailshaft on the ship during the inspection, they will
naturally expect to see them still aboard on delivery. Occasionally, a ship has incurred damage
to an item o f equipment such as a working propeller betvveen the time o f inspection and

C h a p te r 5
delivery, in vvhich eventthe spare propeller has been substituted ío rth e damaged unit while the
latter is ashore fo r repairThe seller may point out that the spare propeller is aboard the vessel,
being used to propel the ship, while the working propeller is ashore and damaged o r possibly
condemned. It is important, thereíore, to speciíy that the ship will be delivered w ith ơ spơre
propeller rather than the spare propeller. Such subtleties in negotiation should be noted by the
aspiring s&p broker
Normally,all the vessels manuals, plans, instruction books and other working documents should
be handed over by the seller as soon as possible aíler delivery (if not already on board).The
contract should stipulate a period within which such delivery is to be completed,
A list o f radio and navigational aids, w hether leased o r not, should also be itemised by the seller
so that the buyer, on deiivery, is fully aware o f what is ship's property and vvhich o f the items
on hire may be retained under new contracts betvveen the buyer and the equipment leasing
company. Given the critical role played by electronics in navigation it is vital fo r the buyer to
know w hether o r not the ship can sail as soon as delivered.
5.8 B U N K ER S A N D L U B R IC A T IN G OILS
Ships at the time o f delivery will have bunkers and unused lubricating oils on board, These
must be paid fo r in addition to the purchase phce, unless othePAíise agreed.The exceptions to
this may occur when a vessel is sold ‘as is, where is’ o r when purchased fo r demolition, when
bunkers may be more o f a liability than an asset. Demolishing a ship w ith m ore than a minimal
am ount o f bunkers on board is a dangerous exercise.
VVhen taking over bunkers at a p o rt o f delivery, there are three possible areas fo r dispute: the
price.the quantity remaining on board and the quality.
Bunker prices vary from p o rt to p o rt and a buyer will naturally wish to limit as much as possible
the amount to be paid fo r bunkers remaining on board when a ship is delivered. If a ship has
taken on board bunkers at a p o rt where they are expensive, it is understandable that the buyer
will object to paying the same price if the delivery p o rt is a place where bunkers are cheap.
Agreem ent needs to be reached about how the cost o f bunkers should be determined at the
tim e o f delivery.
Prices o f bunkers at any p o rt in the w orld are readily obtainable through a bunker broken oil
traden oil company o r the internet and a broker shouid always be ready to assist in providing
this iníormation.The sources mentioned can provide the current price fo r bunkers at the p o rt
o f delivery. Any oil company can advise on the cost o f lubricating oil. Howeven a ship customarily
contracts w ith only one supplier fo r lubricating oil and its price may diiĩer from another supplier’s,
although usually they are based on the last invoices. If some invoices are missing at the time o f
delivery.the buyer is not obliged to pay ío rth e m at an unrealistic price.
If, at the p o rt o f deiivery, bunkers are expensive, the buyer may stipulate the maximum
quantity to be paid fo r with a view to taking on only enough to take the ship to a p o rt where
they are cheaper
A t the tim e o f delivery, the skill o f the brokers in bringing their principals to an amicabie
agreement over bunkers can be invaluable. Should this prove diíĩìcult, they should seek an
impartial reíeree in the íoriTi o f an oii company representative w ho can propose a way to settle
the matten Occasionally, the buyer may claim that bunkers contain quantities o f siudge, in which
case the quality will be challenged; again, the decision o f an impartial reíeree should settle the
m atter to the satisfaction o f both parties.

T h e Ship Saie
The quality o f bunker fuel IS o f the utm ost im portance
The broker should try to establish which prices should prevail when settlement fo r bunkers and
lubricants is required at the tim e o f delivery. Most transactions are based on the buyer paying
less than the sellers last paid prices, because this is generally the íairest method. Exceptions are if
the seller knows invoices are not available o rth e bunkers are the property o f the charterer and
a different calculation fo r paỵment is used - usually Platts on the day o f delivery.
Although this discussion o f bunker prices may seem unnecessarily detailed in the context o f the
price o f the ship itself, the fact remains that disputes over bunkers are common.
5.9 B U YER ’S C R E W O N BO A R D BEPORE DELIVERY

The tim e when a ship is to be delivered can test the nerves o f all parties involved in the sale,
including the brokers. Buyers are anxious to place their crew aboard as soon as they arrive
at the delivery port, but experience has shown that it is unwise to allow the buyers crew
to go aboard before the ship has been paid fo r and documents exchanged. The essence o f
any contract should always be goodwill, howeven and where possible a compromise should
be sought.
Difficulty arises because the buyers have a natural anxiety to ensure that items o f ships pro p e rty
are not being taken ashore before handover while sellers discourage any interíerence in the
running o f the ship while it remains their property. Purthermore, should there be an accident
involvingthe buyer’s crew, litigation will ensue and the delivery tim e ío rth e oíTìcial handing over
could be delayed.
Duhng the sale negotiations it is usual fo r agreement to be reached to allow a limited num ber
o f members o f the buyers crew aboard ío rth e purposes o f familiarisation.This is alvvays at the
buyers risk and expense.
5 .10 SAM E C O N D IT IO N AS W H E N IN S P E C TE D
This stipulation has been knovvn to cause disputes, as it can be hard to provide p ro o f o f the
condition o f the vessel when it was inspected. For example, the buyers surveyor may not

C h a p te r 5
have conducted an exhaustive inspection o f the entire ship. If items o r areas were missed, then
there may well be doubt over w hether a particular defect was present on the day the vessel
was inspected.
Obviously a seller is anxious to sell their ship and will not go out o f their way to point out items
that are not in períect repairThe burden o f proving that the vessel was in better condition upon
inspection thereíore falls on the buyer.
The wording ‘substantialiy the same condition as when inspected' is a common term and gives
the buyer a degree o f assurance that, save fo r fair wear and tear, the ships condition will not
have changed appreciably between inspection and delivery. The seller is under an obligation
to act as a reasonably prudent ow ner between the date o f inspection and the date o f delivery,
The buyers inspector will oíìen take photographs o r make a video record to avoid scope for
later arguments.
5.1 I SUBJECT PU R TH ER DETAILS BASIS

NSF 1993 OR NSF 2012
N o tw o ship sales are the same. Each has its own, often uníoreseen, complications that test the
skill and ingenuity o f the broker whose task it is to bring the tw o sides together in harmony.
Reíerence has been made to the N orêgian Saleíorms as being used throughout the w orld fo r
ship sales.The words basis NSF 1993 o r NSF 2012 mean that the basic íornn will be used, clause
by clause and line by line, but. with amendments, additions and alterations according to the
negotiated ship sale terms agreed at the tim e o f concluding the agreement
5.12 EN G LISH L A W /A R B IT R A T IO N L O N D O N
Technically, these four vvords form a part o f what is knovvn as a 'choice o f law and jurisdiction
ciause'.This clause sets down the agreement between the buyer and the seller to refer disputes
to a particular law, in a particular place and using a particular dispute resolution mechanism.
Here the parties have chosen English law, with hearings to be held in London. In essence, the
procedure o f the dispute is also governed by English law, and the dispute will be submitted to
arbitration rather than the courts.
London arbitration is a nornnal agreement to find in any shipping contract simply because o f
the history o f London in shipping and international trade. London arbitrators and ịudges are
experts in shipping disputes o f all natures and types. For instance.there is the wortd-renowned
London Maritime A rbitrators Association. Law and jurisdiction clauses have been draíted by
BIMCO and other organisations fo r brokers and lawyers to be included in the memorandum o f
agreement between the buyer and the sellen
Brokers should always try to find a mutualiy acceptable resolution to any dispute betvveen the
buyer and the seller Sometimes this wili not be possible, perhaps because the issues are legally
complex and the parties' positions are to o entrenched to enabie a settlement to be reached.
Thus, some disputes do end up going to arbitrators.
5 .13 W IT H CLASS M A IN T A IN E D FREE OF

R E C O M M E N D A T IO N S A N D FREE OF AVERAGE
D A M A G E A F F E C T IN G CLASS
The above condition is commoniy used in s&p and it is im p o rta n tto understand its full meaning
and implications.These may be summarised as foilows.
I. Nothing relating to surveys should be overdue. All surveys have a deadline date and all
must be up to date at the time o f delivery.

T h e Ship Sale
2. Class surveys may have 'recommendationsVoutstandings' or'subject items o f class'.This

means that the classiíìcation surveyor has seen something that has to be dealt w ith by a
certain date. If this recommendation is noted, even though it may not be due until after
delivery o f the vessel, it must be settled at the tim e o f delivery.
3. There are also appendix items that are not given a definite date. A buyer cannot claim
an appendix item from the sellen as these do not affect clean class vvhereas outstandings
do aíĩect them.
4. Claims on Insurance must be cleared.'Average' means anything that is to be claimed

against Insurance u n d e rw h te rs .W h e n th e ship is s o ld .th e n e w o w n e r c a n n o t claim on
the undenA/riters o f the previous ownen so average items must be cleared beíore the
ship is delivered.
There are diffenng views on the interpretation and implementation o f the conditions imposed
above and these will be considered more fully when examining the sale contract in chapter 6.
5.14 T H E OFFER A N D C O U N T E R -O F F E R
There is no Standard form fo r putting íonAârd oíĩers, but many brokers have a check-sheet o r pro
[orma on th e ir desk as an aide-mémoire to ensure that no items are neglected o r overlooked.
Let us assume the Georgina is fo r sale and the seller’s brokers have circulated the vessel w ith an
indicated price o f $20,250,000 w ith delivery UK/Continent duringthe following July/August.
A typical oATer might read like this:
Georgina, O n behalf o f Moya Shipping o f Nevv City Court, London [the first oíĩer may om it the
prospective buyers name and simply say something like Tirst class buyers to be nominated'], we
are authorised to offer firm fo r replyTuesday July 7, 2 0 13 17.00 BST London tim e basis details
as set out in your email o f July 3 ,2 0 13 tim ed 16 .15 [o r State tim e and date and type o f whatever
communication was used to give details o f the ship]:
1. Price $ 19,750,000 - less 2% total commission this end.
2. Subject prom pt inspection o f the vessel with clean svvept holds atRotterdam within
August 2 0 13.
3. Subject approval o f class records after inspection o f same.
4. Buyers reply on inspection o f vessel and records within three working days after
completion o f vessel inspection.
5. Delivery o f the vessel, charter free, at a p o rt in Antvverp/Hamburg range at a safe

anchorage o r berth saíely aíloat within 30 days after signing o f memorandum o f
agreement and deposit lodged with cancelling date in buyers option.
6. Vessel to be delivered w ith class maintained, free o f recommendations and free o f

average damage. All safety certificates to be up to date.Vessel to be delivered in
substantially the same condition as when inspected.
7. National and international trading certiíìcates to be unextended, clean and valid fo r a

minimum period o f six months from the tim e o f delivery.
List o f all certiíìcates to be provided.
8. D ry docking as per NSF 1993 (Clause 6a to apply)
9. Vessel to be delivered w ith everything belonging to it on board, ashore and on order

including all spare parts and spare equipment inciuding spare propeller and tailshaít,
radio/navaids not on hire (please itemise).
10. Purchase price to include bunkers and luboils as on board at tim e o f delivery.

C h a p te r 5
I I. Vessel to be delivered free o f all encumbrances/mortgages/maritime iiens/taxes/claims

and all debts whatsoever
12. Buyers right to place tw o men on board at buyers risk and expense after contract
signed, deposit lodged and buyers signed indemnities provided.
13. Sellers to guarantee the vessel has not traded w ith /to Israel, Cuba, N o rth Korea and is
not blacklisted by the Central Boycott Oíĩìce o f the Arab League.
14. English law arbitration in London
15. Buyer‘s option to change flag and registration.
5.14.1 T H E FIRST C O U N T E R -O F F E R
On the assumption that this initial offer is o f interest to the seller, a counter-offer from the seller
might be set out as below.
On behalí o f Freya Shipping o f St Mary Axe, London, we are authorised to counter-ofĩer

on the following terms and conditions to your ofíer o f yesterdays date fo r reply here by
15.00 BST London tim eThursday July 3 ,2 0 13.
1. Price $20,250.00 less 1.5% total commission your end. [The seller has
maintained their indicated price and only allowed 1.5% commission from the purchase
price to buyers broker.The fact that there is more than \% commission at the buyers
end tends to indicate that either there is another broker involved in the deal o r that the
buyer has included an address commission in th e ir ofTen]
2. Subject superTicial inspection only at first p o rt o f discharge Antw erp/H am burg range
vvithin July 2 0 13. Buyer will, o f course, have access to holds, but as the vesselwill be
discharging cargo, owners cannot in advance coníìrm that holds will be clean svvept.
Vessels deck and engine logs will be made available to buyer at tim e o f inspection.
3. Agreed. [Seller has agreed inspection o f class records.]
4. Agreed, except decision o f acceptance/reiection o f ship and records wíthin 48 hours

atter ship inspection. [Seller wishes to speed up the decision on whether o r not the ship
is accepted and have shortened the penod fo r reply, A seller must know w ith minimum
delay w hether o r not they have a deal fo rth e purposes o f ĩinding another buyer o r íìxing
the ship,]
5. Agreed, except delivery during August 2 0 13 w ith September 20,20 i 3 cancelling date,
6. Agreed except with the following amendments:
A íte r average damage to add the vvords ‘affecting class’. [Seiler has agreed the wording as
proposed by buyer; but requires the condition that only claims against u n d e w rite rs that
affect the vessel's class will be cleared at the tim e o f detivery.]
Seller will prcvide iist o f up-to-date safety certiíìcates.
To add the vvords ‘fair wear and tear excepted’ after the same condition as when
inspected. [The addition inserted by the buyer can cause complicaticns because o f the
ditĩìculty in proving the condition o f the vessel at the tim e o f inspection. As mentioned in
section 5 .10, the seller is under no obligation to point out items that are not in a períect
State o f repair, so th e b u rd e n o f p ro v in g th a t th e vessel w as in a b e tte r c o n d itio n upon
inspection will fall upon the buyen]
7. Agreed. Seller will provide full list o f national and international trading certiíìcates with
validity dates.

T h e Ship Sale
8. Divers inspection as per NSF 1993 (Clause 6b to apply). [D ry docking has been declined
and the alternative o f a divers inspection oíĩered, which is now quite common practice.]
9. Agreed, except seller will not replace spare propeiler o r spare tailshaữ if used prior to
delivery. Radio/navaids on hire will be advised soonest. [The seller is taking the precaution
o f not being required to replace the spare propeller o r spare tailshaíL in the event o f the
vessel hitting a submerged object before delivery, in vvhich case the working propeller and/
o r tailshatt might be condemned necessitating the spares to be íìtted. Radio and navaids
are listed in the owner's office and the broker will obtain details o f those that are on hire
and those that are the ow ner’s property as soon as the iníormation is íorthcoming.]
10. Remaining bunkers and unused lubhcating oils to be paid fo r extra at current price at
p o rt o f delivery. [It is normal fo r sellers to require buyers to pay extra fo r bunkers in
ship sales fo r íu rthe r trading.The broker can expect some argument regarding prices o f
bunkers and luboils at the p o rt o f delivery, also quantity and quality.]
I I . Agreed. [The seller has agreed to clear all debts on the ship beíore delivery. Prooí o f
this must be given at the time o f delivery to obtain transíer o f flag from one registry
to anothen]
12. Buyers have the right to place tw o men on board at buyers risk and expense on arrival
o f vessel at delivery p o rt.T he risks are obvious, but buyers also are concerned about
items o f ship’s property being taken ashore. Buyers also have an interest in íamiliarisation
o f the vessel by their crew and thereíore may wish to have an engineer aboard fo r the
delivery voyage with this in mind.]
The buyers can place tw o men on board to check what should remain on board
13. Agreed.
14. Agreed. [Brokers have a key role to play in the avoidance o f disputes needing to go to
law. A rbitration can, o f course, be convened at any centre o f shipping throughout the
w orld which is acceptable to buyers and sellers.]
15. For tra n s fe r o f flag in b u y e r’s option, b u y e r t o State th e ir re g istra tio n d o c u m e n ta tio n
requirements with vvhich the seller must do their utmost to comply.

C h a p te r 5
5.14.2 N E G O T IA T IO N S PROCEEDING
It is emphasised that the above oíĩer and counter-offer is an example only o f what might happen
during a negotiation fo r a ship purchase.The brokers will continue their exchanges, clause by
ciause and line by line, until agreement is reached on terms. A fte r that, it will be th e ir duty to
draw up a sale contract fo r signature.
It is assumed that following offers and counter-oíĩers on this outline basis, agreement has been
reached on terms.The sellers broker will then need to draw up a memorandum o f agreement
fo r signature, careíully observing every item that has been agreed by both parties and recording
it in the sale contract.
Howeven both the buyer and the seller are likely to have retained lawyers to advise them on
particular terms in the contract and legal issues that either party should be aware of.
VVhile all offers and counter-ofĩers have to be authorised by the principal concerned.the process
o f submitting them in a manner most likely to result in a favourable reply can be perfected only
by practice and experience. By this means.the broker builds up a reserve o f confìdence and skill
essential ío rth e ir ultimate success.
T he deal Ì5 done

«CVrT-Vr -Ịẽí.'^-.?'
• .i* ' *I*
Chapter 6
Ship Sale Contracts and Clauses
Gơtevvơy o f Indiơ
The gateway was built to commemorơte the lơnding o f their Mợ/esí/es King George y
ơnd Queen Mơry vvhen they visited Indiơ in 1911. Poundations were laid in M arch o f
thơt year.The final design by George vv/tteí vvơs approved in 1914 ơnd the monument
was completed in 1924.
C h a p te r 6
6.1 IN T R O D U C T IO N
The previous chapter looked at the procedure adopted by sale and purchase practitioners. It
pointed out that, when final agreement on terms is reached, it is normally the duty o fth e sellers
broker to draw up a contract (more íormally called a memorandum o f agreement, o r M oA) fo r
signature by the tw o principals.
N o w the períect form o f sale contract can rarely exist by reason o f differing interests betvveen
sellers and buyers. Nevertheless, the ultimate desire o f both parties, after having reached
agreement on terms, is fo r an efficient and smooth transíer o f ovvnership.To this end the careíul
preparation o f a contract is vital.
Experience has shown that the Norwegian Shipbrokers' Associations Memorandum o f

Agreem ent fo r sale and purchase o f ships is as equitable as can be devised.This document was
adopted by the Baltic and International Maritime Council (BIMCO) in 1956 and it has been
revised íive times, in 1966, 1983, 1987, 1993 and 2012. The NorM/egian Saleíorms have the
advantage o f being the most vvideiy knovvn and extensiveiy used o f all sale contracts and it is on
these íorms that this chapter is based.
Shipping people tend to be conservative in their use o f Standard forms. Some dry cargo
charter parties that are still in use contain wording that is unchanged from forms devised in the
I9th century.Thus, although most s&p practitioners consider the 1993 form to be a marked
improvement, it has not yet entirely replaced the 1987 form, and it is likely to be several years
beíore the 2012 form comes into widespread use. It is im portant to know, and to be able to
demonstrate, vvhere the form s diffen
6.2 C O N C L U D IN G T H E SALE
It is now assumed that the buyer and seller exchanging the oíĩers and counter-oíĩers íìnally
reached agreement on terms.
A n email coníirmation o f the agreement to sell vvould be put forward by the sellers broker
as íoliovvs:
O n behalí o f Preya Shipping o f St Mary Axe, London we are pleased to confirm the sale
o f Georgina to Moya Shipping o f N ew City Court, London, on the foilowing term s and
conditions:
1. Price $20,000,000 less 2% total commission your end. Deposit 10% vvithin three banking
days o f signing contract otherwise term s Saleíorm clause 2. Payment vvithin three banking
days o f delivery otheiAA/ise terms Saleíorm clause 3.
[The seller agreed both to low er the price and to allow 2% fo r the buyers broker,
probably fo r distribution w ith others. Brokers usuaily agree to 1% o f the purchase price
and so presumably there is either an address commission past the buyers broker o r
there is another broker w ho has to be covered. On commission, hovveven there is no
hard and fast rule, brokers having to use their discretion and ịudgement at all times.]
2. Subject to superTicial inspection only at Antw erp vvithin July 2 0 13.
[The seller has now nominated the p o rt o f inspection fol!owÌRg more deíìnite news o íth e
vessels movements since the initial ofĩer and counter-offers were exchanged. Superíìcial
inspection means what it says and excludes opening up o f engines but allows the vievving
o f any part o f the vessel within the interpretation o f this term .]
3. The class records have been accepted by buyer after inspection.
[It is usual to inspect class records beíore inspect-ing the vessel as they will indicate the
vessel's condition, trading history and technical problems under its present ownership

Ship Sale C o ntracts and Clauses
and will prove a useful guide as to what areas should be given particular attention vvhen
the buyers inspectors are aboard the vessel at the p o rt o f inspection.]
4. Decision o f acceptance after inspection o f vessel afloat to be given to seller w ithin 48

hours after completion o f such afloat inspection.
[Depending upon market conditions, the seller may insist on inspection o f the vessel
taking place beíore proceeding with negotiations. In this case, clauses 2, 3 and 4 o f this
ofíer would be replaced with:
The buyer has approved class records and accepted the vessel following superíìcial
inspection aíloat a t .............This sale is deíìnite and oưtright subject only to the conditions
o f this offen]
5. Delivery o f the vessel at a safe berth in Antvverp within August 2 0 13 with September 10,
201 3 cancelling.
[The buyer has succeeded in shortening the cancelling date by 10 days. Bear in mind
that the cancelling date is an option that the buyer may exercise o r not as they wish.This
could be catastrophic fo r the seller vvhose ship may simply have been held up through
uníoreseen delays under a preceding charten lf the market has deteriorated substantially
between the time o f signing the agreement and the delivery date.the buyer may be very
relieved if the ship is a few days late because the clause, w ithout any qualification, legally
w ould allow the b u ye rto walk away from the deal w ithout penalty if the ship is so much
as one day laterthan its cancelling date.A prudent seller would insert additional vvording
in the cancelling clause calling on the buyer to declare their intentions in advance if it
appears that the ship is falling behind schedule. Uníoreseen delay can be equally serious
fo r the buyen vvho may lose profitable business through the ship being late. If the delay
were deliberate then the buyer would have a remedy in law against the sellen]
6. D ry docking as per NSF 1987.
[Inspection o f parts below the summer loadline can be carried out by divers specialising
in this form o f survey where a dry dock is not available.VVe shall examine the implications
o f the dry dock clause later in this chapter, but it is im portant to note that the vessel
cannot be declined aíter d ry dock inspection.The sale is deíìnite and all that is necessary
is fo r any defective parts below the summer loadline to be made good to the satisfaction
o f the classification surveyon]
7. Vessel to be delivered w ith everything belonging to it on board and ashore and on order
including spare propeller and spare tailshaft unless taken oưt o f spare p rio r to delivery.
B uyerto pay extra for remaining bunkers, unused lubricating oils only and pay the current
market price at the p o rt o f delivery.
[VVhat is included in the price o f the vessel can be a source o f argument and it is
im p o rta n tto be as explicit as possible in this matten Clause 7 o f both the NSF 1987 and
NSF 1993 is as comprehensive as can be devised in a sale contract, but care must be
taken over items such as those bearing a crest o r name, a sponsors gift and suchlike.
Ince & Co, in comparing the 2 0 12 Saleíorm with the 1993 version, states that clause 7 o f
the M oA has been amended to include an increased responsibility on sellers to list the
items not belonging to them and that are excluded from the sale. Sellers are also obliged
to replace items owned by third parties if those items were on board during inspection.
It appears that this was inserted to ensure that buyers, having inspected the vessel, are
not surprised when certain items that may have been hired from a third party are not
included in the sale.

C h a p te r 6
Bunkers, and the cost o f bunkers, can always be a source o f dispute and this will be
examined when the implications o f clause 7 are discussed íurther]
8. Vessel to be delivered free o f all encumbrances, mortgages, maritime liens, taxes, claims
and all debts vvhatsoeven
[This requirement is an essential beneíìt fo r buyers, and is covered adequately in clause 9

o f NonA/egian Saleforms.The obligation ío rth e sellerto indemniíy the buyershould there
be any subsequent claims on the vessel after delivery is an essential one. For example, a
creditor o f the seller may have obtained a warrant o r a w rit to arrest the ship fo r a debt.
The creditor may not yet have served the writ, so the seller may genuinely be unaware
o f its existence. However, the w rit fo r the debt will cause a maritime lien to come into
existence and its type o f lien remains valid against the ship regardless o f any change o f
ovvnership aíterthe issue o f the warrant.The creditor is under no obligation to advise the
ship ovvnerthat a w rit has been issued, so the first intimation o f the writ's existence may
be the actual arrest o f the ship. Full details o f this procedure, knovvn as arrest in rem. are
discussed in the Institutes publications dealing with shipping law.
Ince & Co has commented that this clause has been amended to include the additionai
w a rra n ty th a t o n d e liv e ry th e vessel w ill n o t be su bject t o a p o r t State o r o th e r
a d m in istra tive d e te n tio n . Such an a d dition al w a rra n ty in re sp ect o f p o rt State d e te n tio n s
may have an effect on the deiiverability o f a vessel as recently considered by the C ourt
o f Appeal in YHM Shipping V Polestar M aritim e (The Rewa) [2 0 12] E W C A Civ 153.]
9. Vessel to be deiivered with class maintained, free o f recommendations, all continuous

survey cycles to be passed minimum three months from date o f deiivery. Free o f average
damage affecting class and w ith all class and trading certificates clean and valid.
[The meaning o f this condition will be explained later in this chapter when saleíorms are
examined line by line.]
10. Vessel to be delivered in substantially the same condition as when inspected, fair wear
and tear excepted.
[The buyer has agreed to the seilers stipulation 'fair wear and tear excepted'.The obvious
diffìculty here is in proving the condition o f the vessel at the time o f inspection. The
buyers surveyor may not have carried out an exhaustive survey o f the entire ship and
there may have been items that were missed. The inclusion o f the words 'fair wear
and tear excepted’ does not mean that when the agreement to sell has been reached
the seller can ignore normal maintenance.They remain under an obligation to maintain
the vessel as a responsible and prudent ow ner from the date o f inspection until the date
o f delivery.]
II.S u b je c t contract details basis NSF 1987 o r NSF 1993; English law and arbitration
London to apply.
[Seller and buyer agreed that the NonA/egian Saleíorm will be the basis o f their contract
w ith additions and/or deletions according to what was agreed in this confirnnation ]
12. Buyer has the right to place tw o men aboard at buyers risk and expense at Antwerp
immediately after contract signed and coníìrmation o f deposit lodged in accordance with
contract and after signing usual indemnities.
[The seller has agreed fo r representatives to be placed aboard, but only after the deposit
is lodged. It is natural fo r the seller to want to be assured beyond reasonable doubt that
the sale is deíìnite.There can be no better assurance than having a signed contract and a
deposit placed by the buyer
ỉt is usual fo r the buyer to obtain p&l cover indemniíying the seller fo r any damage o r

Ship Sale C o n tracts and Clauses
inịury the buyers representatives may do to themselves, to the vessel o r the sellers
oíĩicers, crew and servants.
Unexpected eventualities may occun but the essence o f every contract is goodvvill. It
is therefore a reasonable request from the buyer fo r tw o representatives to be placed
aboard the vessel. Before oíĩicial handoven persons other than the sellers crew are not
usually welcome aboard, but there has to be some give and take in all transactions and in
this instance the seller has shown a vvillingness to co-operate.]
i 3. Seller guarantees that to the best o f their knowledge the vessel is not blacklisted by any
Arab country.
[Some Arab countries still boycott ships that have traded to Israel. Such boycotting is
o f the ship not the ovvner; because it vvould otherwise be easy enough fo r a boycotted
ship to be sold to another company, still controlled by the original ownen A buyer needs
assurance in w riting and in the contract that once the vessel has been taken over there
will be no restrictions on its trading.]
On the assumption that this confirmation, usually reíerred to as a recapitulation o r simply recap,
sent by the sellers broker to the buyer o r their broker has been confirmed as a correct record
o f what was íinally agreed between the buyer and seller, it will now be the task o f the seller's
b ro k e rto draw up a contract o r M oA fo r signature.
6.3 DIFFERENCES B E T W E E N NSF 1987 A N D NSF 1993

Saleíornn 1987 will be used as the basis and italics will be used to indicate vvhere the Saleíorm
1993 difĩers.
In addition we include BIMCOs description o f the differences between NSF 1993 and NSF
2012 in section 6.4.
Date.This should be the date on which agreement was reached on terms.That is to say, when
all otĩers and counter-offers have been exchanged, all outstanding items were íìnally confirm ed
by both parties.The deposit must be lodged vvithin three banking days from the date o f the
agreement being signed by both parties and thereíore the brokers dravving up the contract
must be ílexible in pursuit o f attending to the interests o f their principals and the requirements
o f the sale in question.
Lines I, 2 and 3, Names of the parties and the ship.These are straightíonAârd, containing the
full style and addresses o f buyers and sellers and also the ships name.The 1993 form nnore
correctly says ‘‘agreed to sell” instead o f"so ld " and “ agreed to buy” instead o f ‘‘bought''.
Lines 4 to 8, Details of the ship. Date o f build, classification and name o f builders can be
obtained from the classiíìcation register o r from the owner. ‘Classification society and class’ is
used in the 1993 form rather than sim ply‘classification' Events have even overtaken the 1993
form because registertonnage is now denoted as GT and N T
The 1993 form lines 10 to 15 clariíy some words and phrases used in the contract.
N ote that the ships call sign can be obtained from the classification register o r from the owner.
Gross and net tonnage are best obtained from the tonnage certificate in the owner's offìce.
Clause 1, Price.The price must be expressed stating currency and amount in íìgures and in words.
Clause 2, The d e p o sitT h e sale having been coníìrmed, it is im portant fo r the seller to have
some kind o f surety. Should the seller cause the ship to deviate from its course and keep it
uníìxed in the belief that the ship has been sold, yet the buyer intends only to have an option on
the vessel, then the seller could incur heavy costs. A deposit is essential, because this assures the
seller o f the buyers seriousness and can make the necessary arrangements fo r handing o v e rth e
vessel quickly.The deposit can be lodged in any bank, but it is usually placed in the sellers bank
Ship Sale and Purchase 9 1

C h a p te r 6
so as to íacilitate banking arrangements when the ship is delivered, although the sellers brokers
bank is often used. Saleíorm 2 0 12 reíers to the ‘deposit hoider', paving the way fo r the deposit
to be held othertha n by a bank.
The deposit is to be lodged vvithin three banking days from the signing o f the contract by both
parties. Any interest on the deposit is fo r the buyers account Should the bank holding the
deposit impose a fee, the buyer and the seller bear the cost equally.The 1993 form goes into a
iittle more detail about the release o f the deposit.
Clause 3, Payment. Obviously the seller needs to receive the precise amount o f purchase m oney
as agreed. Banks charge fo r their services so the buyer must instruct their banker to have the
required amount o f money available fo r payment to the sellers account as and when required,
w ith any bank charges fo r the account o f the buyen This accounts fo r the wording 'free o f
bank charges'.
W hen the vessel is ready fo r delivery, official notice o f readiness is given to the buyer by the
sellerThe 1993 form devotes a whole new clause (5) to the question o f notices and, incidentally,
has already clariíìed that the w ord vvritten includes any method o f transmitting the w ritten word.
The 1993 íorrn includes the words in everỵ respect physically ready for delivery. This is included
because the looser wording under the 1987 form became the subject o f a law case ('Aktion'
1987). Full payment within three banking days after such notice is generally acceptable. Such
notice could, o f course, be expressed in other íorms - fo r exampie vv/thin three working days
o r three dơys, Sundays and Bank Holidơys excepted - but the s&p vvorld has almost universally
elected to use the expression banking dơys, which seldom gives rise to ambiguity; banking àays
are deíìned in the 1993 íorm.
Clause 4, Inspections. As noted above, a ship purchased fo rfu rth e rtra d in g is rarely negotiated
w ith o u t inspection o f the ship and its records. A ship purchase is a substantial fìnancial
transaction and the future íortune o f the buyer may weil depend on its outcome. It is im portant
to eliminate risks and margins c f e rro r as far as possible. Classiíìcation records can usually give
a c le a r in d ica tio n o f th e Standard o f m aintenance, tra d in g h is to ry and th e general c o n d itio n o f
the ship since its maiden voyage up to the last survey. A buyer will note recurring problems and
will pay special attention to them when the phỵsical inspection o f the vessel takes place. In the
case we are studying, the Georginơ, the buyer has inspected records and accepted them .The
w ords in lines 22 and 23 o f the 1987 form, which read The buyers shall hơve the right to inspect
the vesseís dơssification records and declơre whetíier same are ơccepted or not witìiin, will have to
be deleted,therefore.
Similarly, if the vessel had been accepted after inspection beíore contract signing we could
expect clause 4 to read - The buyers have accepted the vesseís records and ơlso the vessel after
inspection ơnd the sơle is therefore outright. Sellers are usually reluctant to allow opening up o f the
main engine and it is natural that the seller should require compensation should a buyer hold
up the vessel on account o f delays in inspection. Logbooks fo r engine and deck are part o f the
items inspectors will wish to see. In effect, they are the ship’s diary and provide iníormation o f
importance to a buyer such as speed and consumption and details o f any incidents in which the
ship has been involved.
It is incumbent on the buyer to iníorm the seller whether o r not the vessel is accepted vvithin
48 hours after completion o f inspection. A fte r that the sale becomes deíinite, if the buyer has
accepted the vessel, subject to other conditions o f the contract.
Incidentally, there is no debate about the inspection: the buyer does not have to give their
reasons fo r turning the ship down.They can just walk away from the deal at this stage, and
reclaim the ir deposit. This means there is a risk o f a sale collapsing after all the negotiations
have been completed. The 1993 form takes note o f the growing tendency fo r negotiations
proceeding only once the inspections have taken place and thus provides fo r this situation in
option (a). It even allows fo r careless preparation o fth e form by statingthat option (a) applies if

the broker forgets to delete option (b).
Clause 5, Place and time of delivery. The seller and buyer in the Georgina case agreed that
delivery shall take place at Antvverp vvithin August 2 0 13. It is up to the seller to keep the buyer
up to date about the vessel’s itinerary and estimated tim e o f dry docking.The ship will remain
sellers property until paid fo r and delivery usually takes place immediately after the vessel has
been taken out o f dry dock. Obviously, it is more convenient fo r all concerned in the sale and
handover o f the ship fo r delivery to take place alongside a berth o r quay, but this may not be
possible in a busy port.
As previously mentioned, it is in the interests o f both parties to have a cancelling date in the
contract as a precaution in case the vessel, fo r circumstances beyond the control o f the buyer
and sellen cannot be delivered within the tim e agreed. Such a circumstance could occur should
the vessel be declared a constructive total loss.
If delivery might be delayed by repairs that had not been anticipated when the vessel entered
d ry dock o r fo r any other reason outside the sellers control, then the cancelling and delivery
date could be renegotiated. In this event an addendum to the memorandum o f agreement
would be drawn up by the brokers setting out the terms that had subsequently been agreed.
The brokers task is to attend to the interests o f his principals at all times, and it is essential
that the buyer is kept fully avvare o f the vessel's movements, estimated time o f d ry docking
and delivery.
The 1993 form uses clause 5 to go into greater detail about notices and keeping the buyer
iníormed o f the vessel’s itinerary and includes reíerence to the saíety o f the place o f delivery.
Then there is a long (some brokers say to o long), clause 5(c), which seeks to reduce the íear
o f the buyer simply walking away if the ship misses its cancelling date.There is, however; no
obligation upon the buyer to agree a new cancelling date if the ship is delayed so vvalking away
is still an option.
Clause 6, the drydocking and diver’s inspection clause.This clause should be studied careíully
so that its its implications can be understood. Its purpose is to allovv inspection o f all external
parts o f the vessel belovv the waterline o r loadline, N ote that the 1993 form refers to the
deepest loũdline in preíerence to the 1987 fo rm ’s reíerence to 'summer loadlinế.The inspector
will be the representative o f the appropriate classification society and be accompanied by the
representatives o f the buyer and the seller
Shouid any part o f the vessel below the loadline be found to be broken, damaged o r deíective so
as to affect the vessel’s clean certiíicate o f class, the seller must make it good to the classiíìcation
societys satisíaction. W hile in dry dock, the buyen o r the classification societys representative,
may have the tail-end shaft drawn. Again, should it be found deíective o r condemned, it has to be
made good at the sellers expense to the classiíìcation societ/s satisíaction w ithout qualiíìcation.
All expenses incurred during dry docking are ío rth e buyer's account provided no parts o f the
vessel below the summer loadline are condemned o r íound deíective so as to affect the vessel's
clean certificate o f class. If such parts are found to be so deíective as to aíĩect the vessel's clean
certiíìcate o f class then all expenses, including dry dock dues and the classification societys íees,
are fo rth e sellers account.
The expenses fo r taking the vessel to the dry dock and from the drydock to the place o f
deỊivery are fo r sellers account.
Clause 6 in the 1993 form is far more detailed and students should compare careíully the way
the tw o forms deal with this subject. Clause 6(b) covers the option o f a divers inspection in
place o f dry docking.This is now more frequently adopted and it meant, u n d e rth e 1987 form,
that a w ritten clause had to be added.
Clause 7, Spares, bunkers and so forth. Given that the sale involves millions o f dollars, it may

C h a p te r 6
seem extraordinary that this clause in the memorandum o f agreement probably causes more
controversy than any other It concerns what is included in the purchase price o f the vessel.
The broker should take care when closing a deal to be as precise as possible so as to avoid
misunderstandings at a later stage in the transaction.
Obviously, the buyer expects all equipment aboard the vessel at the tim e o f inspection to be
available on board at the tim e o f delivery. If the vessel has a spare propeller and spare tailshaít
the buyer will expect them to be available when they take possession o f the ship, so diffìculties
can be experienced if they are taken out o f spare and used beíore delivery. Both saleíorms
exonerate sellers from replacing spare parts, including spare tail-end shaft o r spare propeller;
which are taken out o f spare and used as replacements p r io rto delivery. It is im portant ío rth e
b ro k e rto establish what navigational equipment is ships property and what is on hire.
Spares on order are excluded from the sale in the printed vvording o f the saleíorms, but often
the buyer negotiates their inciusion. Any equipment belonging to the vessel at the tìme o f
inspection that is not on board at the time o f delivery is to be fonAârded w ith íor^varding
charges, if any, for the buyer’s account.
Sellers are always reluctant to part with items o f particular interest o r value, such as sponsor’s
gifts presented at the time o f launching, vvorks o f art, pictures o r paintings, and any other articles
bearing the sellers name such as crockery, plate, cutlery, linen, and so on. Should any o f the latter
be taken ashore, the seller must replace them with unmarked items. Personal belongings are
obviously excluded as are personal items such as clothing, which are part o f the slop chest.
Remaining bunkers and unused lubricating oils must be paid fo r at the current market price at
the p o rt o f delivery. Should there be a large quantity o f bunkers aboard at the tim e o f delivery
and the price fo r bunkers at the p o rt o f delivery is high.the buyer may wish to take on a smaller
quantity, with a view to taking the vessel to a p o rt where they are cheapen In this case, the buyer
may require the wording to límit the quantity to an amount not exceeding a specified number
o f tonnes. Any such limitation should be careíully agreed during negotiations.
If the quality o f the bunkers is in doubt, a surveyor may be called in from an oil company to act
as reíeree so that the buyer cannot reíuse to pay what has been agreed under the term s o f the
contract by alleging that bunkers are unusable and little more than sludge.
Brokers should try to obtain in advance the approximate amount o f bunkers and unused
lubricating oils to be paid fo r and agree the cost with their respective principals.
Payment under this clause is to be made at the same tim e as the purchase money is paid and,
unless otheiAvise agreed, shall be in the same currency.
Clause 8, Documentation and Clause 9, Encumbrances. A later chapter wili be devoted to

documentation on delivery.
For the tim e being, it should be noted that the Georgina is registered under the Panama Registry
and it is the responsibility o f the seller to ensure the vessei is deleted írorn the register and to
deliver the certiíìcate to the buyen
The seller must provide, on delivery, a bill o f sale stating that the vessel is íree fronn all
encumbrances and maritime liens and any other debts whatsoever. The bill o f sale must be
attested by a notary and legalised by the consul o f the country in which the vessel will be
registered by the buyen A document presented in this manner is a surety o f authenticity and
enables the b u ye rto proceed knovving that every possible action has been taken to ensure that
the ship is debt-free.
The deposit is released in the sellers íavour and the balance o f the purchase money paid
together w ith items mentioned in clause 7 o f the contract. Classiíìcation certiíìcates, plans
that are on board the vessel and other technical documentation are forwarded to the buyer
Logbooks may remain in the sellers possession, although the buyer may take copies o f logbooks.
Clause lO.Taxes and so íorth.Taxes, fees and expenses incurred in registering the vessel under

the buyers flag must, o f course, be ío rth e buyers account while any such expenses incurred by
the seller in closing the vessei from its Panama registry must be fo rth e sellers account
Clause I I , Condition on delivery. Condition o fthe vessel at the tim e of delivery can sometimes
cause problems fo rth e reasons already mentioned in this chapten It is diffìcult to prove beyond
reasonable doubt that the buyers surveyor conducted an exhaustive survey when they surveyed
the ship.They may weli have missed certain items and a dispute may then arise as to w hether a
particular matter was present at the tim e o f inspection.The words fơir wear and te ar excepted
do, thereíore, lend themselves to dispute. Fair 'wear' may be relatively simple to envisage, but
what about fair'tear’? Nevertheless, legal guidelines do exist.
It is im portant to rem em berthat the seller is under no obligation to point out items that are not
in a perfect State o f repair except damage o r deíects that afĩect class. Ship sales are governed
by the principle o f caveơt em ptor - let the buyer beware. It is up to the buyer to ensure the
eíĩìciency o f the original inspection and the burden o f proving any serious diíĩerences between
the condition at tim e o f the inspection and the condition on delivery.
Under the 1987 Saleíorm, when a sale is deíìnite and the ship has been accepted after inspection
the seller must notiíy the classification society o f any m atter coming to their knowledge, p rio r
to delivery, that might lead to the withdrawal o f its class o r t o a class recommendation. In o ther
words, the seller is obliged to maintain the vessei in the manner o f a reasonably prudent ow ner
betvveen the tim e o f inspection and delivery.The 1993 form goes íurther by stipulating that the
vessel must be free o f average damage aữecting class w hether o r not the seller knew about it
and reported it to the classification society.The w ord 'inspection' is defined in this clause in the
1993 íorm .The vvording o f clause I I in the 1993 Saleíorm is considered by many to be the
most im portant difference between it and the earlier version.
Clause 12, Name and markings. O n delivery the buyer must change the name o f the vessel and
also any íunnel markings.
Clauses 13 and 14, Deíault by buyers or sellers. Compensation must be paid to the seller in
the event o f a default by the buyer and vice versa. Losses fo r such deíaults can be heavy and
compensation must be paid together with interest. In the 1987 form, this is stipulated at a rate
o f 12% a year, but this is often deleted during negotiations, especially when vvorldvvide interest
rates are low.The 1993 form simply states with interest, w ithout specifying a rate. Brokers play an
im portant part in avoiding disputes, but however much care may be taken, defaults occur that
prove expensive and time-consuming fo r all involved in the transaction.The rate o f interest will
vary according to current rates at the tim e o f the transaction.
The wording under sellers default in the 1993 form is far more comprehensive and includes the
procedure if the ship should become unready between the tim e o f giving notice and the buyer
taking delivery.
Clause 15 Buyer‘s representatives.This clause, which is so often the subject o f a w htten clause
in the 1987 version, is self-expianatory.
Clause 15 in Saleform 1987 o r 16 in Saleíorm 1993, Arbitration. Every contract needs to make
provision ío rth is possibility and clause 15 o f Saleĩorm 1987 covers arbitration in a general way.
Because o f its long experience, the City o f London is widely accepted as a place o f arbitration
and in accordance with English law. If the parties to the contract cannot agree on a single
arbitraton three are to be appointed, one by each party to the dispute and the third by the
London Maritime A rbitrators Association.The clause includes a provision in case one party to
the dispute fails to appoint an arbitrator; o r if an arbitraton once appointed, is unable by reíusal
o r other reason to act in the matter.The contract is subject to the law o f the country agreed
to as a place o f arbitration and the avvard rendered by the arbitration court is binding on the
parties to the dispute.
The 1993 form goes into more detail, giving three options: I6(a) sets out the procedure fo r

C h a p te r 6
London arbitration; 16(b) covers the N ew York arbitration system; 16(c) is available if the parties
w ant arbitration othertha n in London o r NewYork.
As mentioned previously, it is rare fo r a printed form to cover all eventualities and the addition
o f w ritten clauses tends to be the rule ratherthan the exception.
In the case o f the Georgina sale, item 9 in the email o f confirmation o r recap is extra to
the provisions o f Saleform 1987 and therefore an extra clause is required to the contract.
The meaning o f this clause, vvhich would be numbered Clause 16 basis 1987 form , can be
summarised as follows:
i) Nothing relating to surveys should be overdue. All surveys have a date and thereíore all
must be up to date at the tim e o f delivery.
ii) Class surveys may have recommendations, outstandings o r subject items o f class.This
means that the classification surveyor has seen something that must be dealt w ith by a
certain date. If this recommendation is noted, even though it may not be due until after
delivery o f the vessel, it must be settled at the tim e o f delivery. It may, o f course, suit
both buyer and sellerto agree a sum o f money in lieu and fo rth e w o r k to be deíerred
fo rth e b u ye rto carry out nearerthe specified date.
iii) There are also appendix items that are not given a deíìnite date.The buyer cannot claim
an appendix item from the seller as these, unlike outstandings, do not aiĩect clean class.
iv) Claims on Insurance must be cleared/Average' means anything that is to be claimed

against undet^/riters. VVhen the ship is sold the new ow ner cannot claim on the
undeiAvriter o f the old owner; so average items must be cleared beíore the ship
is delivered.
Clause 17. In the recap it vvas agreed that the buyer could place tvvo men aboard the vessel
w ith the usual indemnities after the contract has been signed and the deposit has been lodged
in accordance with clause 2 o f the memorandum o f agreement. A vvritten clause covering this
point vvould not be needed if the 1993 is used, because this is covered in ciause 15.
There are conflicting interests in this matter.The seller is usually unwilling to allow the buyers
crevv aboard the vessel beíore payment in full has been made.The reasons ío rth is reluctance
inciude the possibility o f pilíerage, accidental o r vvanton damage, o r even interference in the
running o f the ship. If the i 987 form is being used, the representatives may spend their time
closeiy inspecting the ship and bringing to the sellers attention deíects that were missed at the
tim e o f the fìrst inspection.This piaces the seller in a difficult position.
Having agreed to purchase the vessel vvith everything included in accordance w ith clause
7 o f the memorandum o f agreement, the buyer has a natural desire to ensure, so far as is
reasonably possible, that m inor items o f ship’s property are not taken ashore by the sellers
crew. A compromise is a reasonable solution to this probiem and tw o men placed aboard as
representatives usually suffices.Their presence must be at the buyer's risk and expense and it
is understood that they will not interíere w ith the running o r períormance o f the ship while it
remains the seller’s property. Sometimes, the buyer may wish an engineerto sail with the vessel
during its final voyage to the deiivery port, but this can only be done w ith the full permission
and approval o f the seller
Clause 18. The buyer will wish to ensure that the vessel they are buying is free to trade
w orldw ide - hence the insertion o f a noArơb boycott clause.
Although by no means defìnitive, the above notes, combined w ith those in chapter 5.2 - 5.14,
provide a useíul guide with regard to the business o f buying and selling ships.
As has been mentioned previously, few if anỵ ship sales are identical, each One having certain
unique requirements that necessitate separate clauses. Each sale has its own problems and
diATiculties that need to be overcome.

6.4 B IM C O ’S ANALYSIS OF DIFFERENCES

B E T W E E N NSF 93 A N D NSF 2012.
Following the launching o f the new Singapore Ship Sale Form in 2 0 II (SSP20I 1), BIMCO
launched a new and updated version o f the NorAvegian Saleíorm 93 (NSF 93), now named
Saleíorm 2 0 12 (NSF 2 0 12). BIMCO discusses the main changes made to the form, and points
out some o f the diATerences between NSF 2012 and SSF20I I. Several changes o f cosmetic
nature have been made to the NSF 2 0 12, but such changes will not be discussed here.
As a general comment, BIMCO is o f the opinion that many o f the changes are in line with
commercial practice overthe last years, but there are also a few signiíìcant new changes o f vvhich
a potential buyer/seller should be aware.These are discussed belovv. Regarding the diíĩerences
between SSF20I I and NSF 2012, the main impression isthat SSF20I I is more detailed/specifìc
on various terms, while NSF 2012 has a more open/flexible wording. SSF201 I may then avoid
some uncertainties caused by a Aexible wording in NSF 2 0 12, but may also cause disputes if the
specific terms are not consistent w ith the íacts o f the transaction and the parties involved.Thus,
w hether you are using SSF201 I o r NSF 2 0 12, the Standard wording should not be adopted
directly, but adjusted to the needs o f the transaction and parties involved.The sale/purchase
agreement is hereinaíter referred to as the MoA. N ote that previous MoAs could come into
existence as broker‘s recaps. NSF 2 0 12 regards these as executed documents.
D eposit
The deposit clause o f NSF 2012 has been updated and slightly amended.The most im portant
changes are the adjustments to comply w ith new and stricter procedures ío rth e deposit banks'
KYC (KnowYour Customer) procedures.VVhile the old form required payment o f deposit within
a certain number o f banking days from the date o f the MoA, the new form requires payment
o f deposit within three banking days atter signed M oA A N D the deposit bank has confirm ed
in w riting that the deposit account has been opened. Also, an obligation is imposed on both
parties to provide all necessary documentation to open and maintain the account w ith o u t delay.
However, no exact tim e limit fo r providing the documents is inserted which may allow a buyer
to delay the timing o f providing the deposit, unless this is clarified.
Purthen while the old form fixed the deposit at 10% o f the total purchase price.the new form
leaves it to the parties to agree and fill in the percentage to be used, íailing vvhich 10% will
apply.This amendment may seem minor; but it is im portant as it opens the way fo r discussions
regarding the size o f the deposit. W e have seen several cases where higher deposits have
been requested, in particular during more distressed market conditions.This amendment may
thereíore open up more discussions on the level o f deposits.
The SSF201 I , on the other hand, has maintained a Standard o f 10% deposit. It has also taken
the approach to fix a value date fo r latest remittance o f deposit.The sellers are responsible fo r
establishing the deposit account in time. It also includes certain detailed KYC requirements on
the buyers’ side together with a general reíerence to comply w ith anti-money laundering laws
and reguiations o f the country o f the deposit bank.
It may be considered that SSF201 I removes uncertainty, as it is more detailed and specifíc
on the issue o f deposit. It is our opinion, however, that the SSF20I I may be to o detailed and
specific, and may raise issues if the deposit bank has different KYC requirements than set o u t in
the form o r applicable local law. Purthen technically the sellers will be in breach o f contract if the
deposit account is not opened vvithin tw o banking days p rio rto the fixed value date fortransfer.
W e all know that there may very well be delays in opening such an account, and such delays
may depend on the buyers. In o ur view, NSF 2012 seems to have a more Aexible approach w ith
regards to the issue o f deposit.
Payment Procedure
NSF 2012 has amended the payment procedure to make it clearthat the payment on delivery
shall consist o f (i) release o f deposit, and (ii) payment o f balance o f purchase price plus o ther

C h a p te r 6
sums due under the agreement. Hovvever; no amendments have been made in respect o f the
actual payment procedure as the ciause is still limited to stating that payment shall be made on
delivery and within three banking days after Notice o f Readiness (N O R ) has been given.
During the amendment discussion o f the NSF 2 0 12, we proposed that the form was amended
to include a Standard payment procedure, o r alternative payment procedures. W e have seen, in
particular in the last couple o f years, that discussions regarding payment procedure have often
caused problems, in particular vvhere there are banks involved with financing the buyers and
sellers.The payment procedure has almost been a show s to p p e rto a number o f transactions,
and in a few cases it has in fact been a show stopper as the sellers' bank does not w ant to
discharge the mortgage until the loan is repaid (which usually is done by the sale proceeds)
and the buyers/buyers' bank will not make any payment until the vessel is coníìrmed free o f
mortgages.Thus, we strongly recommend to our clients to raise this issue when negotiating the
M oA and agree a procedure in advance and at a stage where both the buyers and sellers are
determined to close the transaction and conclude a sale. If there is a signed and agreed MoA,
and the involved parties (including banks) at a later stage are not able to agree on a payment
procedure, both sellers and buyers may face problems.
SSF20I I also lacks a suggested payment procedure.The Japanese form Nipponsale 1999 has
a deíault solution where the buyers, upon receipt o f Notice o f Readiness, shall preposition
the balance payment with the sellers’ bankThe balance is then to be held by such bank and
released upon signing by the buyers and sellers o f a protocol o f delivery and acceptance. in our
experience, such payment procedure is becoming more and more common. O th e r solutions
couid be (i) Payment Letter where the buyers' bank guarantees payment but only remits funds
once the vessel is delivered, o r (ii) SWIFT transfer o f funds directly to sellers’ account on closing
p r io r to delivery o f the vessel (before o r aíter discharge o f the mortgage).
It should also be noted that the payment clause o f SSF201 I includes an option fo rth e buyers to
delay delivery o f up to seven consecutive days against paying a pre-agreed daily amount. Such an
option is not included in NSF 2012.
Initial Inspection
The inspection clause remains in general unchanged, but it should be noted that in case the
M oA is subject to buyers' inspection post-signing o f the MoA, a íailure o r omission by the buyers
to petform the agreed inspection as scheduled will release the deposit to the buyers and render
the agreement null and void.Thus, should a buyer decide not to use the option to inspect, the
sellers and buyers should make a joint w ritten statement o r am endm entto keep the M oA alive
vvithout such inspection.
Time of Delivery
NSF 2012 imposes an earliest date to tender NOR, such date to be agreed between the
parties. Purthen the notíces o f estimated tim e o f arrival at the place o f delivery have been
changed to estimated notices fo r tendering o f N O K As the date o f arrival at the place o f
delivery may very well differ from the date o f tendering o f NOR, this ís a logical amendment.
SSF201 i uses estimated tim e o f arrival at place o f delivery. Also, in NSF 2 0 12 the buyers' limit fo r
either canceiling o r accepting the new cancelling date should the Sellers give notice o f delayed
cancellation date, has been reduced froin 7 running days to 3 banking days. SSF20I I has no
provision in this respect.
The most im portant change is in clause 14 where the sellers in NSF 93 were given an additionai
three banking days after N O R had been tendered to make arrangements fo r the delivery
documentation. This could cause a situation where the sellers were not ready to deliver all
documentation required under the M oA within the cancellation date, but still could prevent
the buyers from cancelling as long as all documentation was brought in place within such
three banking days.This option is removed in NSF 2012. SSF20I I specifically requires that all
documentation, except fo r certain documentation only available on the delivery date, must be
in place beíore N O R (in SSF20I I called Notice oíA ctual Readiness) can betendered.

Diver‘s Inspection/Dry-docking
NSF 2012 requires a buyer to declare an option to conduct an underAvater inspection within
nine days p rio r to the estimated tim e o f delivery (one day after 10 days estimated delivery
notice has been received). NSF 93 only gave the buyers the option, but did not State a tim e limit
fo r declaring the option.
A further and rather im portant amendment is that NSF 2 0 12 now states that the sellers cannot
tender N O R prior to completion o f such undePA/ater survey. As a N O R given p rio r to the
cancellation date will prevent a buyer from cancelling the M oA based on delayed delivery, this
means that the sellers’ possibility to tender the N O R in tim e will now in some cases be in the
hands o f the buyers. NSF 2 0 12 has a provision stating that the undenâter inspection shall be
undertaken vvithout undue delay, but there could be several reasons fo r some delays in the
inspections which cannot be deemed to be undue.Thus, a seller using the Standard w ording o f
NSF 2012 must be very careíul delivehng a vessel on o r close to the cancellation date. Should
the conditions fo r the undeiAvater inspection not be suitable, and the vessel consequently is
moved to another location, the cancellation date will be extended accordingly (also a new
provision in NSF 2012). Hovveven other justifiable delays will not automatically extend the
cancellation date.
In our opinion, it is a weakness w ith NSF 2012 that the provision can cause a seller to miss
the cancellation date even if he is ready to deliverthe vessel in accordance with the M o A within
the cancellation date, but the buyer‘s delay in carrying out the u n d e w a te r inspection takes the
time to tender N O R past the cancellation date. SSF201 I does not have any equivalent provision
in this respect.
A new provision is inserted in NSF 2012 where damages are found during the undervvater
inspection, but class does not require immediate repair In NSF 93 the only solution fo r damages
found was immediate dry-docking. Under NSF 2012 the vessel shall be delivered w ith the
deíects and the purchase price shall then be reduced by the estimated direct cost o f repairs.
The direct costs are estimated by the average o f quotes from tw o reputable shipyards in the
vicinity o f the place o f delivery, one obtained by each party. Such provision in o ur experience
was also regularly inserted into NSF 93 by amendment, and a similar provision is included in
SSF201 I . Hovveven it should be noted that under NSF 2 0 12, N O R cannot be tendered before
the estimate has been established. Thus, the sellers cannot tender N O R beíore undenA/ater
inspection is completed, and if any damages affecting class are found but no immediate repairs
required, also quotes from yards must be obtained beíore N O R can be tendered. If possible, a
seller should under NSF 2 0 12 make sure to have a good buffer betvveen the date o f undenA/ater
inspection and cancellation date w ith the new NSF 2012 terms. It should be noted that if
damages are íound vvhich require immediate dry-dockingthe cancellation date will be extended
with the tim e required fo r dry-docking and steaming but limited to 14 days. In our opinion, NSF
2012 lacks consistency in this clause.
Excluded items and bunkers on board
NSF 2 0 12 requires that all items to be excluded from the sale, including hired o r leased items to
be excluded, must be listed in the MoA. If a hired item is not listed as excluded, the Sellers are
required to replace it at their own cost o r compensate the buyers. O th e r items not speciíìcally
excluded (save fo r library and íorms exclusively fo r use on sellers' vessels and captain's/officersV
crew‘s personal belongings) are included. SSF20I I does not explicitly say that sellers shall
compensate buyers fo r hired items not listed, but still require that hired items to be excluded
are listed. An alternative solution in both cases could be that the sellers procure that lease
contracts are transíerred and novated to the buyers, ratherthan the sellers having to replace o r
compensate the equipment. If desirabie, such option must be included by amendment.
NSF 93 had as a deíault provision that bunkers remaining onboard should be purchased by
the buyers at the prevailing market price at the p o rt and date o f delivery.This was regularly
amended to avoid sellers speculating in delivery p o rt and the quality o f bunkers remaining on

C h a p te r 6
board to make extra proíìt. In NSF 2012 the parties can choose between tw o options - the
market price at the p o rt o f delivery (as per NSF 93) o rth e actual net price paid by the Sellers
as evidenced by invoices. SSF201 I is limited to the option o f sellers' actual net paid prices.
Documentation
The documentation clause o f NSF 2 0 12 has been extended to cover documentation normally
required in connection w ith the sale o fth e vessel.A general change from NSF 93 isthe inclusion
o f certain corporate documentation evidencing that the sellers have authorised the sale and
a Power o f A ttorney (POA). However, the provision only reíers to evidence that all necessary
corporate, shareholder and other action has been taken.. ..This may cause disagreements on
what documentation shouid actually be provided.VVe thereíore recommend the parties clearly
specify,that is, what resolutions will be provided, when entehng into the MoA.
It should also be noted that the Declaration o f Class to be provided can now be issued three
banking days prior to closing and not 72 hours as stated in NSF 93 (vvhich caused problems
w ith weekends and holidays). Also CSR documentation and some other documents have
been included.
NSF 2 0 12 also requires that buyers shall provide corporate documentation ío rth e authorisation
o f the sale in addition to a PoA.The same vvording as fo r the sellers' documentation is used,
and o u r above comment applies. In addition, there is a requirement that the parties shall, to
the extent possible, exchange samples/draữs fo r review and comments by the other party
not later than an agreed date o r nine days p rio r to the intended date o f delivery if there is
no agreed date. Nine days p rio r to the intended date can often prove to be very short, and
we would thereíore recommend the parties, if timing allows, agree an earlier date if possible.
SSF20i I has 14 days as deíault SSF20i I requires the same documents, but the requirements
are somewhat more extensive and speciíìc. Board resolutions and shareholders' resolutions
are required by deíault, and must be amended if only board resolutions are applicable. For a
listed company, o r companies with several shareholders, it could prove very diffìcult to obtain
shareholders’ resolutions and it should be avoided if not necessary. SSF 201 I also includes
constitutive documents and Good Standing certiíìcate (o r similar) fo r both sellers and buyers, in
addition to requirements that the notarisation o f various documents shall coníirm both identity
and authority o í the signatory. A seller should, howeven be aware that SSF201 i as a default
also requires closed CSR documents to be provided vvithin 30 days o f delivery.The flag states
are, under current regulations, required to send the closed CSR documents to the new flag
State 'as so o n as possible and p re íe ra b ly n o t la te r th a n o n e m o n th ' a fte r d e le tio n , b u t th e fìnal
de a d lin e is 9 0 days.Thus, th is is in th e hands o f th e flag State and th e re is a risk fo r a S eller
undertaking to provide it in 30 days. NSF 2012 only states that it shall be provided ‘promptly
upon it being issued' (in accordance vvith comnnents submitted by Vogt & W iig). Nevertheless,
the documentation clause o f S5F20I I seems more complete, detailed and in accordance with
w hat we previously inserted as amendments o r addenda to NSF 93, than the NSF 20l2.Thus,
amendments and additions will still be necessary to NSF 2012.
Encumbrances and condition on delivery
It shouỉd be noted that NSF 201 ! indudes a provision in the 'encumbrance' ciause that the
vessel shall not be subject to Pont State o r other administrative detentions.This is an update
from NSF 93. SSF201 I includes this, and also a number o f other issues such as writs (save 'vvhere
security has been íurnished), stowaways and trading commitments. NSF 2 0 12 now includes ‘íree
o f stowaways' and Tree o f cargo' in the 'condition on delivery' clause.
O n the condition on delivery, N5F 2012 is in line w ith NSF 93, except ío rth e inclusion o f ‘free
o f stowaways' and ‘free o f cargo’ as mentioned above. SSF201 I is similar to NSF 2012, but with
some changes. SSP20I I declares that the vessel shall be substantially in the same condition
as it was at the tim e o f inspection (fair wear and tear excepted), vvhile NSF 2012 only states
in the same condition as it was at the tim e o f inspection (fair wear and tear excepted). NSF
2 0 12 states that the vessel shall be ‘free o f average damage aATecting class’, while SSF201 I only

states 'damage affecting class'.The reíerence to ‘average' in NSF 2012 means that the damage
must be, o r could have been, covered by insurances. SSF201 I does not include such restnction
as long as the damage is afĩecting class, Also, NSF 2 0 12 states that the vessel shall at the tim e
o f delivery maintain the certiíìcates it had at the tim e o f inspection valid and unextended
w ithout conditions/recommendations, while SSF201 I only states that the vessel shall maintain
its certiíìcates clean and valid at the tim e o f delivery (no link to the tim e o f inspection). An
im portant difference between NSF 2012 and SSF20I I is that SSP20I I only allows buyers to
reject the vessel 'if the diíĩerence in condition has a substantial impact upon the buyers’ ability
to trade the vessel’. OthenA/ise, the buyers’ remedy will be damages. SSF201 I also places the
burden o f p ro o í as to the condition o f the vessel at the tim e o f inspection on the buyers. In
NSF 2012 a breach o f agreed condition will mean that the vessel is not ‘physically ready in
accordance with the M oA' and valid N O R cannot be tendered and cancellation is a hsk if the
cancellation date is exceeded.
Buyers’ and sellers’ default
The buyers' deíault clause o f NSF 2 0 12 has not been materially changed from NSF 93. Hovvever,
there are differences to SSF201 I . SSF201 I makes it clear that the buyers' deíault not only
comprises deíault in payment o f deposit and purchase price, but also any additional amounts
payable under the MoA. Also SSF201 I makes it clear that the seilers will be entitled to forfeit
the full deposit irrespective o f actual losses and expenses, and then be entitled to claim íu rth e r
losses should the deposit not be sufficient. According to SSP20I I the burden o f proving loss
and expense lies w ith the sellers. NSF 2 0 12 also states that the deposit shall be released to the
sellers, and íu rth e r compensation may be claimed if the deposit is not suíĩicient, but it does not
State that the Sellers can keep the deposit even if the actual loss is less than the deposit.This will
then be subjectto interpretation u n derthe relevant law.
The sellers' deíault clause o f NSF 2012 has not been materially changed from NSF 93,
except as described above under T im e o f Delivery’. SSF201 I is again similar to NSF 2 0 12,
but includes some additional provisions. Under SSF201 I it will also be a sellers' default if the
sellers do not produce the documentation required under the MoA, o r fail to deliver the vessel
free o f encumbrances.
An im portant diíĩerence between NSF 2012 and SSF20I I is that NSF 2012 only avvards
damages if the sellers’ íailure to deliver the vessel is due to a proven negligence by the sellers.
SSF20 M , on the other hand, only releases the Sellers from liability if the íailure was caused by
matters outside the sellers’ reasonable control. SSF201 I also states that the burden o f proving
the loss is on the buyers while the burden o f proving that the íailure was caused by matters
outside the sellers' reasonable control shall be on the sellers.
O ther issues
In respect o f the buyers’ right to place representatives on board the vessel p rio r to delivery
fo r íamiliarisation purposes, NSF 93 included a provision where the parties should agree on a
place and estimated tim e fo r boarding.This is deleted in NSF 2012, and it now only states that
the buyers have such right after the M oA is signed and deposit lodged.The same applies in
SSF201 I . For a vessel at sea and trading at the tim e o f signing, this could cause disagreements
between sellers and buyers on when to board, w hether the vessel should deviate to pick up
suyers' representatives, and son.Thus, if possible, we recommend that an estimated tim e and
place are agreed.
The arbitration clause o f NSF 2 0 12 is extended to some degree, and more detailed in respect o f
the process establishingthe arbitration panel and inclusion o f small claims procedure.VVhile NSF
2012 provides a choice between English/American law and arbitration in London/N ew York, or
such other piace and jurisdiction as the parties may agree, SSF201 I provides a choice between
Singaporean/Engiish law and arbitration in Singapore, o r such other place and jurisdiction as
the parties may agree. Some jurisdictions, notably PR China, may not alvvays recognise forum
selection clauses, unless a close link w ith the parties can be established with the venue, so care

C h a p te r 6
6.9 BROKERS’ C O M M IS S IO N S
The brokers commission is rarely inserted in a contract. Brokers are responsible fo r attending
to th e ir own commission and must thereíore ensure that this is recorded in w riting and agreed
beíore the conclusion o f a sale.
Ideally, there should be a separate commission letter signed by the seller; who technically pays all
the commissions, but this is not oíten done today. Howeven there is no point in being trusting
to the point o f íoolishness because the legitimate earning o f commission is why the broker is
there; they, like any o the r labourer; are w o rth y o f th e ir hire. Brokers should ensure that there is
am p le w r it te n e vid e nce , usually the exchange o f e le c tro n ic C om m unications, th a t co m m ission is
due. Alternatively, PONASBA has devised a formal commission contract that would cover the
m atter fully.
So why not include a commission clause on the M o A as is often done in charter parties?
The only answer is that it has never been custom ary to do so in contracts drawn up under
English law.The Contracts (Rights ofThird Parties) A ct i 999 allovvs a b ro k e rto sue in their own
name if a brokerage clause is included in a contract between tw o other parties, fo r example.the
owner and the charteren In Corning years, customs may change and brokerage may appear in
sale contracts.

ặm
Chapter 7
Nipponsale Form
Phơros Lighthouse Alexondria

The lighthouse was constructed in the 3rd century BC.The building wơs [inished during
the reign o f Ptolemy II Philơdelphus. It took 12 years to consưuct and was the prototype
for ơll lơter lighthouses.
C h a p te r 7
The first Nipponsale form was issued in 1965, with revisions and updates following in 1971,
1977, 1993 and 1999. The latest version is produced in a user-friendly A4 form at w ith a box-
style íro nt page.The Nipponsale 1999 does not enjoy the same widespread use as the Saleíorm
1993 but is likely to be used when, fo r example, Japanese sellers are involved. O n a practical
level.the tw o íorms contain many similarities.The few íundamental diíĩerences are highlighted in
the following examination o f the individual clauses o f Nipponsale 1999.
The íìrst, and perhaps the most íundamental diíĩerence betvveen the tw o forms, is that
negotiations under the Nipponsale 1999 M oA are concluded aíter the buyer accepts the
vessel as a result o f th eir superíìcial inspection.There is no provision in the printed form fo r a
negotiation to be concluded beíore an inspection.The superTicial inspection having taken place,
Its place and date are recorded in Box 9. Similarly, the potential buyer is to inspect the class
records before concluding the M oA negotiations and the place and date o f the class records
examination are recorded in Box 10.
7.1 FR O N T-P A G E BOXES

These contain much o f the data which is to be found in the preamble to the Saleform 1993,
together with other specifics that appear at intervals throughout the Saleíorm 1993 (such as the
place o f closing), which in the Nipponsale 1999 are brought to one convenient position in the
contract.
A boxed space is provided fo r the date and place o f the M oA and the name and domicile o f
both seller and buyenThe required details o f the vessel are as foilows:
» existing name;
• flag/registry;
• class;
• date o f build and builders;
• GRT;
• summer deadweight tonnage.

The remaining boxes deal with:
• place/date o f superTicial inspection;
• place/date o f class records examination;
• purchase price;
• place o f closing;
• delivery range;
• delivery period/cancelling date;
• places;
• liquidated damages.
The entries fo r pìaces requires sorne explanation. Its purpose (according to the accompanying
notes) is to provide space where it is possible to record places at which the parties are to
períorm their contract obligations and that may be affected by national holídays.These, in turn,
may aíĩect períormance u n derthe contract, such as fo r banking days.These obligations are not
described, but may be assumed to cover the domiciles o f seller and buyen the domicíle o f the
sellers bank and the place o f closing.
The entry concerning daily liquidated damages will be explained in the paragraphs accompanying
clause 7.

N ipponsale F o rm
There is a useful box in which to insert reíerences to rider clauses.
There is fu rth er space within the fro n t page o f the Nipponsale 1999 fo rth e signatures o f seller
and buyer. As a m atter o f broking aesthetics there are difFering vievvs about signing other than
at the fo o t o f the íìnal page o f a contract. Signatures on page I, fo r example, may not be held
to apply to alterations to the printed te x t on pages 2 o r 3. One can circumvent that potential
difficulty by ensuring that all pages are signed o r initialled by both sides.
Clause I:
PURCHASE PRICE
The purchase price o f the Vessel ('the Purchase Price’) shall be as stated in Box I I .
Nothing íurthe r need be said.
Clause 2:
PAYMENT
(a) As security fo r the fulfìlment o f this Agreement, the buyers shall rem it a deposit o f ten
(10) per cent o f the Purchase Price (‘the Deposit') to a bank nominated by the sellers
within three (3) banking days (being days on which banks are open ío rth e transaction o f
business in the place stated in Box 15 ('Banking Days')), írom the date o f this Agreement,
in the names o f both the sellers and the buyers.Any interest earned on the Deposit shall
be credited to the buyers. Bank charges on the Deposit shall be borne equally by the
sellers and the buyers.The Deposit shall be paid to the Sellers as a part o f the Purchase
Price in the same manner as the balance o f the ninety (90) per cent o f the Purchase Price
as provided fo r hereunder.
(b) The buyers shall remit the balance o f the Purchase Price by telegraphic transfer to the
said bank immediately after the Notice o f Readiness fo r Delivery is tendered by the
sellers as per clause 7 o f this Agreement.The balance shall be paid to the sellers together
w ith the Deposit against the Protocol o f Delivery and Acceptance being duly signed by a
representative o f each party at the tim e o f delivery o f the Vessel.
In 2a, it is becoming more common fo r the deposit to be negotiated at 20% o f the purchase
price. It is also more common in negotiations fo r buyers to stipulate that this should be put into
a jo int deposit account. In 2b, during negotiations the buyer endeavours to have the the w ord
'immediately' in the second line removed.
There is a neat division o f requirements betvveen payment o f the deposit money (Clause 2a)
and the balance o f the purchase price (Clause 2b). Banking days are defined in Section 6.3.
Nipponsale 1999 is identical to Saleíorm 1993 in its provisions that an account fo r the deposit is
to be established at the sellers bank and the deposit lodged by the buyer within three banking
days; that interest earned is fo r the credit o f the buyen and that bank charges are to be shared.
W here Nipponsale diíĩers is in requiring payment o f the balance o f the purchase price
"immediately"; there is no margin o f three banking days aíter the buyer receives the sellers
notice o f readiness to deliven although three days’ notice is given in clause 7.
Clause 3:
D O C U M E N T A T IO N
(a) A t the tim e o f deiivery o fth e vessel.the sellers shall provide the buyers with the following
documents:
(i) the Bill o f Sale, duly notarised by a N otary Public, specitying that the vessel is free
from all debts, encumbrances, mortgages and maritime iiens; and
(11) a le tte ríro m the sellers undertakingto supply a Deletion Certiíìcate from the Registry
stated in Box 4 as soon as practicable aíterthe vessels deiivery; and

C h a p te r 7
(iii) such other documents as may be mutually agreed.
(b) Upon delivery the buyers and the sellers shall execute and exchange a Protocol of
Delivery and Acceptance, thereby coníirming the date and tim e o f delivery o f the Vessel.
(c) Closing shall take place at the place stated in Box 12.
In the Nipponsale 1999 the documents clause is moved forward to anearly part o f the MoA.
It mentions just tw o documents that the seller is obliged to provide to the buyer: the bill o f sơle
and the certiỊicate o f deletion. Howeven this is followed by a generalised requirement to provide
‘such other documents ơs may be mutually agreeđ. As Chapter 6 clause 4 noted, numerous other
documents may be required by both sides, so almost certainly this will call fo r a comprehensive
rid e r clause to the Nipponsale 1999. More often, an addendum to the M oA is agreed later;
although it will be clearly stated in the M oA that this will delay neither the execution o f the
contract nor the lodging o f the deposit.
The requirement fo r a protocol o f acceptance and delivery is common to virtually all s&p
MoAs. Howeven in the Nipponsale form, this is the trigger fo r payment.
Clause 4:
DELIVERY PƯ^CE A N D TIME
(a) The sellers shall ensure that the vessel is ready fo r deiivery vvithin the Delivery Range
stated in Box 13 not beíore and not laterthan the dates stated in Box 14, the latter date
being the cancelling date.
(b) The sellers shall keep the buyers iníormed o f the vessels itinerary and give the Buyers
th irty (30), fifteen (15), seven (7) and three (3) days' notice o f the expected date and
place o f readiness fo r delivery.
(c) In the event that the vessei is not ready fo r delivery on o r beíore the cancelling date.the
buyers shall have the option o f cancelling this Agreement, provided such option shall be
exercised in writing within tw o (2) vvorking Days (which shall be the days not íalling on
Saturdays, Sundays, o r Public holidays in the place stated in Box 15) from the cancelling
date. However; if the íailure to deiiver the vessel is caused by any event over which the
sellers have no control, then the cancelling date shall be extended by the corresponding
tim e lost due to such event but in no case shall such extension be ío r a period o f more
than th irty (30) days.
(d) In the event the buyers do not elect to exercise the option to cancel this Agreement
in accordance with sub-clause (c) above, they shall have the right to designate a new
date fo r deiivery o f the vessel, provided such right is exercised in wnting within tw o
(2) working days from the canceliing date, and such designated date shall be the new
cancelling date as is stated in Box 14. However if no new cancelling date is designated by
the buyers in accordance with this sub-clause there shall be no íurther cancelling date
and the sellers shall deliverthe vessel as soon as practicable.
(e) Notwithstanding the exercise o f due diligence by them, if the sellers anticipate that
the vessel will not be ready fo r delivery by the cancelling date, w hether it be the first
agreed cancelling date o r any subsequent cancelling date as provided fo r in sub-clause
(d) above), then the sellers may notiíy the buyers in vvriting stating the date when they
anticipate that the vessei will be ready fo r deiivery and proposing that that date shall
be the new cancelling date. Upon receipt o f such notiíication the buyers shall have the
option to cancel this Agreement, provided such option is exercised in w riting within tw o
(2) working days from the receipt o f the aíoresaid notification from the sellers. If the
buyers do not exercise the option to cancel this Agreement, the date proposed by the
sellers shall be the new cancelling date as if stated in Box 14.

N ipponsale F o rm
The vvording o f this clause is doubtless an attem pt to be fair to both sides and to prevent a
buyer from avoiding a purchase agreement fo r reasons over which the seller has no control.
Nonetheless, if the buyer is entitled to w ithdraw and seeks to do so, they will have to read the
wording carefully to ensure that they do not act to o quickly, because they can give notice o f
cancellation only after the cancelling date, even if it is obvious some tim e earlier that the vessel
will miss its cancelling date. It does not appearthat the buyer has any contractual redress from
the seller fo r compensation - say, fo r a post-sale íìxture that is lost as a result o f late delivery by
the sellen Howeventhis appears to have been addressed in clause I4b (see belovv).
Clause 5:
DELIVERY C O N D IT IO N
(a) The sellers shall deliver the vessel to the buyers in substantially the same condition as
when the vessel was inspected by the buyers at the place stated in Box 9, fair wear and
tear excepted, but free from outstanding recommendations and average damage aíĩecting
its present class and w ịth all its class, national and international trading certificates clean
and valid at the tim e o f delivery.
(b)U pon the vessel being delivered to and accepted by the buyers in accordance w ith this
Agreement the sellers shall have no liability whatsoever fo r any fault o r deíìciency in
their description o f the vessel o r fo r any deíects in the vessel regardless o f w hether such
deíect was apparent o r latent at the tim e o f delivery.
A vessel must be in the condition as inspected, fair wear and te a r excepted
This clause has to be read in the knowledge that the buyer was able to carry o u t only a
superíìdal inspection beíore signingthe MoA. Unlessthe seller voluntarily agreed to dry docking,
the buyer also had no chance to drydock the vessel beíore delivery, although clause 6 does
give them the right to a divers inspection. In contrast to the NoiAA/egian Saleíorm as tested in
the Union Power case in the English High C o u rt (Dũlmare spa V Union M aritim e Ltd (The ‘Union
Power') [2012] EW HC 3537), Nipponsale 1999 Clause 5b leans heavily in the sellers íavour as
regards liability fo r any damage discovered after delivery.

C h a p te r 7
Clause 6:
UNDERVVATER INSPECTION
(a) The sellers may deliverthe vessei w ithout dry-docking, subject to the following provisions.
(b) Prior to delivery o f the vessel the buyers shall have the right to have divers approved
by a classiíìcation society reíerred to in Box 5 (the Classiíìcation Society), carry out an
inspection o f the vessels undenA/ater parts below the summer loadline in the presence
o f a surveyor o f the Classifìcation Society arranged by the Sellers. Such inspection, if any,
is to be at the buyers' arrangement, risk and expense and is not to interíere w ith the
vessels operation and delivery schedule.
(c)The buyers shall give a w ritten notice o f their intention to have an undeiAvater inspection
carried out within tw o (2) days from the receipt o f the seven (7) days’ notice stipulated
in sub-clause (b) o f clause 4. If the buyers fail to give such a w ritten notice vvithin tw o (2)
days, they shall lose the ir right to have an underAvater inspection.
(d) Upon receipt o fth e buyers' notice the sellers shall arrange w ith the Classification Society
to carry out an unden/vater inspection.The cost o f the undervvater inspection shall be
borne by the buyers unless damage affecting the class is found, in vvhich case the sellers
shall bearthe cost.
(e) Should any damage affecting the class be íound by such divers' inspection the following
shall apply:
(i) vvhere the damage is o f such nature that repairs are not required p n o r to the next
scheduled dry-docking by the Classiíìcation Society, then the Seilers and the buyers
shall each select a reputable shipyard in the Delivery Range stated in Box 13 o r near
thereto and obtain from such shipyard a quotation fo r the cost o f repairs o f the
damage. Each quotation is to be for the direct repair costs o f the damage only and is
not to include the cost o f dockage and generai Service expenses.The seilers shall then
have the option to either repair the damage p rio r to delivery o f the vessel o r deliver
the vessel w ithout the damage being repaired with a reduction from the Purchase
Price o fth e estimated cost o f repairs.The estimated cost o f repairs shall be deíìned as
the average o f the tw o quotations obtained from the tw o shipyards;
(ii) where the damage is o f such nature that repairs are fequired p rio r to the next
scheduled dry-docking by the Classification Society, then the sellers shall repair the
damage at th e ir cost and expense and to the Classiíìcation Society's satisíaction.
(f) In the event that the vessel is dry-docked to effect repairs o f damage in accordance with
sub-clause (e) hereoí, the seliers shall have the right to designate the drydock place as
the new delivery piace if such dry-dock piace is within the Delivery Range stated in Box
13. In such event the buyers shall have the right to clean and paint the underâter parts
o f the vessel at their risk and expense and vvithout interTering with the w o rk o f the sellers
and a surveyor o f the Classiíìcation Society and w ithout affecting the vessel's delivery
schedule. However the buyers’ w o rk in dry-dock is still in progress when the sellers
have completed the ir work, then the additional docking period necessary fo r completing
such w o rk shall be at the buyers’ risk and expense, in which event the sellers shall have
the nght to tender a Notice o f Readíness for Delivery on o r after completion o f their w o rk
(g) lf repairs are required in accordance w ith sub-clause (e) hereoí, then the cancelling date
shall be extended by the corresponding tim e lost to effect such repairs provided that
such extension shall not in any event exceed th irty (30) days.
I 10 Institute of Chartered Shipbrokers

N ipponsaie Form
There is no provision in the Nipponsale form fo r m ovingthe vessel iíth e conditions a tth e p o rt
o f delivery are unsuitable fo r a diven unlike NSF 93. Brokers should tr y to address this issue.
In contrast with Saleíorm 1993, there is no distinction between dry-docking fo r hull damage
and dry-docking in o rd e rto draw the tailshaữ. N either is there a deíinition o f undervvater parts
such as ‘below the deepest loơdline', although line M 3 o f Nipponsale 1999 stipulates ‘be/ovv the
Sum m er loơdline'. It is not likely that an undenAâter diving examination o f the hull will pick up
internal tailshaữ damage, so the repair o f any post-delivery tailshaữ damage will be at the risk
and expense o f the buyen w ho will have to base their judgement on any clues that may exist in
the classiíìcation records o r logbooks.
Clause 7:
N O TIC E OF READINESS A N D LIQUIDATED DAMAGES
(a) W hen the vessel becomes ready fo r delivery, the sellers shall tender to the buyers a
Notice o f Readiness fo r Delivery.
(b)The buyers shall take over the vessel within three (3) Banking Days from the day o f
receipt o f such Notice o f Readiness fo r Delivery.
(c) In the event the buyers do not take delivery o f the vessel within the period specified
above, the buyers shall pay to the sellers fo r each day o f the delay up to the tenth ( I Oth)
day o f the delay the liquidated damages as stated in Box 16. If the delay exceeds ten ( 10)
days then the sellers shall have the right to cancel this Agreement and claim damages fo r
their losses flowing therefrom.
This appears to contrast with the apparent requirement in clause 2 that payment o f the balance
o fth e purchase price has to be paid ‘im m ediatelỳ upon receipt by the buyer o fth e sellers notice
o f readiness fo r delivery.The coníusion might be removed by deleting the word 'immediately' in
clause 2, which would make clear that the provision in clause 7 that the buyer has three banking
days within vvhich to make payment o f the balance will prevail.
This is where one encounters the promised reference to ‘liquidơted damơges'. It is in fact a
payment akin to a demurrage rate fo r delays by the buyer beyond three working days. It might
be helpíul to add ‘pro rata' a fte r‘per dơy’ in Box 16, to make sure that the seller is entitled to at
least and no more than a percentage o f the daily rate fo r part o f a day.
Clause 8:
TOTAL LOSS A N D FORCE MAJEURE
Should, beíore delivery, the vessel become an actual, constructive o r compromised total
loss (not being a result o f an act o r omission o f the sellers com mitted with the intent
to cause such total loss o r recklessly and with knowledge that such total loss would
probably result therefrom ), o r should the Vessel not be able to be delivered before the
cancelling date through the outbreak o f wan the restraint o f governments, princes o r
people, political reasons o r any other cause over which the sellers have no control, then
this Agreement shall be null and void and neither party shall be liable to the othen In such
event the Deposit together with interest accrued thereon, if any, shall be immediately
released in full to the buyers.
Ship Sale and Purchase I II

C h a p te r 7
Damage beíore deỉivery usually calls a halt to the deal
Nipponsale Ciause 8 isthe equivalent o f clause 5d o íth e Saleíorm 1993.
Clause 9;
TRANSPER O P T IT L E A N D RISK
Title and risk to the vessel, together with everything belonging to it, shall pass to the
buyers upon both payment o f the Purchase Price and delivery o f the vessel having
occurred. Delivery o f the vessei shall be deemed to take place at the date and tim e
specified in the Protocol o f Delivery and Acceptance.
This is self-explanatory.
Clause 10:
B E L O N G IN G S A N D BUNKERS
The sellers shall deliver to the buyers the vessel with everything belonging to it at the
tim e o f the superíìcial inspection referred to in the Box 9 including all spare parts, stores
and equipment, on board o r on shore, used o r unused, except such things as are in the
normai course o f operations used during the period between the superTicial inspection
and delivery.The sellers shall provide the buyers with an inventory list at the time o f
delivery. Forwarding charges, if any, shall be ío rth e buyers' accountThe buyers shall take
over and pay the sellers fo r the remaining bunkers and unused lubricating oils at the last
purchased prices evidenced by supporting vouchers. Payment under this clause shall be
made on o r p rio rto delivery o f the vessel in the same currency as the Purchase Price.
This clause contains similar provisions to the Saleíorm 1993 clause 7. Like the Saleíorm, it nakes
no reíerence to spare parts on order

N ipponsale Form
Clause I I:
EXCLUSION PROMTHE SALE
The sellers have the right to take ashore all crockery, cutlery, linen and other articles
bearing the sellers' flag o r name, provided the sellers substitute the same fo r an
equivalent number and type o f similar unmarked items. Books, cassettes and forms
and so on, exclusively fo r use by the sellers on the vessel, shall be taken ashore beíore
delivery. Personal etĩects o f the Masten Oíĩìcers and Crew including slop chest and hired
equipment, if any, are excluded from this sale and shall be removed by the sellers p rio rto
delivery o f the vessel.
This.too, is a similar provision to that contained in the Saleíorm 1993 and discussed in chapter 6
ciause I I . It is novv normal to have all original continuous synopsis records (CSRs) with original
oil record books stay on board in compliance w ith the requirements o f Marpol.
Clause 12:
C H A N G E OF NAME ETC.
The buyers undertake to change the name o f the vessel and alter the funnel markings
upon delivery o f the vessel.
This clause is almost identical to the equivalent Saleíorm 1993 provision.
Clause 13:
ENCUMBRANCES ETC
The sellers shall deliver to the buyers the vessel free from all debts, encumbrances,
mortgages and mahtime liens. The sellers hereby undertake to indemniíy the buyers
against all claims o f whatever nature made against the vessel in respect o f liabilities
incurred p rio rto the tim e o f delivery.
Once more, virtually identical to the equivalent Saleíorm 1993 provision.
Clause 14:
DEPAULTAND CO M PENSATIO N
(a) Should the buyers deíault in the payment o f the Deposit o rth e balance o f the Purchase
Price in the manner and vvithin the tim e herein speciíìed, o r the buyers otherAvise fail to
perform the ir obligations under this Agreement and such íailure is not remedied within
seven (7) days following receipt o f a notice o f deíault from the sellers to the buyers,
then the sellers shall have the right to cancel this Agreement. In such event the Deposit if
already paid.together w ith interest accrued thereon, if any, shall be forfeited to the seilers.
If the Deposit has not yet been paid the sellers shall have the right to receive the amount
equivalent to the Deposit from the buyers. If the Deposit o r the amount equivalent to
the Deposit does not cover the sellers’ losses, the sellers shall have the right to claim
íurther compensation from the buyers to recover such losses.
(b) Should the sellers default in the delivery o f the vessel w ith everything belonging to it in
the manner and within the tim e herein speciíied, o r the sellers otheiAvise fail to períorm
th eir obligations under this Agreem ent and such íailure is not remedied vvithin seven (7)
days following receipt o f a notice o f deíault from the buyers to the sellers.then the buyers
shall have the right to cancel this Agreement. In such event the buyers shall have the right
to be paid the amount equivalent to the Deposit by the sellers and the Deposit, if already
paid, together w ith interest accrued thereon, if any, shall be released to the buyers. If the
amount equivalentto the Deposit does not coverthe buyers’ losses the buyers shall have
the right to claim íu rth e r compensation fr'om the sellers to recover such losses.
Ship Sale and Purchase I I3

C h a p te r 7
In effect, the provisions o f clauses 13 and 14 o f the Saleíorm 1993 are combined into this one
clause 14 in the Nipponsale 1999. The provisions are very similar and each side is entitled to
claim fo r proven losses from the other in the event o f their deíault.
Clause 15:
ARBITRATION
Any and all disputes arising out o f o r in connection with this Agreement shall be submitted
to arbitration held in Tokyo at the Tokyo Maritime Arbitration Commission (TO M AC)
o f the Japan Shipping Exchange, Inc. in accordance with the Rules O ÍTO M A C and any
amendments thereto, and the award given by the arbitrators shali be íìnal and binding on
both parties.
The arbitration procedure provides íorTokyo arbitration in accordance with the Rules o f the
Tokyo Maritime A rbitration Committee.

i
Chapter 8
Nevvbuildings
The Parthenon is a temple on the Acropolis plateau dedicơted to the mơiden goddess
Athena. Its construction begơn in 44 7 BC when theAthenian Empire wơs ơt its
most powerful.
C h a p te r 8
selling and buying o f ships. Some specialise in the sale and purchase o f new ships fro m a
shipyard. Anyone intending to pursue a career in the area o f newbuildings needs a high aegree
o f technical knowledge and, as negotiations extend over a long period, patience.
8.2 N A V A L A R C H IT E C T S
A ship s ta rts its life on a dravving board - on rathen a C o m p u te r w ith specialised s o ftw a re .T h e
design w o rk is done by a naval architect at the shipyard. Naval architects are also employed in
owners' offices and sometimes in those o f a b ro k e rto identiíy the right ship fo rth e Job.
Naval architects are highiy trained. The UK offers specialised university degree courses at
Newcastle-upon-Tyne and Southampton (three-year courses) and Strathclyde (four years). In
the USA, a handíul o f colleges oíĩer degree courses, including Michigan, lowa, South Plorida
and N ew England universities. Designing a small barge would be quite simple, but it is a huge
challenge to design a Class I passenger ship with its miles o f cables and pipes serving thousands
o f cabins.
8.3 S H IP BUILDERS
Once a classiíication society has approved the plans, the shipyard uses them to build the ship.
Shíps are normally built in modules, which are then transported by gantry and crane to a building
dock where they are vvelded together.VVhen the vessel is ready, the building dock is ílooded and
the ship is tovved out fo r the fìnishing touches to be made and fo r the ship to be christened.
Seatrials are then carried out and, if satisfactory,the ship is handed o v e rto the ow ner
The mass production o f ships moved from Europe to the Far East many years ago. Initially,
owners w ent to Japan in search o f cheaper ships, but, as they became more expensive.the focus
moved to South Korea. Rival ship-building countries accused the Koreans o f building at below
cost to estabiish a competitive advantage.This was strenuously denied. But then it became the
South Koreans’ turn to cry foul as China to o k over as the world's largest ship-building country.
Beíore the 2008 economic downturn, ship owners were seduced by cheap prices, leading to a
rush to order ships in China.VVhen the recession set in, it became clearthat there was an over-
supply o f ships, so many owners opted to íoríeit their deposits to get out o f deals w ith the yards.
In some cases, yards continued to build the vessels and were able to sell them to other ovvners.
For various reasons, some countries believe It is im portant to retain their shipyards. In the
USA ship-building is seen as an essential arm o f deíence and yards are used to develop and
build large numbers o f naval ships.The USA is also known fo r protectionist shipping iegislation
known as the Jones Act.The Merchant Marine A ct o f 1920 is a United States íederal statute that
regulates maritime commerce in U5 waters and betvveen u s ports. Section 27, better knovvn
as the Jones Act, requires ali goods transported on the water betvveen u s ports to be carried
in US-fiagged ships, constructed in ihe United States, and owned and crewed by u s citizens and
u s permanent residents.
The íoreign-sourced Steel content o f repair w o rk on the huli and superstructure o f US-flagged
vessels is limited to 10% by weight. This restriction largeiy prevents u s ship ovvners from
reíurbishing th eir ships at overseas yards.
In the main, shipyards outside the Far East survive on subsidies o r on government w o rk Some
keep going by building highly specialised vessels. Australia, fo r example, is knovvn fo r building
large high-speed íerries, largely constructed in aluminium. European shipyards tend to focus on
large, complex cruise ships.

N ew bu ildin gs
yi ,
i' "'!. :
i
V
Lloyds Register naval architects G A plan o f a 7,000teu Container ship
Ship Sale and Purchasing I 17

C h a p te r 8
W hile some merchant ships, especially cruise ships, continue to be built to order; it is more
common now fo r shipyards to concentrate on the production o f one o r more Standard designs.
Individual purchasers can nevertheless have these Standard vessels customised to suit their own
requirements.
An aspiring ship ow ner vvanting to purchase a new vessel will need to scour the shipyards o f
the vvorld to discover the most suitabie design fo r their needs and fo r their pockets. Here the
knowledge and expertise o f the s&p broker can be invaluable, pointing the ovvner towards
appropriate ship builders. Shipowners can also check the lists o f nevvbuilding ships on order
published in the international shipping press. These contain comprehensive information that
should enable intending purchasers to narrovv the search down to those yards that build
potentially suitable vessels.
The potential customer can, either directly with a yard o r in consultation with an s&p broken
examine the íìnancial implications o f each prospective deal. Encouraged by aggressive sales
techniques o r the desire to cut out the middleman, some shipovvners may be tem pted to
negotiate directly with shipyards. Howeventhat is not necessarily the best option,as shipbrokers
have a vveaith o f experience and knowledge and their advice may provide cash savings well in
excess o f the brokerage incurred.
Yards offer a variety o f incentives to secure business, including competitive prices, íìnancial aid
in the form o f credits o r long-term low-interest loans. Such attractions need to be set against
the speed o f construction and the anticipated quality o f the íìnal product. One shipyard may
be much cheaper on the basic hull and machinery, but pertiaps can only provide necessary
extras at an unrealistically high price.The purchaser needs also to have an eye on the future.
A re spare parts likely to be íreely available and cheap, o r might they prove diffìcult to obtain
and expensive? Is the equipment complicated, necessitating a high Standard o f maintenance o r a
larger crew?
Turning to the construction period, the potential purchaser needs to consider the security o f
any contract placed.The price may be attractive, but is the yard prone to labour disputes that
could cause delays to delivery, o r is the country politically unstable and is there a chance that the
government will interíere o r even cancel the contract? And what o f the shipyards financial State?
Could it fail and, if so, what will be the consequences fo r the ship owner?
The shipowner needs to vveigh up the advantages and disadvantages o f One shipyard constructing
and launching the hull and another yard conducting the fìtting-out operation. One element in
that equation wiỊ| be the length o f the to w from the fìrst yard to the fitting-out yard.
Being wide-read, prudent and abreast o f international politics and economics is essential,
although the purchaser still needs to be able to convert that iníormation into practical
decision-making. Here again, the assistance o f a sale and purchase broker can prove invaluable,
especially if the purchaser is a newcomer to ordering new ships and unversed in the art o f
newbuilding negotiations.
8.4 T H E S H IP YA R D C O N T R A C T
Having decided on the choice o f shipyard and vessel design, the purchaser and builder can
tu rn the ir attention to negotiating detailed terms and conditions.The end result will be a bulky
contract, encapsulating everything that has been agreed. A critical part o f the contract is the
reíund guarantee, whose term s are negotiated between the shipyard and the buyer. This is
arranged by the shipyard w ith its financial institutions, usually a bank. If the shipyard fails to
deliverthe ship,the buyer should get their money backThe building contract does not become
eATective until the refund guarantee has been agreed.
The comprehensive building contract will specity the date by which the shipyard is to start w ork
and the period within which each stage o f construction is to be completed, finishing W‘th the
expected date o f handover to the new owner.

N ew bu ildin gs
Purchase payments are usually staggered and closely allied to various stages o f construction. A
typical payment schedule vvould be as follows:
• 10% on signing contract;

• 10% on arrival o f materials on site;
• 10% on keel-laying:
• 20% on launching;
• 50% on delivery.
Should the shipyard be arranging a loan o r a credit facility to the ow ner to assist th e ir
purchase, th e n th e b u ilding c o n tra c t m ay in clu d e lengthy and d e ta iled c o n te n ts , as f o r
mortgage documentation, o r it could be that a separate loan contract will be produced.
Much detailed negotiation has to be clearly and concisely expressed in a ship-buílding contract.
The prudent purchasers will probably want to obtain legal advice on the technicalities beíore
com m itting themselves to considerable liabilities and expense.
M ost nevvbuilding contracts are tailor-made, but some Standard íorms are available that could
be used as the basis fo r a newbuilding contract. The Shipbuilders' Association o f Japan -
membership o f which comprises major shipyards in Japan - publishes the Standard Shipbuilders
ofJapan Newbuilding Contract Form (the SAJ íorm).
The equivalent document in circulation in western Europe isthe Standard Shipbuilding C ontract
- the AWES Porm.This was designed by the form er Association o f European Shipbuilders and
Shiprepairers and is now prom oted by the Brussels-based successor body, the Com m unity o f
European Shipyards'Associations.
A íurthe r alternative Standard form is the BIMCO Newbuildcon. A fte r introducing Repaircon,
a ship repair Standard contract, BIMCO has put together a Standard contract fo r newbuildings.
Yards in Japan, Korea and China, together w ith lACS, Intertanko, ship owners and underM/riters,
participated in a scheme to draw together core clauses into a contract fram ew ork suitable fo r
all nevvbuilding yards.
W h e th e r based on a Standard form o r speciíically negotiated fo r a particular construction

project, a typical nevvbuilding contract will contain certain essential elements.
8.5 LETTERS OF IN T E N T
Occasionally a deal to contract to build a ship will be dependent on the ship ow ner gaining
an employment contract fo r the vessel. Or, if the design o f the vessel is futuristic, the deal may
depend on a market developing fo r that type o f craft. In this situation the ship ow ner and
builder may find it advantageous to sign and publicise a letter o f intent to construct the ships
when the tim e and market are rightThe builder is demonstrating its intention and ability to build
the vessel, so encouraging íuture orders fo r similar ships, while the ow ner is advising potential
charterers o f their íoresightedness and resolve to invest in the trade, should it materialise.
8.6 B U IL D IN G S U P ER VIS IO N
Right from the arrival on site o f the íìrst materials fo r construction o f the new vessel, it is
essential that one o r more construction engineers/surveyors representing the purchaser should
be on hand to p ro te c tth e ship ow ner’s interests. Provision ío rth e ir attendance should be made
at an early stage and provided fo r in the building contract. For a complex vessel, several owner's
engineers may be needed, dividing the w o rk between machinery, hull and so on.
The owner's superintendents overseeing construction have to inspect all materials and
workmanship as the ship takes shape. It is also im portant that they establish a cordial w orking
relationship with the yard’s employees, negotiating tactíully when ditĩerences o f opinion arise

C h a p te r 8
selling and buying o f ships. Some specialise in the sale and purchase o f new ships fro m a
shipyard. Anyone intending to pursue a career in the area o f newbuildings needs a high degree
o f technical knowledge and, as negotiations extend over a long period, patience.
8.2 N A V A L A R C H IT E C T S
A ship starts its life on a drawing board - on rather; a Computer with specialised software.The
design w o rk is done by a naval architect at the shipyard. Naval architects are also employed in
owners' offices and sometimes in those o f a broker to identiíy the right ship fo r the job.
Naval architects are highly trained. The UK oíĩers specialised university degree courses at
Newcastle-upon-Tyne and Southampton (three-year courses) and Strathclyde (four years). In
the USA, a handíul o f colleges offer degree courses, including Michigan, lowa, South Plorida
and N ew England universities. Designing a smail barge would be quite simple, but it is a huge
challenge to design a Class I passenger ship with its miles o f cables and pipes serving thousands
o f cabins.
8.3 S H IP BUILDERS
Once a classiíìcation society has approved the plans, the shipyard uses them to build the ship.
Ships are normally built in modules, which are then transported by gantry and crane to a building
dock vvhere they are vvelded together.VVhen the vessel is ready.the buiiding dock is ílooded and
the ship is tow ed out fo r the finishing touches to be made and fo r the ship to be christened.
Seatrials are then carried out and, if satisfactory,the ship is handed o v e rto the ownen
The mass production o f ships moved from Europe to the Far East many years ago. Initially,
owners w ent to Japan in search o f cheaper ships, but, as they became more expensive.the focus
moved to South Korea. Rival ship-building countries accused the Koreans o f building at below
cost to establish a competitive advantage.This was strenuously denied. But then it became the
South Koreans' turn to cry foul as China to o k over as the world's largest ship-building country.
Before the 2008 economic downturn, ship owners were seduced by cheap prices, leading to a
rush to orde r ships in China.VVhen the recession set in, it became clear that there was an over-
supply o f ships, so many owners opted to íoríeit their deposits to get out o f deals w ith the yards,
In some cases, yards continued to build the vessels and were able to sell them to other ovvners.
For various reasons, some countries believe it is im portant to retain their shipyards. In the
USA ship-building is seen as an essential arm o f deíence and yards are used to develop and
build large numbers o f naval ships.The USA is also knovvn fo r protectionist shipping legislation
known as the Jones A c tT h e Merchant Marine A ct o f 1920 is a United States íederal statute that
regulates maritime commerce in u s waters and between u s ports. Section 27, better known
as the Jones Act, requires all goods transported on the vvater between u s ports to be carried
in US-flagged ships, constructed in xhe United States, and ovvned and crewed by u s citizens and
u s permanent residents.
The íoreign-sourced Steel content o f repair w o rk on the huli and superstructure o f US-flagged
vessels is limited to 10% by weight. This restriction largely prevents u s ship owners from
reíurbishing the ir ships at overseas yards.
In the main, shipyards outside the Far East survive on subsidies o r on government w o rk Some
keep going by building highly speciaiised vessels. Australia, fo r example, is known fo r building
large high-speed íerries, largely constructed in aluminium. European shipyards tend to íocus on
large, complex cruise ships.

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C h a p te r 8
and reporting regularly and thoroughly to their em ployerThey have the added responsibility
o f liaising with surveyors appointed to superintend the vessels construction on behalí o f the
classification society selected by the ovvner
A t an early stage th e s u p e rin te n d e n t w ill also e xa m in e Steel ía b rica tio n s and o th e r m a te ria ls th a t
are being built off-site by third parties to witness build quality. Coatings and paint manuíacturers
will have been selected and included in the building contract.
Classiíìcation societies are concerned with the condition o f vessels entered in their registers.
O ne o f their many tasks is to inspect newbuilding ships and to classiíy each stage o f the
construction project as being o f good and sound workmanship. It is usual to add to the class
notation against its name the classification societ/s Symbol, such as a Maltese cross (•ĩ*) a íte rth e
description o f its hull, machinery and other specialised equipment, such as reírigerated cargo
spaces and its machinery.
For less conventional ships, an ow ner may have appointed a naval architect to design a vessel to
s u it a c lie n ts specifìc re q u ire m e n ts .A fte rfu ll c o n su lta tio n betvveen the a rc h ite c t and th e Client, a
preíerred design can then be íorârded to suitable shipyards around the world.Yards interested
in taking on the w o rk will then submit an estimate o f the tim e and cost o f building such a ship.
This method saves shipyards the tim e and expense o f their own design team perTorming such
w o rk and may encourage a greater number o f quotations.
It isthe o w n e rw h o chooses which classiíìcation society should oversee theirvessels construction

w o rk and with which to classiiy their trading merchant ship. The major traditional maritime
countries all enjoy ciassification íaciiities provided by independent bodies. Many buyers choose
to build ships underthe supervision o f Lloyd's Register (LR),American Bureau o f Shipping (ABS)
o r Det Norske Veritas (NV). Japanese buyers often opt fo r Nippon Kaiji Kyokai (ClassNK), An
ow ner is free to class their vessels with as many societies as they please, although using multiple
classiíìcation societies is m ore complicated and expensive than using only one.The ow ner can
aiso change th eir classiíìcation society when they wish, although they should be careíul not to
leave a gap betvveen leaving one society and joining another.
8.7 PLANS
As a ships construction progresses,the yards drawing oATice will produce a succession o f plans.
The ow ner wiil keep one complete set fo r reíerence, the builder will retain íurther sets fo r their
records and another set wiil be kept aboard the ship.These pians are each dated, numbered and
signed by the shipyard oíĩicial responsible ío rth e individual drawing, and each should be careíuliy
vetted by the owner's construction engineer; the classiíìcation society surveyor and by naval
architects appointed by the ovvnenThe ow ner may choose to give the naval architects complete
responsibility fo r the practical aspects o f the vessels construction. In that case they vviil check
and approve the plans, appoint the construction engineers and superintendents, liaise with the
classification society and, o f course, co-operate closely with the shipyard.
8.8 Y A R D OR H U L L N U M B E R
A ship is invariably left unnamed until its launching ceremony, which takes place well into the
construction schedule.The original ow ner may subsequentiy decide to a lte rth e ships name. In
times o f íast-rising íreight markets, the ovvner will sometimes sell a ship on the stocks and the
new ow ner will usually change the vessels name. Consequently, ship builders pay little heed
to names, but the vessel still needs to be identified during its construction and throughout its
w orking life. As early as possible,therefore,the builder allots the ship a yard o r huli number.This
notation appears on all the plans, building contract and correspondence, even after the vessel
has been íormally named.Yand identiíìcation numbers appear in column 5 o f Uoyđs Register o f Ships.

N ew bu ildin gs
8.9 L A U N C H IN G
Once a ship’s hull construction w o rk is completed it is ready fo r launching. Builders are keen to
períorm this operation at the íirst opportunity, so as to free the berth fo rth e next newbuilding.
Fitting-out w o rk on the íloating hull is then períormed - usually adịacent to the builders íacilities.
Many ships are constructed in d ry docks and, once the hull has been completed, are merely
íloated out to be fitted-out alongside a convenient berth.VVhere a launching is necessary, the
opportunity arises fo r a traditional ceremony - an ideal opportunity fo r ship ovvner and builder
alike to indulge in a public relations and advertisement exercise. Hovvever; fo r vessels built in
yards far from the owner's place o f business it is often difficult and very expensive to organise
a large gathering. In any event, some owners preíer anonymity and dispense with the launching
ceremony, letting their vessel take to the vvater unobserved by all but a handíul o f worknnen.
Should the yard be in a convenient location, however,the opportunity does arise fo rth e owners
to carry out a more fitting recognition o f the value o f their new ship, and shrewd invitations to
mortgagees, insurers, naval architects and suchlike can íoster goodwill in a convivial atmosphere
and give the ship a happy send-off to its trading life.
8.10 TR IA LS A N D D ELIVERY
Once fìtting-out has been completed and senior seagoing staff arrive, a vessel is ready to
períorm its seatrials. It is advisable ío rth e ships officers - the Masten chief officen and chief and
second eng ineers - t o jo in th e ir ship d u rin g th e tìttin g rO u t p e rio d , w e ll b e fo re th e s ch e du le d
delivery date.This will enable them to become accustomed to their new vessel before ít begins
its trading life in earnest.
Seatrials comprise various tests to prove the vessels seaworthiness and proper construction, in
accordance w ith the original order and contract o f agreement between the builder and ownen
T h e / include speed trials over a measured distance (usually one nautical mile) and vibration
tests.A couple o f days before handover is the usual time fo rth e otĩìcial naming o f the ship.
Provided the trials are satisfactory and the alterations required are only minor, the delivery o f
the vessel takes place. The ow ner íìnalises registration and any mortgage arrangements, the
crew board, stores are taken on, bunkers supplied, and the vessel generally made ready fo r sea
and the start o f its trading life.
8 .1I STORES A N D P R O V ISIO N S

An ow ner equipping a new vessel has one considerable advantage over the ovvner o f an
existing trading vessehthe ability to make bulk purchases. Equipping a new ship requires placing
some large orders, and suppliers are likely to oíĩer competitive prices, particularly as the lead
tim e to delivery allows the ow ner room fo r some hard bargaining.The ow ner can deal directly
with specialised suppliers o f such items as ropes, pyrotechnics, medical equipment and linen;
alternatively, they can use a ship chandler o r an experienced purchasing agent. Purchasing agents
receive a commission on the value o f the goods supplied, but ought to be able to save the
ow ner a bigger sum through th eir knowledge and ability to secure supplies at competitive prices.
Once the ship is trading, owners will rarely fìnd tim e o r opportunity to engage in such a
comprehensive search o f suppliers. Nevertheless, the equipping o f a new merchant ship is an
expensive and detailed task, and not one to be left together with final arrangements shortly
beíore delivery. O ne example is the supply o f books and similar material. Every international
merchant vessel must coníorm to numerous regulations concerning cargo handling,
maintenance and navigation, so that a library o f papers and documents is required aboard.The
collection o f these documents alone is a tedious and time-consuming occupation fo r the busy
ship ovvner.
Ship Sale and Purchasing 121

C h a p te r 8
VVell in advance o fth e vessel’s triais, seiection o f lubricating oils ío rth e main engine and auxiliary
m a c h in e ry needs t o ta ke place. O il co m p a nie s are n o rm a lly eager t o o b ta in c o n tra c ts fo r th e
supply o f lubrication fo r new ships.They often offer at competitive prices the initial fìlls o f the
main engine so long as the company is awarded the contract to supply the ships requirements
during its trading careen
The sale and purchase broker acts as an intermediary on behalf o f the principal in the selling
and buying o f ships.The representative o f the chosen paint and coatings company, the builder;
classification society surveyor and owner's construction engineer will all need to co-operate
closely to ensure that coating w o rk proceeds on schedule, w ithout interTering w ith other
construction activities. Much o f the Steel to be used in the vessel’s early construction and
internals needs to be coated beíore it is fìtted, which underscores the importance o f m aking an
early decision on the paint supplien
Internal structures also need coatings. The type and quaiity o f coating are o f particuiar
importance fo r a parcel o r chemical tanker's cargo tanks. The coating manuíacturer needs
to w ork in harmony with yard staff, classiíìcation society surveyor and the ship owner's staff
to ensure that the coatings are applied proíessionally in clean conditions and at the correct
tem perature and humidity.
Portankers built with coated cargo tanks,the painting regime is even more critical, as the success
o f th e vessels íu tu re tra d in g d e p e n d s u p o n th e highest Standard o f a p p lica tio n and cu n n g o f
internal paintw ork Usually, the coating supplier will arrange fo r its surveyors to supervise the
work.The contract may well include a guarantee o f paint perTormance fo r several years.
The provision o f stores IS not something with which an s & p broker will be involved.
8.12 A U X IL IA R Y E Q U IP M E N T
Depending on the terms o f the building contract, the yard will arrange supply and fitting o f
certain auxiliary equipment, fo r example, the radar and radio room machinery. Here again,
as with lubricating oils and paints, an early decision needs to be reached about the type o f
e q u ip m e n tto supply, and vvhetherto hire o r purchase.This is included in the purchase contract.
Given the cost o f such items.the owner; unless very knovvledgeable in this field, should seek the
advice o f one o r more experienced seagoing navigational oíĩicers.
8.13 SPARE PARTS

Ideally, a nevvly constructed vessel should leave the ship-building íacility with a comprehensive
set o f spare parts such as piston rings and cylinder liners fo r its main and auxiliary engines.VVith
adequate spare engine parts and engine-room equipm ent.the crevv should be able to carry out
simple machinery tasks - so long as they are qualifìed to petform that vvork, o f course.
O n a properly equipped merchant ship its constant weights vvill be o f more signiíìcance when
voyage and cargo planning. 'Constant weights’ reíers to the more o r less constant weight o f
spares plus crew effects, stores, provisions and stũcks o f fresh w ater carried aboard a vessel.The
total, usually below 500 tonnes, has to be deducted from available deadweight when calculating
cargo intake fo r vessel operations, voyage estimating and suchlike. It does not inciude the weight
o f bunkers, which is separately assessed voyage by voyage.
8 . 14 G U A R A N T E E PER IO D
The purchaser o f a new ship negotiates a guarantee period, probably o f one yean during which
the builder undertakes to put right any deíects that arise. The contract will speciíy which
deíects are covered, generally excluding problems that arise from navigational accident o r crew
negligence.

N ew bu iidin gs
8.15 IN S U R A N C E
It is tem pting to assume that few, if any, risks attach to a newbuilding before handover. In fact,
there are many risks fo r potential ship ovvners against which it is prudent to insure.
These include:
• dam age d u rin g c o n s tru c tio n , fìttin g -o u t and trials;
• total loss during construction, fitting-out ortrials;
• loss o f earning capacity;
• price o f replacement increases;
• loss o f stage payments;
s&p brokers are not normally involved in the Insurance aspects.
8.16 J H I4 3
Recent years have witnessed a spate o f ship construction casualties throughout newbuilding
yards, primarily caused by íìres.The problem reached such an intensity by the early 2000s that
some underv/riters announced they were no longer prepared to unden^rite shipyard risks.
The result was an initiative by the Joint Hull Com m ittee in London, an association íorm ed by
members o fth e International UndenA^riting Association (lUA) and Lloyds o f London, vvhich acts
fo r th e entire London Insurance market as a íorum fo r issues affecting hull policies. A f t e r giving
the m atter th e ir attention, the Joint Hull 143 Shipyard Risk Assessment QHI43) programme was
born.JH 143 requires an assessment by a reputable and experienced surveyor o f the risk posed
by each shipyard.
Laten the Salvage Association introduced its ShipShơpe Survey, a shipyard risk assessment
vvarranty that sets out the fram ew ork o f a shipyard (o r project) risk assessment strategy,
including the review and testing o f a yards saíety management, quality assurance and quality
control o f shipyard systems and procedures.The survey is wide-ranging, covering yard access
and security, fire prevention measures, vvorker training, subcontractor supervision, saíety team
training through to the more mundane but essential matters such as equipment storage and
garbage removal.
Insurance is mentioned to illustrate the importance o f seeking the advice o f a com petent
m a rin e Insurance b ro k e r w h e n co n s id e rin g sale and purchase Insurance m a tters. C e rta in ía c to rs
are often beyond the working knowledge o f many outside the Insurance industry, even though
they may be deeply involved in alternative areas o f sale and purchase vvork.
8.17 S H IP B U IL D E R ’S S T A B IL IT Y
Brieí reíerence was made earlier in this chapter to the need fo r an ow ner to pre-check the
stability, both political and financial, o f a ship builder selected to construct a newbuilding vessel.
Most problems are avoided by careíul vetting o f potential shipyards, but where ship owners feel
there is a chance that the builder is not completely stable.there are ways they can mitigate the
risks, fo r example.through the reíund guarantee negotiated in the early contract stage.
The ship builder will have taken out reíund guarantee Insurance protection to cover its liabilities
during construction and during the pehod following delivery.
Ship Sale and Purchasing i 23

C h a p te r 8
8.18 B U ILD E R ’S C ER TIPICA TE

W hen ovvnership o f a nevvbuilding vessel is transíerred from ship builder to ship ownen the
transíer is recorded in a builders ceríỉf/cơte, which evidences ownership o f the vessel.
Enough has been w ritten in this chapter to signpost some o f the practical considerations
requiring attention when embarking on the construction o f a new vessel. It is intended to draw
to the attention o f potential purchasers the importance o f paying careíul attention to detaii and
obtaining skilled assistance where necessary.

Chapter 9
Demolition
Koreơn Peninsulơ ot Night

Nasa imơge tơken from spơce showing well-lit South Koreơ and well-lit Chinơ with North
Korea in darkness between them.The only place lit is the C apital Pyongyơng.
C h a p te r 9
A merchant ship may stay w ith one ovvner o r change ownership several times during its life.
That life is finite, howeven and the íinal sale will alvvays be to the shipbreaker
A t one time it was reckoned that a ships life was 25-30 years, but the length varies considerably
fo r a variety o f reasons.The State o f the chartering market is a major general iníluence: in the
current State o f the market, tankers are now scrapped at less than 20 years and bulkers at just
over. Particular íactors include the type o f trade in which the ship has engaged, the quality o f
care the ship has received, the policy o f the ow ner and the effects o f international conventions.
High-cost events, such as a special survey becoming due that the ships earnings cannot support,
may also be decisive íactors.
W hen a ship is sold fo rfu rth e rtra d in g ,th e new ovvner may use it to trade in direct com petition
with the sellenThat is why some ovvners insist on selling ships fo r scrap even if they have several
years o f useíul trading life left.The price fo r scrap will be much low er than a price fo r íurther
trading, but the aim is to eliminate potential competition.
The scrap market is quite distinct from the market fo r íurther trading, with different contract
conditions, a completely dilĩerent type o f buyer and particular pitíalls fo r the unwary seilen
W hen sold fo rfu rth e rtra d in g , the ship will probably continue in Service much as beíore.A ship
sold fo r scrap will have been run down to the barest stipulations o f seavvorthiness and with
no concern at all fo r cargoworthiness. In this context, seaworthiness means that the ship must
still be in good enough condition to retain its class; if it became a casualty on the way to the
dem olition yard,the insurer w ould not pay out.
There will be cases where a ship has been in a serious accident o r has been laid up fo r so long
that its engines no longer w o rk and it is certainly well out o f class. In such a case it would have
to be tovved to the breaker’s yard, fo r which tugs will be hired. Beíore towage can take place,
a towage certificate will have to be obtained from the classification society, which will demand
that the ship be made sea saíe.This involves all openings, such as doors, hatches and portholes
be welded shut to make them water-tight, after vvhich the ship can be insured fo r its final voyage.
The actual arrangements fo r the towage may be made by the selien but it is quite common fo r
dead ships to be sold 'as is, where is’, leaving the buyer to make the arrangements.These are
usually carried out by specialist ship-delivery companies.
The purpose o f this chapter is, thereíore, to emphasise the specialist skills and knowledge that
an s&p broker trading in the demoiition market needs to acquire.
9.2 T H E SH IPB R EA K ER ’S W O R K P LA C E
This industry is largely based in the less developed countries, where traditionally the w o rk has
been carried out very effectively but rather crudely.The most active shipbreaking areas are the
Indian subcontinent, South-east Asia and the Far East.There is also increased competition from
Turkey and the United States o f America.
In many instances the breakers premises are no more than a stretch o f seashore with a gently
sloping beach. The ship íirst anchors o ff this beach until the transíer o f ownership has been
completed. A fte r this, most o f the sellers crew depart; howeven a few remain because their
duties are essential fo r delivery o f the ship.This involves waiting untii high tide, aiming the ship at
a marker on the shore and then driving it at three to four knots straight at the beach.The speed
is necessary to ensure the ship’s hull is íìrmly stranded.The operation is careíully supervised by
an expert beachmasten
Once the ship has been beached.the buyer removes anything that has a resale value. In additicn
to items from the engine room such as electric generators, there is a ready secondhand market
fo r equipment from the galley, cookhouse and crew accommodation.

D e m o litio n
Before the serious task o f demolition can begin some precautions have to be taken.Tankers, o f
course, have to be gas-free and sludge removed so that w o rk w ith cutting torches can be safely
carried out. It is a m atter fo r negotiation w hether the seller o r the buyer does this cleaning w ork.
The same applies to fuel tanks on any ship and the question o f remaining bunkers is another
area fo r decision during negotiations.
Then the ship is simply taken to pieces w ith ílame-cutters.The ships own cranes o r derricks
may be retained as long as possible to handle the sections as they are cut out.
Some o f the Steel will go to steelworks where it is re-melted; even Steel production from raw
materials needs a certain amount o f scrap to help the molten Steel to flow. However; much
o f the ships plating oniy has to be heated suARciently to re-roll it fo r reuse in other ways.The
advantage o f using scrap Steel is th a t th e massive Capital in v e stm e n t necessary fo r m aking Steel
from raw materials is avoided.The particular value o f Steel fronn ships' plates is that the quality is
uniíorm, which cannot be achieved from the use o f miscellaneous scrap.
This method o f shipbreaking requires very little Capital investment in sophisticated equipm ent
and the fact that it is labour-intensive is an attraction in the countries concerned. Uníortunately,
these aspects, combined with lovv skill levels and lack o f training, have meant that casualties
are not uncommon. As a result, the demolition yards - these days known as 'ship recyclers’ -
have come under close scrutiny from regulators.The health hazards fo r vvorkers exposed to
toxic materials, and also more general environmental hazards, have attracted criticism from non-
governmental organisations too. Greenpeace, fo r example, has highlighted the dangers fro m oily
residues and especially asbestos, which was long used as insulation fo r steam pipes and boilers.
9.3 E N V IR O N M E N T A L PRESSURE
W ith the w orld becoming increasingly environment-conscious, the long-term future o f current
methods o f shipbreaking is not easy to predict but ío rth e immediately foreseeable íuture that is
the main buying end o f the dem olition m arket
Most major ship owners have a ship recycling policy. As an example, here is the Maersk one:
Ship recycling offers opportunities to reduce waste and energy consumption by reusing
parts and equipment from decommissioned ships.
Steel can be recycled to produce new Steel, reducing the energy required fo r Processing
by as much as two-thirds. C opper cables and aluiDÌnium can also be recycled, enabling
most natural resources used to produce a vessel to be passed down from generation to
generation.
Ship recycling policy
Maersk supports the Hong Kong International Convention fo r the Safe and
Environmentally Sound Recycling o f Ships, and our goal is to saíely recycle all o u r ships at
th e end o f th e ir Service life.
O u r ship recycling policy requires us to use only recycling íacilities that have adequately
trained staíĩ and the required Health and safety procedures in place.These procedures
include rigorously checking all ships beíore they are delivered to the yard, conducting a
radiation survey, auditing hazardous materials and noting parts that require special care
when being dismantled.
For ou r new Triple-E class vessels o ur aim is to achieve 90% recyclability, while we
continue to use the Cradle to Cradle passport, which lists all materials used on a vessel,
th e ir locations and how they can correctly be disassembled and recycled o r disposed of.
inventorying hazardous materials
Since 2009, ship owners have been required to equip th e ir new and existing ships w ith
inventories o f hazardous materials. W e started using hazardous materiais inventories
Ship Sale and Purchasing 12 7

C h a p te r 9
as early as 2007, and we fully support all efĩorts to ensure safen more environmentaily
friendly ship recycling.
Scrapyards that are ISO-approved fo r ship recycling are mostly situated in China o r India.
9.4 BASIC PRIN C IPLES OF A D E M O L IT IO N C O N T R A C T

Beíore studying any contract in detail some íundamentals from the buyers viewpoint need to
be considered.
It is estimated that the average ship, in scrap terms, comprises the following:
• 86% scrap Steel;
• 1% cast iron;
• I % non-ferrous metals such as brass, copper, bronze;
• 6% n o n -m e ta llic m a te ria ls such as tim ber and plastics.
Ships are traded in the demolition market according to their actual weight o f metal. This is
reíerred to as the light displacement, which is the weight o f the huil completely equipped plus
the weight o f its machinery, boilers and vvater in the boilers, but excluding cargo,bunkers,
provisions, stores and other waten
Prices are quoted in u s dollars per light displacement ton.This is often shortened to lightvveight
o r Idt. Care must alvvays be taken to check vvhether it is the ton o f 2,240 Ib, o rth e metric tonne
o f I.OOOkg.The u s s h o rtto n o f 2,000 Ib is seldom used in this context.Although the Idt is the
way prices are quoted, the eventual contract o f sale usually quotes an agreed total lump sum
price as well as a price per light displacement ton.
A prudent buyer will insist on some independent coníìrmation o f the ship's iight displacement,
which can be checked from the original builders plans o r a letter from the buildenThe same
iníormation may also be gained from the ship's deadweight scale o r trim stability booklet.The
ship's records should be checked to see w hether any modifications have been made that might
affect its lightweight. Some ships have permanent ballastThis might be concrete, the vveight o f
which should be deducted from the lightweight when calculating price.
As with any ship sale, confirming vvhat is included in the sale is important. For example, the
Steel in a spare tailshaft is o f particularly good quality.The material used ío rth e spare propeller
should be checked too. It is usually o f cast iron, but it may be made o f phosphor bronze, which
commands a very high price.The nature and weight o f any other spares, such as an anchor, aiso
need to be checked.
9.5 SELEC TIN G T H E R IG H T BUYER

A prim ary concern from the seller's point o f view is the identity o f the buyer. A recent listing
o f shipbreakers found more than 100 in India alone, some o f which will be o f better financial
standing than others.
But the reality is that about 99% o f ali scrap deais are made, usually through a broken to a cash
buyer. Only a dozen o r so cash buyers are active in the market today. O f these, four o r five
conduct 95% o f the deals.
Payment has to be arranged via a letter o f creditT he cash buyer opens a letter o f credit in a
bank convenient to the sellenThe tw o parties agree which documents the seller will have to
present to the bank at the tim e o f delivery o f the ship in o rd e rto release the money.The letter
o f credit has to be irrevocable.The cash buyer posts a non-refundable deposit o f 30% o f the
agreed selling price.The buyer deducts 3% commission and then makes the best deal it can with
the ship recycler.

D e m o litio n
W hen the ship arrives at the demolition site, the protocol o f delivery is signed, the agent
contacts the seller and its bank, and the letter o f credit funds are released.
9.6 T H E D E M O L IT IO N M A R K E T
Extracts from saleíorms fo r demolition are given as examples. N o t only will different shipbreaking
areas tend to íavour certain forms but individual breakers may wish to include special clauses to
suit th e ir own circumstances.
The demolition market is a specialised one and diíĩers markedly from the secondhand market
fo rfu rth e rtra d in g , in particular because breakers are demolishing ships all the tim e.The breaker
does not want its berths and w orkforce to remain idle, so it wili wish to arrange its purchases
in such a w a y th a t as so o n as One ship has been d e m o lis h e d a n o th e r is re ad y t o o c c u p y th e
berth. Once a breaker has arranged purchases fo r a reasonable period into the íuture, it will
tem porarily drop out o f the market, unless an irresistible bargain is on ofĩen But after a few
weeks it vvill be back again. In effect, shipbreakers are in the market all the time, which is seldom
the case fo r buyers fo r íurthertrading.
The prices that a breaker offers are affected not only by the íreight market, which inAuences the
num ber o f ships available fo r scrapping, but also by the price the breaker can obtain locally fo r
the scrap Steel it is producing.This internal market fo r scrap Steel can vary from area to area, so
an s&p broker specialising in the demolition market will be expected to know which breakers
are paying the best prices at any one time.
As was mentioned earlier in this chapter, the activity in the demolition market is strongly
iníluenced by the strength o f the chartering market. If rates are high, an ow ner will trade his
ships as long as possible, but in a weak chartering market, not only is the income low but
charterers will tend to prefer more modern ships than those nearing the end o f th e ir w orking
liíe.Thus the number o f sales fo r scrap will vary as the market Auctuates.

C h a p te r 9

ũ íỀ ỉắ ấ ề ^ ^
Chapter 10
Demolishcon 2004
Mount Stromboli
Active volcơno o ff the West coast o f Italy, N orth o f Sicily. M ount Stromboli hơs been in
continuous eruption for more than 2,000 years.
C h a p te r 10
The íìrst Standard contract fo r the ship demoiition industry was introduced by BIMCO in
1987 and codenamed Salescrap 87. Before that, there had been no Standard memorandum
o f agreement in widespread use fo r ship scrapping and the market had managed by either
adapting the mainstay o f secondhand sale and purchase - the Saleform - o r by using private
commercial typew htten documents.
Despite high expectations fo r widespread usage following its introduction, Salescrap 87 was not
as successíul as its creators had hoped.
The result was BIMCOs complete revision in Novem ber 2001 o f the earlier docum ent and
its replacement by Demolishcon (the full title is Standard Contract fo r the Sale o f Vessels fo r
D em olition and Recycling, which is the subject o f this chapter Although it is used as an example
o f a demolition sales form, most brokers have developed their own form and Demolishcon is
rarely seen.VVe study it here because it includes in one document ail the relevant elements o f
other forms.
Initially, Demolishcon incorporated reíerences to the shipping industry's Code o f Practice on

Ship Recycling in relation to saíety and environment issues. In 2004, Demolishcon was revised
through the incorporation o f reíerences within its te xt (clauses 7 and 17) to the IMO Guidelines
on Ship Recycling, which replaced the reíerences to the industry code.
Demolishcon (2004) Part I contains empty boxes that are to be íìlled with data. Part II comprises
printed clauses. Additional agreement is added by way o f rider clauses.
lO .I P A R T IB O X E S
This follows the modern íorm at o f BIMCO contract forms, in which im portant iníormation
is inserted in boxes at the íront o f the document both as an aide-mémoire fo r those íixing
the business and dravving up the contract and as a data bank for those using the document.
Reíerences are made where appropriate to subsequent contract clauses, and the clauses
themselves contain cross-reíerences back to relevant boxes.
Space is provided fo r the place and date o f the contract as well as fo r details o f the vessel’s
sellen buyen m anager and p & l Club.The vessel is id e n tiíied , inciuding its ío r m e r nam es and o th e r
detaiis, as belovv:
• type o f vessel;
• hull construction;
• date o f build and place o f construction;
• flag/registry;
• class;
• IM O number;
• GT/NT;
• LOA/LBP;
• breadth and depth;
• deadweight (basis summer saltvvater);
• light displacement tonnage;
• permanent ballast;
• main engine (make, model, power);
• g e n e ra to rs (num ben m ake, m o d e l, povven voltage, íre q u e n cy);

Dem olishcon 2004
• working propeller(s) (number and material);
• spare propeller(s) (number and matehal);
• spare tailshaữ;
• spare anchor and Chain.
It will be noted that this iníormation is far more comprehensive than that to be found at the
front o f the saleíorm, o rth e Nipponsale memorandum o f agreement, designed fo r sales o f ships
fo r continued trading.The reason is that the buyer o f a ship fo r scrap will probably not have
arranged an inspection o f the vessel.The íìrst tim e a buyer is likely to see o r physically inspect
the vessel will be when the ship arrives at the recycling facility, usually weeks after com pleting
purchase negotiations. It is essential, thereíore, to give details o f the categories o f equipment,
tonnages and dimensions set out in the above list so that the buyer can evaluate the residual
scrap and recycling content o f a vessel proposed fo r demolition.
A no the r essential piece o f iníormation is the approximate draught (fore and aft) at which the
vessel is to present on delivery.W hetherthe vessel is to be demolished alongside a shipbreaking
íacility o r in a dry dock, but especially if destined fo r beach break-up, this data is vital to the
shipbreaker and will be the subject o f negotiation and record.
O f course, various types o f vessel will have particular íeatures relative to their trades and
cargoes. In recognition o f this, Demolishcon provides separate boxes o f data fo r d ry cargo
vessels and ío r ta n k e rs in a d d itio n t o th e above, Standard, in ío rm a tio n .
For dry cargo vessels, the listed data comprises:
• reefer spaces (type o f insulation);
• cargo gear;
• holds/hatches;
• ballast tanks coating (condition).
For tankers:
• heating coils (place and material);
• deck/steam/cargo lines (material);
• cargo tanks (condition).
Such information serves tw o purposes.There is the on-sale potential, fo r example, o f vvorking

cranes, either as entire units o r fo r spare parts.There is also an early vvarning to the demolishing
labour force o f the dangers o f toxic coatings and identification at an early stage o f potential
disposal problems o f reefer gases, although this data should be supplemented by the inventory
required u n d e rthe auspices o f clause 7.4 (see below).
This is not necessarily a comprehensive list o f either the attributes o r potential problems o f
individual ships and, if necessary, the list can be supplemented by way o f a rider clause to
the MoA.
Purther boxes set out the term s o f the agreement reached.Those include:
• trading history/last fìve cargoes;
• purchase price;
• deposit terms;
• sellers bank details;
• íinancial documents details;
• place o f closing;

C h a p te r 10
• bill o f sale legalisation;
• number o f commercial invoices;
• place o f delivery;
• tim e o f delivery;
• cancelling date;
• notices;
• buyers watchmen;
• dispute resolution provisions.
A t the foo t o f the Part I section o f the M oA is space fo r the signatures o f seller and
buyen a reference to the Part II provisions and a space fo r the insertion o f rider o r additional
clause numbers.
10.2 PART II P R IN T E D CLAUSES

Preamble
The preamble to the printed clauses sets out the agreement o f the sellers to sell and the buyers
to buy the vessel described in Part I and makes particular reíerence to each sides express
undertaking to comply w ith the IMO Guidelines on Ship Recycling. The íìrst íìve printed clauses
relate to tlnancial matters:
Deíìnition
‘Banking days' are days on which banks are open both in the country o f the currency
stipulated ío rth e purchase price in clause 2 and a tth e place o f closing.
The term 'banking days' ỉs detlned in the contract as days on which banks are open both in
the country o f the currency stipulated fo r the purchase price and at the place o f closing.Thus,
for a u s doilar transaction with ciosing in London, weekends o r national holidays in either the
USA, the State o f N ew York, o r in the United Kingdom vvill not count as banking days.Those
responsible fo r transíerring u s doilars may, hovveven also have to take into account holidays and
vveekends in the U SA/N ew York on the day preceding closing in London, o r elsewhere, as these
may affecưdeiay the eíTicient and timely transíer o f funds.
If either the seller’s bank, where the purchase funds are eventually to be delivered, o r the bank
where the deposit account is held and from which deposit funds are to be transíerred to the
sellers bank, are located o ther than in the country o f the currency o r the place o f closing, the
above contract definition o f banking days may need to be widened. Proper aiiowance needs to
be made fo r hoiidays and weekends at all relevant contract centres that have the potential to
affect the smooth transíer o f íunds.
Clause i : Outright Sale
The vessel has been accepted by the buyers vvithout inspection and the sale is outright
and deíìnite subject only to the term s and conditions o f this contract.
This provision confirms the usual practice that the vessel has not been inspected by the buyer
bưt that, nevertheless, the sale is outright and subject only to the ternns and conditions o f the
Demolishcon MoA. If, by chance, the vessel has been inspected, then it is a relatively simple
matter to amend the wording o f this clause to read:

Dem olishcon 2004
The vessel has been inspected and has been accepted by the buyers vvìth o u t inspection
and the sale is o u trig h t...
Clause 2: Purchase Price
The purchase price isth e sum stated in box 37(a) payable in United States Dollars based
upon a price per long ton Light DisplacementTonnage (LDT) (see clause 12) as stated in
box 37(b) calculated on the basis o fth e vessels LDT as stated in box 20.
This clause incorporates the purchase price into Part II o f the memorandum o f agreement, at
the same tim e setting out how the purchase price is to be calculated, based on data contained
in Part 1. Reference is made to box 37 o f Part I o f the Demolishcon, vvhich provides both the
light displacement tonnage o f the vessei, in the Standard units (long tons) used throughout the
ship scrapping industry and the result o f the conversion, expressed as a lump sum price.
Clause 3: Deposit
3 .1: As a security ío rth e due fulfìlment o f this contract,the buyers shall pay a deposit as
stated in box 38 to be placed with the bank stated in box 38 in the joint names o f the
sellers and the buyers.
3.2: Such deposit shall be made latest within 3 banking days a tte rth e date o f signingthis
contract.
3.3: Interest, if any, on such deposit shall be credited to the buyers.
3.4: Any fees o r charges fo r establishingand holding such deposit shall beborne equally by
the sellers and the buyers.
By way o f a series o f sub-clauses, the wording o f clause 3 refers to the deposit agreement
contained in Part I (box 38). It stipulates that the deposit is to be paid into a mutually agreed
bank vvithin three banking days o f signing the sale contract. It provides that any interest on the
deposit account is to accrue in íavour o f the buyer. And it establishes that bank fees/charges are
fo r equal division betvveen seller and buyen
Box 38 o f Part I contains a reíerence to the size o f the deposit to be lodged by the buyer
when agreeing to purchase a ship fo r scrap, expressed as a percentage o f the purchase price.
This can, o f course, be amended by agreement to reílect an actual sum. VVhether expressed
as a percentage o r as a fìxed sum, the deposit is fo rfe it to the seller in the event o f the buyers
default (see clause 19 below). Alternatively, in the event o f the sellers default, the deposit isto
be returned to the buyer (see clause 20).
If the deposit is not lodged according to the terms o f the contractpthe seller is entitled to cancel
the contract and to claim compensation fo r any expenses incurred and fo r any losses sufFered.
A crucial difference between the Salescrap and Demolishcon concerns the start date o f the
three banking days within which the deposit is to be lodged. Salescrap was based on deposits
being lodged within three days o f the date that agreement has been reached between seller and
buyer - in other words, within three days o f the date o f the contract. Demolishcon, howeven
re íle cts w h a t is said t o be Standard d e m o litio n tra d e p ra ctice , in th a t th e th re e banking days
applies from the date that the contract has been signed by both parties. If the buyer insists
on signing the contract personally, rather than allowing an intermediary (such as the sale and
purchase shipbroker) to sign on th eir behalí, the logistics o f couriering contract papers around
the w orld may mean that several days elapse after agreement has been reached but beíore the
contract is physically signed.This is thereíore a term which, general practice o r not, printed o r
not, a seller may wish to resist and aiter in their íavoun so that the three banking days start once
the deal has been struck and agreement reached.

C h a p te r 10
The potential diíĩìculty arising from the printed wording o f the Demolishcon is that, following an
agreement to sell and to buy a ship fo r demolition, several days may pass beíore the contract is
signed. During this time the market may turn in the buyers íavoun encouraging an unscrupulous
b u y e rto try to renegotiate the sale price on indeed, any o th e rte rm o f the contractTem ptation
can be removed, and parity w ith the provisions o f the Saleíorm and Nipponsale restored, by the
sellers reasonable insistence on cash deposits being paid within three days o f the agreement or
contract date.
Clause 4: Payment
The buyers shall release the deposit stated in box 38 to the Sellers and shall pay the
balance o f the said purchase price in full to the sellers' bank stated in box 39 o f delivery
latest vvithin three banking days from the tim e the sellers have tendered notice o f
readiness fo r delivery in accordance with the terms and conditions o f this Contract.
This sets out an agreed regime fo r the release o f the deposited funds and payment o f the
balance to the sellers bank o f the purchase price o f the vessel vvíthin three banking days o f
notice o f readiness to deliver having been tendered in accordance with the term s o f the
memorandum o f agreement.
Clause 5: Pinancial documentation
Clause 5 .1:
In exchange fo r the payment o f the purchase price the sellers shall íurnish the buyers
with the following documents at the place o f closing stated in Box 40(a), whỉch shall be in
English o r with a certiíìed English translation if in a language otherthan English.
Sub-clause 5 .1 is itselí subdivided into various elements, listing individual documents required
from the sellers fo r a successíul closing and beíore the transfer o f the purchase funds.
Demolishcon makes the sensible provision that all documents are to be in the Engiish language.
This may not be a comprehensive list, as certain additional documents may be required in
certain jurisdictions. Howeventhose listed in the Demolishcon are:
1. Legal bill o f sale
2. Commercial invoices
3. Certificate o f registry
4. Undertaking to apply fo r a registry deletion certiíìcate
5. Undertaking to instruct the Master to hand over the vessel to the buyer
6. Minutes o f board meeting resolution to sell
7. Certiíìcate o f encumbrances o r liens.
W e will now take each o f the seven documents in turn.
Legal bilỉ o f sale
(i) a legal bi!l o f sale transíerring title o f the vessel and stating that the said vessel is free
from all encumbrances and maritime liens o r any other debts vvhatsoever; notarially
attested, legahsed o r apostilled as appropriate by the consul o r other competent authority
stated in box 40(b).
This will be in a similar form at to a bill o f saie required ío rth e transíer o f secondhand tonnage.
Standard íorms are available fo r the purpose and the document should certify that the vessel
is free from all encumbrances, maritime liens, mortgages o r any other debts, and be signed by
the directors o f the seller (o r on behalí o f the seller by its duly appointed lawyers), dated and
legalised by the registry authority o r by a convenient local consulate.

D em olishcon 2004
Commercial invoices
(ii) the number o f commercial invoices mentioned in box 40(c) signed by the sellers,
stating the purchase price o f the vessel and its particulars as mentioned in boxes 6 -3 6
as applicable.
This is a Standard financial requirement when purchasing vessels fo r demolition,just as commercial

invoices are necessary fo r the routine im portation o f commodities. A typical commercial invoice
(in several copies) prepared by the seller should be produced on the sellers headed notepaper
It should be addressed to the buyer appearing in the memorandum o f agreement contract,
ideally speciíying the details o f the vessel that appear in the contract (in boxes 6 through to 36
inclusive), its purchase price and, perhaps, additional data such as an im p o rt licence number.
Certiíìcate o rtra n scrip t o f registry
(iii) a certificate o r transcript o f registry evidencing the ownership o f the vessel and that
the vessel is free from registered encumbrances, taxes and mortgages. Such certiíìcate
o r transcript o f registry shall be dated not earlier than fìve days p rio r to the date o f the
Sellers tendering notice o f readiness fo r delivery.
It is, o f course, essential that the buyer is satisíìed that the seller has title to and is entitled
to sell the vessel. W hen the vessel is delivered, it must be free o f any encumbrances, liens,
outstandingtaxes, debts o r mortgages.A Standard requirement in the sale and purchase o f ships
fo r scrapping is a certiíìcate to that effect issued by a local consulate o f the ship’s flag State.
There may be several weeks between the sale agreement being reached between the seller and
the buyer and its actual delivery to the buyer Accordingiy, there is usually a contract provision
that this certificate containing the above evidence o f title and assurances be dated close to the
date o f handover Demolishcon has a provision to date the certiíicate not earlier than five days
before the Master tenders notice o f readiness to deliven
Registry deletion certificate
(iv) a vvritten undertaking from the sellers to apply fo r and supply to the buyers a certiíìcate
o f deletion o r closed transcript o f registry latest four weeks after delivery o f the vessel.
A no the r routine requirement is an undertaking from the sellerthat within a set period aữ erthe
handover they will apply to the ships registry authorities and provide the buyer w ith either a
certificate o f deletion o r a closed transcript o f registry. In Demolishcon the period is stipulated
to be within latest four weeks o f handoven In some contracts it may be negotiated m ore loosely,
say within three months o f delivery.
Instructions to deliver
(v) a w ritten undertaking by the sellers to instruct the master o r their agents to prom ptly
release and deliver the vessel to the buyers.
One o f the routine closing sale requirements o f a ship destined fo r demolition is a letter o f
undertaking from its seller stating that immediately after the purchase price o f the vessel has
been received in full by the seller, they, o r their attorney, will contact the master o r th e ir local
p o rt agent w ith instructions to deiiver the vessel to the buyers representatives. It may be a
contractual requirement that the letter o f undertaking adds various caveats - fo r example, that
the vessel is to be delivered saíely aíloat o r portw orthy, substantially intact, free o f external
leakages, free o f fìre damage, free o f cargo and charter-free vvith all belongings intact including,
fo r example, radio equipment and navigational aids, and all remaining bunkers and lubricating
oils. Am ong the other requirements are that its auxiliary engines and generators are in w orking
condition, subject to normal wear and tear There may be a stipulation that the vessel be
delivered w ith its cargo holds ortanks empty and reasonably clean, and fo r buik carriers to have
hatches closed and derricks lowered.

C h a p te r iO
This is clearly a requirement that needs attention when the sale is negotiated. Very likely the
buyer; o r th e ir representatives, w ill p ro d u c e Standard le tte rs at th e tim e w ith th e re q u ire d
wording so that these can be checked on behalí o f the seller and agreed.
Minutes o f board resolution to sell
(vi) a certiíìed copy o fth e minutes o f the Board o f Directors and/or shareholder's resolution,
as appropriate, according to which they decide the sale o f the vessel and a copy o f the
povver o f attorney authorizing the signature o f the bill o f sale.
As fo r secondhand tonnage (see chapter 15.3) one o f the sellers obligations IS to produce a
certifìed board o f directors' and/or shareholders' resolution coníìrming their agreement to sell
the vessel.
Certiíìcate o f guarantee
(vii) a certificate according to which the sellers guarantee that at the time o f delivery the
vessel is free from all encumbrances and maritime liens o r any other debts whatsoeven
Following from the document under (iii) above, at the tim e o f closing the seller is to issue
a certificate guaranteeing that at the tim e o f delivery the vessel is free o f all encumbrances,
maritime liens o r any other debts vvhatsoeverThe buyer may also insist that this is accompanied
by an undertaking from the seller that they will indemniíy the buyer against the consequences o f
any claims that may have occurred beíore the tim e o f delivery to the buyen
Povver o f attorney
As fo r secondhand tonnage, vvritten authority will be required permitting the representatives

o f the sellers to act on th e ir principals behalí, including pow er to sign legal documents and
to accept payment o f the purchase price o f the vessel. A similar povver o f attorney may be
necessary fo r the buyers representative to act on behalí o f the purchasers.
Lightweight verification documentation
See comments under clauses 7. i and 12 below.
Clause 5.2
A t the time o f delivery the buyers and sellers shail sign a protocol o f delivery and
acceptance coníìrnning the date and tim e o f delivery o f the vessel.The sellers shall make
available to the buyers copies o f the documents listed in sub-clauses 5 .1 (i) to (vii) as
soon as possible a fte rth e signing o fth is contract, but no laterthan three days p rio rto the
date o f the Sellers tendering notice o f readiness fo r delivery.
Clause 5.2 o f Demolishcon provides fo r a protocol to be signed by the buyer and the seller in
the manner described in chapter 7 .1 relating to secondhand tonnage.The clause also recognises
the risk o f a problem vvith the wording o f any one o f the above documents at th e tim e o f
closing. Accordingly, there is a provision vvhereby the seller is obliged to prepare copies o f the
above documents fo r review by the buyen and not later than three days before tendering a
notice o f delivery. Should a problem be identified, there should at least be time to correct any
mistake in the papervvork.
Some buyers may insist - and they are probably right to do so - that the copy paper^vork be
produced fo r checking far earlier; fo r example, 'within fìve working days o f the lodging o f the
deposit money’.
Clause 6: Advance notice of arrival

The sellers shall keep the buyers fully iníormed about the vessels position and o f any
alteration in expected tim e o f arrival and shall give the buyers 15, 10,7, and 3 days notice
o f the expected tim e o f arrival o f the vessel.
This is a Standard provision to the efíect that the seller shall keep the buyer notiíied o f the
vessels position and o f any alteration in expected tim e o f arrival at the place o f handover In

D em olishcon 2004
particulan Demolishcon provides fo r notices o f 15, 10, 7 and 3 days, although this provision may
be adjusted depending on the intervening tim e between the date o f the contract and the date
o f delivery.
The buyer is nevertheless advised to check and establish a vessels position and expected
readiness fo r handover at least once a week following the completion o f a m em orandum o f
agreement to purchase, irrespective o f the sellers contractual obligations to disclose details o f
the vessels movements.
Clause 7: Notices of readiness for delivery
VVhen the vessel is ready fo r delivery, the sellers shall give to the buyers a w ritte n notice
o f readiness fo r delivery.The notice o f readiness shall be tendered during normal offìce
hours at the place o f delivery and, unless otherAvise speciíìcally provided elsewhere in this
contract, be accompanied by the following documents to the extent necessary.
This clause sets out not only the times vvithin vvhich notice o f readiness fo r delivery is to be
handed to the buyer vvithin ‘normal offìce hours' but also, importantly, the documentation that
must accompany that notice. Numerous documents may be required and close attention to
detail will be necessary. Demolishcon includes a list that its authors consider com monly applies
in the main recycling countries, as follows:
7 .1a certificate issued by a local marine surveyor confirming the LDT o f the vessel as stated
in box 20 as p e rth e builders’ original trim and stability booklet o rth e builders’ capacity
plan on board theVessel, vvhich has been sighted.
As fo r any surveyor boarding a vessel, it will be helpíul to establish in the contract exactly vvhich
o f the signatories has the right to select and to appoint the surveyor; and how he o r she is to
be paid and by whom. Ideally, a surveyor should be jointly appointed to attend and the fees
shared equally betvveen the seller and buyer Plainly, the master should be instructed by the
seller to have readily available fo r inspection the ship's plans and documents confirm ing its light
displacement tonnage (LDT).
7.2 a letter from the sellers' local agents at the place o f delivery stating that there are no
pending dues against the Vessel at the tim e o f delivery.
A Standard document, but one fo r vvhich the sellers local agent should be prepared in advance.
7.3 a letter signed and stamped by the master stating that neither he nor the crew have any
outstanding claims against the vessel.
A n o th e r uncontroversial document, but one that needs advance preparation.
7.4 an inventory, in the form as recommended by the IM O Guideiines as applicable.
O ne o f the novelties o f Demolishcon is that sellers are expressly obliged to com plete an
inventory in the form as recorĩimended by the IM O Guidelines on Ship Recyc/íng. This provision
wiil not necessarily be íound in custom-prepared, individual memoranda, although it may only be
a m atter o f tim e beíore similar inventories are required throughout the ship recycling industry.
The inventory may be taken as that deíìned in Section 5 o f the IMO Guidelines under the
heading ‘Green Passport'. The IMO Guidelines were still being fìnalised as this book w ent to
press.The im portant point fo r the sale o f ships fo r demolition is that at the tim e o f tendering
notice o f readiness fo r delivery under Demolishcon terins, the master is to provide an inventory
o f materials aboard known to be potentially hazardous, including the location and approximate
quantity/volume o f each identiíìed material on board the ship.
The inventory is subdivided into the following categories:
Part I Potentially hazardous materials in the ships structure and equipment
P a rt2 Operationally generated wastes
P a rt3 Stores

C h a p te r 10
7.5 a p o rtw o rth y certificate issued by a local marine surveyor coníirming the material o f the
vvorking propeller(s) as stated in box 25 o f the form,
It would be a sensible policy to arrange that the marine surveyor vvho has been contracted
to check the vessel's light deadweight tonnage should also deal with this aspect, checking both
th at the vessel is p o rtw o rth y and veriíying the material o f the vessels working propeller(s). It
is puzzling that Demolishcon speciíìes that the material o f the vvorking propeller(s) is to be
checked but not the material o f the spare propeller(s). It vvould make sense ío rth e su rve yo rto
check and veriíy the material o f both the working and the spare propellers. A slight amendment
to and expansion o f the wording o f clause 7.5 might be appropriate at the negotiating stage.
A query arises over the definition o f ‘p o rtw o rth y ’. Just what is the marine surveyor certiíying
when he examines the vessel and confirms that it is o r is not portworthy? As discussed in
chapter 6, the w ord is likely to mean 'saíely afloat’.The buyer is seeking coníìrmation that at the
tim e o f the vessels delivery itt is saíely afloat and capable o f moving o r being moved about the
p o rt to its place o f demolition, such as a beach o r alongside a recycling facility.
7.6 a valid gas-free certificate fo r hotwork. Such certiíìcate shall be issued by the relevant
authorities on arrival at the place o f delivery and shall speciíy that all the vessel's cargo
tanks, pump rooms and coíĩerdams are gas-free, safe fo r men, safe fo r fire and are free o f
siops, sludge and residues.
The signiíìcant wording o f this, usually uncontroversial, provision is that the various spaces
identifìed must be safe fo r man entry.The seller wili thereíore be obliged to arrange fo r a local
surveyor o r chemist to inspect the various compartments just beíore handover and to issue a
valid gas-free certiíìcate acceptable to the buyen
Generally, prices in India and Bangladesh reílect that vessels are gas-free fo r hot work, vvhiie
prices in Karachi and China reílect only that spaces are suitable fo r man entry.
It is not a printed requirement to verify that bunker tanks are gas-free and it would usualiy be
impossible to give such a blanket assurance, as bunkers will in all probability be required to
enable the vessel to shift under its own povver either up a beach to its final resting position,
o r alongside a ship recycling íacility, o r into dry dock. Howeven vessels will need only a small
quantity o f bunkers fo r those purposes so that, with proper planning aboard, remaining bunkers
might be conveniently restricted to only one o r tw o tanks. Consequently, there appears to be
no practical reason to stop the buyer insisting that the majority o f the vessels empty bunker
tanks be gas-free in the same manner as fo r other compartments.
7.7 a letter from the sellers stating that the vessel has not carried any nuclear waste o r
industrial waste o r chemicals p rio r to the tim e o f notice o f readiness being tendered.
Some merchant ships are, o f course, specifically built fo r the carriage o f nuclear and industria!
vvaste and others ío rth e carriage o f chemicals. Consequently, sellers o f such ships cannot agree
such a provision, vvhich will have to be amended to fit the circumstances.
7.8 a letter from the master confirming that there have been no removals from the Vessel
othei"than those stated in box 22.
Purchasers o f ships fo r demolition will naturaliy be keen to ensure that the ship is delivered with
all the parts and equipment which was contracted íorT his provision addresses that concern,
See the commentary under clause I 1.2,
7.9 a letter o f undertaking from the sellers' agents that they will arrange fo r the fìling o f the
inward general maniíest.
An im p ort general maniíest is a customs requirement at certain demolition ports o r places and
coníirms that the vessel is being im ported fo r scrapping and is accepted by the local customs as
such.This will usually be a task fo r the sellers local p o rt agent to arrange. Local regulations may
also require the vessel to be issued with a routine invvard p o rt clearance certiíìcate, sometimes

D em olishcon 2004
reíerred to as a jerque note, as fo r any vessel arriving in p o rt from overseas o r elsewhere

w ithout cargo o r passengers. Similarly, local authorities may demand that the ovvner produces a
rummaging certificate, sometimes reíerred to as a jerquing certiỊicate, certiíying that the ship has
successfully passed a customs inspection and is free o f contraband.
7 .10 a valid deratisation exemption certiíìcate issued by the relevant authorities.
A deratisation certificate is a mandatory certificate carried aboard trading merchant ships

confirming that they have been inspected and fumigated o r othenîse cleared o f pests, and are
certified free o f vermin. Reinspections have to take place every six months. If a ship is reinspected
and found to remain free o f vermin, the ship will be issued w ith an updated docum ent term ed
a deratisation exemption certificate. It means that the ship is exempt from the need to be de-
ratted. Demolishcon refers to the provision o f a deratisation exemption certiíìcate. Hovveven
the provision o f a deratisation certificate has the same eíĩect, because it records that the vessel
has been certiíìed vvithin the previous six months and inspection found it to be free o f vermin.
The difference is simply that when providing a deratisation certificate, íumigation o r other
suitable treatm ent was conducted on the occasion o f the previous reinspection.
Strictly w orded ,th e clause should therefore re fe rto the provision o f either a valid deratisation
exemption certiíicate o r a valid deratisation certiíìcate and purists may wish to make an
appropriate adjustment to provision 7 .10 o f Demolishcon.
The following clause is subdivided into digestible portions and sets out the agreed procedure
fo r physical delivery.
Clause 8: Delivery
8.1: The vessel shall be delivered by the sellers to the buyers under its own pow er saíely
afloat, substantially intact, free o f any fìre and/or explosion damage, free o f cargo, free
from all charters, with anchors in place and, vvhere applicable, with hatches closed and
derricks lowered and gas-free fo r hotw ork (see sub-clause 7.6), as appropriate, w ith the
approximate arrival draít stated in Box 19 at the place stated in box 41 (hereinafter'the
place o f delivery').
Reíerence has already been made as above in relation to the vesseis arrival draught, being
saíely afloat, under its own pow er and gas-free and suitable fo r hot work. Reíerence is also
made in this paragraph to the anchors being in place - an essential requirement o f beach
demolition. Plainly, if the vessel has been damaged, perhaps in a collision, explosion, stranding o r
fìre, and is being tow ed to its delivery position beíore being broken up, this clause will require
some adjustment In particulanthe seller may need to delete reíerences to beingunder its own
povver' or'substantially intact, free o f fìre and/or explosion damage'. Beíore making an offenthe
buyer will be well-advised to inspect damaged ships available fo r demolition, as they can then
clear th e ir mind o f concerns and properly evaluate the vessel.They might also then be in a
position to make an ‘as is' offer; if they are confident in their commercial ability.they may obtain
a particularly competitive purchase price if they agree 'as is/where is’ purchase terms, arranging
their own towage from purchase place to their demolition site.
8.2 lf, on the vessels arrival, the place o f delivery is inaccessible fo r any reasons whatsoever
including but not limited to p o rt congestion, the vessel shall be delivered and taken over
by the buyers as near thereto as it may saíely get at a safe and accessible berth o r at a
safe anchorage which shall be designated by the buyers, always provided that such berth
o r anchorage shall be subject to the approval o f the sellers and the m a s te r which shall
not be unreasonably withheld. If the buyers fail to nominate such place within 24 hours
o f arrival, the place at which it is customary fo r vessels to wait shall constitute the place
o f delivery.
This deals w ith the potential problems o f congestion o r other, unexpected events, interíering
with the smooth delivery o f the vessel.

C h a p te r 10
8.3 The delivery o f the vessel according to the provisions o f sub-clause 8.2 shall constitute a
full perTormance o f the sellers’ obligations according to sub-clause 8.1 and all other term s
and conditions o f this contract shall appiy as if delivery had taken place according to sub-
clause 8. 1.
This sub-clause protects the seller providing they act in coníorm ity with the requirements o f 8. 1
and/or 8.2 above.
8.4 All expenses incurred p rio rto delivery o fth e vessel and all local íees/port disbursements
relating to the vessel, including repatriation o f the crew shall be fo r the sellers’ account
while ail expenses after delivery o f the vessel, including im p o rt duties and other local
taxes, if any, shall be fo r the buyers' account.
The purpose o f this provision is to simply and equitably divide the responsibility fo r local fees,
taxes, p o rt disbursements and im port duties betvveen the sellen pre-delivery and the buyen
post-delivery.
8.5 The vessel vvith everything belonging to it shall be at the sellers’ risk and expense until it
is delivered to the buyers.
This provision should simply put into words that which everyone assumes to be the case. Equally,
vvords might be added that the vessel and everything belonging to it shall be at the buyers risk
and expense after it has been delivered.
8.6 The sellers shall deliver the vessel to the buyers with the minimum amount o f ballast
w ater on board vvithout prejudicing the saíety o f the vessel.
This provision appears to be intended to protect the buyer from delivery o f the vessel with
excess and unnecessary ballast water aboard, thereby avoiding perhaps the need to hire
portable pumps to remove from the hull any ballast water that cannot be removed by gravity. It
has to be read, however, with the sellers obligation (box 19) to deliver the vessel with particular
forward and aft draughts.The words 'and subject to the provisions o f box 19’ might useíully be
added to protect the sellen
8.7The vessel shall be delivered vvithout any stowaways, contraband o r arms and ammunition
on board, othep^vise the buyers shall have the option not to accept the vessel, w ithout
prejudice to any claim fo r loss and/or damages the buyers may have against the sellers
under this contract.
W here a rummaging certificate is a requirement o f the memorandum o f agreement (see the

com m entary under clause 7.9), any probiems under this provision will probably have come to
a head beíore delivery, following inspection o f the vessei by the local delivery p o rt customs
rummage gang. Quite plainly, a buyer does not wish to find the vessei has on board any o f the
above as all are iikely to create disposal/repatriation problems and interfere with the demolition
o f the vessel.
Clause 9: Time of delivery/cancelling date
Even w ith the best-ỉaid plans, ships are more likely to lose tim e at sea than to gain it.These
provisions recognise that fact and set out a procedure in the event that tim e lost ensures that
the ship is likely to o r will miss its cancelling date.
9 .1The vessel shall be ready fo r delivery betvveen the dates (both inclusive) stated in box 3 1
but latest on the date stated in box 43 (hereinafter'the Cancelling Date’).
This is what everyone wants to happen when the contract is negotiated and fixed.
9.2(i) Should the seliers anticipate that notwithstanding the exercise o f due diligence, the
vessel will not be ready fo r delivery by the cancelling date they may notify the buyers
in vvriting stating the date when they anticipate that the vessel will be ready for delivery
and propose a new date fo r the cancelling date. Upon receipt o f such notification the
buyers shall have the option either to cancel the contract according to ciause 20 within

Dem olishcon 2004
tw o vvorking days o f receipt o f such notice o r o f accepting the new date as the cancelling
date. If the buyers have not declared their option within tw o vvorking days o f receipt o f
the sellers' notification on if the buyers accept the new date, the date proposed by the
sellers shall be deemed the cancelling date.
10.3 DELAYS
lí a vessel is delayed and misses its cancelling date, this sub-clause sets out the buyers options.
It depends initially on w ritten notiíication by the seller to the buyer o f the diíĩìculty the vessel is
e<penencing and the new cancelling date the seller requires. lía seller keeps the unpleasant news
to themselves fo r longer than necessary, the buyer may be faced vvith a sudden, unexpected and
late request fo r later delivery. That might disrupt their demolition programme and interíere
v.'ith an opportun ity o f buying a replacement vessel. Buyers can protect themselves to a degree
against such unpleasant surprises, howeven by insisting that sellers rigorously comply w ith the
notice requirements o f clause 6 and, as advised above, make it a policy to check the position
c f the vessel and its expected readiness fo r delivery regularly - say, at least once a week in the
iritial stages, increasing in írequency as the vessel near its delivery date.
Hovvever, when and if íaced w ith a w ritten request to deíer the cancelling date, the buyer has a
cnoice. Eitherthey cancel o r maintain the contract.A ccordingto the printed provisions o f clause
9.2(i) they have tw o working days within which to decide and to advise the seller.
Naturally, the seller requires a more o r less instant answer so that they can make their own plans
for the future o f the vessel and, from their perspective, tw o working days may seem adequate.
Here one needs a common understanding o f the definition o f working days.VVhat if the seller
gves notice during a normal working week in their domicile, but during o r at the beginning
c f a national holiday in the buyers domicile? One can imagine the íurore that might arise if
the buyer returns from a holiday during which their office has been closed, only to discover a
v/ritten notice o f delay waiting fo rth e m and, due to the expiry o f an intervening 48 hours, the
attempted imposition by the seller o f their chosen, later cancelling date. Practical advice would
be fo r both sides to seek to agree on the definition o f ‘working days' in the same manner as the
ternn ‘banking days' is defined earlier in the memorandunn o f agreement.Where both sides are
at w o rk when the notice is given, tvvo days should indeed be adequate.
The cynics among us may suggest that the buyers choice o f w hether to maintain the contract
o r to cancel will be determined by w h e th e rth e sale and purchase scrap market has gone up o r
cown in the period since the contract was signed. But that is business. Such is the volatility o f the
tíemand fo r scrap metal at times that an onlooker might reasonably excuse a buyer exercising a
legitimate contractual exit from what has developed into an unproíitable deal. A market pundit
sumnned up the lot o f the scrap dealer as follows - a good buy One month may turn into good-
bye the next!
From the sellers point o f view it is im portant that they should receive a prom pt response to
their vvritten request fo r an extension to the cancelling date. If they do not receive a prom pt
reply from the buyer within tw o working days (subject to reasonable deíìnition o f a working day
in the context o f the domicile o f the parties to the contract) they will be entitled to proceed on
the basis that th eir revised cancelling date will prevail and that they will be entitled to deliverthe
vessel laterthan originally contracted.
One way o r another, cancelled o r maintained, the seller will not be placed in the invidious
position o f having to proceed w ith the perTormance o f the contract, late delivery o r not, not
knowing until the buyer reacts to th e ir eventual delivery notice whether o r n o tth e vessels M oA
is being maintained by the buyenThis provision thereíore protects the sellerírom a potentially
expensive and perhaps unnecessary positioning voyage to the delivery port. Clause 9 provides
what BIMCO term s an interpolation provision. It compares with similar provisions in the Saleíorm,
although that provides the buyers w ith seven running days to elect vvhether to maintain o r to
cancel, and the Nipponsale, which also has tw o working days.

C h a p te r 10
9.2(ii) lf this contract is maintained with the new cancelling date, all o ther term s and
conditions hereoí shall remain in full force and effect. Cancellation o r non-caicellation
by the buyers in accordance with the provisions o f sub-clause 9.2 (i) shall be vvithout
prejudice to any claim fo r loss and/or damages the buyers may have against tne sellers
underthis contract.
This sub-clause contains tw o elements. First, it simply contains the usual contractual caveat in
the event that if a specific option is made o r a change efFected, the remainder o f the contract
remains unaíĩected by the alteration.
Second, that in the event o f late delivery, and despite their election to extend the cancelling
date, buyers remain entitled to bring fo w a rd claims fo r losses and/or damages vvhich they
may have suíĩered by reason o fth e vessels late delivery. Ifth e buyer can successfully prove that
the local scrap market has deteriorated and that they have suffered íìnancially by the delay in
delivery beyond the original cancelling date, and providing they can convert that proven loss
into a deduction from the contracted price.they might be persuaded to maintain the contract.
Clause IO:Beaching
Following payment and delivery o f the vessel the sellers shall assist the buyers in the
beaching o f the vessel at the buyers' designated demolition p lo t The vessel shall be
delivered with suíTicient useable/pumpable fuel, water and provisions fo r one day's
steaming and nine days’ idling.The sellers shall arrange fo r crew according to the safe
manning certiíìcate to remain with the vessel fo r a period o f up to 10 days after delivery
in o rd e rto assist wíth the aíoresaid beaching.
The beachíng o f the vessel, which shall include the rmoving o f the vessel íronn the outer
anchorage to the beaching plot, shall be fo r the buyers' risk and expense. Howeven
the master shall co-operate with the buyers in achieving the best possible draft and trim
fo r beaching,
The buyers shail use th e ir best endeavours to assist in the safe disembarkation o f the
crew aíter beaching.The sellers shall pay the wages and arrange p&l Insurance cover on
th e ir crew involved in the beaching operation.
This clause sets out the provisions relating to a ship destined fo r beach dem olition and covers
several issues. Under Demolishcon terms, the ovvnership o f the vessel and the SLibsequent
beaching risks pass to the buyer while the vessel remains saíely afloat, as in clause 8. 1. Even
where it is specifically agreed that a vessel is expected to beach beíore offìciai handover and
delivery from seller to buyer; fo r legai purposes deiivery is deemed to have taken place beíore
the beaching operation.
The buyer will need to have suíĩìcient bunkers aboard the vessel so it can operate through to
the next suitable tide. Demolishcon provides that the selier will deliver the vessel w ith enough
bunkers remaining aboard fo r up to nine days o f idling and one day's steaming - obviously with
spring tides in mind. Given that a quantity o f bunkers in each bunker tank vvill be unpumpable,
the sellers chief engineer/superintendent W ill need to take considerabỉe care in calculating the
minimunn o f bunker quantities remaining on board. The clause provides simply fo r 'sufìcient
bunkers’.There is no qualifìcation o f the vvords and no indication is given about a quantity o f
bunkers remaining on board in excess o f what is needed. If the buyer wishes fo r minimum
bunkers and no more, the seller will either have to make arrangements to consume bunkers
so as to deiiver as required - an almost impossibie task - o r they will need to dispose o f any
excess bunkers on the open market to a local buyer at the place o r p o rt o f delivery beíore
handover. This is an im portant m a tte rth a t needs to be reconciled during the sale and purchase
negotiations, although it is partially addressed in clause I 1.2 (see below).
The buyer vvill need the services o f experienced mariners fo r the beaching operation ard the
ciause contains the usual provision that a statutory minimum o fth e sellers personnel will remain
on board to assist vvith that procedure.The hsks and costs o f the beaching operation wiil be fo r

D em oiishcon 2004
the buyer, although the crew vvages and p&l Insurance premium in respect o f crew risks will still
be paid by the sellen
A useíul and practical provision o f the Demolishcon form is that it obliges the buyer to assist in
ứ e saíe disembarkation o f the crew a íte rth e vessel has been beached.The disembarking crew
rray well be íaced with a drop o f around 20m from the deck to the beach - almost 30nn in the
case o f a ULCC - so they vvill require some means o f saíely negotiating that descent.
T ie following provision is subdivided into digestible chunks.
Gause I I : Bunkers, equipm ent etc
I l.l The vessel shall be delivered with everything belonging to it on board w ith o u t
removals other than those stated in box 22. Howeven the sellers shall have the right to
take ashore vvithout compensation the following items: crockery, cutlery, linen and other
articles bearing the sellers’ flag o r name, as well as library, íorms, etc., exclusively fo r use in
the sellers' vessels. Masters, officers’ and crevvs' personal belongings including slop chest
and the vessel’s log book shall be excluded from the sale.
Tnis sub-clause speciíìes the general items which sellers are normally permitted to take ashore.
Tvpical items will include:
• hired equipment;
• books and documentation;
• tank-cleaning machines;
• navigational instruments (chronometers, binoculars and so on);
• cutlery and crockery stamped with sellers company insignia;
• masters, oíĩìcers' and crew's personal efíects:
• bonded stores.
The master may well require the assistance o f the local p o rt agent o r chandler to help pack
these items and fon/vard them overseas.
Reference is made to the vessel's logbook, but only in the singulan It will be essential fo r the
seiler to retain possession o f the vessel's deck and engine logbooks (and associated items such
as the bell book and oil record book), not only as a record o f events aboard the vessel when
under th e ir control but also as potential evidence fo r Insurance claims and legal disputes. So
that there can be no doubt about the sellers rights in this regard, the printed w ording might
usefully be amended to r e a d : . .and the vessels deck and engine logbooks shall be excluded
from the sale'.
To avoid an unnecessary argument at the tim e o f delivery, all items that the seller needs to
retain rather than sell with the vessel should be comprehensively listed and entered in Box 22.
If there is insufFìcient room in box 22 then the items should be included in a rider clause, with
typed vvording in the box itselí along the lines o f ‘see rider clause..
I 1.2 Unless otherwise agreed, any remaining bunkers, lubricating oils, stores, equipm ent
and spares used o r unused on board at the tim e o f delivery shall become the buyers’
property vvithout extra payment.
It is customary fo r all remaining unused bunkers, lubricating oils, stores, equipment and spare
parts, broached o r unbroached, to be delivered with the vessel, free o f additional charge to
the bu yerW e have already drawn attention to the importance o f establishing the approximate
quantity o f bunkers that will be handed over with the vessel, especially given the high cost o f
bunkers.The same goes fo r lubricating oils. It is a íutile and expensive exercise fo r a seller to
deliver a vessel w ith a large quantity o f bunkers and lubes fo r which they have, no doubt, paid a
substantiai sum but will receive no payment. It might thereíore be w o rth selling surpỉus bunkers

C h a p te r 10
and lubes on the open market betvveen the agreement to sell the vessel and Its delivery -
without, o f course, running onboard quantities so low that the ship is placed in operational
danger Hovveven local regulations at the demolition place may not allow the disposal o f bunkers
and/or lubricating oils, so disposals may have to take place at an earlier port, if initerested
purchasers can be identiíìed with suitable facilities available.
The seller should also take note o f the Standard provision that all spares on board are also
to be handed over to the buyer free o f charge. Expensive spare parts with a ready demand
such as spare tailshaữs, anchors o r cylinder liners/piston rings may attract a prem ium on the
open market o r be required aboard sister-ships. A seller wishing to remove spares fro m vessels
destined fo r demolition must identiíy the spares and e n terthe details in box 22.These items will
also have to be crated and removed before handover
The clause is silent regarding spares on order o r stored ashore, though it can probably be
interpreted as excluding those stores from the sale o f the ship. Speciíìc additional vvo^rding on
the point might be helpíui and provide clariíìcation (see clause 7.8 above).
I 1.3 The sellers shall, at the tim e o f delivery, hand to the buyers all plans, specificatÌ0'ns and
certificates, o r copies thereoí, as available and whether valid o r invalid.
This is another Standard procedure, although it may seem strange given that the ship is to be
demolished. However; items such as anchors and chains have a considerable resale value for
íu rth e r use in other ships, and certiíìcates may be needed fo r such purposes. Manuíacturers’
handbooks and certificates will enhance the onward sale o f items such as generators, cranes,
winches and derricks. Purthermore, certain pians may assist the buyer in planning the eíĩicient
dem olition o f the vessel.
A seller is not obliged to obtain plans and certiíìcates that are not actually in its possession, as
the clause oniy requires delivery o f those that are available.
I 1.4 The sellers are not required to replace such material, spare parts o r stores
including spare propellers, if any, which may be consumed ortaken out o f spare and used
as replacement prior to delivery, but all replaced spares shall be retained on board and
shail become the property o f the buyers.
This useíul provision is intended to protect sellers from being obliged to replace spare parts
used aboard the vessel betvveen the contract date and delivery.The buyer has the right t o retain
the replaced parts.These will presumably be w o rth little more than scrap value, but at least the
buyer wiỊ| be abie to satisíy themselves that the spares have genuinely replaced damaged parts,
rather than having been sold o ff by the seller in contravention o f clause I 1.2.
Clause 12: Light displacement tonnage (LDT)
The purchase price o f the vessel shali be based on the vessel's LDT in long tons as
stated in box 20 exciuding any permanent bailast.The vessels LDT shall be veriíìed by
the builders’ original trim and stabiiity booklet stamped and approved by class which shall
be on board the vessel and made available to the buyers' representatives at th e time o f
tendering the vessels notice o f readiness in accordance with Clause 7 .The seỉlers shall
also make available to the buyers an onginal o r copy o f the builders’ capacity plan with a
deadvveight scale and/or buiiders' letter.
The sellers shall make copies o f the above documents available to the buyers as soon as
possible after the signing o f this contract.
This is, o f course, a critical provision and goes to the heart o f the contract - the purchase
price o f the vessel. Despite the prevalence o f metric measurements, it stipulates that iight
deadvveight tonnage in long tons continues as the basis fo r ship valuations.The clause also
identifies the evidence required to verify the vessels light displacementtonnage. (See also
clause 7 .1 above.)

D em olishcon 2004
Clause 13: Encumbrances and mahtime liens etc
The sellers vvarrant that the Vessel, at the tim e o f delivery, is free from all charters,
encumbrances and maritime liens o r any other debts whatsoever Should any claims,
which have been incurred p rio r to the tim e o f delivery, be made against the Vessel, the
sellers hereby undertake to indemnify the buyers against all consequences o f such claims.
In the uníortunate event that unexpected encumbrances, maritime liens o r arrests occur after
the contract date and p rio rto delivery.the wording o f this clause provides that the buyer will be
indemnified by the seller (See clause 5 .1 (i) and 5 .1 (vii).)
Clause 14: Taxes, dues and charges etc
Any taxes, fees and expenses connected with the purchase o fth e vessel underthe buyers’
ovvnership shall be fo rth e buyers' account, and charges connected with the closing o f the
sellers' register shall be fo r the sellers' account.
This uncontroversial provision states that charges associated with the purchase are fo r the
account o f the buyer and those associated with the sale fo r the account o f the seller
Clause 15: Buyers’ watchmen
The sellers agree to allow the buyers to place the number o f watchmen stated in box 44
on board the vessel on its arrival at the place o f deiivery.
W h ilst on board the bessel, such vvatchmen shall be at the sole risk, liability and expense
o f the buyers and the buyers shall indemniíy the sellers against any claim fo r loss and/or
damages in this respect.The buyers' watchmen must not intetfere w ith the operation o f
the vessel and they shall sign the sellers’ letter o f indemnity p rio r to their embarkation.
Com m only knovvn as a ‘watchman clause’, this routine provision fo r the ship scrapping trade
is aimed at protecting the interests o f the buyer By placing watchmen and a beaching master
aboard a vessel upon its arrival at the point o f deiivery but before handoven the buyer can
assure themselves that the ships crew will be prevented from helping themselves to portable
items that under the term s o f the demolition contract should eventually belong to the buyen
This arrangement may also benefit the sellen as the presence on board o f watchmen may deter
crew members from taking the sellers property that has been speciíìcally excluded from the
sale o f the ship and its equipment under box 22.
The number o f watchmen perm itted to board the ship should be speciíied in box 44.They are
allowed aboard at the risk, liability and expense o f the buyer and must not interíere with the
vessels o p e ra tio n .T h e vessels p&l club w ill re q u ire each w a tc h m a n to sign a Standard in d e m n ity
form beíore boarding the vessel, just as fo r any passenger o r supercargo aboard a trading
merchant ship.
Clause 16: Purpose of sale
The vessel is sold fo r the purpose o f demolition and recycling only and the buyers
undertake that they will neither trade the vessel ío rth e ir own account nor seil the vessel
to a third party fo r any purpose other than demolition and recycling.The buyers shall
procure that this obligation is made a term o f any and every subsequent agreement fo r
the resale o f the vessel.
VVhen a vessel is sold on the dem olition market, the seller is entitled to expect it to be broken
up. If she is subsequently sold by the buyer fo r íu rth e rtra d in g she will become a potential rival
to any similar vessel that the seller may operate. Just as importantly, the seller will have missed
o u t on any enhanced secondhand market value. Despite all the above, onward sales fo r future
trading do occur D em olition traders and those corporations which specialise in purchasing
elderly vessels fo r demolition, pertiaps íilling them with one last cargo, and negotiating th e ir sale
to an eventual scrap purchasen may, if market íorces move strongly in their favoun be tem pted
to sell the vessel fo r íu rth e r trading rather than to a demolition buyer as originally intended.

C h a p te r 10
Most sellers thereíore insist upon an unequivocal undertaking in sales contracts obliging buyers
to break up their vessels. Clause 16 o f the Demolishcon provides such an undertakìng. It does
n o t perm it traders to fìx that one last positioning voyage, so it may require express amendment,
depending on the exact circumstances o f the proposed deal.
To remove all doubt about the post-sale history o f the vessel, the seller might insist that the
buyer eventually provide a legal statement - a demolition certificate - coníìrming that the vessel
has been demolished.
Clause 17: Safety and environment
Both the sellers and the buyers are familiar with the IMO Guideỉines and the sellers
shall use their best endeavours to give iníormation to the buyers in respect o f the
recommendations o f the code and the buyers likewise shall use their best endeavours to
comply w ith such recommendations.
The buyers shall ensure that after delivery the sellers' representatives are ailowed to visit
the ship recycling íacility to ascertain that safe and environmentally sound practices are
being conducted in respect o f the recycling o f the vessel.
Linked to the provisions o f clause 7.4 (see above) this is an entirely new provision for
sale and purchase ship scrapping contracts, but surely typical o f the type o f clause that
the industry will increasingly have to apply to íuture sales o f ships fo r demolition and
recycling.
BIMCO has sought to introduce a balance between, on the one hand, obligations on buyers and
sellers with which they are reasonably able to comply and, on the other hand, doing enough to
persuade outside bodies to leave the merchant shipping industry, through bodies such as IMO,
BIMCO, Intertanko and Intercargo, to manage its own affairs.
Ciause 17 contains three obligations:
1. both sellers and buyers are to íamiliarise themselves with the IMO Guidelines on Ship
Recyding and comply w ith its recommendations
2. the sellers will do their best to provide buyers with the iníormation specified in the
guidelines (see Clause 7.4)
3. aíter delivery o f the vessel the seliers representatives are to be allowed to visit the
recycling íacility to satisíy themselves that the vessel is being recycled in a saíe and
environmentally sound way.
These obligations are less onerous than they might have been, However,the draíting committee
o f BIMCO had to take into account tw o im portant íactors. Pirst, ships fo r demolition írequently
pass through the hands o f interrnediaries betvveen sellers and recycling facilities, hence a ship
ovvner selling a vessel for demoiition may not be aware o f its eventual destination. Second, many
ship recyclers operate from very basic íacilities and it is unrealistic to expect them to become
exemplars o f green recycling overnight. Although beaching ships fo r breaking is the focus o f
most environmenta! complaints, there are as yet few alternatives, so this m ethod is likely to
continue fo r some time.
W ere the environmental lobby to have all its demands iegally eníorced overnightthe maiority o f
the world's ship recyclers would go out o f business, resulting in a backlog o f unscrappabie ships
being laid up o r abandoned, thousands o f w orkers being laid off, and the Steel industnes o f the
Indian subcontinent starved o f raw material. In short, it would create environmental, economic
and social havoc.
Environmental and labour conditions applying to ship recycling have historically been poor,
but they are beginning to improve. Clause 17 thereíore represents a fair comprormse in
today's conditions.

Dem olishcon 2004
Clause 18: Exemptions
N either the sellers nor the buyers shall be under any liability if the vessel should
become an actual, constructive o r compromised total loss before delivery, o r if delivery
o f the vessel by the cancelling date should otherwise be prevented o r delayed due to
outbreak o f wan restraint o f government, princes, rulers o r people o f any nation o r the
United Nations, act o f God, o r any other cause whatsoever beyond the buyers' o r the
sellers' control.
This is a Standard shipping contract provision, which relieves either side from períormance in
the event o f one o r more specific causes:
• actual, constructive o r compromised total loss o f the ship;
• outbreak o f war;
• restraint o f government, princes, rulers, o r people o f any nation, o rth e United Nations;
• act o f God;
• any other cause whatsoever beyond the buyer's o r sellers control.
Q uite plainly, if the vessel becomes an actuai total loss - fo r example, if it sinks - the seller is
relieved o f th eir obligations.The provision also relieves the seller in the event o f a constructive
o r compromised total loss, although some would argue that if the vessel can be tow ed to its
delivery place, each side should do its best to compromise and maintain the contract, perhaps
by vvay o f an addendum to the M oA reílecting the changed circumstances.
The BIMCO commentary on the form advises that even though Demolishcon does not
expressly include [orce mqịeure, it nevertheless implies that the contract will be automatically
terminated in the event o f force mơjeure. Indeed, the very nature o f the sweeping-up provision
that both buyer and seller will be relieved o f liability to períornn fo r any other cause whatsoever
beyond th e ir control should mean just that.
Clause 19: Buyers’ deíault
Should the deposit not be paid in accordance with the provisions o f clause 3, the sellers
shall have the right to cancel this contract, and they shall be entitled to claim compensation
fo r th e ir losses and fo r all expenses incurred together w ith interest at LIBOR plus 3%
per annum.
Should the purchase price not be paid in the manner provided fo r in this contract, in
which case the am ount deposited together with interest earned, if any, shall be forfeited
to the sellers. ỉf the deposit does not cover the sellers’ losses, they shall be entitled to
claim íurthe r compensation fo r their losses and fo r all expenses together with interest at
LIBOR plus 3% per annum.
Should the buyer fail to provide the agreed deposit o r the balance o f the purchase price, the
seller has the right to cancel the contract and to retain any deposit plus any interest th a t might
have accrued.
Clause 20: Sellers’ deíault
Should the sellers fail to give notice o f readiness in accordance with clause 7 o r fail to
execute a legal transíer o r to deliver the vessel with everything belonging to ít by the
canceỉling date, the buyers shall have the right to cancel the contract, in which case the
deposit in full shall be returned to the buyers together w ith interest at LIBOR plus 3%
per annum. VVhether o r not the buyers cancel this contract the sellers shall make due
compensation to the buyers fo r any loss and fo r all expenses incurred together w ith
interest by their failure to give notice o f readiness, to execute a legal transíer o r to deliver
the vessel with everything belonging to it by the cancelling date, if such failure is due to
the proven negligence o f the sellers.

C h a p te r 10
lf, by proven negligence and/or fo r reasons that fall outside the scope o f the exem ption
provisions (clause 18), the seller fails to give notice o f readiness, o r fails to effect a legai transfer
o f the vessel o r to deliver it by the cancelling date, the buyer has the right to cancel the contract
and to retain any deposit.
A common provision o f both clauses 19 and 20 is that, in the event that the deposit interest
is not suffìcient to cover the losses, the innocent party shall be entitled to claim compensation.
They will also be entitled to interest on that compensation at London Inter-Bank Offered Rates
(LIBOR) plus 3%.
Clause 2 1: Dispute resolution clause
Here the reader should reíer to the commentary relating to dispute resolution procedures
found under the clause 16 heading o f the Saleíorm analysis in chapter 6.
The Demolishcon provisions go somewhat íurthen howeven N o t only do they provide for
arbitration in London, N ew York o r elsevvhere in a place chosen by the parties, they also provide
for the mediation o f any disputes. The London Maritime Arbitrators Association (LM AA)
maintains a panel o f trained mediators among its arbitrators and a set o f mediation term s (see
www.lmaa.org.uk).
Clause 22: Notices
2 2 ,1 Any notice to be given by either party to the other party shall be in vvriting and may be
sent by fax, email, registered o r recorded mail o r by personal Service.
This clause sets out the official lines o f communication betvveen the parties.
10.4 A D D IT IO N A L R ID ER CLAUSES
As with most contracts, there will probably be additional issues that need to be íormalised and
recorded. Each additional clause should be numbered, preíerably in direct continuity with the
printed clauses, and the numbers o f the additional cìauses entered and recorded in Box 48 o f
Part I o f the Demolishcon. W e set out below tw o possible additional clauses.
Privacy
This sale and all its term s and conditions are to be kept strictly private and confidential.
If, despite this, the sale details are disclosed, the responsible party shall be liable foi' any
proven damages suíĩered by the innocent party due to the disclosure.
The purpose o f such a clause is twofold.The buyer w ho may be an intermediary trader, is free
to negotiate the vessels onward sale on the open market w ithout potential purchasers being
aware o fth e price paid fo rth e vessel. Moreoventhe eventual buver will be able to negotiatethe
o n w a rd sale o f scrap m a te ria l t o Steel mills fro m a sim ilar p o s itio n o f strength.
Second, the sellen w ho may have other similar ships to dispose of, will be able to trade those
vessels uníettered by the market history o f their recent transactions.
Punnel Marking and Name
Buyers to remove a vessel’s name and íunnel marking as soon as possible aíter delivery
fo r breaking up.
Most sellers prefer any identifying insignia, íunnel markings and other visible signs o f ownership
to be removed as soon as possible from ships that are being broken up.
10.5 LETTERS OF C R E D IT
A t the tim e that the Salescrap memorandum was first prepared and released on to the sale and
purchase demolition market back in 1987, it was common practice fo r buyers to purchase ships

Dem olíshcon 2004
by means o f irrevocable letters o f credit. Such means o f payment is now unusual, and payment is
usually made by cash transactions as set out above in clause 4 o f the Demolishcon.
In the event that parties to a sale and purchase demolition transaction do agree to letter
o f credit terms, the provisions o f clause 4 o f the Demolishcon will need to be replaced o r
supplemented by a rider clause setting out the precise terrns o f the letter o f credit transaction.
For a template one could use an amended version o f the provisions o f clause 6 o f the Salescrap,
which read as foilows:
Letter o f Credit
The buyers shall establish by a fully detailed cable o rte le x a confirnned irrevocable at sight
letter o f credit in a form satisíactory to the sellers fo r the full amount o f the purchase
price latest vvith in ............banking days from the date o f the contract.
Such letter o f credit shall be established by the buyers with a íìrst class bank ( .............
Bank) hereinatter reíerred to as the Opening Bank under advice to the bank nominated
by the Sellers ( ............Bank) hereinaữer referred to as the Advising Bank.
Such letter o f credit shall contain a provision that if the Opening Bank has not within
............ banking days conĩirm ed by pre-arranged telex, cable, fax o r email message to
the Advising Bank that the vessels notice o f readiness fo r delivery has been tendered,the
full amount o f the Letter o f Credit shall be released to the sellers immediately upon the
sellers’ presentation to the Advising Bank o f a copy o f the notice o f readiness fo r delivery
together w ith the documents listed in clause 7.
All bank charges in connection with the Coníìrmed Irrevocable Letter o f Credit shall be
ío rth e buyers’ account except fo rth e Advising Banks negotiating charges.
The expiry date o f the letter o f credit shall not be earlierthan ............
The letter o f credit alternative occurs vvhere banks are selected and nominated by each o f the
parties.The buyers bank - the 'opening bank' - and the sellers bank - the 'advising bank’ are
appointed, instructed and entrusted with the financial arrangements o f the transaction.
A letter o f credit arranges fo r the buyers funds with one bank to be transíerred to the sellers
bank and held on account on behalf o f the buyer beíore being automaticaliy released into
the sellers bank account once the seller has satisíactorily tendered certain documents to their
bank in accordance w ith the letter o f credit provisions. The letter o f credit used fo r a ship
sale transaction should speciíy exactiy the requirements that are to be met beíore funds are
released to the sellerThose requirements can be taken w ord fo r w ord from the MoA.
A fte r agreement has been reached on the sale and purchase o f the ship destined fo r scrapping,
the buyers bank establishes w ith the sellers bank a letter o f credit under acceptable term s and
conditions.The vvording should be checked and approved by both the seller and their banken
The tim ing o f the operation to establish a letter o f credit has to be careíully co-ordinated
with the handover o f the vessel. Once the letter o f credit has been approved and established,
arrangements have to be put in place to ensure letter o f credit funds are automatically released
within a speciíìed tim e o f the readiness o f the vessel fo r delivery to the buyen
For peace o f mind, only íìrst-class experienced banks should be employed fo r this process.
M o re o ve r, th e se lle rs ba n k m u st be c o n íid e n t o f th e s e cu rity and th e u ndenA /ritten value o f th e
document.The names and addresses o f each bank should be recorded in the MoA.
A buyer using a letter o f credit alternative will not wish to part with funds until they are in
possession o f the ship, whereas the seller will not wish to release their hold on the ship until
payment has been received. Payment and handover arrangements need to be careíully co-
ordinated and handled efficiently and simultaneously.
Ship Sale and Purchasing 15 I

C h a p te r 10
In the same way as fo r a cash payment, the trigger mechanism fo r release o f letter o f credit
íunds is the tendering o f the notice o f readiness o f the vessel fo r its delivery to the buyer
in accordance with the M oA terms and conditions. The list o f documents in clause 5 o f the
Demolishcon (which can, o f course, be varied as agreed between the parties) can be used by
the s e lle rto present to the advising o r sellers bankThe latter, once it has received coníìrmation
th at the notice o f readiness and accompanying documents as per clause 7 o f the Demolishcon
have been properly received by the opening o r buyers bank, wili then release to the seller the
íull am ount o f the letter o f credit in payment ío rth e vessel.
To th at release may be added the sum lodged in the deposit account, o r the parties may arrange
th at the proceeds o f the deposit account wili be returned to the buyer once a ietter o f credit
ío r the íull 100% o f the purchase price is released to the sellen
It can be seen that the Demolishcon fo rm o f demolition/recycling contract represents a viable

attem pt to cover in printed íorm at all the nnajor elements required in such a transaction.The
parties are free to include additionai agreement in the form o f speciíìc vvording in the manner
o f side/rider clauses o r addenda, which can be attached to the main body o f the contract and
reíerred to therein. It is likely that many o f those involved in íuture scrap deals vvill discover the
beneíìt o f this set o f clauses and be able to rely on the printed te x t to a large extent, as already
happens with the Saleíorm and the Nipponsale fo rth e secondhand market.

Chapter I I
Pinance, Nevvbuildings and Insurance
Palm Jumeiroh Isíand

Nasơ imơge o f the mơn-mơde islands offD u bơ i. Construction started in 2001.
C h a p te r I I
ll.l IN T R O D U C T IO N
The purchase o f a ship is a m a jo r Capital tra n s a ctio n and a ltho u gh it is q u ite ra re fo r s&p b ro k e rs
to become directly involved in arranging the íinance, it is im portant to understand how their
principals arrange the necessary íìnance.
In essence, the buyer either uses his own money o r uses someone else’s - o r a m ixture o f the
tw o.To express that in more íormal terms, a ship is purchased either froin the buyers own
resources o rth e buyer seeks a source o f external finance.
I 1.2 P U N D IN G T H E PU R C HA SE FROM O W N RESOURCES

It is rare fo r a ship o f any reasonable size to be bought entirely from the buyers own resources.
Some ship recyclers are the exception because sale o f the scrap metal can generate the cash
flow necessary to purchase the next ship fo r breaking and so on. Similarly, a buyer may have sold
suíTicient older ships o r other assets to provide cash fo r a new acquisition.
It might be thought that a big Corporation would have no ditĩìculty in buying ships from its ovvn
resources, bưt this rarely seems to be tru e . A commercial company needs Capital in order to
o p e ra te . In the case o f a lim ite d lia b ility c o m p a n y th is Capital com es fr o m the sale o f shares in
the company, so when a limited company uses its own funds to purchase a ship, it is actually
using its shareholders’ money.
Sometimes, a company will arrange fo r additional shares to be created and placed on the stock
market in o rd e rto increase the cotnpanys Capital base to enable the fleet to be expanded.
For all practical purposes, hovvever; a company using Capital raised from shares can be looked
upon as using its own financial resources. Even fo r major companies this source o f funding is
often the exception rather than the rule.
VVhether the ship to be purchased is a newbuilding o r a secondhand vessel, the buyer may well
provide only a portion o f the purchase price.the percentage o f which wili depend on the details
o f th e tra n s a c tio n and th e State o f th e m a rk e t.T h e re m a in d e r o f th e m o n e y w ill be raised by
other means, such as a loan.
I 1.3 BORROW ED M O NEY

The majority o f ships, w hether newly built o r secondhand, are purchased w ith loans
speciíìcally arranged ío rth a t purpose.The provision o f those funds is a specialised sector o f the
íìnancial market.
Ship purchasers are keenly avvare o f the benefits o f leveraging th e ir investment For exampie,
by reducing the amount o f equity invested in a vessel purchase, the ship ow ner’s return on
equity from the transaction is greatly increased. Prudent purchasers will bearthis in mind while
taking account o f the ability o f the vessel to repay the loan from its earnings under a variety o f
market conditions.This in itselí provides a natural cap on the percentage o f íìnancing a purchaser
shouid seek.
Traditional advance ratios in the bank market range from, say, 50% fo r olden spot-trading vesseis
t o 9 0% o r m o re fo r m o d e rn to n n a g e w ith secure lo n g -te rm e m p lo yiT ie n t w ith s tro n g c h a rte re rs .
Banks consider advance ratios in the context o f the current market cycle. If vessei values are
at historically high levels a bank will normally seek to reduce the advance ratio. Alternatively, if
vessel values are iow, a higher advance ratio may be possible.
Those providing the ship íìnance will aiso closely examine the security o f a vessels employment.
A ship trading on the spot freight market voyage by voyage, tim e charter trip by trip, will be
exposed to the will o f the íreight market. O v e rth e years, this has proved to be both capricious
and fickle. Hovveven a bank willing to advance funds on a very poor íreight market may see

Pinance, N ew buildings and Insurance
the beneíìt o f leaving an experienced ship ow ner to operate the vessel free o f long-term fixed
employment at low rates.The potential o f such a market may outweigh the dovvnside risk.
On the oth er hand, the security of'locking-in' high-rate, long-term tim e charter employment at
the peak o f a strong market may prove illusory if the tim e charterer falls into íìnancial diíĩiculty
and is unable to pay hire.
The principal providers o f loans fo r ship purchases are, o f course, the commercial banks - those
that do day-to-day business w ith the general public. Such banks often have speciíìc departments
for maritime business.Those banks provide by far the majority o f the $50bn estimated to be
spent annually on the purchase o f newbuỉlding and secondhand vessels.
The num ber o f banks active in ship íìnance varies over tim e fo r several reasons. It is a market
as changeable as the shipping industry itselí and some o f the well-known names operating in
ship íìnance when the fìrst edition o f Sơle and Purchase was published in 1981 no longer exist.
Sometimes they are replaced by new banks staíĩed w ith experienced personnel w ho have
moved írorn the ir original desks.
A major driving force behind change in recent years has been merger and acquisition activity
in the banking market, resulting in fewer players overall. Banking is still íragmented in many
countries and this reduction in the number o f íìnancial institutions prepared to lend to the
shipping industry seems likely to continue.
O th er causes fo r the reduction in the number o f lending banks include withdrawal from the
shipping market due to bad debts, the allocation o f íìnancial resources to more profítable
business areas and a switch to investment banking ratherthan provision o f debt.
This attitude is uníortunate ío rth e shipping industry. W hen the shipping íreight market is high,
freights soan Equally when íreights are poonthey may not even pay vessel running costs, leading
to ships, even nevvbuildings, having to be laid up.Those with long experience o f the shipping
market will have knovvn both extremes and many in between. Naturally, a bank that was
encouraged to lend in good times with no conception o f bad times may develop a jaundiced
view o f shipping when debts are not repaid. Nevertheless, shipping has been around fo r several
thousand years and will continue fo r the íoreseeable future, so somebody entering the business
today should still have a career in shipping 40 years from now. Steady and sound investment has
paid dividends in the past and will bring its own revvards in the future.
Howeven once a bank has decided to w ithdraw from ship finance its loan portíolio is
normally advertised fo r sale on the banking market. Most loan agreements allow the loan to
be transíerred to another lender subject to the approval o f the borrovver; which cannot be
withheld unreasonably. in such instances it is normal fo rth e sellerto o ffe rth e ir portíolio fo r sale
at a discount to entice a purchaser.
Sometimes banks increase their lending to the shipping industry, either because they want to
expand geographically in niche areas o r because they believe that ship finance will produce a
better return than other areas o f corporate lending.
Naturally, when shipping markets are doing well banks are more attracted to ship finance, as the
cashflow generated by a strong íreight market and the security cover provided by high vessel
values make shipping deals appear attractive. Conversely, when the íreight market takes a turn
ío rth e worse, cashflows become tight and security cover marginal.That is the trigger fo r certain
banks - otten the late entrants - to review their lending strategy and perhaps to w ithdraw íronn
the market.
The overall effect o f pouring money into already over-heated shipping markets, then abruptly
turning o ffth e taps when times prove more testing, is to increase volatility. Ship owners thereíore
should select th eir lenders with as much care as banks use to choose their clients.They should
check that the lender is stafFed by experienced personnel w ho understand the vagaries o f the
shipping industry and will not panic in weak market conditions. In short, ship owners should

C h a p te r i I
satisíy themselves that the bank is in the market fo r the long haul and is prepared fo r th e odd
bout o f choppy weathen
Portunately, a good number o f banks remain committed to the industry, several o f which finance
the industry on a global basis, either from a netvvork o f oíĩices in the main shipping centres or
fro m a Central base. Others c o n c e n tra te o n le n d in g to ship o w n e rs in a m o re lim ite d g e o g ra p h ic
area, usualiy one o f those main shipping centres.
il.4 B A S E L II
Maritime businesses considering obtaining íìnance from banks, and those banks lending to the
shipping industry, need to be aware o f ‘Basel ir. Basel II is the offspring o f Basel I - the Basel
Accord o f 1988 - which regulates the allocation o f Capital by banks and thereíore afifects the
pricing o f loans.The technicalities are mainly o f concern to banking directors and politicians, but
fo r readers o f this book the point to note is that Basel II obliges banks to re-examine th e ir loan
portfolio and to reassess the risk weightings o f their lending.This is expected to have an effect
on shipping loans.
The Basel Accord o f 1988 has its origins in the liquidation o f Bank Herstatt in 1974.The German
bank's collapse prom pted the I I counthes that make up the GIO - Belgium, Canada, Prance,
Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, United Kingdom and USA and
Luxembourg - to form a standing committee under the auspices o f the Bank fo r International
Settlements.This became knovvn as the Basel Com m ittee on Banking Supervision, comprising
re pre se nta tive s fro m Central banks and re g u la to ry bodies.
In 1988 the Basel Com m ittee proposed a set o f minimum Capital requirements fo r banks, which
subsequentiy became law in G 10 countries and vvhich has become knovvn as Basel I.
Five years laten the Basel Com m ittee started working on Basel II, which lays down rules fo r
minimum Capital requirements, supervisory revievv and market discipline. It came into effect
in 2007.
Banks handling shipping ioans need to take Basel II into account vvhen making decisions on
minimum Capital requirements and will have reviewed their loans structure before Basel II came
into force. Ship owners wiil be concerned that the availability o f funding does not reduce and
that the cost o f borrowing does not increase as a result.
The first version o f Basel III was published by the Basei Com m ittee on Banking Supervision in
late 2009, giving banks approximately three years to satisíy all requirements. Largely in response
to the credit crisis, banks are required to maintain proper leverage ratios and meet certain
Capital requirements. Howeven changes from I April 2013 extended implementation untii 31
March 2 0 18 and again extended to 3 1 March 2 0 19,
I 1.5 M O N E Y L A U N D E R IN G
Shipping loans are also affected by recent laws aimed at cuĩÌDÌng money laundering.The European
Union has issued directives and individual national legislatures have enacted laws on the subject,
such as the UK's Proceeds o f Crime A ct 2002. Shipbrokers and all w ho are associated w ith the
transíer o f large sums o f money have found themselves subject to much greater scrutiny.
There is thereíore a strong onus on bankers to know their customers or, íailing th a t,to find out
about them in detail. Minimum requirements vary slightly from jurisdiction to jurisdiction, but
usually include the need to see:
• the passports o f at least tw o directors o f the borrower;

• p ro o f o f the directors’ addresses, such as utility bills and tax statements;
• passports o f all signatories and p rooí o f their addresses;
• p ro o f o f ultimate beneficial ownership o f the borrow er

Banks used ío rth e lodging o f deposits (see,for example.clause 2 o fth e Saleíorm 1993) may also
be obliged to contact national authorities and make checks on buyers and/or sellers, especially
single-purpose companies o r companies‘to be nominated’.The checks will be applied regardless
o f any evidence o r suspicion o f money laundering.The bank checks may take longer than the
three banking days traditionally perm itted fo r a b u ye rto establish a deposit fo rth e purchase o f
a secondhand vessel into a join t deposit account, so this needs to be taken into account when
íormulating the sale and purchase transaction.
Shipbrokers, lavvyers and all concerned in the s&p operation have a duty to express concerns if
they suspect an offence is being committed. Pailure to do so is a criminal oíĩence.
These rules affect more than just s&p deals originating in Europe o r the USA. Transactions
between non-residents must be reported by the brokers involved, because national
governments are anxious to prevent money laundering across borders. Even ship sales that fail
to be completed come vvithin the rules.
There are, however, ways round the problem. Most s&p deals are conducted in London o r via
brokers based in the UK, where the National Criminal Intelligence Service is reported to be
ready to fast-track oíĩìcial clearance o f parties to s&p transactions. O th e r countries’ intelligence
services may be equally helpful.
First,the lenderw ill checkthe borrow er’s íìnancial status, by,forexam ple,studyingthe borrower's
published accounts, Consulting w ith experts on the stock market, checking vvith credit reíerence
agencies and Consulting iníormed market sources. The lender wịll certainly want to see the
borrower's cash flo w íorecast, often reíerred to as a business plan.This will provide general detail
about the borrower's vvorking Capital, earnings from other sources and íìnancial commitnnents;
in particular; ít will set out the anticipated earnings o f the ship in question o verthe period o f the
loan.
Some form o f collateral (security fo r payment) will be demanded as protection should the loan
not be repaid.The principal com ío rt the lender seeks is reassurance that the borrow er will be
able to repay the loan. Usually the lender insists that the b orrow er pays a percentage o f the
purchase price from the ir own resources.
W hen íuture market prospects are uncertain, the loan may be provided only if a long-term
charter is arranged, and this can make fo r complex negotiations.The loan is offered subject to
the charter, while the charter has to be negotiated subject to concluding the purchase o f the
ship, and the s&p negotiations have to be subịect to the charter and subject to the loan. In
extrem e cases, the lender may demand a proportion o f the freight being directly assigned so
that loan repayments are more certain. Arrangements like these were common in the middle o f
the 20th century.The market vveakened severely, leaving the ovvners with inadequate cash flow
to operate eíTiciently.
11.6 LO A N D O C U M E N T A T IO N
The key document detailing the agreed term s and conditions under vvhich the bank will lend to
the b orro w e r is the loan agreement, sometimes referred to as the credit agreement o r íacility
agreement.This document includes details o f how the loan will be funded, drawn-down, repaid,
prepaid and so on, as well as the obligations o f the lender and borrowen
Once bank and borrovver have negotiated and reached agreement on the terms o f a loan, the
bank usually employs a specialist lawyer to draw up the loan agreement, setting out in full its
term s and conditions. This bulky docum ent will be extremely detailed, extending perhaps to
m ore than 50 pages and covering all foreseeable eventualities. Although some borrowers may
feel com petent to read, understand and check all that it contains, others may preíer to employ
th e ir own law yerto scrutinise the docum ent and to correct and approve it as necessary beíore
it is signed by both parties to the agreement.

C h a p te r i I
Normally, several copies o f the loan agreement are produced and signed, one o r m ore being
retained by each party fo r ease o f reíerence during the currency o f the ioan.
The most widely utilised legal code ío rth e documentation used in ship íìnance transactions is
English law, regardless o f the domicile o f the borrow er o rth e lender English law has been the
bedrock o f international shipping transactions since the 18th century and has been reíìned over
the centuries. As a result London boasts numerous practitioners and heavyvveight law firm s that
maintain specialist departments dealing with ship finance. O ther legal codes used from tim e to
tim e include Norwegian, Dutch and u s law. Prench, German and other law is used w here there
is a local reason to do so.
One o f the most im portant sections o f the loan agreement, and o f any associated guarantee,
concerns covenants, o r undertakings.These are usually wide-ranging and include vessel covenants
(how the borrow er is expected to maintain the vessel); Insurance covenants (how the vessel
is to be insured); general covenants (the borrow er agrees to remain solvent, avoid illegal acts,
reírain fronn m ergerand acquisition activities) and íìnancial covenants (íìnancial gearing, minimum
liquidity and so on).
The loan agreement will aimost certainly contain a minimum value covenant (the M V Q .T h is
will require that at all times the market value o f the vessel is to exceed the am ount o f the
o u ts ta n d in g loan by an agreed percentage - betvveen 120% and 150% is S ta nd ard.T he agreed
percentage o f the MVC will be set following negotiation between borrovver and lender and
should take into account the likely movement o f secondhand values o f this type o f vessel. If the
ship ow ner is in breach o f the provisions o f the MVC there are generally tw o options: either
provide additional security o r prepay part o f the loan. Either way, the sum needs to be enough
to bring the MVC percentage back into line w ith the original agreement.
The MVC tends to be breached only when there is a poor íreight market, because vessel
values and market earnings are linked, and this is when the ship ovvner may experience cash-
flo w probiems. This is when it is im portant to have chosen a lender that is experienced in
ship íinance and that understands the cyclical nature o f the shipping market and the need to
conserve cash in a slump. Dependent on market prospects, such a bank may be inclined to
be Aexible.
The MVC in the ioan agreement will determine how the market valuation o f a vessel is
determined. Following diíTiculties in the I990s arising from valuations produced in the name o f
ship owners, which left banks unable to take action against the valuers concerned, ship fìnance
banks now usually insist on valuations and on having these addressed directly to the bank -
normally at the borrow er’s cost - at least once a yean Sometimes one valuation will be provided
by a valuer acting on behalf o f the bank and another by the ship ovvners valuer; the tw o íigures
are then averaged to provide a fìnal valuation,
The valuation o f merchant ships is a combination o f art, Science and experience. Given that
there is considerable w o rk involved in maintaining the databases compiled by research and by
s&p brokers, the vaiuatíon o f ships can be costly. Automated valuation systems are thereíore
being introduced that provide an almost real-time valuation o f assets taking into account. market
Auctuations in the value o f Standard vessel types.These new systems are generaily both accurate
and reasonably priced.
Merchant shipping is exciting and can be highly profitable. Howeven it is also a specuiative
and risk-laden industry. Bankers are naturaily reluctant to assist ventures vvithout some form
o f security and o f course do expect a return on their investment. Borrowers are expected
to practise prudent financial housekeeping. The bank will also probably insist on an adequate
system o f securities.
The loan agreement will speciíy a number o f documents upon which the lender wiil rely fo r
security fo r the loan. For a secured ship íìnance transaction these will usually include as a
minimum a mortgage, an assignment o f earnings and an assignment o f insurances (see belovv).

Purthermore, depending on the term s o f the transaction the bank may require a personal
guarantee from the borrovver, o r a corporate guarantee from the holding company o f a
ship owning group o r from One o r more other vessel-ovvning company(ies) within the
ship ovvning group.
11.7 MORTGAGES
Unless a bank is lending to a borrovver on an unsecured basis - and unsecured lending is
reserved fo r only the very largest and strongest corporations - it will wish to take a mortgage
on the vessels to be íìnanced. Usually the bank will have a list o f preíerred vessel registries. Banks
generally preíer registries that are based in jurisdictions where maritime law is vvell-established,
tested and effective, and where the registry has a respectable record and few casualties.
More than one mortgage can be registered against a vessel. It is not uncommon fo r lenders to
perm it the registration o f second, o r even third and íourth, mortgages against a vessel.These
mortgages can then be used fo r the crass-collateralisation o f security fo r transactions with
the same lender on w ith the consent o f the íìrst mortgage lender and upon the signing o f an
acceptable inter-creditor agreement, fo r securing transactions with other lenders.This can be a
useful íinancial to ol where a ship ow ner has a signitìcant amount o f equity invested in one ship,
perhaps due to extensive amortisation o f a connected loan, and wishes to release this equity to
fund the acquisition o f othertonnage.
The preparation o f a mortgage docum ent is yet another potential task fo r shipping lavvyers.
I 1.8 R EC O R D IN G T H E M ORTG AG E
The loan having been negotiated, agreed and documented, the mortgage now needs to be
recorded w ith the registrar o f shipping o f the flag authority. This oíĩicially records a banks
interest in the vessel, and ensures the bank is able to protect its interests in the event o f a ship
collision, o r vvhere a third party claims against the ship o rtrie s to arrest it.This financial interest
has to be clearly displayed on the ship itself, so a framed copy o f the notice o f mortgage must
be placed in a prominent position such as on a bulkhead outside the masters day-cabin, so as to
be readiiy visible to all shipboard visitors.
The original mortgage certificate is retained by the mortgagee.that is the bank, and when a loan
is finally repaid, together w ith payment o f interest and m inor ancillary expenses incurred, the
mortgage is considered to be redeemed.The mortgagee should then execute a discharge o r
release o f the mortgage, in the manner required by the flag authorities.
11.9 A S S IG N M E N T OF E A R N IN G S
Unless the borrow e r is already a substantial ship ovvner, any bank considering iending funds
against the purchase o f a merchant ship is likely to insist on chartering security, such as would
result from a medium o r long-term employment contract with a reputable and established
charteren There are certain well-established ship owners around who, when economic
circumstances are right, are able to persuade first-class charterers such as major oil companies
to provide a long-term charterparty tailored to a tankers loan period of, perhaps, eight years.
A rn e d with this contract, the ship ow ner is then able to obtain sufficient collateral w ith a bank
to íìnance a nevvbuilding project. A fte r eight years, if all goes w ell,the loan is paid, the charter
ends, and the ovvner is left with an eight-year-old vessel, with a long future either on the spot
rriErket o r fo r another period charter
Ths íorm o f security may take the form o f the assignment o f hire and íreights earned by the
vessel or, indeed, earned by another o f the borrow er’s vessels. A special bank account may be
opened on behalí o f the borrow e r with the lending bank, through which all hires and freights
will have to be routed.

C h a p te r I I
Unless holding equity in the venture, a bank does not normally expect to gain from any p ro fit
a shipowner may obtain. Its prime concern is to secure adequate cover fo r the risk. A m ajor
p art o f such cover is charter security and banks are mostly content to aim fo r steady long-term
security vvhere it is obtainable, ratherthan gamble on future íreight market trends. Norm ally an
aspiring ship ow ner will be required to arrange some solid medium o r long-ternn employment
fo r his ship before a bank will lend money.
11.10 IN C E N T IV E S T O BORROW ERS A N D LENDERS
11. 10 . 1 G overnm ent schemes

Shipbuilding has been a staple heavy industry in many countries. During the first half o f the 20th
century.the United Kingdom was am ongthe w orld leaders in shipbuilding, but few yards remain
in the country. Asian countries with lower wage costs now dominate the industry, and South
Korea produces more newbuilding tonnage than any European country achieved at its peak.
Howeven shipbuilding capacity in China currently exceeds even South Korea's.
As European countries began to feel the íorces o f competition th e ir governments often tried to
find ways o f subsidising the ir national yards.The economic logic was that subsidising shipbuilding
workers' vvages was preíerable to paying beneíits to a vast army o f unemployed, and having
ships to sell contributed to a healthy trade balance.
Diíĩerent schemes have been tried, the simplest being State ownership o f shipbuilding in
which selling prices vvere dictated by vvhat the market would bear regardless o f the actual cost
o f production.
A more subtle method o f attracting foreign buyers when interest rates were high was to
provide soft loans. A t one tim e these were offered through the shipbuilders themselves, which
received recompense directly o r indirectly from the country's Central bank Com petition in this
area became so intense that in the I960s it was possible to obtain 100% íinance w ith about
80% o f this at interest rates vvhich bore no resemblance to the money market at the time: such
schemes often included a lengthy grace period beíore the íìrst repayment fell due.
The Organisation fo r Economic Co-operation and Development (O ECD) then stepped in and
sucxeeded in getting a degree o f international agreement as to the maxịmum proportion o f the
purchase price to be lent: 80% over a maximum period o f 8/2 years and a minimum rate o f
interest o f 8%.
The European Union has taken sterner measures against dumping and anti-competitive
measures, and largely íorbids what it sees as uníair subsidy regimes.
Nevertheless, more modest measures to encourage ship owning are still possible, mostly
achieved through tax incentives. The simplest is the tonnage tax, which was introduced in
Greece in 1990. O th e r European countries íollovved and today tonnage tax is applied in Belgium,
Cyprus, Denmark, Pinland, Prance, Germany, Ireland, Italy, Malta, the Netherlands, N oiây, Poland,
Spain, Sweden and the UK. Ship ovvners based in the C ũuntnes concerned can enjoy a lovver
and more predictable level o f tax than other sectors o f industry.The UK tonnage tax scheme
requires the ovvnerto train a minimum number o f seaíarers each year
Many other schemes have been tried in the past. For example, Germany and N o w a y targeted
self-employed proíessionais by agreeingto a much lower taxation rate fo r funds they invested in
ships u n de rth e national flag. Known as KS o r KG schemes, they resulted in many ships in those
countries being ovvned by groups o f doctors and dentists.These schemes were withdrawn in
1998 b u t th e y stim u la te d a d ra m a tic g ro w th in th e ovvnership o f small to [Tiedium-size vessels in
Germany duringthe I980s and early I990s.
There are also incentives to lenders, vvhose main w o rry is the borrow er becoming unable, o r
being unvvilling, to continue repaying the loan.The lenders concerns would intensiíy should the

s&p market be depressed, because repossessing and selling the ship might fail to yield enough
to coverth e outstanding debt.
W here cash-flow problems were behind a ship owner's inability to pay, it would probably also
result in maintenance o fth e ship being neglected, íurther reducing its resale value.
More serious still would be the case vvhere the borrow er’s country is politically unstable. A
sudden change in government might make repayment o f the loan impossible; indeed, the
deposed government might even have been the ow ner o f the ship. N o t only will it be impossible
to recoverthe loan, bưt recovery o f the ship is also likely to be out o f the question.
Lenders can insure themselves against such eventualities and cover may be olĩered by
government agencies o r private insurers underwritten by the governm ent In the United
Kingdom.this is a íunction o f the Export Credits Guarantee Department.
Many such incentive schemes have passed into history as a result o f the general lovvering o f
interest rates in most developed countries, but the w orld o f íìnance can be unpredictable, so
incentives o r subsidies may vvell return in due course.
11.10.2 Leasing
Leasing is not much in demand by entrepreneurial ship ovvners, w ho always like to have an asset
to sell if the market makes that an attractive option. Some corporate ship ovvners, even m ajor
Container operators, preíer not to raise the Capital at all and leave this to a íìnance house.There
are tax advantages to be gained by the íinanciers, but the advantage to the operator is that
there is no need to raise and Service vast amounts o f Capital; instead, the fleet is paid fo r out
o f revenue.This system requires a bareboat charter to be drawn up. Under such charters, the
name and even the flag o f the ship may be changed so that operators are not bound to lease
from a financier in th eir own country.
Such transactions are almost invariably in the newbuilding market and the s&p brokers w ho
become involved in them tend to be specialists. Under a bareboat charterthe o w n e ro rfìn a n cie r
simply provides the shíp; the charterer o r operator provides everything else, including the crew,
and behaves in every way as if it is the actual owner.The agreement contains clauses to protect
the ovvner, such as making certain that all insurances are kept up to date and at adequate levels.
A t the end o f the contract period there are several options. In some cases the ship becomes
the p roperty o f the charterer on paying a fìnal amount, sometimes term ed lease purchase,
vvhich involves a contract rather like a domestic hire-purchase agreement
I 1.10.3 B areboat charteríng

Bareboat chartering is essentially similar to operating leases, but often it has more Aexibility
and may include a purchase option. Also known as chơrtering by demise o r demise chartering,
bareboat chartering is attractive to groups o f individual o r corporate investors vvho, wi1;h little
knovvledge of, o r interest in, the shìpping industry, are nevertheless persuaded to invest in
tonnage vvhich is then let out on period bareboat employment, usually fo r several years at a
tim e .to reliable sub-owners.
In return fo r modest hire payments, the sub-owner (bareboat charterer) takes on the
responsibility o f operating the vessel as its own - providing its crew, running the vessel and
seeking business. It retains all proceeds from subcharters and generally operates the vessel as it
wishes, so long as this is vvithin the limits o f the bareboat charter conditions.
The technical difference between demise and bareboat chartering is that under a demise
charter the actual ow ner may be required to employ the masten oíĩìcers and crew and/or
arrange hull Insurance, whereas under a bareboat charterthe bareboat operator undertakes all
running and fìxing operations.

C h a p te r 11
VVhether bareboat o r demise, there will almost certainly be an obligation to return th e vessel
to its original ow ner in the same condition as on delivery, fair w ear and tear excepted. In some
cases, bareboat charters are designed to run fo r most o f the life o f a ship and the returned
vessel at the end o f an extensive period o f bareboat operations may exhibit rather m ore than
fair wear and tear In that case, demolition may be the only realistic option.
The system does, howeven give a potential ship ow ner with modest means the o p p o rtu n ity
to take a full part in the shipping market, while providing relatively little in the way o f upíront
deposits. It also gives long-term investors the opportunity to secure a reasonable return on
Capital w ith th e eventual re tu rn , su b je ct to any purchase o p tio n s, o f th e asset, su b je ct alw ays to
w ear and tear
Bareboat contracts can be tailor-made, although BIMCOs Barecon A is a Standard fo rm to

which rider clauses can be added.
11.11 O T H E R M E T H O D S OF P IN A N C E
Less traditional ways o f raising íìnance may need a knowledge o f high finance, which is beyond
the scope o f this course. Nevertheless, because they are becoming more populan readers
should be avvare o f their existence.
I l . l l . l Bond issues
These are often íavoured by shipyards and are usualiy secured against the yard's receivables,
paying quite a high percentage above LIBOR.
Securitisation is the use o f a stream o f income o r a portíolio o f assets to back the issue
o f securities.
I Ị . l 1.2 M ezzanine íinance

This is usually provided by speciaiist ship finance houses and is defìned as an unsecured, higher-
yielding loan that is subordinate to bank and secured loans but ranks above equity.
M .i i.3 Seller*s credỉt

To secure the sale o f a vessel in a weak íreight and s&p market, a selier may give credit to a
buyer fo r part o r ali o f the purchase price o f a secondhand vessel,
i I . I i .4 Export credit
Export credit is a system usually provided by government bodies by way o f a credit designed to
assist shipyards to secure overseas orders.
I I . I I .5 Yard credít
The cyclical nature o f the shipping industry means that at certain times shipbuilders find it
hard to obtain new contracts. A t such times a shipỵard may fìnd it prudent to offer fìnancíal
encouragement to potential purchasers o f nevvbuilding tonnage by way o f yard credit
I 1. 11.6 P rivate placem ent

Private placement is a te rm used to describe fìnance provided on terms similar to bank debt,
except that the funds are provided íroin non-bank investors such as large conglomerates and
pension funds.

I 1.12 N E W B U IL D IN G S
The contract fo r the purchase o f a new ship differs markedly from those concerned w ith
secondhand ships. In particular, vvith a secondhand purchase there is a signiíìcant elem ent o f
cơveơt em ptor - 'let the buyer beware'. W ith a new sale there are far fewer imponderables
because detailed plans and specifications are integral to a nevvbuilding sale contract.
A n o th e r clear difference concerns the payment.W hen a secondhand sale is involved the actual
payment is quite straightfonA/ard. A deposit, usually 10%, is piaced in a joint account at the tim e
o f signing the contract. Upon deiivery the deposit is released and the remaining 90% plus agreed
amounts fo r bunkers is paid oven
I 1.13 IN S U R A N C E
The large sums involved in sale and purchase deals demand utmost vigilance over insurance.The
s&p broker is unlikely to be directly involved in the principals Insurance, but, given the need to
understand the principars problems and perhaps even to offer a discreet reminden it is essential
to have basic knowledge o f the Insurance involved in the purchase o f a ship.
Pirst o f all the buyer o f a secondhand ship has to make arrangements well in advance o f delivery
so that, at the precise moment when the ship becomes the buyers property, the Insurance
cover comes into eflFect.The basic cover is fo r hull and machinery, which covers risks to the ship
itself. In addition, a wise buyer will have business lined up as soon as possible aítertaking delivery
and so will need to have cover fo r íreight too.The policy would also include hire if the ship is
going on tim e charter
This form o f Insurance will be placed through an Insurance broker either with Lloyd's o r with an
Insurance com pany specialising in m arine Insurance.
The buyer vvill also need third-party Insurance, which is usually covered through a protection
and indemnity association more colloquially knovvn as a p&l club. Such associations are unlike
Lloyd's or Insurance companies in that they are non profit-making mutual associations run by
and ío r th e ir members.They cover all íorrns o f third-party risks including, among others, claims
by merchants fo r loss o r damage to cargo, claims by parties vvhose property has been damaged
such as p o rt authorities and claims fo r death o r injury to members o f the crevv.
Specific to ship purchase is the mortgagees interest Insurance, which a lender may insist upon as
part o f the terms and conditions o f the loan.This would be in addition to the normal Insurance.
You might expect that the normal Insurance policies, suitably claused to include the mortgagees
as jo in t benefìciaries, vvould be suíĩicient, but there are cases where the insurer reíuses to pay
the ship ownen Payment can be reíused if, fo r example, the ow ner has íailed to com ply w ith
expressed o r implied vvarranties w ritten in the main policy. Similarly, if the ow ner has íailed to
maintain the ship’s class the policy will be void and there will be no payout in the event o f a total
loss, leaving the lender w ith no payments from the ow ner and no ship upon which to foreclose.
The ow ner takes out the policy and pays the premium because the level o f premium will be
assessed by the underAA/riters on the owner's, n o tth e lenders, reputation.The policy is, howeven
drawn up w ith the lender as the beneíìciary and is held by the lender as security.
VVhere a nevvbuilding is involved it is usual for there to be a building risk Insurance policy. In
this case the builder takes out the Insurance and pays the premium, because this is its record
on which the premium will be based. But the buyer will be shovvn as the beneficiary and the
finance house lending the money will want its name included also. Such a policy covers loss o r
damage to the ship during its period o f construction, íitting out and sea trials and covers the
buỵer fo r the loss o f progress payments o r instalments already made to the builder as well as
consequential losses such as loss o f earnings and extra costs involved in arrangÌRg construction
o f a replacement ship.
Ship Sale and Purchasưig 163

C h a p te r I I
A special policy is available to ovvners to cover a ship on its final voyage to the breakers yard
called a breaking-up conditions policy. Such a policy recognises that the ship is in a rundown
State a lth o u g h still in class t o sail u n d e r its o w n p o w e r It c o v e rs any rep a irs to , say, th e main
engine to ensure that the ship does reach its íìnal destination.
11.14 IN S U R A N C E FOR T H E s&p BROKER

N o matter how painstaking a broker may be, accidents can happen. It is prudent,therefore, for
a b ro k e rto seek Insurance coverThe sums involved in s&p are often enormous, so it follows
th a t quite a smali e rro r could result in a substantial claim, Even a completely unjustified claim has
to be foug h t, and íìg h tin g legal b a ttle s is v e ry costly. Errors and o m issio n s Insurance is available
from several sources, but taking such coverthrough a p&l Club specialising in brokers’ problems
can bring greater beneíìts including íriendly advice such as a suitable course o f action to avoid a
ciaim arising. As well as providing legal deíence against claims and eventual payment if negligence
is proved.the club can also assist in extracting legally due commissions from reluctant principals.

Chapter 12
Legal Aspects
Piilars of Hercules, Antiguơ

Limestone formơtions formed by wave erosion in the cliffs ofAntiguơ in the West Indies,
thought to resemble the pillars o f ancient Greece in the imơginơtion o f some.
C h a p te r 12
This chapter deals with the law from tw o points o f view :the legal frannework within which s&p
negotiations take place, and the types o f disputes that may arise and the methods used fo r th e ir
resolution.
For a general approach to the law, readers are recommended to consult the ICS book Legơl
principles in shipping business.
12.2 T H E SH IP SALE A N D PU R CHASE BROKER

Broken in this context, is another name fo r agent, so the law relating to agency applies to
brokers. In particulan the s&p broker when involved in negotiations may only make oíĩers on
the principars behalí, strictly in accordance with the authority received from the principal. Unlike
p o rt agents and liner agents, w ho often have to act on the basis o f implied authority, the s&p
broker almost invariably acts on express authority.
s&p brokers and their principals have the right to assume that, when receiving a firm oATer; the
broker making it has authority to do so. If, deliberately o r accidentally, the offer being passed is
not exactly in accordance w ith the principars authority then the broker is in breach o f warranty
o f authority. In the situation described the breach would be considered as with negligence and
any íìnancial loss suíĩered by either o r both o f the principals and would result in a claim for
damages being made against the broker w ho had made the incorrect offer and there would be
little chance o f any deíence against such a clainn.
On rare occasions more than tw o brokers are involved. If the broker fo r the principal makes
an e rro r in his dealings w ith the intermediate broker it is the latter against w hom the claim
wiil be made.This is described as breach o f warranty vvithout negligence.This may seem uníair
to the deíendant broker who, after all, passed the offer forward in good íaith, but the iaw says
that the injured principal was blameless and should proceed against the broker w ith whom
there is direct contact.The injured principal has no contact with the errant broken It is up to
the deíendant broker to proceed against the negligent broker in due course, regardless o f the
success o r íailure o f the outcome.
The broker should take care to avoid any íailure o f duty o f care. For example, in th e ir enthusiasm
to bring about a successful sale, a broker may give an over-optimistic opinion o f the íinancial
integrity o f one o f the principals. If this later proves to be íalse and the other principal suíĩers
financial loss in consequence.there would be a case against the errant broker
A sellers broker may be guilty o f misrepresentation if false iníormation about the ship IS passed
on. Even if this is unwitting, the broker may fìnd they have to indemniíy the victim for any
actual expenses unnecessarily incurred.This is why ali iists o f particulars circulated on the market
should include the words'believed to be correct but not guaranteed’.
Inadvertent misrepresentation o f the kind described above is legally term ed 'innocent

misrepresentation’. Hovvever, if a party is induced into concluding a contract based upon
deliberately false iníormation it goes beyond the lo r t o f a íailure o f a duty o f care and becomes
íraud.The damages that the injured party can claim are far greater and there ís the added risk o f
criminal action being taken too.
As a passing note in the law o f agency, although it is common in tanker chartering, it is very rare
ío rth e re to be only one broker involved in ship sale and purchase negotiations. Nevertheless it
does happen occasionally and in such a case the situation is rather different in that the broker is
not the agent fo r either principal except ío rth e purpose o f receiving and transmitting offers. But
the penalties fo r errors are much the same.

Legal Aspects
12.3 T H E BROKER’S C O M M IS S IO N
A broker w ho brings about a successful sale o r purchase has a right to be paid a commission.
As mentioned in earlier chapters, this is customarily 1% o f the purchase price to each o f the
brokers involved, although th is may vary as a result o f negotiation. Although it is normal fo r
one broker to represent the buyer and the other to represent the sellen it is the principal who
receives the money, namely the seller; w ho pays both brokers, o r all o f them if more than tw o
are involved.
A charter party usually includes a commission o r brokerage clause. Since the introduction o fth e
Contracts (Rights oíT hird Parties) A ct 1999, brokers have enough legal p o w e rto enable them
to sue fo r th e ir commission if it is not forthcoming. It is rare indeed, hovvever, fo r a commission
clause to appear in a contract o f sale o f a ship, so s&p brokers may have no protection under
the 1999 act. In some countries, the many reíerences to commission in the negotiations is
sufficient evidence o f an obligation to pay the brokers their due, but under English law brokers
do not have prívitỵ to the sale contract, which means they cannot sue under that document.
Thus it w ould always be wise fo r the brokers, once the deposit has been paid, to vvrite to the
seller coníìrming their position and the brokerage agreed as being due to them when the sale
is finalised. Most jurísdictions would accept such a letter plus the supporting evidence o f the
negotiation messages as suffìcient to give judgement in the brokers’ íavounThe brokers’ letters
may not necessarily have to be acknovvledged as the law in many jurisdictions takes the view
that silence means assent. Nevertheless, there has to be p ro o f that what was sent by the brokers
was received by the seller
W ith secondhand sales and sales fo r demolition, special care is needed in those cases vvhere
the seller is a one-ship company. Once that ship has been sold the company may become a
m e re Shell in a m atter o f m inutes; in la w ye rs‘ slang th e y have b e c o m e 'm e n o f s tra w ’ o r are
‘not w o rth pow der and shot'. The s&p broker ought to be sutĩìciently expert to know the
real identity o f the seller and should make appropriate arrangements - nothing should be left
to chance.
There have been unpleasant cases in the newbuilding market. Because the negotiations for
a new ship are so closely bound up with the technical speciíication, it is not unusual fo r the
buyer to talk directly to the builden Such discussions can be protracted and when the deal is
íinaily agreed the broker finds themselves out in the cold. If such a sale was genuinely initiated
through the introductions made by the broker; a clear understanding about commission should
be reached at the outset; courts will demand a great deal o f p ro o f a íte rth e event.
A n oth er commission situation arises more often in nevvbuilding contracts than w ith secondhand
o r dem olition sales. The brokers fulfil ail their tasks during negotiations, culminating in the
production o f the appropriate saleform, vvhich is duly signed by both principals. Then, at a
later date, usually well before building has actually started, the tw o principals decide to cancel
the contract.The brokers feel that, because they have fulfilled their duties and spent tim e and
money on the work, they deserve payment, A t this point the seller points out that commissions
are payable on payments received by them ío rth e ship - and as no ship was sold there will be
no payment. Brokers have fought cases o f this kind in the courts and lost.
Thus when compiling th e ir commission letters at the completion o f negotiations, brokers

vvould be well advised to include a clause protecting them against their principals cancelling
the contract.
12.4 T H E L A W A N D T H E SALEPORM
lf legal problems arise in a ship sale.they will almost always be between buyer and sellen It is in
the s&p brokers own interests to endeavour to ensure that the sale contract is as vvatertight

C h a p te r i2
as possible so that disputes do not occun lf trouble does arise, the broker needs to be ready to
supply any help o r advice w ith a vievv to reaching a solution. If the dispute becomes insoluble
w ith o u t recourse to arbitration o r the law, the broker will almost certainly be called as a witness
and his íiles and any contemporaneous notes may be subject to a subpoena.
s&p brokers should be careíul not to give up their files at the fìrst request, especially if that
request is made by lawyers representing the other side. If in any doubt, the broker should seek
the guidance o f the ir fìrm ’s own legal advisen
12^.1 W h e n does a binding contract exist?

It should be noted that the title printed at the top o f the NonA/egian Saleíorm is 'Memorandum
o f Agreement’, vvhich reiníorces the point that an agreement has already been made and this
docum ent merely sets the details down on paper The agreement becomes binding when
everything has been agreed between the parties and any subjects have been liữed.The messages
exchanged between the brokers, and betvveen the brokers and their principals, provide adequate
evidence o f what has been agreed.
The one exception to this rule relates to the inspections reíerred to in clause 4 o f the Saleíorm.
It is rare fo r a sale to be agreed and an agreement signed w ithout the ship’s records being
inspected and the ship itselí given a superTicial inspection, and approval given.The form does,
however, allow fo r agreement to be reached with either o r both o f these inspections still to be
undertaken. Should this be the case, it is im portant to rem em berthat the buyer can walk away
írom the deal a íle rth e inspection w ithout giving any reason.The agreement is binding insoíar as
the seller is bound to provide the opportunity fo rth e b uyerto inspect.
The Non/vegian Saleform 1987 uses the expressions so/d and bought, whereas the 1993 form
m ore correctly states 'agreed to sell and agreed to buy’, as the ship is not finally sold until it
physicaily changes hands.
As late as 1990, a co urt held that the contract o f saie was definit.e when negotiations were
concluded and it was not conditional upon signatures on a íormal document, Conversely, if
a sale is concluded "subject details” it would be very rare, in most jurisdictions, fo r It to be
considered a binding agreement until the details had all been agreed; us courts have been
known to rule otherAvise, hovvever.
114.2 Id en tiíyin g th e parties

Norm ally.the seller is the ovvner o f the ship. In the case o f a one-ship company, the negotiations
are conducted on behalí o f the real ovvner, w ho sits behind the sheli company registered as the
ownen From both the buyer’s and the brokers' points o f view it is vital to establish the identity o f
the seller and to ensure that they are in a position to sell the ship.
A n exception to this rule may arise if the ship is subject to the sort o f bareboat charter that
allovvs the cha rtererthe option to buy the ship outright at the end o f the term on payment o f
a final sum.The market couid íavour taking up this option and then seliing the ship as soon as
it becomes the charterers property. In such a case the negotiations may take place during the
closing weeks o f the bareboat contract.This should be clearly understood during negotiations
and protective steps taken to cover any uníoreseen diARculties.
It is equally im portant to identiíy the buyer, because it is not unusual, especially if the beneficial
ovvner places each o f his ships under a separate company, fo rth e intended owning company not
to be incorporated at the beginning o f negotiations. Any agreement íìnalised w ith a company
that does not legally exist is nuil and void.

Legal A spects
Ì2A,3 Th e price and paym ent

Certain items are included in the sale but not included in the price.Agreement hasto be reached
about the amount to be paid fo r bunkers, lubricants, stores and provisions on board at tim e o f
delivery.Time spent achieving vvatertight agreement on these items during the negotiations will
be amply repaid, as disputes at the tim e o f delivery tend to be out o f all proportion to the
amounts involved.
The Saleíorm is strict regarding the amount o f deposit that has to be paid and how soon after
the date o f the agreement payment must be made.The modern expression 'banking days' is
less ambiguous than earlier'w orking days’ when discussing tim e o f payment.The form allows
the se lle rto cancel the contract if the deposit is not made within the period agreed.The buyer
cannot use this as a cost-free way o f abandoning the contract if they have has changed th e ir
mind, because if the contract collapses as a result o f the buyers íailure to provide the deposit,
the seller can claim compensation ío rth e ir losses and expenses.
The term s relating to íìnal payment are even stricter and it is im portant fo r the s&p broker to
establish just what method will be employed, because the broker is often called upon to stage-
manage the actual handoven vvhich will include, among other items, ensuring that the payment
takes place. So often the buyer, the seller and the place o f delivery are in three separate
locations;so getting bankers in line at the crucial m oment requires careíul planning.
Ì2 A A Inspections
So far as inspection o f classification society records is concerned, no contractual relationship
exists between the society and the intending buyer lf something is amiss with the records and
the buyer considers they have suffered as a result, their only recourse against the society w ould
be in to rt, on the basis that the society had failed in its duty o f care.The courts are, however
quite cautious as to how strictly to apply this duty o f care towards a buyen and damages under
to r t do not include pure economic loss.
The other inspection isthe drydocking clause, which is clause 6 in the Saleíorm. It includes m ore
than drydocking now that qualified divers can carry out an inspection below the vvaterline.
It is wise to study the drydock clause to the point o f learning it by heart, because although
it appears complex it is really a masterpiece o f íairness. Its apparent complexity makes it a
íavoured question by examiners.
A vital point to rem em ber is that while the buyer can walk away from the deal at the tim e o f
superĩìcial inspection as allovved fo r in clause 4, all the remedies are covered in the drydock
clause, clause 6, and there is no walking away from the deal at this stage unless there has been
ílagrant misrepresentation.
12^3 Cancelling d ate

All sale contracts will include a cancelling date. Ifthe ship is late, cancellation is not automatic.The
canceiling date clause essentially provides the buyer with an option to cancel. Alm ost invariably
the sudden deơth aspect o f a cancelling is modified. It would be rare indeed fo r a contract to
allovv a situation to arise where the seller presents the ship just an hour late, only to have the
buyer walk away demanding th e ir deposit back. It is more normal fo r a clause to be agreed that
allovvs fo r the seller to advise the buyer as soon as it becomes apparent that the ship is falling
behind schedule.The buyerthen has to say w h e th e rth e y intend to cancel. If so, the contract is
cancelled there and then. If the buyer wishes to maintain the contract the parties agree a new
cancelling date.

C h a p te r 12
The s&p broker should keep careíul watch on the ships position and be prepared to remind
the seller if the need arises. Indeed, the s&p broker may become involved in passing on such
iníormation and it is vital that this and any notices o f readiness are transmitted meticulousiy.
Pailure in this respect could result in One or other principal suffering íinancial loss. Should they
do so,they will have a claim against the broker.
12.5 SPARES, B U NK ER S, A N D s o FO R TH
Because disputes can arise in this area brokers need to ensure that the clauses covering
these items are crystal clean lf the broker needs more incentive, remember there is no
commission payable on the money paid íorthese items so that unnecessary w o rk in this area is
totally unproductive.
12.6 M A R IT IM E LIENS A N D E N C U M B R A N C E S
Debts incurred by a ship ovvner o r claims made that have not been settled can result in the
plaintiATobtaining a w rit to eníorce the claim. Some such claims are such that they are considered
to be against the ship itselí and thus remain in force even if the ship changes hands. This is
reíerred to as a mahtime llen and to eníorce it the ship can be arrested.The new ovvner cannot
lift the arrest by arguing that they were not involved. As a result they may be in the unenviable
position o f having to pay a sum, possibly a large One, to settle the previous owner's debt.
Under the heading o f encumbrance, the outstanding claim could be fo r repayments under the
previous owner's mortgage - and there could be more than one mortgage.A vessels w o rth may
be substantially greaterthan the amount to be repaid on the original mortgage, either because
much o f the debt has already been paid over tim e o r because the market is far m ore buoyant
than when the ship was bought. In such cases an ovvner could take out a second mortgage
to raise Capital fo r another venture.There is, in fact, no limit to the number o f mortgages that
can be taken out on a vessel so long as the lenders are confident that there is enough value
unmortgaged to justify another one, In the event o f a íoreclosure when there is m ore than one
mortgage, the priorities are taken in the order in vvhich they were entered into, so a second
mortgage may turn out to be worthless if things turn bad.
Saleíorms include a clause confirming that the ship is free o f any such iiens o r encumbrances
and require the seller to indemniíy the buyer against any ciaim that may come to light.
The seller may State that there are no outstandings in good íaith being unaware o f the
existence o f a vvritThe creditor is under no obligation to advise the ovvner that a w rit has been
obtained; he may simply be waiting fo r the ship to arrive at a place where the arrest laws are
less complex.
There is no guaranteed way o f ensuring a ship really is free o f any claims, but some checks
can be made. In many countries the ow ner is obliged to declare to the ship’s registrar if there
is a mortgage outstanding. Similarly some countries keep statutory accounts, lodged with the
registrar o f companies, that mav disclose any mortgages. Even a study o f the ship's logbooks wil!
indicate if an incident had occurred, such as darnage to p o rt property, that might be the subject
o f a claim. A buyer may seek the brokers assistance in appointing someone to check some o f
these details.
There is one circumstance where there is an encumbrance about which all parties are fully
aware.This is when the seller seeks to dispose o f the ship vvhile it is still under charter.This is,
o f course, only likely to arise if the ship is on a long-term tim e charter o r consecutive voyage
contract, but it is by no means uncommon.
Un!ess the charter party covered such a situation in advance.the charterer is not automatically
obliged to agree to the change o f ownership.The charterer may believe that the new owner will
be less reliable than the one with whom the charter party was originally agreed.The buyer may

Legal Aspects
A/ish to change the ships flag, which could cause problems for the charterer Several snags are
Dossible, so nothing should be taken fo r granted.
ỉt is vital, thereíore, that the s&p brokers ensure that someone is keeping the charterer fully
nfornned and that he is not finding any part o f the intended outcome unacceptable. Even so, the
sale negotiations must be conducted subject charterers approvơl. W h e n all the sale terms have
been agreed, a tripartite agreement has to be signed by the buyer, the seller and the charterer,
which will form an addendum to the charter party.
12.6.1 A t place of delivery

Law books have more cases about disputes relating to circumstances at time o f delivery than
any other part o f the Saleíorm. Many o f these concern arguments about the ship being in a
vvorse State than at the tim e o f the superíìcial inspection.There is little the s&p broker can do
if such disputes arise as th e y are alm ost alvvays concerned w ith th e physical State o f th e ship
ratherthan any ambiguity in the wording o f the contract.
A m o ng the areas o f dispute a tth e tim e o f delivery is a phrase that is included in all negotiations
but is often misinterpreted.The ship is to be delivered 'free o f average damage afTecting class'.
The key w ord here is average, because the vvords do not refer to any condition that might aíTect
class but only damage that has been occasioned by a peril o f the sea and that can be insured
against.This problem can be circumvented only if the clause is modiíìed to read 'free o f average
damage o r deíects aíĩecting class’.
O f course.the delivery ciause does place an obligation upon the se lle rto re p o rt other deíects
o f which they are avvare that could result in class being withdrawn o r a recommendation being
made by the society.The seller could not fail to be aware o f any accidental o r average damage,
but they may not necessarily know o f a condition brought about by fair wear and tear that could
affect class.Thus if, shortly aílertaking deiivery.the buyer discovers the need fo r repairs w ithout
which class could be in peril it vvould be necessary to prove that the seller was aware o f this
problem but failed to re p o rt it;this would be hard to prove as evidence may well be lacking.
One may see that, in this vexed area o f condition at the tim e o f delivery, there is another
reason fo r the seller to be anxious to avoid buyers representatives being allovved on board
before delivery, as they could spend th e irtim e rooting around looking fo r defects that should be
reported to the classitìcation society.
An area o f dispute peculiar to sales fo r demolition is over the ships light displacement - a
critical issue, because light displacement is the actual weight o f potential scrap fo r which the
buyer is paying.The Saleform allows ío rth e lumpsum and the price per light displacement tonne
to be shown and there have been cases vvhere tim e and money have been vvasted through the
buyer, otten quite correctly, challenging the light displacement.
If such a dispute arises, it may be ía irto blame it on sloppy broking. Any broker vvorking in the
demolition market is fully aware o f the importance o f the light displacement. If either broker had
the faintest h in tth a t it was oth erth a n stated in the exchange o f offers,then a brief investigation
at that point might have saved much tim e later on. Principals are apt to blame brokers if things
do not run smoothly, so careful checking can save reputations as well as time.
12.6.2 D e ía u lt by e ith e r of th e parties

lf either the buyer reíuses to accept the ship, o r the seller reíuses to hand it oven arbitration or
a co u rt case will almost certainly follow. In either instance.the brokers are likely to be involved
as witnesses. In the w orst situation, they may be joined in the action if some negligence on
th eir part was alieged to be a contnbutory íacton A t the íìrst hint o f something o f this kind.the
broker should immediately seek proíessional legal advice.

C h a p te r i2
12.7 D IS P U T E R E S O LU TIO N
Reference has been made to ơrbitration or court action, but most Saleíorms speciíy arbitration as
the method o f dealing w ith disputes. In most jurisdictions the courts will reíuse to hear a case if
the contract contains a clear arbitration clause, as is found in the NoiAvegian Saleíorms.
There are several centres o f arbitration, with London and N ew York putting forward rival
claims fo r pre-eminence. London has been in existence the longest and the 1987 form speciíìes
London as the deíault arbitration centre.The 1993 form provides three options: London, N ew
York o r another centre agreed by the parties.
In the case o f London being chosen, it is common fo r the parties to speciíy subject to
London M aritim e Arbiưators Associơtion (UVĩAA) Terms. Brokers should have no hesitation in
recommending this to the ir principals because it ensures that the parties know where they
stand as to procedure. Were the parties simply to State arbiưation London it would not even
guarantee that the arbitrators would be expert in s&p law.
Incidentally, unless otheiAvise stated, arbitration in London will be according to English law and
arbitration in N ew York according to American law. It is theoretically possible fo r arbitration in
one place to be decided according to the law o f anothen fo r example, arbitration in London
according to Republic o f South Aírican law. It is important, if option c in the Saleíorm 93 is used,
that the legal code to be employed is clearly stated.
As it is highly probable that the brokers will be involved to a greater o r lesser extent in any
arbitration, some knowledge o f the procedure is important.
U n d e rth e Saleíorm i 993, as soon as one o r other party has decided that arbitration is necessary,
they will appoint an arbitrator and iníorm the other principai, w ho has to appoint their own
aiÌDÌtrator within 14 days. If this is not done,then the fìrst party can insist on their appointed
arbitrator being the sole arbitrator. It is possible that the tw o arbitrators vvill be unable to agree;
in such a case.they have to appoint a th ird arbitrator term ed an umpire.
The procedure as printed in the 1987 Saleíorm is rather different. it begins by saying that the
dispute should be reíerred to a single arbitraton but if the parties cannot agree to a single
arbitrator then three arbitrators are to be appointed, one by each o f the parties and the third
to be appointed by - and here a biank space is left, A íootnote makes provision ío rth e president
o f the LM AA to appoint the third.
Serious o r complex arbitrations will probably require oral hearings at which the parties present
th e ir respective cases and produce their evidence; vvitnesses may be called, including expert
vvitnesses if this is appropriate, It is becoming the rule rather than the exception fo r solicitors
and barristers o r attorneys and advocates to become involved.
Arbitrations fo r relatively simple disputes are often settled on documents only, vvhich is cheaper
and quicker. Porthis procedure, if agreed by the parties.the party initiating the dispute presents
th e ir case in w riting with supporting evidence to both the other party and the arbitrators.The
respondent then presents th eir submissions, w ith any counter-claim ịf appropriate. Both parties
may give seven days' notice o f their intention to present rurther submissions, atler which tỉie
arbitrators considerthe case and make their award.
Most other centres have th e ir own arbitration associations. Typical is the Society o f Maritime
A rbitrators Inc, based in NevvYork, vvhose term s are similar to those o f the LMAA. One notable
difỉerence is that N e w Y o rk arbitrations are published in the same way as the result o f court
hearings, whereas in London the outcome o f an arbitration is considered to be coníidential
to the parties involved. Unlike court decisions, an arbitration decision cannot be cited as a
precedent in a later case.
The onginal idea behind opting fo r arbitration rather than going to co u rt was that the dispute
should be decided by fellow practitioners in the business w ho would seek a commercial solution
to the problem. Thus arbitration was indeed quicker and cheaper than taking the dispute to

Legal A spects
court.Today, the greater involvement o f lawyers, whose instinct inevitably is to seek a purely legal
solution, has resulted in there being little to choose between arbitration and a co u rt hearing.
To circumvent this difficulty, several innovations have been introduced on both sides o f the
Atlantic. Most are geared towards smailer claims where the cost o f a full arbitration could exceed
the amounts involved. These schemes, often term ed alternative dispute resolution (ADR),
endeavourto restore the original spirit o f arbitration.They can include mediation, conciliation,
and íast and low-cost arbitration.
A party to a dispute may become emotional about the other partys apparently unjust
behavioun but a trusted s&p broker can often help to guide the principal towards a simpler and
cheaper resolution o f the dispute instead o f a headlong rush to íull arbitration or; w orse still, a
court actỉon.
English law recognises that the courts have more than enough to occupy them and legislators
constantly seekwaysto make arbitration as swiftand clean as possible.Thus, underthe A rbitration
A ct 1996, an appeal against an arbitration award is possible only where the arbitrator was
obviously wrong, especially on a point o f law o r in a case o f considerable general importance.
12.8 T H E s & p BROKER’S ROLE W H E N PRIN C IPALS ARE

IN D IS P U TE
Brokers involved in a transaction about which a dispute has arisen are likely to be called as
vvitnesses, vvhich is never a pleasant experience. It is less pieasant still if there is any hint that
the brokers negligence was a contributory cause, in vvhich case the broker should seek the
guidance o f th e ir own legal advisen
Any testimony the broker gives will invariably involve reíerring to records o f events at the
material time. In the pre-electronic era, such records would be found in the brokers daybook
in which, hopefully, a note o f every conversation would appearThere is nothing that lawyers,
arbitrators and judges like bette rtha n contemporaneous notes.
Today, much o f the interchange betvveen broker and principal and betvveen broker and broker
will be via a Computer screen. It is vital, thereíore, that all these exchanges are able to be
recovered.This demands a fo o lp ro o f method o f keeping archives, which is as essential to the
modern-day broker as notebooks were to the broker o f half a century ago.
12.9 E TH IC S A N D T H E s&p BROKER

In the days when the most advanced electronic aid was the telex machine and lists o f particulars
were distributed by sellers’ brokers by post, life proceeded at a more leisurely pace, The
unvvritten rule among brokers and the ir principals was first come, first served; One dealt through
the person w ho fìrst mentioned the business to you. In the electronic age, where nowhere
in the w orld is íarther away than one’s Computer screen, there seems no room left fo r such
niceties.The broker's task now is to consolidate their reputation and rapport with th e ir principal
so íìrmly that if a distant broken on learning o f a ship fo r sale through you goes direct to the
principal.that principal will still continue to w o rkth ro u g h you.
O ne way to consolidate your reputation with principals is to be scrupulously honest w ith them.
As an old broker once said:"Honesty is not the best policy. Honesty is the only policy.”

C h a p te r 12
174 _
Chapter 13
The Markets and the Parties
Sydney operơ House

It wơs designed by the Dơnish architect j 0rn Utzon. It was formalíy opened on
October 20, 1973, construction having stơrted in 1958.
C h a p te r 13
This chapter will discuss the practitioners in the s&p world, their location and the national,
international and geographical íactors that iníluence this most capital-intensive o f all the
shipbroking markets.
13 .1 SH IP O W N E R PER SO N A LITiES
In the days when a large majority o f the world's broking was carried out on the flo o r o f the
Baltic Exchange in London, a senior member o f one o f the broking fìrms attended the Exchange
as a visiton He was not a broker himselí; he was an economist. His discussion revolved around
trying to relate, w ithout much success, what was going on around him to what he had stu d ie d
for his economics degree. In exasperation, a seasoned Baltic Exchange b ro ke rto ld him to íorget
about his economics degree because what he needed in that centre o f shipbroking was a degree
in psychology.
The days o f face-to-face, pocket notebook broking have long gone, but in some aspects o f the
s&p markets psychology can still be more relevantthan economics.
Ship ovvners can be divided into the entrepreneurial and the corporate.The best examples
o f the latter type are to be found among European and Japanese Container operators in the
general cargo world.
They would claim that psychology scarcely affects their decision-making. N o decision is taken
until all the economic íactors have been assessed in the most scientiíìc manner possible.
Certainly, in Japan, there is a tradition o f reaching decisions by consensus in a committee;
individual personalities are seldom overtly apparent. In Europe, howeven the to p man is often
well knovvn and may have considerable iníluence over the basic philosophy o f the company.
Nevertheless, the fìnal decisions tend to be made by committees that do not reach their
conclusions until reports are in from economists, market researchers, naval architects and
other experts. Exemplars o f this approach are Hapag-Lloyd and the Maersk organisation.The
latter can stiil be descnbed as a family company, however; and no doubt a degree o f individual
decision-making takes place.
For major Container operators o f this kind, economies o f scale and market share are pre-
eminent considerations. This does not mean that ship's size can expand indeíinitely. But the
physical a c c o m m o d a tio n o f p o rts and th e ir ap pro a ch es is One iim itin g facton F o r som e tra d e s
the restriction o f Panamax has been circumvented, so the largest ships today have gained the
title o f post-Panamax. Depth o f w ater remains an obvious constraint, not only at the berths
themselves but also in some sea areas - the English Channel and the Malacca Strait are close
to capacity in draught terms. Existing shore cranes are working to the iimits o f their reach and if
ships continue to expand extensive new equípment will be needed.
These ships depend mainly upon a continuous supply o f manuíactured goods to fìil their
containers. Producers can only turn out so much in a given time, vvhich must match a speciíìc
consumer demand. There is no point in having the world's biggest Container ships if they
cannot be fìlled to capacity on every voyage. In any case, shippers prefer írequent sailings that
perm it both e x po rte r and im porter to maintain the lowest possibie inventory (known as just-
in-time inventory). This approach demands smaller ships and more o f them rather than fewer,
bigger ships.
The third limiting fa c to rto size increases is technical. Naval architects are o f the view that ships
o f around 15,000teu are the largest that can be propelled with a singie screw and single engine.
Maersk's 18,OOOteuTripie E class have tw o main engines.
In the current climate and into the íoreseeable future, size and market share are critical, hence
the drive is to operate the biggest, most effìcient ship fo r each Service. The m ajor operators
are ordering ships no smaller than 9,000teu - a size o f vessel that can access all the hub ports.
Smaller ships are more likely to be utilised from the existing fleet o r tram p owners rather than
purchased. Economies o f scale dictate that a very large ship needs far lovver utilisation to be

T h e M a rk e ts and th e Parties
proíitable compared with a smaller ship. In the last few years, a shipping line on an east-west
trade vvould rather have 10 X 13,000teu vessels than 14 X 9,000. Nowadays 18,000teu vessels
are trading.
Container ports require large open areas to stack the boxes
As Container operators move to ever-larger ships, so they are cutting down on the number o f
ports at which they call.This is both fo r reasons o f voyage economy and because few ports
can accommodate the largest ships. Singapore is a classic example o f a hub port. It has a
relatively small amount o f traíĩìc fo r its own population (captive ừade), but it acts as a base fo r
transhipment to smaller ports in South-east Asia and even as far afield as Australia.
W ith ocean carriers reducing calls to just the hub ports, demand has grown fo r feeder ships able
to access ports left o ff the main routes, and this is where the entrepreneurial ship owners come
into their ow n.There is a ílourishing charter market in small to medium-size C ontainer ships,
m any o f th e m geared (e q u ip p e d w ith ca rg o c ra n e s ),to serve th o s e p o rts th a t lack sh o re cranes.
Just as there is a busy charter market coping w ith the íluctuating demand fo r feeder vessels, so
there is in ship sales. Ship ovvners in this speciality keep a constant vvatch on trends in Container
cargo movements and look fo r ships that are in greatest demand by the major operators. s&p
brokers need to be just as knowledgeable about the Container feeder business and the salient
features o f the popular ship types if they are going to impress principals.
There are no dominant geographical locations fo r owners o f C o ntaine r íeeders. Those ships
serving the hubs in N o rth e rn Europe and Atlantic N o rth Am erica will sail under a variety o f
flags. Hong Kong and Japanese owners are prominent among those concerned with hub ports
either side o f the Pacific. In South and South-east Asia especially, the owners o f ships trading to
the least sophisticated ports, mainly involves local owners. W orldw ide, local ownership is oniy
relevant vvhere cabotage trades exist.

C h a p te r I 3
13.2 DR Y BU LK CARRIERS
Market research and route planning are not such pressing problems fo r the ovvners o f large
bulk carriers in the dry cargo market. In the case o f the tw o main commodities, coal and iron
ore, market research is the affair o f the consumers o f the raw material, w ho decide w hat level
o f manuíacturing the market demands. The routes vvill be dictated by the price o f the raw
materials; distance has rather iess iníluence than it did when ships were so much smaller
Supplies o f dry bulk materials tend to be contracted on a long-term basis, so many o f the
ships are b u iltto specifications demanded by the charterers. Hovveven prudent charterers avoid
becoming overstocked w ith material.This means that there is a thriving voyage charter market
in which ships required to fill gaps in the charterers' programmes are taken on; once again, this
type o f market is a magnet fo r more speculative ship owners.
Grain charterers are aiso big players in the drybulk markets and they tend to depend more on
single voyage o r short-term charten because vvhile the basic demand is highly predictable, the
merchants constantly seek the lowest grain prices, which afíects the íavoured loading area.Thus
individualistic ship owners tend to dominate this market.
See page 183 fo r Capesize vessel diagram and specification table.
13.3 TA N K E R S
This heading encompasses many types o f ship, from very large crude carriers (VLCCs) to small,
highly specialised chemical tankers.
The crude oil market is, o f course, dominated by the oil companies, including multinationals
such as ExxonMobil, Shell and BR All have considerable Aeets o f tankers themselves. In the mid-
20th century they owned o r operated on long-term tim e charter with large enough íleets to
cover their average requirements and so seldom had recourse to the spot market. Lately, they
have trim m ed their ship-ovvning divisions and now own barely enough tonnage to cover their
minimum requirements.This has stimulated an active chartering market in which many o f the
ships are owned by entrepreneurial ship owners. This extensive community o f independent
tankerovvners has its own internationai association Intertanko, which produces a Standard form
o f charter party. Entrepreneurism is by no means confined to the ship-owning side, because oil
traders are a significant element among charterers o f crude carriers.
The next type o f tanker in size term s is the product carrier. The oil companies established
th e ir oil refineries close to the points o f consumption rather than crude oil production areas.
Once the crude oil has been reíined, any o f the resultant products that are not distributed by
pipeline o r land transport become available fo r sea transport. Product tankers are o f various
sizes, determined by the product and the type o f consumen
As w ith crude oil, the oil companies have their own fleets to cover the movement o f Products
within th eir own organisations, but there is a wide variety o f buyers of reíìned Petroleum
products and several grades o f productT he heaviest o f fuel oils are used in ships' bunkers and
oil-fìred povver stations, and are reíerred to as dirty cargoes.Those Corning under the heading o f
deơn cargoes range fronn the lighter burning oils, as are used in domestic heating appliances.and
diesel fuei fo r road and railway vehicies. Am ong the lighter grades are special kerosenes for jet
aircraít and gasoline o r petrol fo r use in cars. Some products are not destined to be burnt but
are the íeedstock o r raw material fo r the production o f plastics.
The oil companies sell much o f their product on a CIF basis, so they are constantly in the
chartering market, but a p roportion o f oil refìnery output is sold FOB, so the consumer has
control o f the shipping.
All this chartering activity provides w o rk fo r a wide variety o f ship owners ranging from the
arch- entrepreneurs to the traditional ship owners w ho build íleets o f tankers with particular
ty p e s o f Client in view.

T h e M a rk e ts and th e P arties
Some o f the most valuable products írom oil reíining are chemicals. Chemical carriers are
fa r m o re sophisticated th a n th o s e used fo r P ro d u cts intended fo r c o m b u s tio n . Because m a n y
chem icals are e ith e r c o rro s iv e o r w ill be c o n ta m in a te d by c o n ta c t w ith Steel, th e ta n ks have t o
be coated w ith a chemical-resistant material appropriate to the particular cargo being carried.
The owners o f these ships are specialists and any s&p broker planning to enter this market
will have to be just as specialised. Most o f the more sophisticated chemical carriers are built to
the operators’ own stringent speciíìcations, so s&p activity is likely to be concentrated in the
newbuilding markets.
See page 184 íorV ery Large Crude C arrier (VLCC) diagram and specification table.
13.4 M U L T I PURPOSE SHIPS

There are no deíìned areas in the market fo r what are still the genuine tramps o f the shipping
vvorld. Most owners in this market are relatively smali compared with the multinationals in the
specialised markets and among many o f the potential buyers and sellers the final say in any
decision rests w ith an individual. It is in this market that ships with several previous owners may
be íound - and fo r many o f those older vessels the next stop is likely to be the breakers yard.
Multipurpose vessel shovving cargoes
13.5 S M A L L S H IP S
The small ship market has changed a great deal o v e rth e years. A t one tim e when a 2,500dwt
coaster stopped carrying coal round the British coast it would fìnd a ready market among
owners trading vvithin the Mediterranean. N o w this sector is dominated by ships used in the
C o n ta ine r íe e d e r tra d e .
Some traditional markets fo r small ships remain virtually unchanged, in particular those engaged
in inter-island traffic in South and South-east Asia.
This sector includes such craft as fishing vessels, barges, tugs and other specialised vessels.The
w ord ‘specialised’ is the operative one, because a small ship equais a relatively small price, vvhich

C h a p te r 13
produces a small commission. O ne should not, thereíore, play at it. For a broker w ho normally
seeks to sell o r buy bulk carriers o r even general purpose tramps, to break o ff and become
involved in negotiations fo r the sale o f a ship in the low thousands o f tonnes is a vvaste o f
valuable resource time.
Nevertheless, some brokers do specialise in the small end o f the m arket Certain types o f small
ship, particularly the highly specialised designs, are not necessarily cheaper than th e ir bigger
cousins. On the less-specialised vessels, brokers w o rk on the basis that their throughput o f sales
has to be much higher to earn the same income. Sales o f small ships tend to take less tim e in
negotiation and, because th eir voyages are far shorter; the tim e between signing the saleíorm
and delivery is proportionateiy less. O n the other hand, buyers and sellers o f smaller ships may
have a more individualistic approach, which can prolongthe process. Some say, "The sm allerthe
ship, the ía tte rth e fìle.”
See page 186 fo r Anchor HandlingTug SupplyVessel diagram and specification table.
13.6 PASSENGER SHIPS A N D PERRiES

Large passenger liners designed to carry people from one place to another across oceans have
long since given way to the airlines, but their place has been taken by cruise ships.The cruising
boom began in the last quarter o f the 20th century and the ma]or operators, rather like their
counterparts in the Container world, are constantly seeking to build bigger and better cruise
ships.These are brought into Service long beíore the ships they are replacing have ended their
useíul life,which has created athriving s&p market in secondhand ships.
A similar situation is seen in the passenger íerry market.To meet the demand fo r leisure travel
by people wishing to take their cars with them, the íerry operators have acquired larger and
m ore sophisticated ships.The same trend can be seen among vehicle íerries vvith the steady
increase in the use o f road transport fo r smaller consignments o f cargo. Redundant íerries írom
North-vvest Europe often find a ready market among the operators o f inter-island services in
South and South-east Asia.
Rather than dealing in deadweight tonnes o r teus, brokers concerned w ith passenger carriers
íocus on passenger accommodation - numbers o f berths and types o f cabin, because what
passes fo r íìrst class in one ovvners mind may be considered low er class in another’s.
13.7 OBSOLETE T O N N A G E
Obsolete tonnage refers to ships no longer in Service (obsolescent means out o f date but still in
Service). Obsolete is the te rm often used fo r ships intended fo rth e demolition market.
Shipbreaking is still largely conducted on rather basic lines and is concentrated in low-wage
economies. Many buyers o f ships fo r demolition will be íound in parts o f the Indian subcontinent,
south-east Asia and the Far East, with China also a major playen
In addition to the normal commercial íactors inf!uencing the demolition market, s&p brokers
need to be aware o f external influences.The governments o f both India and Pakistan want to
protect the ir share o f the dem olition market and impose im port duties on ships bought by their
shipbreakers.The level o f this tax changes from time to tim e and affects the prices oíĩered.
A no the r extemal inAuence comes from the environmentaiist lobbies, particularly Greenpeace.
13.8 W H O S H O U L D A N s& p BROKER K N O W ?

Pirst, obviously, the brokers own principals.This is not so easy as in, say, a chartering context
vvhere one’s principal tends to have a repetitive need to be in the market; a ship ovvner needs
a constant supply o f cargoes and a charterer a constant supply o f ships. Most buyers and sellers

T h e M a rk e ts and th e P arties
o f ships acquire ships to operate them and only dispose o f them when circumstances make it
necessary to do so.
Lucky indeed is the s&p broker acting fo r a principal w ho looks upon ships themselves as the
trading com m odity and only seeks employment fo r them in order to have them proíìtably
engaged while waiting ío rth e right market conditions to enable them to be sold at a p ro fìt
As well as knowing the principals, it is necessary to understand how each buyer operates by
identiíying the decision-making unit (DM U). If dealing w ith an entrepreneun then it is likely that
the decision-maker will be the direct link, but if the principal is a large limited company, contact
is likely to be w ith a subordinate; the largerthe organisation, the greaterthe number o f people
betvveen the contact point and the fìnal decision.This chain o f executives between broker and
decision will be even longer if the principal is a m em ber o f a shipping pool where o th e r pool
members may have to be consulted beíore negotiations start in earnest.The same problem
arises if the buying principal is a finance house which buys fo r bareboat charter to the actual
user o f the ship.
Similar constraints apply if the principal is the seller vvhere the entrepreneur will possibly give a
response right there on the telephone, but the big company man will need to consult colleagues
before providing a response. Purther complications arise if the ship is to be sold vvith an existing
chartering commitment, because the charterer vvill have to be a signatory to a trip a rtite
agreement and will,therefore, have to be consulted.
A n o th er im portant difference among phncipals is the attitude to brokers. Some will lean heavily
on the brokers advice as to term s to be agreed o r to be amended during negotiations and
will also expect guidance from the broker as to what is o r is not a fair price. A t the o th e r end
o f the scale are principals w ho will require no more from the broker than that o f a dealer,
transmitting th e ir instructions and reporting back the replies. And, o f course, there are various
shades between these tw o extremes.
Alm ost as im portant as knowing one's potential principals, one needs to know o th e r s&p
brokers.VVith the possible exception o f sectors o f the newbuilding market, it is the rule rather
than the exception fo r there to be a seller’s broker and a buyers broker, and occasionally
intermediate brokers.
By ‘know’ in this context one means knowing what type o f buyer o r seller o r ship type that
broker specialises in as well as knovving the reputation o f those principals and, by extension, the
reputation o f the brokenThe reputation o f the broker is especiaily im portant when dealing in
ships fo r dem olition because it is ditĩìcult fo r a sellers b ro k e rto recognise and know the standing
o f the many shipbreakers.The same safeguard appiies when the buyer is a small enterprise in a
remote part o f the world.
s&p vvork, like so many branches o f shipping business, depends heavily on person-to-person
co n ta ct, so it is im p o rta n t t o m aintain íriendly pe rsonal links w ith fe llo w brokers.
During the course o f negotiations, especially towards the end.there is a host o f people to which
the s&p broker may have to refer in some haste. Documents may need to be notarised, that
is by an independent proíessional person whose signature and seal coníìrms the validity o f a
signed document. Such a person specialising in this w o rk in many countries is called a notary
public, while in others this duty is períormed by a lavvyer.
Knowing how to reach the consulate o f any country and the representative o f its shipping
registrar as well as the local office o f every classiíication society is an essential part o f the s&p
brokers arm oury o f contacts.The role these offìcials play will be covered in the next chapten
13.9 W H A T S H O U L D A N s & p BROKER K N O W r

An s&p broker is only as good as the data in the office vvhich is instantly available. Some o f
this has to be in the brokers head so that a knovvledgeable response can be given to the first
Ship Sale and Purchasing Ì8 I

C h a p te r 13
approach by a potential phncipal.Very shortly a fte rth a t response the broker must be able to
provide details o f suitable ships within the range o f interest o f the buyer. VVhether the principal
is buyer o r seller;the broker must have at his íìngertips the sort o f prices being paid fo r such
ships as are the subject o f discussion.
It goes w ithout saying that an s&p broker's office needs a comprehensive store o f easily
accessible data. Bear in mind that computerised systems are only as good as the data fed into
them, and a staff dedicated to keeping that data up to date is indispensable.
Pinally the broker must know the market. The price o f ships depends upon supply and
demand, and it is essential to know under vvhat circumstances that demand íluctuates -
anything from current prices being paid fo r secondhand ships to economists' long-term global
economic íorecasts.
Maintaining a watch on the chartering markets is almost as im portant as the s&p market itselí
because signs o f a more general íìrmness o r weakness will iníluence the views o f buyers and
sellers o f ships.
Unusual events, particularly wars, can radically affect demand fo r ships, often on a regional basis.
Political unrest short o f actual conílict can be a íactor too. A sudden shiít in the supply o f a
commodity, such as the discovery o f oil reserves, can trigger a demand, which may be local
o r global.
AIỊ these íactors may have to be drawn upon from tim e to tim e if one's principals expect written
market reports to be prepared. It is im portant to be able to read and understand reports made
by others, especially statistical summaries prepared by ofRcial bodies.
Pinally, reverting to the anecdote at the beginning o f this chapter; knowing the psychology o f
one's principals is probably the most im portant skili o f all.
18 2 Institute of Chartered Shipbrokers

T h e M a rk e ts and th e P a rtie s
Capesize Vessel
Side-rolling hatchcovers
Typlcal Vessel Specifications
Typical Size 125,000-300,000 dwt

Typical Length 290 metres
Beam 45 metres
Draught 17.5 mecres
Holds / Hatches 9 holds / 9 hatches
Main engine 23-25,000 bhp

C h a p te r 13
V e ry Large Crude C a rrie r (VLCC)
tanks Double sides for vvater ballast
Typical Vessel Specifications
Size 305-320,000 dwt

Length 333 metres
Beam 60 metres
Draught 22.6 metres
Cargo pumps 3 X 5,000m^/hour
Cargo pumps 3 X 5,000m^/hour
Cargo tanks 15
Slop tanks 2
Speed 15 knots

M ultipurpose Vessel
Vessel Speciíìcatlons
Typlcal size 30,000 dwt

Beam 28 metres
Draught 1 1.2 metres
Holds / Hatches 4-5 holds / 8 - 1 0 hatches
Capacity 30-35,000 cubic metres
TEU 1,500
Cranes 40-300 tonnes swl
Speed 18-20 knots
Ship Sale and Purchasing i8 5

C h a p te r 13
A nchor Handling Tug Supply Vessel
Ệ ỉề ằ ịẵ i': ' --,
tovving pins vvinches towingwinch
Vessel Specifications

Beam 12.8 metres
Draught 4.2 metres
Bollard Pull 50 tonnes
Deck space 180 sq. metres
Accommodation 25
Main engine 4-5,000 bhp

Panam ax C o n tain er Ship
Containers loaded
on deck
12-13 containers
wide
- - Bridge Containers loaded on deck Mast,
Freefall
d : : : liíeboat
- r ------------
After
peak
Stowage in holds ’ Doubl e bottoní ' ' '

tanks
Containers loaded on deck
TypicalVessel Specifications

Beam 32.3 metres
Draught 12.04 metres fresh vvater
TEU 4-5,500
Containers max 13 across
Air Draught 57.91 metres
Dead VVeight about 50,000 tonnes
Speed up to 25 knots

C h a p te r 13

ShipValuation
Yangtze Gorges
Situơted about 1,000 kilometres VVest of Shơnghơi, the gorges ơre now the site o f
theThree Gorges dam and hydro-electric scheme which develops 22,500 megaWơtts
o f elearicity.
C h a p te r 14
It is part o f an s&p broker's daily function to estimate the value o f any ships in which they
become involved; that is all part o f knowing one’s market. Some brokers undertake to provide
valuations on an official basis.
14 . 1 W H O NEEDS A N O F F IC IA L V A LU A TIO N ?
N o one is prohibited from seeking a íormal valuation o f a ship providing they pay the
appropriate fee. Lawyers and arbitrators are frequent users o f ship valuers’ services because
the market value o f a certain ship at a particular tim e may be essential evidence in a
dispute. An independent valuation o f a ship, o r several ships, may be needed during company
takeover negotiations.
The taxation authorities may need to have a ship valued if it was substantially owned by an
individual w ho has died and the amount o f inheritance tax has to be calculated. Banks and
auditors may need an up-to-date valuation in order to reassess the asset value o f a company.
Average adjusters need an accurate value o f a ship at the time that the general average sacriíice
to o k piace.
It may, fo r example, be a merchant bank contemplating the provision o f íìnance fo r a clients

project, and wishing to satisíy themselves o f the current w o rth o f the vessel(s) concerned. Even
when a loan has been made and the scheduled repayments are being satisfactorily remitted, it
is common banking practice to check at least annually that a vessel’s value adequately reílects
the outstanding loan, so that the banks risk is kept under revievv. In such cases the broker will
invariably issue its own certiíìcate o f valuation,
Brokers are sometimes urgently consulted fo r their valuation opinion concerning salvage
operations in progress, and this may be followed by a more íormal appearance at a salvage
court o r an arbitral hearing. s&p brokers may also appear as expert witnesses at legal
proceedings concerning matters otherthan salvage, such as a nevvbuilding dispute.They may be
asked to give as evidence th eir opinion o f a vessels value at a certain tim e and to produce data
supporting their opinion. In certain cases they must be prepared to deíend their opinions against
contradictory evidence brought forward on behalí o f other parties involved in the hearing.
Perhaps the most delicate situation is when a government departm ent seeks a valuation because
o f an allegation about illicit deaiing being involved in the saie o r purchase o f a ship.
O ther reasons sale and purchase brokers may be approached fo r 'oíĩìciar valuations are more
mercantiie than legal.They may concern the issuing o f assessments to facilitate the establishment
o f corporate assets fo r taxation purposes, o r fo r company takeovers, o r fo r liquidators. It takes
a shrevvd market professional to value ships and, vvhateverthe reason ío rth e brokers valuation,
he o r she is entitled to a fee ío rth e service.That sum should be commensurate, o í course, vvith
the degree o f skill and w o rk involved.
It is im portant to stress that ship valuers are seldom, if ever; also ship surveyors. Hence a
valuation is invariably made with no inspection o fth e ship itselí o r its records. It is based entirely
on the premise that the vessel is in sound condition, charter-free and that it is based upon a
willing buyer and a wiiling seilen
Although ship valuation can never be a precise a rt because o f the many variables, the valuer
must provide a ĩigure that vvouíd stand up to examination in a court o f law. A ship valuer can be,
and often is, ordered to give evidence before a court o r an arbitration.
There are several ways o f vaiuing ships and no tw o brokers will use the same methods, but the
following principies should be common to all.
A ship is vvorth what it can earn on the oceans o f the world, so ship values vary according to
the vagaries o f the íreight market and the availability o f certain types o f tonnage, abie to take
advantage o f the prevailing market at any given time.

Ship V alu atio n
The íìrst task o f the valuer is to establish the value o f the vessel per deadweight tonne.This
should offer no problems because keeping records o f ship sales is an essential part o f the s&p
brokers task.
Leading sale and purchase brokers are regularly invited to provide their opinion o f the market
valuation o f a vessel.
VVeekly valuations o f certain Standard ship types are required fo r the íutures markets by the
Baltic Exchange in preparing and publishing its weekly indices in support o f the Baltic sale and
purchase assessments fo r secondhand and demolition tonnage. Panels o f specialist s&p brokers
are appointed by the Baltic ío rth a t purpose.
There is no doubt that, in addition to the successíul sale and purchase o f merchant ships, an
integral and useful íunction o f the sale and purchase broker is the ability to provide a valuation
Service when approached to do so, this duty being a natural extension o f and complementary
to the brokers basic trade.
14.2 S H IP ’S A G E
One surprising question that arises - surprising because one would expect the answer to be
obvious - is how can One tell the age o f a ship? This is essential iníormation because much
depends on the ships age: Insurance premiums, whether a charterer will accept a ship for
charter, and sale and purchase valuation are three exampies. In fact, the answer is not so obvious
as it might first appear
A relevant extract from Lloyđs Register o f Ships states:
‘For ships built under the supervision o f Lloyds Register surveyors, the date o f build,
specified by the year and month, shall be the date at which the new construction process
is completed. The date o f commissioning may be specified in case o f substantial delay
betvveen completion o f construction and the ship commencing active Service'
The initial stages in the life o f a merchant ship are its hull construction, launching, íitting out
and surveying/classification, which all take place before it starts active trading. Occasionally, a
signiíìcant delay occurs during a vessels construction, which may be caused by financial problems
in the shipyard, labour disturbances, political unrest o r the purchaser's íailure to make stage
payments. Any o f these problems may halt construction w o rk fo r days, weeks, even years. If
such a delay occurs after a vessel has been íitted out but beíore it has been surveyed and
classed, one view is that it has y e tto be íìnished and has not yet been constructed because the
building w o rk has still to be checked and the vessel presented w ith a set o f trading certificates.
Howeven once the class surveyor has carried out his duties, arguably the vessel is built and ready
fo r sea even though it may remain at the builders yard fo r many months.The general view will
thereíore probably be that a ship‘s age starts to count from the completion o f the surveying
and classitìcation process.
W h a t is im portant in being able to value a ship is:
• The last sale o f an exact sister-ship;
• VVhether the ship is a good, popular design that appeals to the charter market;
• VVhetherthe ship has speciíic íeatures that make it more o r less populan
To the íìgure o f the exact sisten one would add o r deduct any íeatures that might íavour one
ship o v e rth e othen such as difĩerences in age.type o f gean make.type and size o f engine, place
o f build and so on.To account fo r age, the valuer utilises the 5% per annum rule.
The 5% per annum rule is based on the assumption that the life o f the average ship is 20 years. In
practice, difFerent types o f ships and diíĩerent states o f the market may dictate a much shorter
liíespan, vvhich vvould produce a proportionately higher annual depreciation rate.

C h a p te r 14
The im portant rule is to compare like with like, such as tankers with tankers, dry cargo vessels
w ith dry cargo vessels, bulkers with bulkers and so on.
Brokers and owners have preíerences fo r certain shipyards and countries o f build. Some
consider that a ship constructed in a N o rth European yard is preíerable to one built in a Far
East yard and make th e ir allowances accordingly. Type o f gear is an im portant consideration,
and in comparing one bulk carrier with another bulk carrier; it is essential to establish the type
o f bulk carriers that are being compared, w hether geared o r gearless and the type and safe
vvorking load o f the cranes. But in the end ịt is what the market likes. Until 2008, the market had
a preference fo r high-speed C o n ta ine r ships. A 1,70ơteu ship capable o f 23kt had higher charter
earnings than a simiiar-sized ship that managed only 2 1kt knots.Today, with the po o r market and
high bunker costs, the situation is reversed, with the slow, economical ships commanding the
premiums.
The size and type o f engine are important, as modified by individual preíerences and perhaps
prejudices. Again, it is im portant to compare like with like - an Aíramax with a I2,000bhp
engine cannot be compared exactly w ith a ship having dieseỉ propulsion o f 16,500bhp.
A ships diesel engine
Valuers allovv a diíĩerential when comparing the speed o f ships. A vessel having a Service speed
o f I4kt has an advantage on the overail price compared with a I3kt ship, The differential
becomes more significant in the case o f fast vessels such as Container ships and reeĩers, although,
the trade recession from the 2008 íìnancial crisis has encouraged adoption o f a ‘siow steaming’
strategy. Howeven engine size is im portant fo r future trading.
W hen presenting a valuation.the only iníormation given is the estimate o f value, but the valuer
must bear in mind that this could be challenged in a co u rt o í law by counsel looking fo r flaws in
the arguments.A valuation should, thereíore, not be issued until the valuer is satisfìed that all the
facts are available to support a logical and well-marshalled case.
Valuers present themselves as experts, so any allegation o f giving a íalse o r misleading

va iu ation , even ịf Corning vvithin the d e íìn itio n o f innocent misrepresentation, co u ld have
uníortunate consequences.
It is vital that the vvritten valuation presented to the Client clearly identiíìes the ship in question
and the period fo r which the valuation is valid. It should then include all the necessary caveats,
noting that there was no physical inspection o f e ith e rth e ship itself o rth e classification society
records and that it is an opinion o f the market ío rth e period stated and should not be taken to
apply to any other date.The valuation should conclude with the warning that anyone intending
to rely on the valuation should satisíy themselves a b outth e physical condition o fth e ship,

Ship V a lu a tio n
Except perhaps in the case o f valuations fo r a loyal principal, valuers will, o f course, charge a
fee fo r the ir services, the fee depending on the amount o f vvork involved. In most counthes
com petition laws prohibit the publishing o f any form o f scale o f charges. Hovvever, valuers are
first and íorem ost brokers and knowing one’s m arket is the essential quality o f any broker vvorthy
o f the title.

C h a p te r 14

Chapter 15
Delivery
Alcotraz
Referred to ơs The Rock, the small island was developed with fơcilities for a military
fort, ơ lighthouse, a CivilVVơr militơry prison in 1868 and a federơl prison from 1933
until 1963
C h a p te r 15
The transíer o f a ship írorn one owner to another is often a time o f tension fo r the s&p brokenThis is
not a simple m atter such as buying a car where the buyer hands over cash o r a certiíied cheque and in
exchange receives a couple o f documents and the keys o f the new acquisition, all o f vvhich takes place in
one location w ithout a lawyer in sight.
W ith the transíer o f a ship from seller to buyer there are many more documents involved, the several
parties concerned may be in diíĩerent parts o f the world, possibly several tim e zones apart, and o f course
the sums o f money involved are considerable. Lawyers will probably be involved to ensure that the
exchange o f the money and the ship is simultaneousithey are paid to w o rk on the unhappy principle that
no one can be trusted.
A pa rt from the legal, íìnancial and bureaucratic elements concerned, the very human element, namely
the old and the new crews, must not be overlooked.The brokers may vvell be obliged to play a part in
ensuring there is no problem in the changeover; although much o f this w ork ought to fall to the p o rt agent.
A well-rehearsed drill is vital ío rth is procedure and the s&p broker should be prepared to play an active
part in this when called upon. Much o f the w o rk will be the responsibility o f iavvyers acting on behalí o f
buyers and sellers, together w ith notaries public, but the s&p broker needs to understand the procedure
and protocol fo r delivery because they may have to ensure that everyone concerned and every piece o f
paper is in the right place at the right time.
Having a checksheet fo r handovers is a useíul tooi in any s&p brokers offìce.
The documents peculiarto the handover process are listed belovv.
15.1 B IL L O P S A L E
This is the document o ftitle to the ship. Once executed, notarially attested and legalised by the appropriate
consui when necessary, it is the document that hands the ship over from the seller to the buyen In order
to register the ship, the new ovvner has to produce evidence o f title, thus the bíll o f sale is probably the
most irriportant document at tim e o f handoven
15.2 D E L E T IO N C ER TIPICA TE
Often the buyer registers the ship under a different flag from the one used by the seller, so a certiíicate
coníìrming that the ship has been deleted from the seilers flag has to be presented to the registrar o f
the buyers ílag.VVhere the deietion certiíicate is not available at the time o f handover the seller has to
produce a signed undertaking to present it as soon as possible.That undertaking will probably also have to
be notarially attested and legalised by the consul.
15.3 BOARD R E S O LU TIO N

Ostensible auứiority refers to the principle that even within the same company, different levels o f
management have diíĩerent degrees o f responsibility and authority.The buyer obviously wants to be sure
that the person in the seller's oíĩìce has authority to sell such a large Capital item and this is achieved by
the production o f a certified copy o f a board o f directors’ resolution coníìrming the decisiori to sell tỉie
ship concerned.This certiíicate is usually signed by the company secretary, o r equivalent, then notarially
attested and legalised.
The same type o f certificate must be prepared by the buyer showing authority to purchase
the ship.
In addition to these certiíìcates it is customary fo rth e persons authorised to sign the various documents
on both sides, at the completion site and on board the ship itselí
Buyer and seller both need to have th eir companies' povvers o f attorney, which again have to be notarised
and legalised by the appropriate consul.

D e livery
15.4 PR O TO CO L OF DELIVER Y A N D A C C E PTA N C E

This is a very simple but vital document shovving the sellers name followed by the words:
‘hereby deliver on (day, month, year) at (hours) the ship described belovv’
This is followed by the identity o f the ship namely name, flag, call sign and ofFìcial numbenThen the buyers
name is spelled out, followed by a statement reading:
'pursuant to the Memorandum o f Agreement dated (day / month / year) made between
'sellers and buyers and buyers hereby accept delivery o f the ship described above’.
Then both representatives sign the document, which is the m om ent that ownership transíers.
A t the tim e o f handover; let us assume the following:
1. A ship has been sold w ith delivery in Nagasaki on April 10 ,2 0 14.
2. Payment fo rth e vessel where the handover officially takes place will be in NewYork.
3. The seller’s ofRce is in Lausanne, Switzerland.
4. The ship under its new owners will fly the Greek flag.
5. The ship shall be delivered mortgage-free, but the buyer will register a mortgage on delivery.
The brokers checksheet could look something like the example below, w ith each partys contact numbers
noted against the names.
DATE OF CLOSING Estimated ío rA p ril 10, 2014
PƯ\CES AN D TIM E S OF CLOSING
1. N ew Y ork at Greek Consulate 9.30 am local time

2. Lausanne sellers at offìce o f Swiss Maritime (sellers) 3.30 pm local time
3. Nagasaki seller's broker at Matsumoto & Co 1 1.30 pm local tim e
ATTEN D IN G TH E CLOSING
Telephone numbers are those where representatives can be reached beíore the closing date:
1. INNEVVYO R K
For Swiss Maritime, sellen M rA . Schmidt
For Posidonia Maritime, buyer, M rA . Pericles
For HellenicTrustee Bank, buyer'5 bankei" M r RGuy
2. IN ưVUSANNE
Swiss Maritime, seller MrRPavre
3. NAGASAKI
Swiss Maritime, seller M rA . Georges
Posidonia Maritime, buyer M r D. Dimitria
Then the closing procedure would be arranged as follows:
A t the tim e o f closing tw o lines will be open. O ne between N ew York and Lausanne and the other
between N e w Y o rk and Nagasaki so that exchange o f documents, payments, registrations and so on will
be etĩected simultaneously.

C h a p te r 15
Alternatively, and if the sellers agree, only one telephone link, NevvYork-Nagasaki, may be opened and as
soon as closing is completed then advice shall be given to the seller in Lausanne in this regard.
VVith the vessel being ready fo r handover and with the telephone link between N ew Y ork and Nagasaki
open,the seller's and buyer’s representatives in NevvYork will receive confirmation from theircounterparts
in Nagasaki that the vessel is ready fo r delivery and that they have checked all the necessary documents
are on board.
These will include vital items such its tonnage certiíìcate, plans, Suez and Panama certiíicates plus a host o f
trading certiíìcates that include: international loadline certiíicate, cargo ship safety construction certificate,
cargo ship saíety equipment certiíicate, deratisation exemption certiíìcate, liferaft inspection certiíìcate,
cargo record book, cargo gear derricks o r cranes inspection certiíicate, radio licence, international oil
pollution prevention certiíìcate, minimum mandatory safe manning certificate and stability iníormation.
Ifthe ship were atankerthere would have to be pipeline layouts, pumping rates.and the gas-free certiíìcate.
For a dry cargo ship there vvould be the grain and bale cubic capacity records.There must also be copies
o f the logbooks and certiíìcates covering the various surveys the ship has to undergo.
The seller will have provided the certiíìcate o f no mortgages o r other encumbrances and also the deletion
certiíìcate from the Swiss registry.They will have provided p rooí from the classification society coníìrming
that the ship is in class and noting any recommendations, which will already have been disclosed during
negotiations.
The buyer will have to obtain and provide to the Greek registrar the appropriate class certiíicates.
The buyers bank in N ew York wilỊ hand over a draft fo r the full purchase price less the 10% deposit and
less any address commission.The buyer will provide a letter to the bank in which the deposit is lodged
releasing the deposit to the seller less any bankers charges and plus any accrued interest.
VVhen all is agreed as being in ordenthe buyers and sellers representatives in Nagasaki will be authorised
to sign the protocol o f delivery and acceptance.
15.5 V A R IA T IO N S
Circumstances wili vary and procedures will diíĩer according to the flag and the nationality o f the buyer
and seller
W hile not necessary in the example above, where the deal was between a Greek buyer and a Swiss sellen
some countries may demand that the seller obtains an export licence beíore a ship may be sold; in some
rare cases there may be a prohibition on sales to certain other countries.
Similarly, some countries insist that an im p o rt licence is obtained fo r ships bought by their nationals for
registration underthe countrys Aag.The s&p brokers will have established whetherthese are necessary at
the tim e o f negotiations, but the certiíìcates themselves have to be presented fo r scrutiny by the parties
o rth e ir lawyers at the tim e o f delivery.
O n occasions the bilt o f sale has to be executed in tw o originals.the second one marked second originơl. It
may be necessary to provide a commercial invoice stipulating the sale price o f the vessel.This document
iTiust State th a t it is a c o m rn e rcia l in vo ice and include th e nam e o f th e b u ye r and seller to g e th e r v /ith
purchase price and date.
15.6 BUNKERS O N D ELiVERY

In a previous chapter the matter o f bunkers and lubricating oils on delivery has been discussed. Bunkers
on delivery will invariably be based on the seller’s last net paid prices and not Platts on the day o f delivery.
Platts may be used if the vessel has been on tim e charter and bunkers are charterers' property, o r
the seller knows in advance that invoices will not be available, o r if due to other complications it is the
simplest method o f calculating the cost. Lubricating oils are not paid fo r at current prices, they are alvvays
based on last invoices. If some invoices are missing at the time o f delivery then the buyer is not obliged to
pay fo r them.

D e lìvery
W (th the prices o f bunkers remaining stubbornly above $600 per tonne, quantities are important

C h a p te r 15

Appendices C o n te n ts
Appendices Contents
Appendix I NonA/egian Sale Form 1987 203
Appendix 2 N otêgian Sale Form 1993 209
Appendix 3 Norv^/egian Sale Form 2 0 12 217
Appendix 4 Ince and Co.’s comparison between NSF93 and NSF12 225
Appendix 5 Nipponsale 99 229
Appendix 6 Brokers sales re p o rt 233
Appendix 7 Demolishcon sale form 237
Appendix 8 Nevvbuildcon 243

A p p en d ix I NoiA/vegian Sale Fofm 1987
Norvvegian Saleform 1987

MEMORANDUM OF AGREEMENT
Dated: ị
8
3
a
hereinalìer called the Sellers. have today sold, and hereinafter called the Buyers, n
d
1
have today bought 9
8
6
Classitlcation:
B uilt; by:
Flag: Piace o f Registration: C all sign: Register tonnage:
Register number:
on the tbllovving conditions:
1. Priee
Price:
N onvegian Shipbrokers' A ssociation’s M eniorandum o f A greem ent for sale and purchase o f ships, A dopted bv Tlie Baltic and Iiitem atíonal M aritim e
L o un ciĩ (B IM C O ) in 1956.
Code-name
SALEPORM 1987
2. Deposit
As a security for the correct fu lfillm e n t o f this contract, the Buyers shall pay a dcposit o f 10%—
ten pcr cent— o f the Purchase Money vvithin banking days from the date o f this
agreemenl. This ainount shall bc deposiled \vilh
and held by them in a jo in t account tb rth e Seilers and the Buyers. Interest, ifa n y. to be credited the Buyers. Any
fee charged for holding said deposit shall be bome equally by the Sellers and the Buyers.
3. Payiĩient
The said Purchase Money shall be paid ữee o f bank charges to
on delivery o f the vessel, but not later than three banking days after Ihe vessel is ready for delivery and vvritten or
telexed notice thereof has been given to the Buyers by the Sellers.
4. Inspections
The Buyers shall have the right to inspect the vessel’ s classification records and declare vvhether same are
accepted o r not w ith in
The Sellers shall provide for inspection o f the vessel aưin
The Buyers shall undertake the inspection w ithout undue delay to the vessel. Should the Buyers cause such
delay. they shall compensate the Sellers for the losses thereby incurred.
The Buyers shall inspect the vessel afloat w ithout opening up and w ithout cost to the Sellers. During the
inspection, the vessePs log books for engine and deck shall be made available for the Buyers’ examination. l f
the vessel is accepted after such atloat inspection, the purchase shall become definite-except for other possible
subjects in this contract-provided the Sellers receive w ritten or telexed notice from the Buyers vvithin 48 hours
after com pletion o f such afloat inspection. Should notice o f acceptance o f the vessel’s classification records and
o f the vessel not be received by the Sellers as aforesaid, the deposit shall immediately be released, whereafter this
contract shall be considered null and void.
5. Place and time o f delivery

The vessel shall be delivered and taken over aưin
Expected time o f delivery:

A p pendix I Noiêgian Sale Form 1987
Norvvegian Saletorm 1987 (Continued)

Date o f cancelling (see clause 14):
The Sellers shall keep the Buyers \vell posted about the vessel’ s itineran' and estimated teim and place o f
drydocking.
Should the vessel become a total or constructive total loss before deliven' the deposit shall immediately be
released to the Buyers and the contract thereafter considered null and void.
6. Drydocking
In connection vvith the delivery the Sellers shall place the vessel in di>dock at the port o f deliver>' tbr
inspection by the Classification Society o f the bottom and other underwater parts below the Summer Load Line.
Ifth e rudder. propeller. bottom o ro th e r undenvater parts belovv the Summer l,oad Line be found broken. damaged
or defective, so as to alTect the vessel’s clean certificate o f class, such defects shall be made good at the Sellers'
expense to 1)
satisfaction vvithout qualitìcation on such undenvater parts, 2)

W hilst the vessel is in drydock. and i f required by the Buyers or the representative o f the Classitlcation
Society, the Sellers shall arrange to have the tail-end shaíì dravvn. Should samc be condemned or found defective
so as to aíĩect the vessel’s clean certificate o f class, it shall be renewed or made good at the Sellers’ expense to
the Classification Society’s satisfaction Nvithout qualification.
The expenses ot'drawing and replacing the tail-end shafì shall be borne by the Buyers unless the Classification
Society requires the tail-end shaft to be dravvn (W'hether dam aged o r not), rcnevved or made good in which event
the Sellers shall pay these expenses.
The expenses in connection w ith putting the vessel in and taking her oul o f drydock, including dr>’-dock
dues and the Classilìcation Survcyor’s fees shall be paid by the Sellers i f thc rudder, propeller, bottom, other
undervvater parts belovv the Summer Load Line or the lail-end shart be found broken. damaged or deíective as
aforesaid or i f the Classification Society requires the tail-end shaíì U) be dravvn (vvhether damaged or not). in all
other cases the Buyers shall pay the aforesaid expenses, dues and lees.
During the above mcntioned inspections by the Classitlcation Society Ihe Buyers’ representative shall have
the right to be present in the dr>'dock but without interfering \vith thc Classitlcation Surveyor’sdecisions.
The Sellers shall bring the vessel to the drydock and from Ihe drydock to the place o f deliver>' at then ow n
expense.
7. Spares/bunkersetc.
The Sellers shall deliver the vesscl to the Buyers w ith everything belonging to her on board and 011 shore. A ll
spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s), i f any, belonging to
the vessel at the time o f inspection. used or unused, vvhether on board or not shall become the Buyers’ property.
but spares on order to be excluded. Forwarding charges, i f any, shall be for the Buyers' account. The Sellers are
not required to replace spare parts including spare tail-end shaft(s) and spare propelleits) \vhich are taken out o f
spare and used as replacement prior to deliver>'. but the replaced items shall be the property o f the Buyers. The
radio installation and navigational equipment shall be included in the sale w ithoul extra payment, i f same is the
propert> o f the Sellers.
The Sellers have the right to take ashore crocker\, plale, cutlery, linen and olher articles bearing Ihe Sellers’
ílag or name, provided they replace same w ith sim ilar unmarked items. Librarv, tbrms, etc., exclusivelv for use in
the Sellers’ vessels. shall he excluded \vithout compensation. Captain's, OíTicers’ and Crew’s personal belongings
including slop chest to be excluded from the sale, as w ell as the tb llo w in g additional items:
The Buyers shall take over remaining bunkers, unused lubricating oils and unused stores and provisions and
pay the current market price at the port and date o f delivery o f the vessel.
l’aymcnt under this clause shall be made at the saine time and place and in the sanie currency as Ihe Purchase
Money.
8. Documentatíon
In exchange for payment o f the Purchase Money the Sellers shall tum ish the Buyers vvith legal B ill
o f Sale o f the said vessel free from all encumbrances and maritim e liens or any other debts vvhatsoe-

A p p en d ix I Norvvegian Sale Porm 1987
Norwegian Saleform 1987 (Continued)

ver. duly notarially attested and legalised by the consul together
w ith a certificate stating that the vessel is free from registered encutĩibrances. On delivery o fth e vessel the Sellers
shall provide for the deletion o f the vessel from the Registry o f Vessels and deliver a certiíicate o f deletion to the
Buyers. The deposit shall be placed at the disposal o f the Sellers as vvell as the balance o f the Purchase Money,
which shall be paid as agreed together w ith payment for items mentioned in clause 7 above.
The Sellers shall. at the time o f delivery, hand to the Buyers all classification certificates as w e ll as all plans
etc. which are onboard the vessel, Other technical documentation which may be in the Sellers’ possession shall
prom ptly upon the Buyers' instructions be forwarded to the Buyers. The Sellers may keep the log books. but the
Buyers to have the right to take copies o f same.
9. Encumbrances
The Sellers vvarrant that the vessel. at the time o f delivery, is free from all encumbrances and maritime liens
or any other debts whatsoever, Should any claims which have been incurred prior to the tim e o f delivery be
made against the vessel, the Sellers hereby undertake to indem niíy the Buyers against all consequences o f such
claims.
10. Taxesetc.
A ny taxes, fees and expcnses connected vvith the purchase and registration under the Buyers’ flag shall be
for the Buyers' account. whereas sim ilar charges connected vvith the closing o f the Sellers’ register shall be for
the Sellers’ account.
11. Condition on delivery

The vessel w ith ever>'thing belonging to her shall be at the Sellers’ risk and expense until she is delivered to
the Buyers, but subịect to the conditions o f this contract, she shall be delivered and taken over as she is at the time
o f inspection, fair wear and tear excepted.
However, the vessel shall be delivered \vith present class free o f recommendations. The Sellers shall
no tify the Classirication Society o f any matters com ing to their knowledge p rior to delivery which upon being
reported lo the Classification Society would lead to the w ilhdraw al o f the vessel’ s class or lo the im position o f a
recommendation relating to her class.
12. Name/markings
Upon delivery the Buyers undertake to change the name o f the vessel and alter funnel markings.
13. Buyers’ default

Should the deposit not be paid as aforesaid, the Sellers have the right to cancel this contract, and they shall
be entitled to claim compensation for their losses and for all cxpenses incurred together vvith interest at the rate
o f 12% perannum .
Should the Purchase Money not be paid as aforesaid, the Sellers have the right to cancel this contract. in
which case the amount deposited together w ilh interest eamed, i f any, shall be forfeited to the Sellers. I f the
deposit does not cover the Sellers’ losses, they shall be entitled to claim further compensation for their losses and
for all expenses together w ith interest at the rate o f 12% per annum.
14. Sellers’ default

l f the Sellers tầ il to execute a legal transfer or to deliver the vessel vvith everything belonging to her in the
manner and w ith in the time speciíied in line 38. the Buyers shall have the right to cancel this contract in which
case the deposit in fu ll shall be retumed to the Buyers together w ith interest at the rate o f 12% per annum. The
Sellers shall make due compensation for the losses caused to the Buyers by failure to execute a legal transfer o r to
deliver the vessel in the manner and vvithin the tim e specified in line 38, i f such are due to the proven negligencc
o fth e Sellers.
15. A rbitration
I f any dispute should arise in connection w ith the interpretation and fulfilm en t o f this contract, same shall be
decided by arbitration in the City o f 3)
and shall be referred to a single A rbitrator to be appointed by the parties hereto. I f the parties cannot agree upon
the appointment o f the single Arbitrator, the dispute shall be settled by three Arbitrators. each party appointing
one Arbitrator. the third being appointed by 4)

A p p en d ix I Notwegian Sale Form 1987
Norvvegian Saletorm 1987 (Continued)

I f cither o f the appointed Arbitrators rcfuses or is incapable o f acting. the party who appointcd him, shall
appoint a new A rbitrator in his place.
l f one o f the parties fails to appoint an A rbitrator-either originally or by way o f substitution-for two weeks
after the other party having appointed his A rbitra to r has sent the party making default notice by m ail, cable or
telex to make the appointment, the party appointing the third A rbitra to r shall, after application from the party
having appointeđ his A rbitrator. also appoint an A rbitrator on b e h a iro f the party making default.
The award rendered by the A rbitration Court shall be final and binding upon the parties and may i f necessar>
be enforced by the Court or any other competent authority in the same manner as a ịudgement in the Court o f
Justice.
This contract shall be subịect to the lavv o f the country agreed as place o f arbitration.
1) The name o f the classìfication Society to be inserted.

2) Noles, ìf any, ìn the Surveyor's reporl which are accepted bv the Classifìcation Society wilhoul quali/icalion are nol to be taken inlo
accounl
3) The place o f arbilralion to be ìnserted. I f this one ịs not filk d in. u is underslood thai arbUration will take pìace in London in accordance
wilh Engìish low
4) l f Ihis lìne is noí fiìled ìn it is understood Ihal the thirdArbitrator shaìl be appointed hy the London Maritme ArbUrators 'Associatìon ìn
London.
By kind permission of The Norwegian Shipbrokers Association

A p p en d ix I Noivyegian Sale Form 1987
Norvvegian Saleíorm 1987(Continued)

A p p en d ix to M em o ra n d u m o f A g l-eem cn t c o d e -n a m e S A L E P O R M 1 9 8 7 -(la te d

A p p en d ix I Norvvegian Sale Form 1987

A p p en d ix 2 Noi\vegian Sale Form 1993
Norvvegian Saletorm
Norvycgun ShiphMikcrs' Associatioo's Mcmo-

MEMORANDUM OF AGREEMENT randum ưf A^rẽcnieiii li>f suk and purchasc of
ihips. Adọptèd by The Baltic and Iniemation&l
Msriiimc CouiKÌl IBIMCO) in 1956.
Cude-naine
Dated;
SALEẼORÌVl 1993
Revised 1966. 1983 and 1986/87.
hereinaữer called the Sellers, have agreed to sell, and
hereinatter called the Buyers, have agreed to buy
Name:
Classification Society/Class:
Built: By;
Flag: Place o f Regislration:
Call Sign: Grt/Nrt:
Register Number:
hereinafter called the Vessel, on the following terms and conditions: 9
Ueíinitions 10
"Banking days" arc days on which banks are open both in the country oTthe currency 11
stipulated for the Purchase Price in Clause I and in ứie place o f closing stipulated in Clause 8. 12
"In vvriting" or "written" means a letter handed over from the Sellers to the Buyers or vice versa, 13
a registered letter, telex, lelefax or other ưiodem form o f written communication. 14
"Classification Society" or "Class" means the Society referred to in line 4. 15
1. Purchase Price 16
2. Deposit 17
As security for the correct fulfilment ot' this Agreement the Buyers shall pay a deposit o f 10 % 18
(ten per cent) o f the Purchase Price vvithin banking days from the date o f this 19
Agreement. This deposit shall be placed vvith 20
and held by them in a jo in t account for the Sellers and the Buyers, to be released in accordance 21
with jo in t vvritten instructions o f the Sellers and the Buyers. Interest, i f any, to be credited to the 22
Buyers. Any fee charged for Holding the said deposit shall be bome equally by the Sellers and the 23
Buyers. 24
3. Payment 25
The said Purchase Price shall be paid in full tree o f bank charges to 26
on delivery o f the Vessel, but not later than 3 banking days after the Vessel is in every respect 27
physically ready for delivery in accordance vvith the terms and conditions o f this Agreement and 28
Notice o f Readiness has been given in accordance vvith Clause 5, 29

A p p en d ix 2 Noiêgian Sale Form 1993
Norvvegian Saletorm (Continued)

4. Inspections 30
a)* The Buyers have inspected and accepted ứie Vessel's classiíication records. The Buyers 31
have also ínspected the Vessel at/in on 32
and have acceptcd the Vessel following this inspection and the sale is outright and definite, 33
subject only to the terms and conditions o f this Agreemenl. 34
b)* The Buyers shall have the right to inspect the Vesseĩs classification records and declare 35
whelher same are accepted or not vvithin 36
The Sellers shall provide for inspection o f the Vessel aưin 37
The Buyers shall undertake the inspection vvithout undue delay to the Vessel. Should the 38
Buyers cause undue delay they shall compensate the Sellers for ửie losses thereby incurred. 39
The Buyers shall inspect the Vessel without opening up and vvithout cost to the Sellers, 40
During the inspection, the Vessel's deck and engine log books shall be made available for 41
examination by the Buyers. l f the Vessel is accepted after such ínspection, the sale shall 42
become outright and definite, subject only to the terms and conditions o f this Agreement, 43
provided the Sellers receive written notice o f acceptance from Ihe Buyers within 72 hours 44
after completion o f such inspection. 45
Should notice o f acceptance o f the Vessel's dassification records and o f the Vessel not be 46
received by the Sellers as aforesaid, the deposit together vvith interest eamed shall be 47
released inimediately to the Buyers, whereaíìer this Agreement shall be null and void. 48
* 4 a) and 4b) are altermlìves: delete whichever is nol applicabk. In the ahsence o f deleliom, 49
alternative 4a) to applỵ. 50
5. Notices, tinie and place ()f delivery 51
a) The Sellers shall keep the Buyers weli informed o f the Vessel's itinerary and shall 52
provide Ihe Buyers w itli , , and days notice o f Ihe estimaleđ time o f arrival at Ihe 53
intended place o f drydocking/under\vater inspection/delivery. When the Vessel is at the place 54
o f delivery and in every respect physically ready for delivery in accordance with this 55
Agreement, the Sellers shall give the Buyers a wTÌiten Notice o f Readiness for deliver>. 56
b) The Vessel shall be delivered and laken over saf'ely atloat al a safe and accessible berth or 57
anchorage aưin 58
in ihe Sellers' option. 59
Hxpected time o f delivery: 60
Date o f cancelling (see Clauses 5 c), 6 b) (iii) and 14); 61
c) I f the Sellers aniicipate that, nol\vithstanding the exercise o f due diligence by them, the 62
Vessel w ill not be ready for delivery by the cancelling date they may notif^' the Buyers in 63
writing stating the date \vhen they anticipate that the Vessel w ill be readv for delivery and 64
propose a new cancelling date. Upon receipt o f such notiíication the Buyers shall have the 65
option o f either cancelling diis Agreement in accordance with Clause 14 vvithin 7 running 66
days o f rcceipt o f the notice or o f accepting the new date as the new cancelling date. I f the 67
Buyers have not declared their option \vithin 7 running days o f receipt o f the Sellers' 68
notiíication or i f the Buyers accept the new date, the date proposeđ in the Sellers' notification 69
shall be deemed to be the new cancelling date and shall be substituted for the caiicelling 70
date stipulated in line 6 ]. 71
l f ứiis Agreemeiit is maintained vvith ửie nevv cancelling date all other terms and condiiions 72
hereof including those containeđ in Clauses 5 a) and 5 c) shall remain unaltered and in full 73
force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any 74
daim for damages the Buyers may have under Clause 14 for the Vessel not being ready by 75
the original cancelling date. 76
d) Should the Vessel become an actual, constructive or compromised total loss before delivery 77
the deposit together vvith interest eamed shall be released immediately to the Buyers 78
whereafter this Agreement shall be null and void. 79
2 10 Instltute of Chartered Shipbrokers

A p p en d ix 2 Noiv/egian Sale Form 1993
Norvvegian Saleíorm (Continued)

6. Drydocking/Divers Inspection 80
a)** The Sellers shall place the Vessel in drydock at ửie port o f delivery for ínspection by the 81
Classifícation Society o f the Vessel's underwater parts belovv the deepest load line, the 82
extern o f the inspection being in accordance with the Classification Societ>''s rules. l f the 83
rudder, propeller, bottom or other undervvater parts belovv the deepest loađ line are found 84
broken, damaged or defective so as to affect the Vessel's class, such defects shall be made 85
good at the Sellers' expense to the satisfaction o f the Classiíication Society without 86
condition/recommendation*. 87
b )** (i) The Vessel is to be delivered vvithout dr>’docking. However, the Buyers shall 88
have the right at their expense to arrange for an undervvater inspection by a diver approved 89
by the Classification Society prior to the delivery o f the Vessel. The Sellers shall at their 90
cosl make Ihe Vessel available for such inspection. The extern o f the inspection and the 91
conditions under vvhich it is perfomied shall be to the satisfaction o f the Classification 92
Society. l f the conditions at the port o f delivery are unsuitable for such inspection, the 93
Sellers shall make ứie Vessel available at a suitable altemative place near to the delivery 94
port. 95
(ii) I f the rudder, propeller, bottom or other undenvater parts belovv the deepest load line 96
are found broken, damaged or deíective so as to affect the VessePs class, then unless 97
repairs can be carried out alloat to Uie satisfaction o f the Classification Society, the Sellers 98
shall arrange for the Vessel to be drydocked at their expense for inspection by ửie 99
Classification Society o f the Vessel's undervvater parts belovv the deepest load line, the 100
extent o f the inspection being in accordancc with the Classification Society's rules. I f the 101
rudder, propeller, bottom or other undervvater parts belovv the deepest load line are found 102
broken, damaged or defective so as to affect ứie Vessel's class, such deíects shall be made 103
good by the Sellers at tlieir expense to thc satisfaction of'the Classilìcation Society 104
vvithout condiiion/recommendation*. In such event thc Sellers are lo pay also for ihe cost o f 105
the undervvater inspection aiid ihe Classification Society's attendance. 106
(iii) l f the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry- 107
docking facilities are available at thc port o f clelivery, the Sellers shall lake the Vessel 108
to a port where suitable drydocking facilities are available, whelher within or outside the 109
delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver 110
the Vessel at a port \vithin Ihe delivery range as per Clause 5 b) which shall, for the 111
purpose o f this Clause, become the new port o f delivery, In such event the cancelling date 112
provided for in Clause 5 b) shall be extended by the additional time required for the 113
drydocking and extra steaming, but limited to a maximum o f 14 running days. 114
c) I f the Vessel is drydocked pursuant to Clause 6 a) or 6 b) above 115
(i) the Classification Society may require survey o f the tailshaít system, the extent o f 116
the survey being to the satisfaction o f the Classification surveyor. I f such survey is not 117
required by the Classification Society, ihe Buyers shall have the right to require the tailshafl 118
to be dravvn and surveyed by the Classitìcation Society, the extent o f the survey being in 119
accordance with the Classification Society's rules for tailshaft survey and consistent with 120
the current stage o f the Vessel's survey cycle. The Buyers shall declare vvhether they 121
require the tailshaíì to be dravvn and surveyed not later than by the completion o f the 122
inspection by the Classification Society. The dravving and reíitting o f the tailshaft shall be 123
arranged by the Sellers. Should any parts o f the tailshaft system be condemned or found 124
defective so as to affect the Vessel's class, ứiose parts shall be renewed or made good at 125
the Sellers' expense to the satisfaclion o f the Classiíĩcation Society uithout 126
condition/recommendation*. 127
Ship Sale and Purchasing 21 I

A p p en d ix 2 NoiAvegian Sale Form 1993
Norvvegian Saleform (Continued)

(ii) the expenses relating to the survey o f the tailshaĩl system shall be bome 128
by the Buyers unless the Classification Society requires such survey to be caưied out, in 129
which case the Sellers shall pay these expenses. The Sellers shall also pay ửie expenses 130
i f the Buyers requirc the survey and parts o f the system are condemned or found defective 131
or broken so as to alĩect ứie Vessel's class*. 132
(iii) the expenses in connection vvith putting the Vessel in and taking her out o f 133
drydock, including the drydock dues and the Classiíication Society's fees shall be paid by 134
the Sellers i f the Classification Society issues any condition/recommendation* as a result 135
o f the survey or i f it requires survey o f ứie tailshaft system. In all other cases the Buyers 136
shall pay the aĩoresaid expenses, dues and fees. 137
(iv) the Buyers' representative shall have the right to be present in the drydock, but 138
\vithout interfering with the work or decisions o f the Classiíìcation surveyor. 139
(v) the Buyers shall have the right to have the undenvater parts o f the Vessel 140
cleaned and painted at their risk and expense without interfering vvith the Sellers' or ửie 141
Classification surveyor's vvork, i f any, and without atĩecting the Vessel's timely delivery. If, 142
hoNvever, the Buyers' work in drydock is still in progress vvhen the Sellers have 143
completed the vvork vvhich the Sellers are required to do, ữie additional docking timc 144
needed to complete the Buyers' work shall be for the Buyers' risk and expense. In the event 145
that the Buyers' work requires such additional time, the Sellers may upon completion o f the 146
Sellers' work tender Notice o f Readiness for delivcry whilst the Vessel is still in dr>'dock 147
and the Buyers shall be obliged to take delivery in accordance with Clause 3, \vhether 148
the Vessel is in drydock or nol and irrespeclive o f Clause 5 b). 149
* Notes. ifa n y, in the surveyor's report which are accepted by the Classification Society 150
without condition/recommendation are not to be taken into account. 151
** 6 aj and 6 h) are alternatives: delete whichever IS no! applicahìe. In ihe absence o f dektions, 152
alternative 6 a) to apply. 153
7. Spares/biinkers, etc. 154
The Sellers shall deliver tlie Vessel to the Buyers with ever> thing bclonging to her on boardand on 155
shore. A ll spare parts and spare equipment including spare tail-end shaft(s) anđ/or spare 156
propeller(s)/propeller blade(s), i f any, belonging to the Vessel at the time o f inspection used or 157
unused, wheiher on board or not shall become the Buyers' propert>, but spares on order are to be 158
excluded. For\varding charges, i f any, shall be for the Buvers'account. The Sellers are not required to 159
replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) vvhich 160
are taken out o f spare and used as replacement prior lo delivery'. but the replaced items shall be the 161
property o fth e Buyers. The radio installation and navigational equipment shall be included in the sale 162
vvithout extra payment i f ữiey are the property o f the Sellers Unased stores and provisions shall be 163
included in the sale and be taken over by the Buyers without extra payment. 164
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the 165
Sellers' ílag or name, provided they replace same vvith similar unmarked items. Librar>-, forms, etc., 166
exclusively for use in the Sellers' vessel(s), shall be excluded \vithout compensation. Caplain's, 167
Officers' and Crew's personal belongings including the slop chest are to be excluded from the sale, 168
as well as the fotlowing additional items (including items on hire): 169
The Buyers shail take over the remaining bunkers and unused lubricatíng oils in storage tanks and 170
sealed drums and pay the current net market price (excluding barging expenses) at the port and date 171
o f delivery o f the Vessel. 172
Payment under this Clause shall be made al the same time and place and in the same currency as 173
the Purchase Price. 174
212 institute of Chartered Shipbrokers

A p p e n d ix 2 Noi^v^/egian Sale Foi'in 1993
Norvvegian Saleíorm (Continued)

8. Documentation 175
The place o f closing: 176
In exchange for payment o f the Purchase Price the Sellers shall fumish the Buyers with delivery 177
documents. namely: 178
a) Legal B ill of'Sale in a foiTn recordable in (the country in which the Buyers are 179
to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages 180
aiid maritime liens or any other debts or claims whatsoever, duly notarially attested and 181
legalized by the consul o f such country orother competent authority. 182
b) Current Certiílcate o f OvvTiership issued by the competent auứiorities o f the flag State o f 183
theVessel. 184
c) Coníưmation o f Class issued vvithin 72 hours prior to delivery. 185
d) Current Certilìcate issued by the competent authorities stating that the Vessel is free from 186
registered encumbrances. 187
e) Certificate o f Deletion o f the Vessel from the VessePs registry or other official evidence of' 188
deletion appropriate to the Vessel's registry at the time o f delivery, or, in the event that the 189
registry does not as a matter o f practice issue such documentation immediately, a vvritten 190
underlaking by the Sellers to effect deletion from the VessePs registry forthwith and fumish a 191
Certiĩicate orother official evidence o f deletion to the Buyers promptly and latest within 4 192
(four) weeks after the Purchase Price has been paid and ữie Vessel has been delivered. 193
f) Any such additional documents as may rcasonably be required by the competent authorities 194
for the purpose o f registering the Vessel, provided the Buyers notilỳ the Sellers o f any such 195
documents as soon as possible aíler the date o f ửiis Agreement. 196
A t the time oí delivery ứie Buyers and Sellers shall sign and deliver to each otiicr a Protocol o f 197
Dclivei>' and Acceptance confirming ứie dale and time o f delivery o f the Vessel from the Sellers to the 198
Buycrs. 199
A t the tiưie o f delivery the Sellers shall hand lo the Buyers the classilìcalion certificate(s) as well as all 200
plans etc., vvhich are on board the Vessel. Olher certiíĩcates vvhich are on board the Vessel shalt also 201
be handed over to the Buyers unless the Sellers are required to retain same, in which case ửie 202
Buyers to have the right to take copies. Other technical documentation which may 203
be in the Sellers' possession shall be proniptly forwarded to the Buyers at their expense, i f they so 204
request. 'I he Sellers may keep the Vessel's log books but the Buyers to have the right to take 205
copies o f same. 206
9. Encumbrances 207
The Sellers warrant tliat the Vessel, at the time o f delivery, is free from all charters, encumbrances, 208
mortgages and maritime liens or any other debts whatsoever. The Sellers hereby undertake 209
to indemnilỳ ửie Buyers against all consequences o f claims made against the Vessel vvhich have 210
been incurred prior to the time o f delivery. 211
10. Taxes, etc. 212
Any taxes, fees and expenses in connection vvith the purchase and registration under ửie Buyers' ílag 213
shall be for the Buyers' account, whereas similar charges in connection with the closing o f ửie Sellers' 214
register shall be for the Sellers' account. 215

A p p e n d ix 2 Notwegian Sale Form 1993
Norvvegian Saleform (Continued)

lĩ. Condition on delivery 216
The Vessei with everything belonging to her shall be at Ihe Sellers' risk and expense until she is 217
delivered to the Buyers, but subject to the teims and conditions o f this Agreement she shall be 218
delivered and taken over as she was at the time o f inspection, fair vvear and tear excepted. 219
However, the Vessel shall be delivered with her class maintained \vithout condition/recommendation*. 220
free o f average damage affecting the Vessel's class, and with her classification ceriiíĩcates and 221
national certiíĩcates, as well as all other certiíĩcates the Vessel had at the time o f inspection, valid and 222
unextended vvithout condition/recommendation* by Class or the relevant authorities at the time o f 223
deliver>', 224
"Inspection" in this Clause 11, shall mean the Buyers' inspection according to Clause 4 a) or 4 b), í f 225
applicable, or the Buyers' inspection prior to the signing o f this Agreement. I f the Vessel is taken over 226
vvithout inspection, the date o f this Agreement shall be ứie relevant date. 227
* Notes, i f any, in the surveyor's report \vhich are accepted by theClassiíìcation Society 228
without condition/recommendation are nol to be taken into account. 229
12. Name/markings 230
Upon delivery the Buyers undcrtake to change the name o f thc Vessel and alter íunnel markings. 231
13. Buyers' deíault 232
Should the deposit not be paid in accordance w ith Clause 2, the Sellers have the right to cancel this 233
Agreemem, and they shall be enlitled 10 claiin conipensatioii t'or their losses and foi all expeiises 234
incurred together vvith interest. 235
Should the Purchase Price not be paid in accordance with Clause 3, Ihe Sellers have the right to 236
cancel the Agrccment, in which case the dcposit together with interest earned shall be released to thc 237
Sellers. I f the deposit does not cover ữieir loss, the Sellers shall be entitled to claim turther 238
compensation Ibr their losses and for all expenses incuưed together with interesl 239
14. Scllcrs' deíault 240
Should the Sellers fail to give Notice o f Readiness in accordance w ith Clause 5 a) or fail to be ready 241
10 validly complete a legal lransfer by the date stipulated in line 61 the Buyers shall have 242
the option o f cancelling this Agreement provided alvvays that the Sellers shall be granted a 243
maximum ot'3 banking days after Notice o f Readiness has been given to makc arrangements 244
for the documentalion set out in Clause 8 I f after Notice o f Readiness has been given bui before 245
the Buyers have taken delivery, the Vessel ceases to be physically ready for cleliver>' and is not 246
niađe physically ready again in every respect by the date stipulated in line 61 and nevv Notice o f 247
Readiness given, the Buvers shall retain their option to cancel. In the event that the Buyers elect 248
to cancel this Agreenient the deposit togeứier with interest eamed shall be released to them 249
immediately 250
Should the Sellers tail to give Nolice o f Readiness by the date stipulated in line 61 or fail to be ready 251
to validly complete a legal transtềr as atbresaid they shall rnake due compensation to the Buyers for 252
their loss and for all expenses together with interest i f their tailure is due to proven 253
negligence and vvhether or not ửie Buyers cancel Ihis Agreemenl, 254
15. Buyers' representatives 255
After this Agreeinent has been signed by both parties and the deposit has been lodged, the Buyers 256
have ữie right to place two representatives on board ứie Vessel at their sole risk and expense upon 257
arrival at on or about 258
These representatives are on board for the purpose o f íamiliarisalion and in ửie capacity o f 259
observers only, and they shall not interfere in any respect vvith the operation o f the Vessel. The 260
Buyers' representatives shall sign ửie Sellers' letter o f indemnity prior to their embarkation. 261

A p p e n d ix 2 Nowegian Sale Foi'm 1993
Norvvegian Saletorm (Continued)

16. Arbitration 262
a)* This Agreement shall be governed by and construed in accordance with English lavv and 263
any dispute arising out o f this Agreement shall be referred to arbitration in London in 264
accordance w ith the Arbitration Acts 1950 and 1979 or any statutory modiíication or 265
re-enactment thereof for the time being in force, one arbitrator being appointed by each 266
party. On the receipt by one party o f the nomination in vvriting o f the other party's arbitrator, 267
that party shall appoint their arbitrator vvithin fourteen days, failing which ứie decision o f the 268
single arbitrator appointed shall apply. I f tvvo arbitrators properly appointed shall not agree 269
they shall appoint an umpire vvhose decision shall be íinal. 270
b)* This Agreement shall be govemed by and construed in accordance with Title 9 o fth e 271
United States Code and the Law o f the State o f Nevv York and should any díspute arise out o f 272
this Agreemeni, ứie matter in dispute shall be refeưed to three persons at New York, one to 273
be appointed by each o f the parties hereto, and the third by the tvvo so chosen; their 274
decision or that o f any two o f them shall be final, and for purpose o f enforcing any award, this 275
Agreement may be made a rule o f the Court. 276
The proceedings shall be conducted in accordance with the rules o f the Society o f Maritime 277
Arbitrators. Inc. New York. 278
c)* Any dispute arising out o f this Agreement shall be referred to arbitralion at 279
, subịect to the procedures applicable there. 280
The lavvs o f shall govern this Agreement. 281
* 16 a). 16 b) and 16 c) are ahernatives: delete whichever is no! applicabk. In the absence o f 282
deletions, alternaíive 16 a> to apply. 283
By kind permission o f The Norvvegian Sliipbrokers Association

A p p en d ix 2 Noivyegian Sale Form 1993

A p p en d ix 3 Not^vegian Sale Form 2 0 11
MEMORANDUM 0F AGREEMENT Norwegian Shipbrokers' Association's

Memorandum 01 Agreem ent for sale and
purchase of ships. Adopted by BIMCO in 1956.
Code-nam e
SALEPORM 2012
Revised 1966, 1983 and 1986/87. 1993 and 2012
Dated: 1
(Name oísellers), hereinatter called the “Sellers”, have agreed to sell, and 2
{Name oỉbuyers), hereinaíter called the "Buyers”, have agreed to buy: 3
Name of vessel: 4
IMO Number: 5
Classification Society: 6
Class Notation: 7
Year of Build: BuilderA'ard: 8

Flag: Place of Registration: GT/NT; / 9
hereinaíter called the “Vessel”, on the following terms and conditions: 10

Definitions 11
“Banking Days" are days on which banks are open both in the country of the currency stipulated for 12
the Purchase Price in Clause 1 (Purchase Price) and in the place of closing stipulated in Clause 8 13
(Documentation) and (aơd additional jurìsdictions as approphate). 14
“Buyers' Nominated Flag State” means {State flag State). 15
“Class" means the class notation referred to above. 16
“Classiíication Society" means the Society referred to above. 17
"Deposit" shall have the meaning given in Clause 2 (Deposit) 18
“Deposit Holder" means (State name and location of Deposit Holder) or, if left blank, the 19
Sellers’ Bank, which shall hold and release the Deposit in accordance with this Agreement. 20
“In writing" or "vvritten" means a letter handed over from the Sellers to the Buyers or vice versa, a 21
registered letter, e-mail or teleíax. 22
"Parties" means the Sellers and the Buyers. 23
“Purchase Price” means the price for the Vessel as stated in Clause 1 (Purchase Price). 24
“Sellers’ Account" means {State details o ỉb an k account) at the Sellers’ Bank. 25
“Sellers’ Bank” means (State name oỉbank, branch and details) or, if left blank, the bank 26
notiíied by the Sellers to the Buyers for receipt of the balance of the Purchase Price. 27
1. Purchase Price 28
The Purchase Price is {State currency and amount both in vvords and íigures). 29
2. Deposit 30
As security for the correct fulfilment of this Agreement the Buyers shall lodge a deposit of 31
% ( per cent) or, if left blank, 10% {ten per cent), of the Purchase Price (the 32
“Deposit”) in an interest bearing account for the Parties with the Deposit Holder within three (3) 33
Banking Days after the date that: 34
(i) this Agreement has been signed by the Parties and exchanged in original or by 35
e-mail or teleíax; and 36
(ii) the Deposit Holder has confirmed in vvriting to the Parties that the account has been 37
opened, 38
The Deposit shall be released in accordance with joint vvritten instructions of the Parties. 39
Interest, if any, shall be credited to the Buyers. Any fee charged for Holding and releasing the 40
Deposit shall be borne equally by the Parties. The Parties shall provide to the Deposit Holder 41
This document is 8 Computer Qensrated SALEFORM 201? form piinted by suthority of th t Norvvegian Shipbrokers' Assữciation Any insertion or deletton to tha (orm musl be clsariy vitible In the flv«ni ef
any modificatjort mad« lo the pre-prmted text of thi« document which it nol cloarty vittble. th« text of tha oríginBl ■pproved document shall appíy. BIMCO and tha Norw»g>ao Shipbrokers Aoociation
assum« no responsíbíltty for any ioss, damage or expenss as a result of discrepanáoỉ betvveen th« oríeinal spprovad documenl in d this Computer gener«ted document.

A p p e n d ix 3 Noiwegian Sale Form 2 0 12
all necessary documentation to open and maintain the account without delay. 42
3. Payment 43
On delivery of the Vessel, but not later than three (3) Banking Days after the date that Notice of 44
Readiness has been given in accordance with Clause 5 (Time and place of delivery and 45
notices): 46
(i) the Deposỉt shall be released to the Sellers; and 47
(ii) the balance of the Purchase Price and all other sums payable on delivery by the Buyers 48
to the Sellers under this Agreement shall be paid in full free of bank charges to the 49
Sellers' Account. 50
4. Inspection 51
(a)* The Buyers have inspected and accepted the Vessers classỉfication records. The Buyers 52
have also inspected the Vessel at/in (State place) on (State date) and have 53
accepted the Vessel following this inspection and the sale is outright and definite, subject only 54
to the terms and conđitions of this Agreement. 55
(b)* The Buyers shall have the right to inspect the Vessers classitication records and declare 56
vvhether same are accepted or not vvithin (State date/perioơ). 57
The Sellers shall make the Vessel available for inspection aưin (State place/range) within 58
(State date/períod). 59
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the 60
Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. 61
The Buyers shall inspect the Vessel vvithout opening up and without cost to the Sellers. 62
During the inspection, the Vessel's deck and engine log books shall be made available for 63
examination by the Buyers. 64
The sale shall become outright and deíinite, subject only to the terms and conditions of this 65
Agreement, provided that the Sellers receive written notice of acceptance of the Vessel from 66
the Buyers vvithin seventy-two (72) hours after completion of such inspection or after the 67
date/last day of the period stated in Line 5 9 . vvhichever is earlier. 68
Should the Buyers fail to undertake the inspection as scheduled and/or notice of acceptance of 69
the Vessel's classiíication records and/or of the Vessel not be received by the Sellers as 70
aíoresaid, the Deposỉt together with interest earned, if any, shall be released immediately to the 71
Buyers, whereafter this Agreement shall be null and void. 72
'4(a) and 4(b) are altematives: delete whicheveris noi applicable. In the absence oídeletions, 73
altemative 4(a) shall apply. 74
5. Time and piace of delivery and notices 75

(a) The Vessel shall be delivered and taken over sately afloat at a safe and accessíble berth or 76
anchorage aưin ịstate place/range) in the Sellers' option, 77
Notlce of Readiness shali not be tendered before: (ơaíe) 78
Cancelling Date (see Clauses 5(c). 6 (a ìíiì. 6 (a) (iii) and 14): 79
(b) The Sellers shall keep the Buyers well intormed of the Vessel's itinerary and shall 80
provide the Buyers with twenty (20), ten (10), five (5) and three (3) days’ notice of the date the 81
Sellers intend to tender Notice of Readiness and of the intended place of delivery. 82
W hen the Vessel is at the place of delivery and physically ready for deiivery in accordance with 83
this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery. 84
(c) lf the Sellers anticipate that, notvvithstandỉng the exercise of due diligence by them, the 85
Vessel will not be ready for delivery by the Cancelling Date they may notify the Buyers in vvriting 86
stating the date when they anticipate that the Vessel will be ready for delivery and proposing a 87
new Cancelling Date. Upon receipt of such notiíication the Buyers shall hav8 the option of 88
either cancelling this Agreement in accordance with Clause 14 (Sellers’ Deíault) vvithin three (3) 89
Banking Days of receipt of the notice or of accepting the new date as the new Cancelling Date. 90
lf the Buyers have not declared their option vvithin three (3) Banking Days of receipt of the 91
Sellers' notiíication or if the Buyers accept the new date, the date proposed in the Sellers' 92
notification shall be deemed to be the new Cancelling Date and shall be substituted for the 93
Thia documant IS • computvr 9«ner8ted SALEFORM 2012 íorm prìnttd by auửtority oí Iha Norw«gian Shipbrokers' Association. Any insenron or del«lior, to the form musl be clearty vieible. In the «v«nt of
»ny mođiíicâbon mađe lo the pre-pnnteđ text of th ij document \t not ctearly vistbta. the t«rt of the oriQinal approveđ đocumenl shall appty BIMCO and the Noívvegian Stírpbf0ker$‘ Astociation
• 8 »um « no r»«poo«iM ity for an y lo s t, d « m ag e or e x p t n t t a s a r«»uH of đ iicr*p« nc*e 5 betvveen lh« onợioal approveđ d o cu m enl an d lhi« com p utar g«nerBleđ docum «nt
2 18 Institute of Chartered Shipbrokers

A p p e n d ix 3 Notv/egian Sale Form 2012
Cancelling Date stipulated in line 7 9 . 94

lf this Agreement is maintained with the new Cancelling Date all other terms and conditlons 95
hereot including those contained in Clauses 5(b) and 5{d] shall remain unaltered and in full 96
force and effect. 97
(d) Cancellation, íailure to cancel or acceptance of the new Cancelling Date shall be entirely 98
vvithout prejudice to any claim for damages the Buyers may have under Clause 14 (Sellers' 99
Deíault) for the Vessel not being ready by the original Cancelling Date. 100
(e) Should the Vessel become an actual, constructive or compromised total loss before đelivery 101
the Deposit together with interest earned, if any, shall be released immediately to the Buyers 102
whereafter this Agreement shall be null and void. 103
Divers Inspection / Drydocking 104

(a)* 105
(i) The Buyers shall have the option at their cost and expense to arrange for an undervvater 106
inspection by a diver approved by the Classification Society prior to the delivery of the 107
Vessel. Such option shall be declared latest nine (9) days prior to the Vessel’s intended 108
date of readiness for delivery as notiíied by the Sellers pursuant to Clause 5(b) of this 109
Agreement. The Sellers shall at their cost and expense make the Vessel available for 110
such inspection. This inspection shall be carried out without undue delay and in the 111
presence of a Classiíication Society surveyor arranged for by the Sellers and paid for by 112
the Buyers. The Buyers' representative(s) shall have the right to be present at the diver’s 113
inspection as observer(s) only vvithout intertering with the work or decisions of the 114
Classiíicatlon Society surveyor. The extent of the inspection and the conditions under 115
which it is períormed shall be to the satisíaction of the Classiíication Society. If the 116
conditions at the place of delivery are unsuitable for such inspection, the Sellers shall at 117
their cost and expense make the Vessel available at a suitable alternative place near to 118
the delivery port, in which event the Cancelling Date shall be extended by the additional 119
time required for such positioning and the subsequent re-positioning. The Sellers may 120
not tender Notice of Readiness priorto completion of the undervvater inspection. 121
(ii) lf the rudder, propeller, bottom or other undervvater parts below the deepest load line are 122
found broken, damaged or defective so as to affect the Vessel's class, then (1) unless 123
repairs can be carried out aíloat to the satisíaction of the Classiíication Society, the 124
Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by 125
the Classiíication Society of the Vessel’s undenvater parts below the deepest load line, 126
the extent of the inspection being in accordance with the Classitication Society's rules (2) 127
such deíects shall be made good by the Sellers at their cost and expense to the 128
satisíaclion of the Ciassiílcation Society vvithout condition/recommendation** and (3) the 129
Sellers shall pay for the undervvater inspection and the Classification Society's 130
attendance. 131
Notvvithstanding anything to the contrary in this Agreement, if the Classiíication Society 132
do not require the aíorementioned deíects to be rectitied beíore the next class 133
drydocking survey, the Sellers shall be entitled to deliver the Vessel with these deíects 134
against a deduction from the Purchase Price of the estimated direct cost (of labour and 135
materials) of carrying out the repairs to the satisfaction of the Classiíication Society, 136
whereafter the Buyers shall have no turther rights whatsoever in respect of the deíects 137
and/or repairs. The estimated direct cost of the repairs shall be the average of quotes 138
for the repair work obtained from two reputable independent shipyards at or in the 139
vicinity of the port of delivery, one to be obtained by each of the Parties vvithin two (2) 140
Banking Days from the date of the imposition of the condition/recommendation, unless 141
the Parties agree othervvise. Should either of the Parties fail to obtain such a quote within 142
the stipulated time then the quote duly obtained by the other Party shall be the sole basis 143
for the estimate of the direct repair costs. The Sellers may not tender Notice of 144
Readiness prior to such estimate having been eslablished. 145
(iii) lf the Vessel is to be drydocked pursuant to Clause 6(aHii) and no suitable dry-docking 146
tacilities are avaílable at the port of delivery, the Sellers shall take the Vessel to a port 147
where suitable drydocking tacilities are available, vvhether within or outside the delivery 148
range as per Clause 5 (a ). Once drydocking has taken place the Sellers shall deliver the 149
Vessel at a port vvithin the delivery range as per Clause 5(a) which shall, for the purpose 150
of this Clause, become the new port of delivery. In such event the Cancellỉng Date shall 151
be extended by the additional time required for the drydocking and extra steaming, but 152
limited to a maximum of íourteen (14) days. 153
3
Thift documeni 1» ■ coíTipulef generated SALEPORM 2012 íorm pnnted by Buthonty of (h t Norw«B>an Shipbrokers' Assữciaoon. Any msertíon or del«tion to the form must M cJ«ariy vlslDlt. In the vvent of
any rDOdirication m«d8 lo pre-printad l«xt of this đocument vvhích Í9 noi clearly vi9ibl«. the taxt of th0 onginal approved docum«nl shall apply. BIMCO and the NorvMgitn Shipbrokers' A«<ociation
auum e no rsiponsibỉKty for «ny \osi. damags or •xp é n t* a t » r«>ưH of đi«cr«partct«> b«lw««n th i ohginsi approv«d documvnt and this computcr g«ner>ted ciocurTMni

A p p e n d ix 3 Norvv/egian Sale Form 20 I 2
(b)* The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the 154
Classification Society of the Vessel's undervvater parts belovv the deepest load line, the extent 155
of the inspection being in accordance with the Classiíication Society's rules. If the rudder, 156
propeller, bottom or olher undervvater parts belovv the deepest load line are íound broken, 157
damaged or deíective so as to affect the Vessel's class, such deíects shall be made good at the 158
Sellers' cost and expense to the satisfaction of the Classiíication Society without 159
condition/recommendation**. In such event the Sellers are also to pay for the costs and 160
expenses in connection with putting the Vessel in and taking her out of drydock, including the 161
drydock dues and the Classification Society's fees. The Sellers shall also pay for these costs 162
and expenses if parts of the tailshaít system are condemned or found deíective or broken so as 163
to affect the Vessel's class. In all other cases, the Buyers shall pay the aíoresaid costs and 164
expenses, dues and fees. 165
(c) lf the Vessel is drydocked pursuant to Clause 6 (aUii) or 6 (b) above; 166
(i) The Classiíication Society may require survey of the tailshaít system, the extent of the 167
survey being to the satisfaction of the Classiíication surveyor. If such survey is 168
not required by the Classiíication Society, the Buyers shall have the option to require the 169
taỉlshaft to be drawn and surveyed by the Classification Society, the extent of the survey 170
being in accordance with the Classitication Society's rules for tailshaít survey and 171
consistent with the current stage of the Vessel's survey cycle. The Buyers shall declare 172
whether they require the tailshatt to be drawn and surveyed not later than by the 173
completion of the inspection by the Classiíication Society. The dravving and reíitting of 174
the tailshaít shall be arranged by the Sellers. Should any parts of the tailshatt system be 175
condemned or founđ deíective so as to affect the Vessers class, those parts shall be 176
renewed or made good at the Sellers' cost and expense to the satistaction of 177
Classification Society without condition/recommendation**. 178
(ii) The costs and expenses relating to the survey of the tailshaữ system shall be borne by 179
the Buyers unless the Classiíication Society requires such survey to be carried out or if 180
parts of the system are condemned or found deíective or broken so as to affect the 181
Vessel's class, in vvhich case the Sellers shall pay these costs and expenses. 182
(iii) The Buyers' representative(s) shall have the right to be present in the drydock, as 183
observer(s) only without interíering with the work or decisions of the Classiíication 184
Society surveyor. 185
(iv) TheB uyers shall have the right to have the underwater parts of the Vessel cleaned 186
and painted at their risk, cost and expense vvithout interíering with the Sellers' or the 187
Classification Socỉety surveyor's work, if any, and without affecting the Vessel's timely 188
delivery. If, hovvever, the Buyers' work in drydock is still in progress when the 189
Sellers have completed the work whlch the Sellers are required to do, the additional 190
docking time needed to complete the Buyers' work shall be for the Buyers' risk, cost and 191
expense. In the event that the Buyers' work requires such additional time, the Sellers 192
may upon completion of the Sellers' work tender Notice of Readiness for delivery whilst 193
the Vessel is still in drydock and, notvvithstanding Clause 5(a). the Buyers shall be 194
obliged to take delivery in accordance with Clause 3 (Payment), vvhether the Vessel is in 195
drydock or not. 196
*ổ (a) and 6 (b) are altematives; delete whlcheveris noi applicable. In the absence oídeletions, 197
altemative 6 (a) shall apply. 198
"N o te s o r memoranda, iỉany, in the surveyor's report which are accepted by the Classiíication 199
Society without condition/recommendation are not to be taken into accounl. 200
Spares, bunkers and other items 201

The Sellers shall deliver the Vessel to tne Buyers with everytning Delonging to her on board 202
and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or 203
spare propeller(s)/propelier blade(s), if any, belonging to the Vessel at the time of inspectíon 204
used ór unused, vvhether on board ór not shall become the Buyers' property, but sparés on 205
order are excluded. Forwarding charges, if any, shall be for the Buyers' account. The Sellers 206
are not required to replace spare parts including spare tail-end shaft(s) and spare 207
propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to 208
delivery, but the replaced items shall be the property of the Buyers. Unused stores and 209
provisions shall be included in the sale and be taken over by the Buyers vvỉthout extra payment. 210
Library and forms exclusively for use in the Sellers' vessel(s) and captain's, officers' and crew's 211
personal belongings including the slop chest are excluded from the sale vvithout compensation, 212
Th ít document i i a Computer eenaraied SALEPORM 2012 fi>mi prinitd by authonty of tfie Nom«oi8n Shipbrokeri' Astociation. Any lns«rtlon or deleilon to lorm nr>us( be ctaarty viiiD lt In eveni or
•ny modiícation mod« to lh« pre-pnntcđ taxt of thít document Mtxch ú not cỉearly visibta. the text of th« onomal approvvd document «hail Ipply. BIMCO and Noovegian Shipbroker»‘ Assooabon
• M u m * no r«spon»íbiiity íor any l o i i dam ag* or «xp«ns« 8 t a r * tu lt o f d ttc rtp a n c M t b*«w t«n th« onginal apprav*d docuxrcnt and this C0(nput*r g«n«rBt*d docum *nt

A p p e n d ix 3 Noiêgian Sale Fortn 2 0 12
as well as the following additional items: (include list) 213
Items on board which are on hire or owned by third parties, listed as follows, are excluded from 214
the sale vvithout compensation; (include list) 215
Items on board at the time of inspection vvhich are on hire or ovvned by third parties, not listed 216
above, shall be replaced or procured by the Sellers prior to delivery at their cost and expense. 217
The Buyers shall take over remaining bunkers and unused lubricating and hydraulic oils and 218
greases in storage tanks and unopened drums and pay either: 219
(a) *the actual net price (excluding barging expenses) as evidenced by invoices or vouchers; or 220
(b) ’ the current net market price (excluding barging expenses) at the port and date of delivery 221
of the Vessel or, if unavailable, at the nearest bunkering port, 222
for the quantities taken over. 223
Payment under this Clause shall be made at the same time and place and in the same 224
currency as the Purchase Price. 225
"inspection" in this Clause 7 . shall mean the Buyers’ inspection according to Clause 4(aì or 4(b) 226
(Inspection), ịf applicable. If the Vessel is taken over vvithout inspection, the date of this 227
Àgreement shatl be the relevant date. 228
'(a) and (b) are alternatives, ơelete whichever is not applicable. In the absence of deletions 229
alternative (a) shall apply. 230
Documentation 231
Theplaceoíclosing: 232
(a) In exchange for payment of the Purchase Price the Sellers shall provide the Buyers with the 233
following delivery documents; 234
(i) Legal Bill(s) of Sale in a form recordable in the Buyers’ Nominated Flag State, 235
transíerring title of the Vessel and statỉng that the Vessel is free from ali mortgages, 236
encumbrances and maritime liens or any other debts vvhatsoever, duly notarially attested 237
and legalised or apostilled, as required by the Buyers' Nominated Flag State; 238
(II) Evidence that all necessary corporate, shareholder and other action has been taken by 239
the Sellers to authorise the execution, delivery and períormance of this Agreement; 240
(iil) Power of Attorney of the Sellers appointing one or more representatives to act on behalf 241
of the Sellers in the pertormance of this Agreement, duly notarially attested and legalised 242
or apostílied (as appropriate); 243
(iv) Certificate or Transcript of Registry issued by the competent authorities of the flagState 244
on the date of delivery evidencing the Sellers’ ownership of the Vessel and that the 245
Vessel is free from registered encumbrances and mortgages, to be faxed or e-mailed by 246
such authority to the closing meeting with the original to be sent to the Buyers as soon as 247
possible after delivery of the Vessel; 248
(v) Declaration of Class or (depending on the Classitication Society) a Class Maintenance 249
Certiíicate issued vvithin three (3) Banking Days prior to delivery confirming that the 250
Vessel is in Class free of condition/recommendation; 251
(vi) Certiíicate of Deletion of the Vessel from the Vessel's registry or other official evidence of 252
deletion appropriate to the Vessers registry at the time of delivery, or, in the event that 253
the registry does not as a matter of practice issue such documentation immediately, a 254
written undertaking by the Sellers to effect deletion from the Vessel's registry forthwith 255
and provide a certiíicate or other official evidence of deletion to the Buyers promptly and 256
latest vvithin four (4) weeks after the Purchase Price has been paid and the Vessel has 257
been delivered; 258
(vii) A copy of the Vessel's Continuous Synopsis Record certiíying the date on vvhich the 259
Vessel ceased to be registered with the Vessers registry, or, in the event that the registry 260
does not as a matter of practice issue such certiticate immediately, a vvritten undertaking 261
from the Sellers to provide the copy of this certiíicate promptly upon it being issued 262
together with evidence of submission by the Sellers of a duly executed Form 2 stating 263
the date on which the Vessel shall cease to be registered with the Vessel's registry; 264
Thít document Ì8 a Computer generat«d 8ALEP0RM 2012 íoim phnt»d by authorty oí th* Norvvvgian Shipbrokers' As»ociatu3n Any initrtio n or delBtion to the form musl dearly visíble. In the ev*nt of
any fnođification made 10 me prs-prínlad taxi 0l this documeni wt)ich IS not clearly vistbld. tho text of ỉh« origínal approved document 9haU appFy. BIMCO and the NorvMgisn ShípbfOlc«rs' Associatton
assume no rssponsibility for any to$s. damage or expons* «$ a resutt of discrepsr)ct«s between the oríginal approveú oocumani and thls Computer gensraitcl document

(viii) Commercial Invoice for the Vessel; 265
(ix) Commercial Invoice(s) for bunkers, lubricating and hydraulic oils and greases; 266
(x) A copy of the Sellers’ letter to thelr satellite communication provider cancellìng the 267
Vessel's Communications contract which is to be sent immediately after deliveryof the 268
Vessel; 269
(xi) Any additional documents as may reasonably be required by the competent authorities of 270
the Buyers’ Nominated Flag State for the purpose of registering the Vessel, provided the 271
Buyers notiíy the Sellers of any such documents as soon as possible after the date of 272
this Agreement; and 273
(xii) The Sellers’ letter of coníirmation that to the best of their knowledge, the Vessel is not 274
black listed by any nation or international organisation. 275
(b) At the time of delivery the Buyers shall provide the Sellers with: 276
(ỉ) Evidence that all necessary corporate, shareholder and other action has been taken by 277
the Buyers to authorise the execution, delivery and períormance of this Agreement; and 278
(II) Povver of Attorney of the Buyers appointing one or more representatives to act on behalf 279
of the Buyers in the pertormance of this Agreement, duly notarially attested and legalised 280
or apostilled (as appropriate). 281
(c) lf any of the documents listed in Sub-clauses (a) and (b) above are not in the English 282
language they shall be accompanied by an English translation by an authorised Iranslator or 283
certiíied by a lawyer qualiíied to practice in the country of the translated language. 284
(d) The Parties shall to the extent possible exchange copies, draíts or samples of the 285
documents listed in Sub-clause (a) and Sub-clause (b) above for revievv and comment by the 286
other party not later than {State number o f days), or if left blank, nine (9) days prior to the 287
Vessel's intended date of readiness for delivery as notifìed by the Sellers pursuant to 288
Clause 5(bl of this Agreement. 289
(e) Concurrent with the exchange of documents in Sub-clause (a) and Sub-clause (b) above, 290
the Sellers shall also hand to the Buyers the classiíication certificate(s) as well as all plans, 291
dravvings and manuals, (excluding ISM/ISPS manuals), which are on board the Vessel. other 292
certificates which are on board the Vessel shall also be handed over to the Buyers unless 293
the Sellers are required to retain same, in which case the Buyers have the rỉght to take copies. 294
(f) other technical documentation which may be in the Sellers' possession shall promptly after 295
delivery be forwarded to the Buyers at their expense, if they so request. The Sellers may keep 296
the Vessel's log books but the Buyers have the right to take copies of same. 297
(g) The Parties shall sign and deliver to each other a Protocol of Delivery and Acceptance 298
coníirming the date and time of delivery of the Vessel from the Sellers to the Buyers. 299
9. ỊEncumbrances 300
The Sellers vvarrant that the Vessel, at the time of delivery, is free from all charters, 301
encumbrances, mortgages and maritime liens or any other debts whatsoever, and is not subject 302
to Port State or other administrative detentions. The Sellers hereby undertake to indemniíy the 303
Buyers against all consequences of ciaims made against the Vessel which have been incurred 304
prior to the time of delivery. 305
10. Taxes, fees and expenses 306

Any taxes, fees and expenses in connection with the purchase and registration in the Buyers' 307
Nominated Flag State shall be for the Buỵers' account, vvhereas similar charges in connectlon 308
with the closing of the Sellers' register shall be for the Sellers' account. 309
11. Condition on delivety 310

The Vessel with everything belonging to her shall be at the Sellers' risk and expense until she is 311
delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be 312
delivered and taken over as she was at the tlme of inspection, fair wear and tear excepted. 313
Hovvever, the Vessel shall be ờelivered free of cargo and free of stowaways with her Class 314
maintained without condition/recommenđation*, free of average damage affecting the Vessel's 315
class, and with her classification certiíicates and national certiticates, as well as all other 316
certiíicates the Vessel had at the time of inspection, valid and unextended vvithout 317
condition/recommendation* by the Classiíication Society or the relevant authorities at the tỉme 318
6
Thi» ơocument ís a compuler 9»narai®d SALEPORM 2012 íorm printed by ■uưiorrty of Iho Nor\w8i«n 5h»pbroKer»’ AísodiUon. Any mstrtion 0f đekỉtion fofm musl be clcBíly vl»ibte. In the evenỉ of
any modiftcauon mide lo tha pre-prin(ed Itx t of this document v^ích i» not ciearty visibie, th0 ỉext or tne onginal tpprov«d docum«nt «hsll appV BIMCO and ư>« Norwegian Shipbrokers' Associaton
u & u m a no rcsponsibibty fo r any ioss, damag« or e x p e n tf a» a r«$uN o f di$cr«panc)«» be(vii««n th» onginal approved docum ent and this comput«r generat«d docum ent

A p p e n d ix 3 Noivêgian Sale Form 2 0 12
oídelivery. 319
"inspection" in this Clause 11. shall mean the Buyers' inspection according to Clause 4(a) or 320
4(b) (Inspections), if applicable. If the Vessel is taken over vvithout inspection, the date of this 321
Agreèmènt shall be the relevant date. 322
'Notes and memoranda, if any, in the surveyoi^s report which are accepted by the Classiiication 323
Society without condition/recommendation are not to be taken into account. 324
12. Name/markings 325

Upon delivery the Buyers undertake to change the name of the Vessel and alter íunnel 326
markings. 327
13. Buyers'deíault 328

Should the Deposit not be lodged in accordance with Clause 2 (Deposit), the Sellers have the 329
rỉght to cancel this Agreement” and they shall be entitled to claim cómpénsation for their losses 330
and for all expenses incurred together with interest. 331
Should the Purchase Price not be paid in accordance with Clause 3 (Payment), the Sellers 332
have the right to cancel this Agreement, in which case the Deposit together with interest 333
earned, if any, shall be released to the Sellers. If the Deposit does not cover their loss, the 334
Sellers shall be entitled to claim íurther compensation for their losses and for all expenses 335
incurred together with interest. 336
14. Sellers' default 337

Should the Sellers fail to give Notice of Readlness in accordance with Clause 5(b) or fail to be 338
ready to validly complete a legal transíer by the Cancelling Date the Buyers shall have the 339
option of cancelling this Agreement. If after Notice of Readiness has been given but beíore 340
the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not 341
made physically ready again by the Cancelling Date and new Notice of Readiness given, the 342
Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this 343
Agreement, the Deposit together with interest earned, if any, shall be released to them 344
immediately. 345
Should the Sellers fail to give Notice of Readiness by the Cancelling Date or fail to be ready to 346
validly complete a legal transíer as aforesaid they shall make due compensation to the Buyers 347
íortheir loss and for all expenses together with interest if their tailure is due to proven 348
negligence and whether or not the Buyers cancel this Agreement. 349
15. Buyers' representatỉves 350

After this Agreement has been signed by the Parties and the Deposit has been lodged, the 351
Buyers have the right to place two (2) representatives on board the Vessel at their sole risk and 352
expense. 353
These representatives are on board for the purpose of íamiliarisation and in the capacity of 354
observers only, and they shall not interíere in any respect with the operation of the Vessel. The 355
Buyers and the Buyers’ representatives shall sign the Sellers' p&l Club’s Standard letter of 356
indemnity prior to their embarkation. 357
16. Law and Arbitration 358

(a) *This Agreement shall be governed by and construed in accordance with English law and 359
any dispute arising out of or in connection with this Agreement shall be reíerred to arbitration in 360
London in accordance with the Arbitration Act 1996 or any statutory modification or re- 361
enactment thereoí save to the extent necessary to give effect to the provisions of this Clause. 362
The arbitration shall be conducted in accordance with the London Maritime Arbitrators 363
Association (LMAA) Temns current at the time when the arbitration proceedings are 364
commenced. 365
The reíerence shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall 366
appoint its arbitrator and send notice of such appointment in vvriting to the other party requiring 367
the other party to appoint its own arbitrator within tourteen (14) calendar days of that notice and 368
stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own 369
arbitrator and gives notice that it has done so within the íourteen (14) days speciíied. If the 370
other party does not appoint its own arbitrator and give notice that it has done so within the 371
tourteen (14) days speciíied, the party reíerring a dispute to arbitration may, vvithout the 372
requirement of any further prior notice to the other party, appoint its arbitrator as sole arbilrator 373
and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on 374
both Parties as ịf the sole arbitrator had been appointed by agreement. 375
7
Tni» đocument if a coữtputer g«n«raled SALEPORM 2012 form prtnteđ by •ulhonty oí th« Norvivgian ShipbfoK*fi' AsíocHition, Any líiM rtion or deletion to tha form m uít b« cle#fty viêibte. In lh« evenl of
any modiĩtcation made to the pre-piỲited text oí Utii document vvhich 1« not clearV VISÌM. tha text of the onginal approveđ docum«nt shsli appíy. 6IMCO and the Nory«gian ShipbroKers' Assodition
assume no ra tpo n sib ilily for any io ts , dam ag« o f sxpenaA » t ề rttu H o f discrcpancMS betMeen Ihe onginal approved docuiTMnt and thts com put»r generated documenl.

In cases where neither the claim nor any counterclaim exceeds the sum of u s $ 1 00,000 the 376
arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at 377
the time when the arbitration proceedings are commenced. 378
(b) *This Agreement shall be govemed by and construed in accordance with Title 9 of the 379
United States Code and the substantive law (not including the choice of law rules) of the State 380
of New York and any dispute arising out of or in connection with this Agreement shall be 381
reíerred to three (3) persons at New York, one to be appointed by each of the parlies hereto, 382
and the third by the two so chosen; their decision or that of any two of them shall be final, and 383
for the purposes of eníorcing any award, judgment may be entered on an avvard by any court of 384
competent jurisdiction. The proceedings shall be conducted in accordance with the rules of the 385
Society of Maritime Arbitrators, Inc. 386
In cases vvhere neither the claim nor any counterclaim exceeds the sum of u s $ 100,000 the 387
arbitration shall be conducted in accordance with the Shortened Arbitration Procedure of the 388
Society of Maritime Arbitrators, Inc. 389
(c) This Agreement shall be governed by and construed in accordance with the laws of 390
(S tate place) and any dispute arislng out of or in connection with this Agreement shall be 391
reíerred to arbitration at (State place), subject to the procedures applicable there. 392
*16(a), 16(b) and 16(c) are alternatives: delete whicheveris not applicable. In the absence of 393
deletions, altemative 16(a) shall apply. 394
17. Notices 395

All notices to be provided under this Agreement shall be in writing. 396
Contact details for recipients of notices are as follows: 397
For the Buyers: 398
For the Sellers: 399
18. Entire Agreement 400

The written terms of this Agreement comprise the entire agreement between the Buyers and 401
the Sellers in relation to the saie and purchase of the Vessel and supersede all previous 402
agreements vvhether oral or written betvveen the Partỉes in relation thereto. 403
Each of the Parties acknovvledges that in entering into this Agreement it has not relỉed on and 404
shall have no right or remedy in respect of any statement, representation, assurance or 405
warranty (vvhether or not made negligently) other than as is expressly set out in this Agreement. 406
Any terms implied into this Agreement by any applicable statue or law are hereby excluded to 407
the extent that such exclusion can legally be made. Nothing in this Clause shall limit or exclude 408
any liability for fraud, 409
For and on behalf of the Sellers For and on behalf of the Buyers
Name: Name:
Title: Title:
Thi» document is 8 compul«f 0en«raie<l SALẼFORM 2012 form prínt»d by lutttority of ữê NorM«glin Shlpt>roker9' Asxoclation Any inMrtion or ctaletion (0 th« form musl clearty visibls In the event ot
any modiricabon made 10 th t pra-pnniad text oí thíi documcnt vvtMCh i« not cletrly the lexi of onginai ipprov«d document shtll appty BIMCO and tr>e N o r^g ia n ShlpbroKert Assooation
Itsum e no responsibility for any lo«». damaô or «xptn«« a« • r««uM of di»cr«psno«i b«tw»«n Ih t onginal approved docưmtnt and th ii Computer g«narat«d docurmnl

A p p en d ix 4 Ince and Co.'s comparison betvyeen NSF93 and NSFI 2
THE NORW EGIAN SALEPORM 2012 - A N OVERVIEW by Paul Herring

Anna Devereaux o f Ince and Co., and reproduced here with their kind permission.
T h e Norwegian Saleíorm 1993 is curren tly th e m ost vvidely used and in tern a tio n ally recognised S ta n d a rd
agreem ent for th e sale and purchase o f second hand to n n ag e (at least in th e W estern H em isphere). D espite
its wide use, feedback from the industry indicated th a t th e Saleform could benefit from an update. B IM C O
and th e Norvvegian Shipbrokers A ssociation ( ‘N SA ’) th e re fo re set about the challenge o f revising the
S ta n d a rd agreem ent. T he result is th e in t r o d u c t io n o f th e Saleform 2012.
T h e general principles and structure o f th e S aleíorm have been retained. H ow ever, am endm ents h av e been
made to b etter re íle c t industry practice and to clarify certain issues pro n e to am biguity o r dispute. In th is
article, we shall consider th e m ain am en d m en ts in c o rp o ra te d into th e n ew S aleform 2012.
Preamble
T he pream ble has been subject to som e m in o r am en dm en t but th e revision has no w ording to re íle c t th e
co m m o n p ractice w here a buyer or seller provides a p e río rm an c e guarantee in respect o f its n o m in a ted
b u y in g /s e llin g c o m p a n y . In light o f th e re q u ir e m e n ts f o r a v a lid g u a r a n te e under English lavv, su c h S ta n d a r d
wording setting out th e e x te n t o f th e guarantee and calling for th e signature o f the g u arantor m ay have been
beneficial by lim iting disputes concerning th e validity o f guarantees. A signature box for any g u aran tee can
o f course always be added as necessary.
Definitions
A num ber o f additional defin itio n s have been included in th e revised Saleform , the m ost striking being th e
definition o f “ Class” as th e “ class n o ta tio n ” ra th e r th a n th e C lassification Society itself. Sellers will no w be
required to insert th e class n o ta tio n in to th e M em orandum o f A greem ent (“ M O A ”), a practice w hich is
currently rare, and which sellers usually avoid in order to prev en t possible m isdescription claim s. It is n o ta b le
th a t th e definition o f “ in vvriting” has n o t been linked to th e new no tice provisions at clause 17.
The de po si t ( c l a u s e 2)
In order to tak e account o f com m ercial p ractice, th e parties are now free to insert th e relevant p e rc e n ta g e
o f th e purchase price w hich will be paid by way o f a deposit. Hovvever, th e traditional 10% rem ains as th e
default level o f th e d eposit if no o th e r figure is inserted by th e parties.
An in terestin g am enđm ent is th e new reference to a “ D ep osit H older” which is a m ove away from th e
assum ption th a t th e d eposit will always be held by th e sellers’ nom inated bank. T he “ D eposit H older” can be
any th ird party - be it th e brok ers, lawyers etc.
One o f the m ost significant a lte ra tio n s to clause 2 is th e revised vvording se ttin g out the trigger fo r p a y m e n t
o f th e deposit by th e buyer. T he Saleform 1993 provides th a t th e deposit be paid w ithin a certain num ber o f
banking days from th e date o f th e M OA. T h e num ber o f banking days allowed for pay m en t is op en to th e
parties to agree. T h e revised Saleform 2 0 1 2 now provides th a t th e deposit will be payable th ree banking days
from signature and exchange o f th e original M OA and receipt o f c o n firm atio n in w riting from th e D ep o sit
H older th a t th e account has been opened.
T he tim e for p a y m e n t under th e clause is clear but it is possible th a t th is w ording m ay give rise to difficulties
o f in te rp re ta tio n . T he usual p o sitio n is th a t absent indications to th e c o n tra ry , th e b ro k ers’ recap is evidence
o f a binding agreem ent hav in g been reached, p rovided all term s have been agreed. It is possible th a t th is new
vvording will lead to argum ents th a t th e agreem en t is n o t binding until signature and exchange o f th e M O A ,
though this was presum ably n o t th e in te n tio n o f th e drafters.

A p p e n d ix 4 Ince and Co.'s comparison between NSF93 and NSFI2
1 nere IS aiso ttie aaaea express oDiigation on ttie parties to proviae ttie u ep osit Hoider witn aii
docum entation required to open th e account. T he failure by one o f th e parties in providing this
docum entation m ay have a considerable effect as the deposit will n o t be payable until th e D eposit H older
confirm s th at th e account has been opened. T here is no express provision dealing with th e consequences o f
such a failure.
P a y m e n t o f th e p u rc h a s e p rỉc e (c la u s e 3 )
T h e vvording for the trigger fo r p a y m e n t o f th e purchase price has also been altered. Buyers are n o w obliged
to pay th e purchase price w ithin th ree banking days o f th e date th a t N o tice o f Readiness ( “N O R” ) is given i
accordance with clause 5. T he additional requirem ent in th e Saleíorm 1993 fo r th e vessel to be “ in every
respect physically ready for delivery” has been rem oved.
T h e o th e r signiíicant d ev elo p m en t is th e express co n firm atio n th a t the deposit should n o w b e considered as

form ing part o f th e purchase price. T his deals w ith the in te rp re ta tio n given to th e Saleform 1993 by the
English High C ourt in P T Berlian Lạịu Tankers V. N use S h ip p in g (The A ktor) [2008] EW H C 1330 (C om m ).
Ti me and pl ace o f d e l i v e r y and no t ic e s ( c l a u s e 5)
Clause 5 has been am ended so as to include a đate range for delivery by the inclusion o f a date b e ío re vvhich
NOR m ay n o t be provided as well as a cancelling date. Sellers’ obligation to keep buyers inform ed o f the
v essel’s itinerary now requires th em to give no tice o f when th ey intend to tender NOR.
NOR is still to be provided when th e vessel is “ at th e place o f delivery and physically ready for delivery in
accordance w ith th is A greem ent.” Hovvever, the w ell-know n wording “ in every resp ect” has been rem oved
ap p aren tly in order to clariíy th a t m ino r defects vvill n o t enable buyers to reject th e vessel under th e MOA.
T his arguably goes back to th e p o sitio n enunciated in The A ktion [1987] 1 L loyd’s Rep 283:
W here a s e lle r indicates th a t th e ship will n o t be ready by the cancelling date, the buyers’ tim e for exercisinj
th e ir o p tio n w hether to cancel the M OA or n o t has been reduced from seven running days to th re e banking
days.
Di ve r ’s i n s pe c tỉ on and dry d o c k i n g ( c l a u s e 6)
A lthough the d ifferen t altern ativ es fo r dry docking and inspections have been retained, th e order o f the
a ltern ativ es in th e Standard form has been altered in order to re tlect industry practice.
Clause 6(a)(i) has been am ended so as to provide th at buyers m ust exercise th e ir o p tio n to require a diver’s
inspection a t least nine days p rio r to th e intended delỉvery date. This seeks to ensure p ro p er n o tic e for
sellers to m ake the required arrangeinents. Buyers should take n o te o f th e tim e lim it to ensure th e y are n o t
deprived o f their right to call for a d iv e r’s in spection.
W here a diver’s insp ectio n is required and th e conditions at th e p o rt o f delivery are unsuitable, Saleform
2 01 2 adds a p rovision c o n íĩrm in g th a t th e cancelling date shall be extended by the additional tim e required
for th e positioning and subsequent rep o sitio n in g o f th e vessel.
Clause 6(a)(ii) proviđes th a t if Class do n o t require certain deíects to be rectified before th e n e x t dry dockiti]
survey, the sellers are e n title d to deliver th e vessel with those defects against th e deduction from th e
purchase price o f th e estim ated direct co st o f labour and m aterials o f carrying out th e repairs. Buyers will
th e n have no íiirth er right in respect o f any defects and/or repairs. A lthough this reílects th e in co rp o ratio n
o f a ữ equent am en d m en t, sellers should consider this wording carefully as th e direct costs incurred may
exceed the costs o f labour and m aterials and include various additional expenses.
T he clause also sets out a m echanism for calculating the deduction from th e purchase price. Q uotes for th e
repair work are to be obtained by th e parties from tw o reputable independent shipyards in the v icinity o f thi

A p p e n d ix 4 Ince and Co.'s companson between NSF93 and NSFI 2
lo n or deiivery vvitnin tw o Danking days tro m ttie im p o sitio n or tne co n d itio n /rec o m m en aatio n or c ia ss
inless th e p arties agree othenvise. l f one o f th e parties fails to obtain such a quote th e n the quote o f the
ither party will be th e sole basis o f th e estim ate. N O R ca n n o t be tendered by sellers until th e various quotes
lave been obtained. T his m ay becom e a fu rth er area o f dispute. D ifferences in th e standards applied by
arious Class surveyors and a subjective decision as to w h eth er a defect m ust be repaired before delivery or
lot m ay be o f sig niĩicant effect. T here m ay also be som e practical difficulties arising from th e im posed tim e
im it o f two banking days for th e p arties to obtain th e ir q uotations. Som e shipyards m ay n o t be prepared to
irovide a quo tatio n w itho ut a full inspection to survey th e w ork required, which m ay lead to difficulties in
•btaining a quote, o r inaccurate quotatio n s.
) b l i g a t i o n on s e l l e r s r e g a r di n g l i s t i n g s pa r es etc. ( c l a u s e 7)
"lause 7 o f the MOA has been am ended to include an increased responsibility on sellers to list th e item s n o t
lelonging to th em and excluded from th e sale. Sellers are also obliged to replace item s owned by third parties
f th o se item s were on board during inspection. It appears th a t this was inserted in order to ensure th a t
)uyers, having inspected th e vessel, are n o t surprised when certain item s which m ay have been hired from a
hird p a rty are n o t included in th e sale.
) o c u m e n t s ( c l a u s e 8)
'lau se 8 has been am ended so as to include a longer list o f the docum ents required in th e form o f delivery
locum ents. T h e m ore co m p reh en siv e list is an im p ro v e m e n t, how ever it is n o t exhaustive o f all the
locum ents which m ay be required on th e sale o f a vessel. P arties would be well advised to consider atnending
h e S ta n d a rd w o rd in g f u r th e r in o r d e r to c la r if y c e r t a in issu e s a n d th e d o c u m e n ts re q u ire d f o r t h e tr a n s f e r o f
h at p articu lar vessel.
ỉ n c u m b r a n c e s ( c l a u s e 9)
rh is clause has been am ended to include th e additional vvarranty th a t on delivery the vessel will n o t be
;ubject to a “ p o r t S ta te o r o t h e r a d m i n is tr a t iv e d e t e n t i o n . ” Such a n additional w a r r a n ty in respect o f port
;tate d eten tio n s m ay have an effect on th e deliverability o f a vessel as recently considered by th e C ourt o f
\p p e a l in an In c e c a se , Y H M S h ip p in g v . P olestar M aritim e (The Rewa) [2012] EW CA Civ 153.
r o n d i t i o n on d e l i v e r y ( c l a u s e 11)
"lause 11 includes th e added obligation th a t th e vessel be delivered free o f cargo and stow aways. T his may
ịive rise to practical issues relating to th e c o n d itio n o f th e vessel as it is unclear vvhether “ free o f cargo” also
equires th e vessel to be free o f any cargo residue.
ị e l l e r s ’ d e f a u l t ( c l a u s e 14)
rh e th re e banking days provided to sellers a fte r ten der o f an NOR to “ m ake arrangem ents fo r th e
locu m en tatio n set out in clause 8” has been deleted from clause 14. T his deletion is significant in light o f the
•ecent decision o f th e C ourt o f A ppeal in T he Rewa (see above). Sellers will now need to be diligent as
•egards th ese docum ents and certificates as th e grace period afforded to p e rfec t problem s with docum ents has
3een rem oved.
Law and a rbi trat ion ( c l a u s e 16)
rhe w ording o f th e law and ju risd ictio n clause has been updated. It retaỉns th e choice betvveen English law and
ôndon a rb itra tio n o r N ew Y ork law and New Y o rk arb itratio n or any o th e r law and jurisdiction which th e
3arties m ay agree. In rela tio n to th e cho ice o f English law and London a rb itratio n o p tio n , any arb itratio n is
lovv subject to LM A A term s.
So ti ce s ( c l a u s e 17)

A p p en d ix 4 Ince and Co.’s companson between NSF93 and NSF12
AU n o ti c e s b e tw e e n t h e p a r tie s W1 I 1 n o w n e e a to Be in vvritm g a n a g iv e n in a c c o r a a n c e w itn c la u s e 1 / , tn o u g h

no p ro v isio n s have been inserted to clarify w hen such notices are deem ed to have been received.
Entỉre a g r e e m e n t c l a u s e ( c l a u s e 18)
An e n tire agreem en t clause has been inserted which will result in any previous agreem ents (vvhether oral o r ir
w riting) betw een th e parties being o f no íiarther effect as th ey will have been superseded by th e signed MOA.
T his will go som e way to avoiding disputes regarding alleged agreem ents made orally during neg o tiatio n s and
m ay p re v e n t buyers from m aking m isrep resen tatio n claims.
T he clause also has th e significant e ffe ct o f effectiv ely excluding the im plied term s o f the Sale o f G oods A ct
1979. M uch debate has cen tred around \vhether sales o f ships under th e Saleform exclude the obligation on
th e seller to ensure th a t th e vessel is o f satisfacto ry quality and fìt for purpose pursuant to th a t statu te. T his
rem oves any such argum ent and confirm s th e “ as is” nature o f th e sale.
Comment
Some useíùl am endm ents have been m ade to th e S ta n d a rd form by this new revision, Saleform 2 0 1 2 . It is
likely th a t th is nevv form will in tim e becom e widely used and p o ten tial users o f the form should consider the
am en d m en ts m ade and th e im pact o f th ese changes on th e w orkings o f the MOA.
T h e in f o im a tio n a n d c o m m e n ta ry h e re in d o n o t an d a re n o t in te n d e d to a m o u n t to le g al a d v ic e to any p e rs o n o n a s p e c iric

m a tte r. T h e y a r e fu m is h e d fo r in fo rm a tio n p u rp o s e s o n ly an d f r e e o f c h a rg e , E v e ry re a s o n a b le e f fo r t is m a d e to m a k e th e m
a c c u r a te a n d up to d a te b u t no resp o n sib ility fo r Ih e ir a c c u r a c y o r c o r r e c tn e s s , n o r fo r an y c o n s e q u e n c e s o f re lia n c e o n th em ,
ís a s s u m e d by th e fin n R e a d e rs a re fiư n ly a d v ise d to o b ta in s p e c itlc le g a l a đ v ic e a b o u t an y m a tte r a f f e c tin g th e m an d a r e
w e lc o m e to s p e a k to th e ir u su al co n ta c t.
Ịp ce.ạ n d C ọ

A p p e n d ix 5 Nipponsale 99
Nipponsale 1999
Issued Dec.16, 1965
Amen^d ivlL íó 1977 Documentaiy Committee o f The Japan Shippỉng Exchange, Inc.
SiE E2.IÌ m e m o r a n d u m o p a g r Ìe e m e n t
Place and Date o f Agreement
Code Name: NIPPONSALE 1999 (Pan 1)

1. Sellers (Preamble) 2. Buyers (Preamble)
3. VessePs name (Preamble) 4. Flag/Registry (Preamble, Cl. 3 (a) (ii))
5. Class (Preamble, Cl. 6 (b)) 6. Built (year and builder’s name) (Preamble)
7. Gross register tonnage (Preamble) 8. Summer deađweight tonnage (Preamble)
9. Place/Date superficial inspection (Preant Cl. (a), Cl.) 10. Place/Date o f classecrds examination (Preamble)
11. Purchase price (Cl. 3)
12. Place o f closing (Cl. 3 (c))
13. Delivery range (Cl. 4 (a), Cl. 6 (e)(i), (f))
14. Delivery period (Cl. 4 (a)) and Cancelling Date (Cl. 4 (a), (d), (e))
15. Places (Cl. 2 (a), Cl. 4 (c))
16. Liquidated damages. per day (Cl. 7(c)) The additional clauses, i f any, numbered from 16 to .................
shall be deemed to be fiilly incorporated into this Agreement.
It is mutually agreed that this Agreement shall be performed in accordance with the terms and conditions contained herein.
Signature (Sellers) Signature (Buyers)

A p p e n d ỉx 5 Nipponsale 99
NIPPONSALE 1999
I T I S T H I S DAY M U T U A L L Y A G R E E D betw een the S ellers referred to have the right to designate a nevv date for delivery o f th e Vessel,
in B ox 1 (“th e S ellers” ) and the B uyers referred to in B ox 2 ( “the B uyers” ) provided such right ís exercised in w riting w ithin tw o (2 ) W orkm g
th at th e S ellers shall sell and the B uyers shall buy the Vessel nam ed in D ays from the C ancelling D ate, and such designateđ date shall be
B ox 3 vvith parliculars as refeư ed to in B oxes 4 - 8 (“the Vessel” ), w hich has the new C ancelling D ate as if stated in Box 14, H ow ever i f no new
been accep ted by the B uyers follow ing their superiĩcial inspection o f the Cancelling D ate is designated by the B uyers in acco rd an ce vvith
Vessel and exam ination o f her class records as refeư ed to in B oxes 9 and 10 thís sub-clause there shall be no further C ancelling D ate and Ihe
respectively o n the follow ing term s and conditions. Sellers shall d eliv er the Vessel as soon as practicable
(e) N otw ithstanding the exercise o f due diligence by th em , i f the
1. PURCHASE PRICE Sellers anticipate th at the Vessel vvill not be ready fo r delivery
T h e purchase price o f the Vessel ("the Purcliase P rice") shall be as stated by the C ancelling D ate, (vvhether it be the first agreed C an celling
in B ox 11. D ate or any subsequent C ancelling D ate as provided for in sub-
clause (d) above), then the Sellers may notity the B uyers in vvriting
2. PAYMENT stating the date w hen they anticipate th at the Vessel w ill b e ready
(a) A sse c u rity fo rth e fu lfilm e n to fth isA g re e m e n t,th e B u y e rssh a llre m it fo r delivery and proposing that date shall be the new C an celling
a d ep o sit o f ten (10) per cent o f the Purchase Price (“the D eposit” ) Date, U pon receỉpt o f such notiíication the B uyers shall have the
to a b an k nom inated by the Sellers w ithín three (3) banking days option to cancel this A greem ent, provided such option is exercised
(b ein g days on w hich banks are open for the transaction o f business in w riting w ithin tw o (2) W orking D ays from the receip t o f the
in the place stated in Box 15 (“ B anking D ays” )), from the date o f aforesaid notification from the Sellers. I f the B uyers do not
th is A greem ent, in Ihe nam es o f both the S ellersan d the Buyers. Any exercise the option to cancel this A greem ent, the date proposed
interest eam ed on the D eposit shall be credited to the Buyers. Bank by the Sellers shall be the new Cancelling D ate as if stated in
charg es on the D eposít shall be bom e equally by the Sellers and Box 14.
the B uyers. T he D eposit shall be paid to the S ellers as a part o f the
P urchase Price in the same m anner as the balance o f the ninety (90) DELIVERY CONDITION
p er cen t o f the Purchase Price as provided for hereunder (a) The Sellers shall deliver the Vessel to the B uyers in substantially
(b ) T h e B u y ers shall rem it th e balan ce o f th e P u rch ase P rice by the sam e condition as w hen the Vessel w as inspected by the B uyers
te le g ra p h ic tra n sfe r to the said bank im m ed iately a fte r the at the place stated in Box 9, fair w ear and tear excepted, but free
N o tic e o f R ea d in ess for D elivery is te n d ered by th e S ellers from outstanding recom m ended xns and average dam agc aíTecting
a s p e r clau se 7 o f th is agreem ent. T h e x x n ce shall be pxxx h er p resent classed w ith all her class, national and intem ational
to th e S ellers to g e th e r w ith the D ep o sit a g a in s t th e P roto- trading certiíìcates dow n and valid at the one o f d elv eo '
co l o f D e liv e r y a n d A c c e p ta n c e b e in g d u lly s ig n e d by re- (b) U pon the Vessel being delívered to and accepted by the B uyers in
p r e s e m a tiv e o f e a c h p a rty at th e tim e o n d e liv e r y o f th e accordance w ith Ihis A greem ent the Sellers shall have no liberty
V esse l, vvhatsoever for any fault o r deficiency in their đ escn p tio n o f the
Vessel o r for any defect in the Vessel regardless o f vvhether such
3. DOCUMENTATION defect vvas apparent o r latent at the tim e o f delivery.
(a ) A t th e tim e o f delivery o f the Vessel, the S ellers shall provide the
B uyers w ith the follow ing docum ents: l'NDERWATER INSPECTION
(i) the Bill o f Sale, du!y notarized by a N otary Public, specilýing (a) The S ellers m ay deliver the Vessel vvithout dr>'docking, subject to
that the Vessel is free from all debts, encum brances, m ortgages the follow ing provisions
an d m arĩtim e liens; and (b ) Prior to d eliv eo ' o f the Vessel the B uyers shall have the right to
(ii) a letter from the Sellers undertaking to supply a D eletion have divers approved by a classirication society referred lo in
C ertìíìcate from the R egistry stated In B ox 4 as sooti as Box 5 ("the C lassification Society”), carry' o u t an inspection ot'
practicable after the VessePs delivery; and the VessePs u n denvater parts belo\v the sum m er load line in the
(iii) such other docum ents as m ay be m utually agreed presence o f a surveyor o f the Classification Society arranged by the
(b) U pon deliver>' Ihe B uyers and the Sellers shall execute and exchange Sellers. Such inspection, i f any, is to be at the B u y ers’ an an g em en t,
a P rotocol o fD eliv ery and A cceptance, thereby con fim iin g the date risk and expense and is not to interfere « ith the VessePs operation
and tim e o f đelivery o f the Vessei, and dclivery schedule,
(c) C losing shall take place at the place stated in B ox 12, (c) The B uyers shall give a w rinen notice o f th eir intention to have
an u n denvater inspection ca ư ied oiit vvithin tw o (2) days from the
4. DELIVERY PI,ACE AND TIME receipt o f the seven (7 ) days notice stipuiated in sub-clause (b ) o f
(a) T h e S ellers sliall ensure thai tlie Vessel is ready for deliveiy within C lause 4. l f the B uyers fail lo give such a w riiten notice w ithin
the D elivery R ange stated in Box 13 not beíore and not later than the tw o (2 ) days, they shall lose their right to have an undenvater
dates stated in B ox 14, the laKcr đate being the C ancelling Dale. inspection.
(b ) T h e S ellers shall keep the B uyers infonned o f th e V essel’s itinerary (d) U pon receipt o f the B u y ers' notice the S ellers s la ll arrange w ith
and g iv e the B uyers thirty (30), fifteen (15), seven (7 ) and three (3) the C lassification Society to carry out an u ndcnvater inspection.
d ay s notice o f the expected daie and place o f readiness for delivery. The cost o f the undervvater inspection shall be bom e by the B uyers
(c ) In the event that the Vessel is not ready for delìvery o n o r before unless dam age affecting the class is foiind, in w hich case the
th e C ancellin g D ate, the B uyers shall have the option o f cancelling Sellers shall bear the cost
tb is A greem ent, provided siich option shall be exercised in w ritipg (e) Shoiild, any daniage aíTectitig the class t e found bv suc.h d iv ei^’
w ithin tw o (2) W orking D ays (w hich shall be th e days n ot falling on inspection the follow ing shall apply:
Saturd ay s, Sundays, or Public holidays in the place stated in Box (i) where the danìage is o f such nature that repairs are not required
15) fro m the C ancelling Date. Hovvever, if the tầilu re to deliver the prior to the next scheduled drydocking by the Classification
Vessel IS caused by any event over which the S ellers have no conưol, Society, then the Sellers and the Buyers shall each seiect a
then th e C ancelling D ate shall be extended by th e corresponding reputable shipyard in the Delivery Range stated in Box 13 or near
tim e lo st due to such event but in no case shall such extension be for thereto and obtain from such shipyard a quotation for the cost
a p eriod o f m ore than thirty (30) days. o f repairs o f the dam age. Each quotation is to be for the direct
(d ) In the event the B uyers do not elect to exercise the option to cancel repair costs o f the dam age only and is not to include the cost o f
th is A greem ent in accordance vvith sub-clause (c) above, they shall

A p p e n d ix 5 Nipponsale 99
NIPPONSALE 1999 (Part II)
dockage and general Service expenses. The S ellers shall then on shore, used o r unused, except such things as are ìn the norm al co u rse
have the option to eith er repair the dam age prior to delivery o f operations useđ during the period betw een the su p eríicial in sp ectio n
o f the Vessel o r deliver the Vessel vvithout the dam age being and delivery. T he Sellers shall provide the B uyers vvith an inventory
repaired w ith a reduction ftom the Purchase Price o f the líst at the tim e o f delivery, P o n v ard in g charges, if any, shall be fo r the
estim ated cost o f repairs- The estim ated cost o f repairs shall be B uyers’ account. The B uyers shall take ov er and pay the S ellers fo r
d efined as the average o f the tw o quotations obtained from the the rem aining bunkers and unused lubricating oils at the la st p u rch ased
tw o shipyards; prices evidenced by supporting vouchers. Paym enl un d er this clause
(ii) vvhere the dam age is o f such nature Ihat repairs are required shall be m ade on o r prior to delivery o f the Vessel in the sam e cu ư e n cy
prior to the next scheduled drydocking by the C lassifìcation as the Purchase Price,
Society, then the S ellers shall repaír the dam age at their cost
and expense and to the C lassification S ociety’s satisfaction 11. EXCLUSION FROM THE SALE
( 0 In the event that the Vessel is drydocked to eíĩe c t repairs o f dam age The S ellers have the right to take ashore all crockery, cutlery, lin en and
in accordance w ith sub-clause (e) hereof, the S ellers shall have the o th er articles bearing the S ellers’ flag o r nam e, provided th e S ellers
right to designate the drydock place as the new delivery place if substitute the sam e for an equivalent num ber and type o f sim ilar
such drydock place is vvithin the D eliveiy R ange stated in Box 13. unm arked item s B ooks, ca ísettes and form s etc , ex clu siv ely fo r use
In such event the B uyers shall have the right to clean and paint by the S ellers on the Vessel, shall be taken ashore b efo re delivery.
the undenvater paits o f the Vessel at their risk and expense and Pereonal eílects o f the M aster, O íH cere and C rew in cluding slo p chest
BÌthout ínteiíering vvith the vvork o f the S ellers and a surveyor and hired equipm enl, if any, are excluded from this sale an d shall be
o f the C lassiíication Society and w ithout affecling the Vessel’s rem oved by the Sellers prio r to delivery o f the Vessel.
delivery schedule. H ow ever if the B uyers’ w ork in drydock is still
in progress w hen the Sellers have com pleted their w ork, then the 12. CHANGE OF NAME ETC.
additional docking p eriod necessary for com pleting such w ork The B uyers undertake to change the nam e o f the Vessel an d alte r the
shall be at the B uyers’ risk and expense, in w hich event the Sellers funnel m arkings upoa delivery o fth e Vessel.
shaJI have the right to tend er a N otice o f Readiness for Delivery on
or after com pletion o f th eir work 13. ENCIIMBRANCES ETC.
( g ) I f rep airs are re q u ired in ac co rd an ce w ith su b -cla u se (e) T he Sellers shall d eliv er to the B uyers the Vessel free from all debts,
h ereo f, th e n th e C a n c e llin g D ate shall be ex ten d ed by the encum brances, m ortgages an d m aritim e liens. T he S ellers hereby
c o rre sp o n d in g by th e lo s t to eíTect such rep airs p ro v id e d that undertake to indem nify the B uyers againsl all claim s o f w h atev er
such as te n sio n shall n ot in any ex c eed th irty 30 days. nature made against the Vessel in respect o f liabilities in cu rred prio r
to the tim e o f delivery.
7. NOTICE OF XXXDINESS AND LIQUATED DAMAGES
(a) W hen the Vessels com es ready for delivety, the S ellers should 14. DEPAULTANDCOMPENSATION
tender to the B uyers a N otice o f Readiness for Delivery. (a) Should be the B uyers default in the paym ent o f the D ep o sit o r
(b) The B u yers shall xxke o v e r the Vessel w ith three (3 B anking) the bãlance o f the Purchase Price in the m anner and w ith in the
Day from the day ot' receipt o f such N otice o f R eadíness for three herein specific o f the B uyers o thenvise fail to p e río m i th e ir
Delỉvery. o bligation under this A greem ent and such failure is not rem ed ied
(c) In the event the B uyers do not take deliveiy o f the Vessel vvilhin w ithin seven (7) days follow ing receipt o f a notice o f d efau lt from
the period speciíied above, the B uyers shall pay to the Sellers the S eller to the B uyers then Ihe Sellers shall have the rig h t to
for each day o f the delay up to the tenth (lO th) day o f the delay cancel this A greem ent. In such event the D eposit if alread y paid,
the lỉquidated dam ages as stated in Box 16, I f the delay exceeds together w ith interest accrued thereon, if any, shall b e fo ife ited to
ten (10) days then the S ellers shall have the right to cancel this the Sellers. If the D eposit has not yet been paid the S ellers shall
A greem ent and claim dam ages for their losses Aovving th e reữ o m have the right to receive the am ount equivalent to the D ep o sit from
the Buyers. I f the D eposit o r the am ount equivalent to the D ep o sit
8. TOTAL LOSS AND KORCE MAJEURE does not cover the S ellers’ losses, the S ellers shall h ave th e right
Should, before dclivery, the Vessel becom e an actual, constnictive to claim further conipensation froni the B uyers to reco v er such
o r com prom ised total loss (not being a result o f an act o r om ission losses.
o f the S ellers com m in ed w ith the intent to cause such total loss or (b) Should the S ellers default in the delivery o f th e Vessel vvìth
recklessly and with know ledge that such total loss vvould probably everything belonging to her in the nianner and w íthin the tim e
result th e reữ o m ), or should the Vessel not be able to be delivered herein specifĩed, o r the S ellers othenvise fail to perTorm th e ir
before the C ancelling D ate through the outbreak o f war, the restraint obligations under this A greem ent and such íailure is n ot rem ed ied
o f G ovem m ents, Princes or People, political reasons or any other cause w ithín seven (7) days follow ing receipt o f a notice o f d efau lt from
o v er vvhích the S ellers have no contTol, then this A greem ent shall be the Buyers to the S ellers, then the B uyers shall h ave the rig h t to
null and vo id and neither party shall be liable to the other. In such cancel this A greem ent. In such event the B uyers shall have the right
event the D eposit together vvith interest accnied thereon, i f any, shall to be paid the am ount equivalent to the D eposit by th e S ellers and
be im m ediately released in fiill to the Buyers, the D eposit, i f already paid, together vvith interest a c craed th ereo n ,
i f any, shall be released to the Buyers. I f the am ount eq u iv alen t to
9. TRANSFEROFTITLEANDRISK the D eposit does not cover the B uyers’ losses the B uyers shall h av e
Title and risk to the Vessel, together w ith everything belonging to her, the right to claim further com pensation from the S ellers to reco v e r
shall pass to the B uyers upon both paym ent o f the Purchase Price and such losses.
delivery o f the Vessel having occu ư ed. D elivery o f the Vessel shall be
deem ed to take place at the date and tim e speciHed in the P rotocol o f 15. ARBITRATION
D elivety an d Acceptance. A ny and a)l disputes arising out o f o r in connection w ith th is A g reem en t
shall be su b m in ed to arb iừ atio n held in Tokyo at the Tokyo M aritim e
10. BELONGINGSANDBUNKERS A rbitration C om m ission (“T O M A C ”) o fT h e Japan S hipping E x ch an g e,
T he S ellers shall deliver to the B uyers the Vessel w ilh everything Inc. in accordance vvith the R ules o f TO M A C and an y am en d m en ts
belonging to h er at the tim e o f the superTicial inspection referred to in thereto, and the aw ard given by the arbiừ ators shall be final an d b in d in g
the B ox 9 includíng all spare parts, stores and equipm ent, on board or on both parties.

A p p en d ix 5 Nipponsale 99

A p p en d ix 6 Brokers sales report
Brokers Sales Report
PEATHERSTONE MARINE LIMITED Uanuary 2014
B U L K C A R R IE R S DW T B u il t Y a rd M /E R e m a rk s P r ic e B u y e rs
SA NK O POVVER 181,196 2010 Sasebo B&VV6S70MC-C At auction HK $49.40fn Singapore
CENTRANS RHYTHM 180,000 2013 Qingdao B&W 6S7ŨMC-C ) En blcx: $48.00m Greeks
CENTRANS ETERNAL 180,000 2013 Beihai China B &W 6S70M C-C ) $48.00m
GOLDEN NANTONG 176,000 1/2014 Jinhai H I Ch. B&W 6S70MC $46.S0m Greeks
Incl.ưcto Jan.16
CONCHES 170,078 2011 Sundong B & W 6S70M C $52.00m Greeks
$26,000
CAPE PROVIDENCE 169,234 2010 Daehan B&W6S7ŨMC-C $34.00m u s based
KAMISHIMA 95,625 1993 Oshima Sulz.6RTA62 $8.00m Chinese
CHRISTINA VIC TO R Y 82,619 2006 Tsuneishi B&W 7S50MC-C $23.50m undisclosed
PRETTY MASTER 82,000 1/2014 Zhejiang J.Ch. B&W 5S60MC- $24.00m Chinese
C8
M INERAL PEARL 81,545 2013 Guangzhou L B&W 5S60MC-C $26.00m Greeks
PRIME DAISY/ PRIME 81,507 2012 s.p .p B&W 6S60MC-C ) En bloc $33.30m Greeks
GINGER éach
PRIME LILY / PRIME ROSE )
GRAND DIVA 76,596 2007 Imabari B & w 6S60MC $23.20m Italians
CHENYANG PIONEER 76,202 2013 Yangfan Ch. B & w 5S60ME- $27.00m undisclosed
C8
TRAVE 75,230 2001 Samho B&W 6S60MC $16.30m Greeks
KALYPSO 73,762 1997 Sumitomo S ulz7R TA 48T $11.00m Koreans
SEA RESOLUTE 73,322 1998 Halla B&W 5S60MC At Auction $12.40m Greeks
GLOBAL TRIUMPH 72,870 1996 CSBC Sulz 5RTA62U $8.00m Chinese
HSIN HO 71,965 1997 Hitachi B & w 6S60MC $8.60m Hong Kong
RESALES HULLS 63,600 2014 Jinling China B & w 5G60ME- En bloc $30.25m Greeks
408/9/10/11 C9 each
Cr.4x30
DIETRICH OLDENDORFF 63,500 2013 Yangzhou Ch. B&W 5S60ME- $30.90m Greeks
C8
C r4x35
ORIENT RISE 56,700 2010 Qingshan Ch B&W 6S50MC-C $21.00m Germans

Cr.4x30
IKAN SERONG 56,023 2006 Mitsui B&w 6S50MC-C $22.80m Thais

Cr,4x30
AYOYAMA 56,013 2006 Mitsui B&W 6S60MC-C DD due $22.1 Sm Hong Kong
Cr.4x30
METROPOL 54,430 2012 Vinashin B & w 6S50MC-C $25.00m Greeks

A p p en d ix 6 Bi-okeỉ'S sales report
FAR EASTERN VENUS 53,487 2006 Imabari B&W 6S 50M C -C $20.50m Greeks
Cr,4x30
SANKO MARBLE / 50779 2010 Oshima B&w 5S 60M C -C ) En bloc $22.00m Greeks
MERCURY each
SANKO MERMAID 50,779 2009 Oshima B&W 5S 60M C -C )
Cr.4x40 8ho/ha
EILHARD SCHULTE 48,913 1999 IH I S ulz.6RTA48T Incl.ưc to Nov,2014 $12.75m Greeks

Cr.4x25
SEA PEACE 46,786 2000 Kanasashi Mitsu 6U EC 52LS $14.20m Greeks

Cr.4x30
NIKKEI PHOENIX 45,635 2002 Oshima B&W 6S 46M C -C $15.50m Greeks

Cr.4x30
SPILIANI 43,246 1994 Hyundai B&W 6S50M C $7.30m Greeks

C r4x25
PACIPIC CHAMP 43,229 1996 Hyundai B & W 6 S 5 0M C )En bloc $9,00m Greeks
b el.6/2014
PA C IR C ROYAL 43,210 1996 Hyundai B & W 6 S 5 0M C )lncl.lư c$10,750 to $9.00m
Sept
Cr.4x25
B U L K C A R R IE R S DWT Built Yard M/E Rem arks Price Buyers
TINA A 42,717 1997 IH .I. Sulz.6RTA48T $10.S0m Danes

Cr.4x30
ST.ANDREVV 41,455 1996 Varna B&W 6L60M C Delivery wlth DD $6.75m undisclos
passed
Cr.4x30
CARL OLDENDORFF 31,642 2001 Saikí Mitsu.6UEC52LA $14.20m undisclos

C r 4x30
PEDERAL AGNO 29,643 1985 N.K.K Sulz,6RTA58 $3.25m undisclos

Cr.4x25
c s SOLARIS 28,492 2001 Imabari B & W 6 S 4 2M C D D passed $13.00m undisclos

Cr.4x30
ISUVND SKIPPER 28,031 1984 Hitachi S ulz6R T A 58 $3.25m undisclos

Cr.4x25
CARMEN SILVA 25,739 1992 Santierul B&W 8DKRN42 $2.63m Turks

Cr.3x25
OANIELA BOLTEN 23,641 2008 ShinKochi B & W 6S 42M C $14.80m undisclos

Cr.4x30 4 ho/ha

A p p e n d ix 6 Brokers sales report
TANKERS DW T B u ilt Y a rd M /E R e m a rk s P ric e B u y e rs
BW NYSA 299,543 2000 Daewoo B&w 7S80MC FSPO conversion $32.00m Uapanese
LUXEMBOURG 299,150 1999 Daevvoo B&W 7S8ŨMC FPSO conversion $28.00m Japanese
N EPTUNE GLORY 299,127 1998 Daevvoo Sulz.7RTA48T $23.1 Om undisclosed
cosco
G ULF SHEBA 298,923 2007 B&W 7S80M C ) En blcx: $51.00m Norvvegians
Nantong
coscố
GULF EYADAH 298,971 2006 B&w 7S80MC ) $48.00m
Nantong
SATURN GLORY 298,892 1998 Daewoo Sulz.7RTA84T-B $23.1 Sm Singapore
PRISCO ALCOR/PRISCO En bloc

166,546 2007 Hyundai B&w 6S70MC-C $42.00m Greeks
MIZAR each
A LGECIRAS SPIRIT 160,250 2000 Daewoo B&w 6S70MC $17.80m Greeks
KIM JACOB 159,211 1998 Daevvoo B&W 6S70M C $13.00m undisclosed
S C F A L D A N /S C F 159,062 2005 Hyundai B&W 6S 70M C -C En bloc Greeks T&T

BRYRRANGA each
HERO 156,532 2011 Jlangsu B&W 6S 70M C -C pre auction sale $51.50m Greeks
Rongsh
ELISEVVIN 149,991 2002 N K K. Sulz.6RTA72 $23.00m Greeks
SEAM ASTER 109,266 2006 Hudong Ch. B&W 7S60M C $24.00m Greeks
VALCONCA + 4 SISTERS 109,060 2010/09 Hudong Ch. B&w 7S60MC En bloc coated $29.00m Singapore
each
OVAL NOVA LPG 73,362 1993 M.H.I M itsu.7UEC60LS $30.00m Chinese

CBM
NOEMI / SENATORE 72,604 2004 Samsung B & w 6S60M C En bloc 3 pumps $22.00m Greeks
each
ELEG A N T VICTORIA 74.999 2007 Onomichi B&w 6S60MC ) En bloc $27.00m Greeks
ANNA VICTORIA 74.999 2004 Hyundai B&W 6S 50M C -C ) $22.S0m
ABU DHABI / EM IRATES 51,069 2008 S T .X . B&VV6S50MC-C 12p u m p s lM O 111 $28.00m undisclosed
STAR each
OCEAN LEO 47,366 2010 Onomichi B&W 6S50M C $28.00m M.E.
ZA PPH IR E 47,329 2010 Onomichi B&W 6S50M C 4 pumps $29.00m undisclosed
THERESA CRYSTAL 46,342 1993 Halla B&W 6S50M C 8 pumps $8.00m Indlans
IVER EXCEL 45,750 1997 Halla B&VV6S50MC 20 pumps $12.90m Peruvians
G R EA T SWAN 23,480 1991 Lindenau MAN 6L58/64 5 pumps $6.S0m Greeks
TURID KNUTSEN 22,000 1993 J.Gijon Spain B&W 6S50M C 14 pumps old $7.80m Nigerian
salé
CLIPPER MAKISHIO 19,999 2009 Pukuoka B&VV6S42MC IS pum ps S U Stanks $26.80m Norvvegians
MYKINES +3 SISTERS 17,548 2008/09 Samho B&W 8S35M C 14 pumps en bloc $18.00m Joint Vent.
each

A p p en d ix 6 Brokers sales repori:

A p p en d ix 7 Demohshcon sale form

A p p en d ix 7 Demolishcon sale form
ntinued) PART
■DEMOLISHCON' BIMCO STANDARD CONTRACT FOR THE SALE 0 F VESSELS FOR DEMOLITION AND RECYCLING
. Trading history and last five cargoes
. Purchase Price in figures and letters (State both lump sum price and the equivalent price per long ton light displacement)(CI. 2)
(a) Lump sum price (b) Equivalent price per long ton light displacement
Deposit (Cl. 3) 39. Sellers' bank (State name and place and bank account details to
vvhich the balance of the purchase price shall be paid)(CI. 4)
(a) State percentage of purchase price
(b ) State name and place of bank to vvhich the deposit shall be

paid
. Pinancial Documentation (Cl. 5) 41. Place of delivery (Cl. 8.1)
(a) State place of closing
42. Time of delivery (Cl. 9.1)

(b ) State by whom bill of sale shall be legalised or apostilled
(c) State number of commercial invoice(s) 43. Cancelllng date (Cl. 9.1)
, Buyers' watchmen (Cl. 15) 45. Dispute Resolution (State 21.1, 21.2 or 21,3: if 21.3 agreed place
of arbitration must be stated)(CI. 21)
. Notices (State postal and cable address, e mail and teleíax number 47. Notices (State postal and cable address, e mail and telefax numbei
for servina notice and communication to the SellersMCI. 2 2 . 2 ) for serving notice and communication to the BuversìiCl. 22.2)
, Numbers of additional clauses covering special provisions, if agreed
The Sell»rs shall not lie held responsible for any errors, omissions and/or overall condition of the Vessel Iipon arrlval at the p ia re of
delivery except for the items speciíìed in this PART I
s mutually agreed betvveen the party named in Box 2 (hereinatter referred to as “the Sellers") and the party named in Box 3 (hereinalíer referre(
as “the Buyers”) that on the date of this Contract the Sellers have sold and the Buyers have bought the Vessel described ìn PART I hereo
ỉreinafter reíerred to as “the Vessel”) on the terms and conditions contained in this Contract consisting of PART I including additional clauses, i
y agreed and stated in Box 48, and PART II. In the event of a conAict of conditions, the provisions of PART I shall prevail over those o f PART II t(
ì extent of such conAict but no íurther.
Ịnature (Sellers) Signature (Buyers)

A p p en d ix 7 Demoiishcon sale foỉ'm
PART II
“DEMOLISHCON” Standard Contract for the Sale of Vessels for Demolition and Recycling
e 1 Such certiíicate or transcript of registry shall be dated 63

/ stated in Box 2 (hereinafter ‘‘the Sellers”) has 2 not earlier than 5 days prior to the date of the Sellers 64
) sell and the party stated in Box 3 (hereinatter “the 3 tendering notice of readiness for delivery; 65
has agreed to buy the Vessel stated in Box 6 on 4 (iv) a vvritten undertaking from the Sellers to apply for 66
/ving terms and conditions which, in particular, 5 and supply to the Buyers a certiíicate of deletion or 67
n undertaking to comply with the IMO Resolution 6 closed transcript of registry latest 4 weeks after delivery 68
) IMO Guidelineson Ship Recycling (hereinafterthe 7 of the Vessel; 69
delines") in accordance with Clause 17 (Saíety and 8 (v) a vvritten undertaking by the Sellers to instruct the 70
lent). 9 Master or their agents to promptly release and deliver 71
the Vessel to the Buyers; 72
ri 10 (vi) a certitied copy of the minutes of the Board of 73
Days" are days on vvhich banks are open both in 11 Directors and/or shareholders resolution, as appro- 74
:ry of the currency stipulated for the purchase price 12 priate, according to vvhich they decide the sale of the 75
ỉ 2 and at the place of closing. 13 Vessel and a copy of the povver of attorney authorizing 76
the signature of the bill of sale; 77
rightSale 14 (vii) a c e r t it ic a te according to vvhich the S ellers 78
Vessel has been accepted by the Buyers vvithout 15 guarantee that at the time of delivery the Vessel is free 79
ection and the sale is outright and detinite subject 16 from all encumbrances and maritime liens or any other 80
to the terms and conditions of this Contract. 17 debts whatsoever. 81
5.2 At the time of delivery the Buyers and the Sellers 82
Chase Price 18 shall sign a protocol of delivery and acceptance 83
purchase price is the sum stated in Box 37(a) 19 coníirming the date and time of delivery of the Vessel. 84
ỉble in United States Dollars based upon a price 20 The Sellers shall make available to the Buyers copies 85
long ton Light Displacement Tonnage (LDT) (see 21 of the documents listed in sub-clauses 5.1 (i) to (vii) 86
jse 12) as stated in Box 37(b) calculated on the 22 as soon as possible atter the signing of this Contract, 87
s of the Vessel's LDT as stated in Box 20. 23 but no later than 3 days prior to the date of the Sellers 88
tendering notice of readiness for delivery. 89
lOsit 24
A sasecurityíorthe duefulfilmentofthisContract, 25 6. Advance Notice of Arrival 90
Buyers shall pay a deposit as stated in Box 38 to 26 The Sellers shall keep the Buyers fully intormed about 91
ilaced with the bank stated in Box 38 in the joint 27 the Vessel's position and of any alteration in expected 92
les of the Sellers and the Buyers, 28 time of arrival and shall give to the Buyers 15, 10, 7, 93
Such deposit shall be made latest vvithin 3 banking 29 and 3 days notice of the expected time of arrival of the 94
3 after the date of signing this Contract, 30 Vessel. 95
Interest, if any, on such deposit shall be credited 31
le Buyers. 32 7. Noticeot ReadinesstorDelivery 96
Any fees or charges for establishing and holding 33 When the Vessel is ready for delivery, the Sellers shall 97
1 deposit shall be borne equally by the Sellers and 34 give to the Buyers a vvritten notice of readiness for 98
Buyers. 35 delivery. The notice of readiness shall be tendered 99
during normal office hours at the Place of Delivery and, 100
ment 36 unless othervvise speciíically provided elsevvhere in 101
Buyers shall release the deposit stated in Box 38 37 this C ontract, be accom panied by the following 102
ie Sellers and shall pay the balance of the said 38 documents to the extent necessary: 103
:hase price in full to the Sellers' bank stated in Box 39 7.1 a certiíicate issued by a local marine surveyor 104
DD delivery latest vvithin 3 banking days from the 40 contirming the LDT of the Vessel as stated in Box 20 105
ì the Sellers have tendered notice of readiness for 41 as per the builders' original trim and stability booklet 106
íêry in accordance with the terms and conditions 42 or the builders’ capacity plan on board the Vessel, 107
nis Contract. 43 vvhich has been sighted; 108
7.2 a letter from the Sellers’ local agents at the Place 109
incial Documentation 44 of Delivery stating that there are no pending dues 110
In exchange for the payment of the purchase price 45 against the Vessel at the time of delivery; 111
Sellers shall turnish the Buyers with the following 46 7.3 a letter signed and stamped by the Master stating 112
uments at the place of closing stated in Box 40(a), 47 that neither he nor the crew have any outstanding 113
:h shall be in English or with a certiíied English 48 claims against the Vessel; 114
slation if in a language other than English: 49 7.4 an inventory, in the form as recommended by the 115
a legal bill of sale transterring title of the Vessel 50 IMO Guidelines as applicable; 116
stating that the said V essel is free from all 51 7.5 a portvvorthy certiíicate issued by a local marine 117
umbrances and maritime liens or any other debts 52 surveyor contirm ing the m aterial of the vvorking 118
itsoever, notarially attested, legalised or apostilled 53 propeller(s) as stated in Box 25; 119
appropriate by the Consul or other competent 54 7.6 a valid gasíree certiíicate for hotvvork. Such 120

PART II
“DEMOLISHCON” Standard Contract for the Sale of Vessels for Demolitlon and Recycling
tendered; 129 and propose a new date for the Cancelling Date. Upon
7.8 a letterírom the Master confirming thatthere have 130 receipt of such notification the Buyers shall have the
been no removals from the Vessel other than those 131 option either to cancel the Contract according to
stated in Box 22; 132 Clause 20 vvithin 2 working days of receipt of such
7.9 a letter of undertaking from the Sellers' agents 133 notice or of accepting the new date as the Cancelling
that they will arrange for the íiling of the invvard general 134 Date. Ifthe Buyers have notdeclared theiroption vvithin
manifest; 135 2 vvorking days of receipt of the Sellers’ notiíication or,
7.10 a valid deratisation exemption certificate issued 136 if the Buyers accept the new date, the date proposed
by the relevant authorities, 137 by the Sellers shall be deemed the Cancelling Date.
7.1 7.10. Delete as appropríate. 138 (ii) líthis Contract is maintained with the new Cancelling
Date, all other terms and conditions hereof shall
Delivery 139 remain in full force and effect. Cancellation or non-
8.1 The Vessel shall be delivered by the Sellers to 140 cancellation by the Buyers in accordance with the
the Buyers under her own povver, saíely aílo at, 141 provisions of sub-clause 9.2 (i) shall be vvithout
substantially intact, free of any fire and/or explosion 142 prejudice to any claim for loss and/or damages the
damage, free of cargo, free from all charters, with 143 Buyers may have against the S ellers under this
anchors in place and, vvhere applicable, with hatches 144 Contract.
closed and derricks lovvered and gasíree for hotvvork 145
(s ee su b -clau se 7 .6 ), as a p p ro p ria te , with the 146 10. Beaching
approximate arrival draft stated in Box 19 at the place 147 Following payment and delivery of the Vessel the Sellers
stated in Box 41 (hereinatter "the Place of Delivery”). 148 shall assist the Buyers in the beaching of the Vessel
8.2 lf, on the Vessel’s arrival, the Place of Delivery is 149 at the Buyers’ designated demolition plot. The Vessel
inaccessible for any reason vvhatsoever including but 150 shall be delivered with sufficient useable/pumpable
not limited to port congestion, the Vessel shall be 151 fuel, vvater and provisions for one day’s steaming and
delivered and taken over by the Buyers as near thereto 152 nine days' idling. The Sellers shall arrange for crew
as she may sately get at a safe and accessible berth 153 according to the safe manning certificate to remain
or at a safe anchorage vvhich shall be designated by 154 with the Vessel for a period of up to 10 days afler delivery
the Buyers, alvvays provided that such berth or 155 in order to assist with the aíoresaid beaching.
anchorage shall be subject to the approval of the 156 The beaching of the Vessel, which shall include the
Sellers and the Master vvhich shall not be unreasonably 157 moving of the Vessel from the outer anchorage to the
withheld. If the Buyers fail to nominate such place 158 beaching plot, shall be for the Buyers’ risk and expense.
within 24 hours of arrival, the place at vvhich ít is 159 Hovvever, the Master shall co-operate with the Buyers
customary for vessels to wait shall constitute the Place 160 in achieving the best possible draft and trim for
oíDelivery. 161 beaching.
8.3 The delivery of the Vessel according to the 162 The Buyers shall use their best endeavours to assist
provisions of sub-clause 8.2 shall constitute a full 163 in the safe disembarkation of the crew after beaching.
períormance of the Sellers’ obligations according to 164 The Sellers shall pay the wages and arrange p&l
sub-clause 8.1 and all other terms and conditions of 165 Insu ran ce c o ve r on th e ir cre w in vo lve d in the beaching
this Contract shall apply as if delivery had taken place 166 operation.
according to sub-clause 8.1. 167
8.4 AllexpensesincurređpriortodeliveryoítheVessel 168 11. Bunkers, Equipment etc.
and all local fees/port disbursements relating to the 169 11.1 The Vessel shall be delivered with everything
Vessel, including repatriation of the crew shall be for 170 belonging to her on board vvithout removals other than
the Sellers' account vvhile all expenses after delivery 171 those stated in Box 22. Hovvever, the Sellers shall have
of the Vessel, including import duties and other local 172 the right to take ashore vvithout compensation the
taxes, if any, shall be for the Buyers’ account. 173 following items: crockery, cutlery, linen and other
8.5 The Vessel with everything belonging to her shall 174 articles bearing the Sellers' flag or name, as well as
be at the S ellers’ risk and expense until she is 175 library, forms, etc., exclusively for use in the Sellers’
delivered to the Buyers. 176 vesseis. M aster's, O fficers’ and crew's personal
8.6 The Sellers shall deliver the Vessel to the Buyers 177 belongings including slop chest and the Vessel’s log
with the minimum amount of ballast water on board 178 book shall be excluded from the sale.
vvithout prejudicing the safety of the Vessel. 179 11.2 Unless otherwise agreed, any remaining bunkers,
8.7 The V essel shall be d elivered vvithout any 180 lubricating oils, stores, equipment and spares used
stowaways, contraband or arms and ammunition on 181 or unused on board at the time of delivery shall become
board, othervvise the Buyers shall have the option not 182 the Buyers’ property vvithout extra payment.
to accept the Vessel, vvithout prejudice to any claim for 183 11.3 The Sellers shall, at the time of delivery, hand to
loss and/or damages the Buyers may have against 184 the Buyers all plans, speciíications and certificates, or
the Sellers under this Contract. 185 copies hereoí, as available and vvhether valid or invalid.
11.4 The Sellers are not requlred to replace such
T im o n f n o liw o r\//ẩ ? s in r^ ttllin n H a t a 1AR m atorial cnarỂS nartc nr ctnroQ inrlnH inn Qnaro

PART II
“DEMOLISHCON” Standard Contract for the Sale of Vessels for Demolition and Recycling
uding any permanent ballast. The Vessel's LDT shall 260 othervvise be prevented or delayed due to outbreak of 322
êriíied by the builders’ original trim and stability 261 war, restraint of Government, Princes, Rulers or People 323
<let stamped and approved by Class which shall be 262 of any Nation or the United Nations, Act of God, or any 324
loard the Vessel and made available to the Buyers’ 263 other cause whatsoever beyond the Buyers’ or the 325
esentatives at the time of tendering the Vessel's 264 Sellers' control. 326
:e of readiness in accordance with Clause 7. The 265
ers shall also make available to the Buyers an 266 19. Buyers’ Default 327
inal or copy of the builders’ capacity plan with a 267 Should the deposit not be paid in accordance with the 328
dweight scale and/or builders' letter. 268 provisions of Clause 3, the Sellers shall have the right 329
Sellers shall make copies of the above documents 269 to cancel this Contract, and they shall be entitled to 330
lable to the Buyers as soon as possible after the 270 claim com pensation for th e ir losses and for all 331
ing of this Contract. 271 expenses incurred together with interest at LIBOR plus 332
3% per annum. 333
umbrances and Maritime Liens, etc. 272 Should the purchase price not be paid in the manner 334
Sellers warrant that the Vessel, at the time of 273 provided for in this Contract the Sellers shall have the 335
/ery, is free from all charters, encumbrances and 274 right to cancel the Contract, in vvhich case the amount 336
itime liens or any other debts whatsoever. Should 275 deposited together with interest earned, if any, shall 337
claims, vvhich have been incurred prior to the time 276 be forfeited to the Sellers. If the deposit does not cover 338
elivery, be made against the Vessel, the Sellers 277 the Sellers' losses, they shall be entitled to claim 339
íby undertake to indemniíy the Buyers against all 278 íurther com pensation for their losses and for all 340
sequences of such claims. 279 expenses together with interest at LIBOR plus 3% per 341
annum. 342
ss, Dues and Charges, etc. 280
taxes, fees and expenses connected with the 281 20. Sellers’ Default 343
;hase of the Vessel under the Buyers’ ovvnership 282 Should the Sellers fail to give notice of readiness in 344
II be for the B uyers' acco un t, and ch arg es 283 accordance with Clause 7 or fail to execute a legal 345
lected with the closing of the Sellers’ register shall 284 transter or to deliver the Vessel with everything 346
or the Sellers' account. 285 belonging to her by the Cancelling Date, the Buyers 347
shall have the right to cancel the Contract, in which 348
ỉrs’ VVatchmen 286 case the deposit in full shall be returned to the Buyers 349
Sellers agree to allovv the Buyers to place the 287 together with interest at LIBOR plus 3% per annum. 350
iber of vvatchmen stated in Box 44 on board the 288 VVhether or not the Buyers cancel this Contract the 351
sel on her arrival at the Place of Delivery. 289 Sellers shall make due compensation to the Buyers 352
Ist on board the Vessel, such vvatchmén shall be 290 for any loss and for all expenses incurred together 353
le sole risk, liability and expense of the Buyers and 291 with interest by their íailure to give notice of readiness, 354
Buyers shall indemniíy the Sellers against any 292 to execute a legal transíer or to deliver the Vessel with 355
TI fo r loss and/or damages in this respect. The 293 everything belonging to her by the Cancelling Date, if 356
ers’ watchmen must not interíere with the operation 294 such íailure is due to the proven negligence of the 357
le Vessel and they shall sign the Sellers’ letter of 295 Sellers. 358
imnity prior to their embarkation. 296
21 . Dispute Resolution Clause 359
pose of Sale 297 21.1 *This Contract shall be governed by and construed 360
Vessel is sold for the purpose of demolition and 298 in accordance with English law and any dispute arising 361
'Cling only and the Buyers undertake that they will 299 out of or in connection with this Contract shall be 362
her trade the Vessel for their own account nor sell 300 reíerred to arbitration in London in accordance with 363
Vessel to a third party for any purpose other than 301 the Arbitration Act 1996 or any statutory modiíication or 364
lolition and recycling. The Buyers shall procure 302 re-enactment thereoí save tó the extẽnt necessary to 365
this obligation is made a term of any and every 303 give effect to the provisions of this Clause. 366
sequent ăgreement for the resale of the Vessel. 304 The arbitration shall be conducted in accordance with 367
the London Maritime Arbitrators Association (LMAA) 368
ỉty and Environment 305 Term s current at the tim e when the a rb itration 369
1 the Sellers and the Buyers are íamiliar with the 306 proceedings are commenced. 370
I Guidelines and the Sellers shall use their best 307 The reíerence shall be to three arbitrators. A party 371
eavours to give iníormation to the Buyers in respect 308 vvishing to refer a dispute to arbitration shall appoint 372
le recommendations of the IMO Guidelines and the 309 its arbitrator and send notice of such appointment in 373
ers likewise shall use their best endeavours to 310 vvriting to the other party requiring the other party to 374
iply vvith such recommendations. 311 appoint its own arbitrator within 14 calendar days of 375
Buyers shall ensure that after delivery the Sellers’ 312 that notice and stating that it will appoint its arbitrator 376
esentatives are allovved to visit the ship recycling 313 as sole arbitrator unless the other party appoints its 377
itvto ascertain that safe and environmentallv sound 314 own arbitrator and qives notice that it has done so 378

A p p e n d ix 7 Demolishcon sale íorm
PART II
“DEMOLISHCON” Standard Contract for the Sale of Vessels for Demolition and Recyclìng
igreement. 387 agree to mediation, in which case the parties shall

ling herein shall prevent the parties agreeing ỉn 388 thereatter agree a mediatorvvithin a íurther 14 calendar
ing to vary th ese provisions to provide for the 389 days, íailing vvhich on the application of either party a
Dintment of a sole arbitrator. 390 mediator will be appointed promptly by the Arbitration
ases where neither the claim nor any counterclaim 391 Tribunal (“the Tribunal") or such person as the Tribunal
ỉeds the sum of u s $ 5 0 ,0 0 0 (or such other sum as 392 may designate for that purpose. The mediation shall
p a rtie s m ay a g re e ) the a rb itra tio n sh all be 393 be conducted in such place and in accordance with
ducted in accordance with the LMAA Small Claims 394 such procedure and on such terms as the parties may
:ed u re current at the time when the arbitration 395 agree or, in the event of disagreement, as may be set
;eedings are commenced. 396 by the mediator.
!*This Contract shall be governed by and construed 397 (iii) lf the other party does not agree to mediate, that
ccordance with Title 9 of the United States Code 398 fact may be brought to the attention of the Tribunal and
the Maritime Law of the United States and any 399 may be taken into account by the Tribunal when
ute arising out of or in connection with this Contract 400 allocating the costs of the arbitration as betvveen the
I be reíerred to three persons at New York, one to 401 parties.
appointed by each of the parties hereto, and the 402 (iv) The mediation shall not affect the right of either
I by the two so chosen; their decision or that of any 403 party to seek such relief or take such steps as it
of them shall be final, and for the purposes of 404 considers necessary to protect its interest.
ìrcing any avvard, judgement may be entered on 405 (v) Either party may advise the T ribunal that they have
ivvard by any court of competent jurisdiction. The 406 agreed to mediation. The arbitration procedure shall
;eedings shall be conducted in accordance with 407 continue during the conduct of the mediation but the
rules of the Society of Maritime Arbitrators, Inc. 408 Tribunal may take the mediation timetable into account
ases vvhere neither the claim nor any counterclaim 409 when setting the timetable for steps in the arbitration.
ỉeds the sum of us$50,000 (or such other sum as 410 (vi) Unless othervvise agreed or specified in the
p a rtie s m ay a g re e ) th e a rb itra tio n sh all be 411 mediation terms, each party shall bear its own costs
ducted in accordance with the Shortened Arbitration 412 incurred in the mediation and the parties shall share

A p p en d ix 8 Newbuildcon
Explanatory Notes for NEVVBUILDCON are available from BIMCO at www.bimco.org
NEVVBUILDCON
BIMCO STANDARD NEVVBUILDING CONTRACT
PART I
Place and date o f Contract ( c y , Cl. 44(bl. 0 4 7 )
2. Builder’ 8 n a m , h ill style addrees and contact details (Delinitions) Buyer*! narm, h ill style address and contact details (Detinitions)
Name; Name:
Address; Address:
Country: Country:
Phoneíax: Phoneâx:
E-mail: E-mail:
Compary registration No, Company registtation No.
Addltional names, addresaes and contact numbers: Additlonal names, addresses and contact numbere;
Name: Name:
Address: Address:
Country: Counlry:
Phone/Fax: Phone/Fax:
E-mail: E-mail:
Company registration No. Company regisưation No.
V etsel d ncriptlo n /typ e (Delinitions, Cl. 2(bll State v e sial typa:

(i} Dry bulk carríer
(ii) Tanker
(iii) Container vessel:
(iv) o ttie r (State type):
A. Maln dim aiB Ìont (Cl 2(bll: B l. C»rqo caMCltv (Cl. 2(b)(vl and Cl. I B2. TEU canylng u p a c lty (only if
ỊJJ: applkable) (State num ber o f containers);
(i) Total on òeck
(i) LOA(m): (i) Cubic capacity: a. 20740745” TEU:
(ii) Length between perpendiculai^ (m): b, No. oí reefers;
(ii) Deadvreight capacity DWT (mts): (ii) Bale capacity: Total underdeck
(iv) Meandraftỉnsaltwater(m): a, 20740745"TEU:
(iii) Grain capacíty:
b. No. ofreefers;
(iii) No of TEU homogenous
loaded at 14 mts.
c, Main enaine(8l: ICI. 2(b)(iil. Cl. 2(bl(^l and Cl. 91
(i) Maker/Type:
(io Max. Continuous Rating (MCR) (kilotvatts at MCR);
(iii) RPMatMCR;
(iv) Specific Fuel Oil Consumption at MCR:
(v) Nornial Continuous Rating (NCR):
(VI) RPM at NCR:
(víi) Type of fuel and specificaljon (including Calorilic Value (kcalíkg)):
1
This document Ì8 a compuỉer generated NEWBUILDCON fofm printed by authority of BIMCO Any insertion cx delelion to lh« form must be clearty visible, In the evenỉ of any modification made lo the pre-printed
texl of this documenl vvhich Ì6 not clearly visible, the lext of the original BIMCO approved document shall apply. BIMCO assumes no responsibility for any loss, damage 0f expense as a result of discrepancies
beỉwaen íhe original 0IMCO approved document and Ihis Computer generaled documert.

A p p en d ix 8 Nevvbuildcon
D, A veranetpeed (Cl. 2(bl(i) and Cl, 8ì E. o tlie r m atten (optỉonalKstate any ottier technical requlrements for the particular vessel
typeKCI. 2 lb )lv ilandCI 121
(i) Setvk* speed at design drall (m):
(ii) Min, numberotknols:
(iii) Engine output(kilowattsatMCR):
(iv) Percentage of engine’s max. continuous power/sea maigin:
(v) RPM:
Shipyard(B) (» different from Box2l (Full style address and contact details)
(Detiníionsl
Name: Name;
Address: Address:
Country: Counby;
Phoneâx;
Phõne/Fax;
E-mail: E-mail:
Addỉtíonal namet, addressM and contact num bert; A dd ltìon ii nim es, addressM in d conUct numbers:
Name: Name:
Address: Address:
Countíy: Countiy:
Phone/Fax. Ptìoneâx:
E-mail:
E-íĩiail:
6, Bưilder' 1 Hull Nưmber (Definitions. Cl. 2(311 7. Flas State (Delinitions)
8 Clas»ilicatioii Society/Cla«* N o trto n (DelinHóns, C U ) 9 Contract Price and Currency (D«finitịons, Cl. 7)
(a)Price
(b) Cumency__________________________
10. Contractual Date o f D«llveiy (D«linitions, c 11, Payment Amount* and Time Due (Defin«ons, 212, CI.15. Cl.39(cn
1st Instalment (see Cl. 15íal(in
12, B ullile f’« Bank Account DealH ÍCI. 15(011 2nd Instalment and tin e due
Name: 3rd Instalment and time due

Address:
4th Instalment and time dge
Countiy: Final Instalmeiil (see Cl, I5(a)(ivll

Phone/Fax:
E-mail;
Sortcode:
Account nimben
Account name:
13. Speed Dofici«ncy ( O i , Cl, 39la)(rvn
(i) Contract Price neducbon amount

(ii) Maxứnum anx>unt (State monetary limit):
14. EẰCe»8iv» Fuel ContumĐtion (Cl. 9. Cl 39(al(v)l 15, DệadweigM D«ficieiicy ÍCI. 10. Cl. 39la)ivi«
{ỉ) Contract Price reductỉon amount (i) Deadaveighttolerance:

(ii) Maximum amount (State monetary limit): (iì) Contrad Price reduction amognt
(iit} Maximum amount: (State monetary limít):
Ttiis òocument is a compulet generaled NEWBUILDCON fofm pnnled by aulhaity of BIMCO. Any inserlion or deleíon lo ths form musl be dearly viáble. In the 0 venl of any modiíoalion made lo Ihe pr8-p<mlsd
texl of lhỈ6 document which is not clearly viáble, the text of the origínal BIMCŨ approved document Gliall apply. BIMCO assumes no responsibilíty for any lo&s, damage or expense a& a result of discrepancles
belween the originai BIMCO approved document and thl8 computSí genefate<l documenl

A p p e n d ix 8 Nevvbuildcon
16, Cubic Deticìencv fCI. 11. Cl, 39(aHviilì 17. Other Deticiencim (ODtional)ICI. 12. Cl. 39(al(viiill
(i) Cubic capacity tolerance:

(ii) Contract Price reduction amount:
(iii) Maximum amount; (State monetary limit):
18. Late Deliverv CoiDDensation (Cl. 13) 19. GuaratiteeslCI. 14(a)and(b)l
(i) Amount per day; (a) Buyei^s guarantees

(ii) Maximum amount: (State monetary limit): (i) NumberotdaysaíersigningContract
(ii) Buyet's lnstalment/Perlòmiance Guarantee:
(b) Buildei^s guarantees
(i) Number of days after signing Contract:
20. Guarantee Period (State number 21 Additional Guarantee Period 22. S u«pon»ionandTem ilintion(C I. 39)
of months, lf tefl blank 12 months (State numberoí months)
shallapply)(CI, 35(alíỊ]] ICI, 35(e)) (i) Runnirg period (State tiumber of days);
(ii) Noticeperiod (State numberoídays):
23 Govemina law and DISDute Resolutlon (Cl. 41 and Cl. 421 24. G uarantm Enolneer (State monthlv lumo suml (Cl. 36(bl)
(a) Goveming law

(b) Place of dispute resolution
25. Effective Date of Conưact (State conditions to be fulfilledl (Cl. 44(al) 26 State number o f d a v i within whlch co nd ltíon i have to be » tis fie d (Cl. 44(bll
27. ŨDtional additional v e s u ls (State numberl (Cl. 461 28. Ootional id dltion a l vesM ls contract Drice and dellveiv dates (Cl. 461
29. Declaration o f Options (State number of morttis atter Effective date) 30. Intsrest (State rateoíinterestl (Cl. 18. Cl 38(bMiil(21(il. Cl. 39(e) and 39(0 (iwll
(CU61
31. Buyer^s Guarantor (State name of bank or party as appiopríale. full style 32. B ullde r't Guarantor (State name of bank or paity as appropriate, full style address and
addness and contactdetailsl (Cl. 14(al)
Name: Name:
Address: Address:
Country: Counừy:
Phoneâx: Phoneíax:
E-mail: E-mail:
33 A d d ltlo n a lA n n e im 34 Numbere o f Addltional C la u u s
This Contract consists of PARTI including additional clauses, if any agreed and stated in B ox34. and PART II as well as any Annexes agreed and attached
hereto and shall be pertormed subịect to the conditions contained herein, In the event of a conAict of conditions the provisions of PARTI shall prevaíl over those
ũf PARTII to the extent o f such conAict, but no turther.
The Speciíication, Makei^s List, Plans, and/or Dravvings hereafter approved by the Buyer shall to m part of this Contract, but in the event of contlict between the
provisions of this Contracl and the SpeciScation, Makei^s List, Plans and/or drawings, the provisions of this Contract shall prevaíl. In the event of inconsistency
betvveen the SpeciAcation and Makei^s List, on the one hand and the Plans and/or Dravvings on the olher, the SpeciScations/Maker^s List shall prevail. In the
case of inconsistency betv«en any of the Plans and/or Dravvings, the later in date shall prevail.
Sígnature (Bulkỉer) Signature (Buyer)
This document is 3 compuler generaled NEWBUILDCON fa m printed by aulhority of BIMCO. Any insertion or deleiion to the form must be clearly visỉble. In the event of any moditication made to the pre-pnnted
text of this do cum ît w hidi Ì8 not clearly visible, the text of the original BIMCO approvdd document shall apply. 6IM C 0 assumes no rdsponsibility for any lỡss, damage or expense as a resull of discrepanciee
t>etween the original BIMCO approved document and Ihis Computer generated document.

A p pendix 8 Newbuildcon
NEVVBUILDCON - Standard Nevvbuilding Contract - PART II
LIST 0 F CLAUSES
D E PIN ITIO N S
IN TE R P R ET A TIO N
1. Builder's and Buyei^s obllgations 34. Pemnissible Delays

2. Description 35. Builder's Guarantee
3. Classiflcatlon, Rules and Regulations 36. Guarantee Engineer
4. IMO Hazardous Materials Inventory 37. Responsibilities and exclusions from liabllitles
5. Protective Coatings BuiiơeCs exclusion Clauses
6. Source of Origin (a) Liability for Deíects discovered betore
or at the time of delivery.
(b) Liabílity for Deíects discoveređ after delívery
(c) Liability for thirđ party replacement or repair
7. Contract Price (d) Implied terms
8. Speed Deíiciency Mutual exclusion Clauses
9. Excessive Fuel Consumption (e) Liabilitỵfollowing termination
10. Deadvveight Deficiency Responslbility Clauses
11. Cubic Capacity Deíìciency ự) Responsibility tor death and personal injury
12. o ther Deíiciencíes (optional Clause) (g) Responsibility for damage to or loss of property
13. Late Delivery for non-permissíble delays 38. insurancés
14. Guarantees (a) Buildei^s Insurances
(a) Buyei^s Instalment/Pertonmance Guarantee (b) Allocation of Insurance Proceeds
(b) Buildei^s Refund Guarantee 39. Suspension and Terminatlon
(c) Guarantee Compliance and Expiry (a) Buyei^s Termination
15. Payments (b) Builder's Termínalion
(a) Instalments (c) Suspension of VVork
(b) Payment for Modlfications and other items (d) Deemeđ Insolvency
(c) Payment of Liquldated Damages (e) Effect of Buyei^s Termination
(đ) Paýment Procédures (f) Effect of Buildei^s Termination
16. Taxes, duties. stamps, dues and fees 40. Copyrights, Trade Marks and Patents
17. Right to set-off 41. Goveming law
18. Iniérest 42. Dlspute Resolutlon
(a) Classiíication/Regulatory Authorities
(b) Expert determination
19. Sub-contracting ' ,» t (c) Arbitration and Međiation
20. Approvals
21. Buyer's Supplies
(a) Buyer 43. N oticei _
(b) Builder 44, Effertive date of Contract
22. Buyer's Representative, Assistants, Officere and Crew 46. Assignment
23. Inspections. TestsandTrials (a) Builder s assignment
24. Modlíications and Changes (b) Buyei^s assignment
25. Buíldei^s Modifications and Substitution of Materials 46. Optlons
26. Changes ìn Rules and Regulations 47. Entire Agreement
27. Sea Trials 48. Third party ríghts
(a) Notice
(b) VVeather Conditions
(c) Conđuct of the Sea Trials
(d) M ethod of A cceptance or Rejection
ANNEX "A" - (GUARANTEES)
A N N E X 'B "-(S P E C IF IC A T I0 N )
28. Delivery
29. Documénts on Delivery ANNEX 'C ' - (MAKER'S LIST)
30. Final Instalment
31. TitleandR ísk
32. Possesslon and Removal of the Vessel
33. Vessel Registration

DEPINITIONS 1
In this Contract: 2
“Banking D ay” m eans a day on whichbanks are open in the places stated in Box 2 and Box 3 3
and, where a remittance isinus dollars, inNew York. 4
“Builder” m eans the company or companies stated in Box 2 , organised and existing under 5
the laws of the country or countries stated in Box 2 having their principal office at the address 6
stated in Box 2 and including their personnel. If more than one company is stated in Box 2 7
then they shall be jointly and severally liable. 8
“Buyer” m eans the company or companies stated in Box 3 , organised and existing under the 9
laws of the country or countries stated in Box 3 having their principal office at the address 10
stated in Box 3 and including their personnel. 11
“Buyer's R epresentative” means the named representative of the Buyer who may be present 12
at the Shipyard throughout the construction of the Vessel. 13
“Buyer’s Supplies” means all of the items to be provided by the Buyer in accordance with the 14
Specifìcation at its own risk, cost and expense. 15
“Classification Society" means the classitication society stated in Box 8 . 16
“Contract Price” m eans the amount stated in Box 9 as may be adjusted in accordance with 17
the terms of this Contract. 18
“Contract” m eans this BIMCO Standard Newbuilding Contract consisting of Part I including 19
additional Clauses, if any agreed, and Part II as well as any Annexes (including the Speciíication 20
and M aker’s List) and Plans and Dravvings attached hereto. 21
“Contractual Date of Delivery" means the contractual date of delivery stated in Box 10. 22
“Deíects” m eans any deficiencies or deíects in the design, construction, material and/or 23
vvorkmanship on the part of the Builder or its sub-contractors. 24
“Delivery D ate” m eans the Contractual Date of Delivery as may be adjusted in accordance 25
with the term s of this Contract. 26
“Final Instalment” m eans the last instalment payable at delivery calculated in accordance with 27
Clause 15 (Paym ents). 28
“Flag State” m eans the State of the flag which the Vessel will fly when registered, as stated 29
in Box 7 . 30
"Instalments” m eans the amounts payable in accordance with Box 11. 31
“In vvriting” m eans any method of legible communication. 32
“Maker’s List” m eans the list of suppliers for equipment, machinery and services approved by 33
the Parties and stated in Annex c. 34
“Parties” m eans the Builder and the Buyer. 35
“Party” m eans the Builder or the Buyer, as the case may be. 36
“Permissible D elays” means delays to the construction and/or delivery of the Vessel and which 37

entitle the Builder to extend the Delivery Date in accordance with Clause 34 (Perm issible 38
Delays). 39
“Personnel” means the employees, agents, servants, suppliers and independent contractors 40
engaged by either Party in order to pertorm work or duties under this Contract for which that 41
Party is responsible. 42
“Plans and Drawings” means the plans and dravvings attached hereto or listed and/or described 43
in the Specitìcation. 44
“Regulatory Authorities” means the regulatory authorities whose rules and regulations must 45
be complied with in the construction and delivery of the Vessel. Such bodies shall include the 46
Flag State together with the other bodies listed in the Specitication. 47
“Shipyard” means the place or places stated in Box 5 w here the Vessel will be assem bled 48
and/ór constructed. 49
“Specification” means the technical details contained in Annex B. 50
“Sub-contractor” means any person (not being a servant or employee of the Builder) or company 51
with whom the Builder has entered into a contract for the design, construction, m anuíacture 52
or supply of any item, equipment, work or S e rvice for the Vessel. 53
“Vessel” means the vessel described in Box 4 (including its machinery, equipment and 54
appurtenances described in the Specitication) with hull num ber as per Box 6 . built ỉn accordance 55
with this Contract. 56
INTERPRETATION 57
Síngular/Plural 58
In this Contract the singular includes the plural and vice versa as the context admits or 59
requires. 60
Headings 61
The index and headings to the Clauses and Annexes to this Contract are for convenience only 62
and will not affect its constructỉon or interpretation. 63
Uointiy and severally 64

All covenants, agreements, undertakings, indemnities, representations and vvarranties by more 65
than one person are entered into, given or m ade by such persons jointly and severally. 66

A p p e n d íx 8 Newbuildcon
SECTION1 - VESSEL .......... "
1. Builder’s and Buyer’s obligations 67

It is mutually agreed betvveen the Builder and the Buyer that: 68
(a) the Builder shall design, cx)nstruct, test and survey, launch, equip, complete, sell and 69
deliver the Vessel to the Buyer all in accordance with good international shipbuilding and 70
marine engineering practice; and 71
(b) the Buyer shall purchase, take delivery of and pay for the Vessel. 72
2. Description 73
(a) The Vessel shall be constructed at the Shipyard and shall have the Builder’s Hull 74
Number stated in Box 6 . 75
(b) The Vessel shall have the dimensions and characteristics as stated in Box 4 and the 76
Speciíication. These shall be detined, m easured and calculated in accordance with the 77
Specification or, if omitted from the Speciíication, in accordance with the following; 78
(i) Speed - T he V essel’s average speed on a sea trial undertaken in both directions 79
over a measured distance of one (1) nautical mile, with clean hull, in vveather with 80
wind speed and sea State not exceeding Beautort W ind Force Scale 3 and Douglas 81
Sea State Scale 2 respectively on a draft as stated in Box 4D(i) shall be at least the 82
number of knots stated in Box 4D(iiV During such a sea trial the engine’s output in 83
kilovvatts shall be as stated in Box 4D(iii^ corresponding to the percentage of the 84
engine’s maximum continuous power output stated in Box 4D(iv) at the approximate 85
revolutions per minute stated in Box 4 D M . 86
(ii) Fuel Consumption - The fuel consumption of the main engine on the test bed using 87
fuel of the type and speciíìcation stated in Box 4C(vii) shall not exceed the number of 88
grams per kilowatt/hour stated in Box 4C(iv) when the engine develops the number 89
of kilovvatts wỉth an effective caloriíic value of the number of kilocalories per kilogram 90
stated in Box 4C(ii) and Box 4C(vii) respectively. 91
(iii) Deadvveight - The V essel’s deadweight shall be the number of metric tons stated 92
in Box 4A(iìi) on international sum m er freeboard, corresponding to a mean draft in 93
saltvvater (speciAc gravity 1.025) as stated in Box 4A(iv). The speciíied deadweight 94
shall include fuel, provisions, stores, freshwater, crew and passengers in addition to 95
spare parts not less than the requirements of the Classification Society. 96
(iv) Propulsion - The V essel’s propulsion machinery shall be of the type and with maximum 97
continuous power in kilovvatts at the number of revolutions per minute as stated in 98
Box 4C (i). 40(10 and 4C(iìn. 99
(v) Cargo Capacity - The Vessel's cargo capacity shall be the capacities stated in 100
4B1 and 4B 2. 101
(vi) o th e r matters - The Vessei shall m eet the technical requirements stated in Box 102
4E, 103
3. Classification, Rules and Regulations 104

(a) The Vessel shall be designed, constructed, surveyed, tested and delivered in 105
compliance with the applicable laws, rules, regulations and requirements of the 106
Classification Society stated in Box 8 . and the Regulatory Authorities: 107
Ship Saie and Purchase 249

(i) in force as of the date of this Contract stated in Box 1. or 108
(ii) if not ỉn force as of the date of this Contract, vvhich are ratitied and promulgated on 109
or before the date of this Contract and which will be compulsory for the Vessel on or 110
beíore the delivery of the Vessel in accordance with Clause 28 (Delỉvery), 111
All such laws, rules, regulations and requirements of the Classiíication Society and 112
the Regulatory Authorities shall be complied with vvithout qualiíication (see Cíause 26 113
(Changes in Rules and Regulations)). 114
(b) The final decisions of the Classification Society or Regulatory Authorities shall be 115
binding on the Parties as to the V essel’s compliance with their respective applicable laws, 116
rules, regulations and requirements. 117
(c) All costs, fees and charges incidental to and in respect of compliance with the 118
applicable laws, rules, regulations and requirements of the Classiíication Society or 119
Regulatory Authorities reíerred to above shall be for the Builder’s cost and expense. 120
4. IMO Hazardous Materials Inventory 121

The Builder shall, in accordance with the IMO Guidelines on Ship Recycling, Resolution 122
A .962 (23), with amendments in force as of the date of this Contract: 123
(a) Endeavour to take due account of the Vessel’s ultimate disposal when designing and 124
constructing the Vessel by: 125
(i) using materials vvhich can be recycled safely and in an environmentally sound manner; 126
and 127
(ii) by minimising the use of materials knovvn to be potentially hazardous to health and 128
the environment. 129
(b) Inconsultation with equipment m a n u ía c tu re rs provide the Buyer with a Green Passport 130
statem ent of Compliance issued by the Classitication Society containing intormation 131
including the Vessel's hull number and main particulars and listing any and all materials 132
knovvn to be potentially hazardous utilised in the construction of the Vessel, its equipment 133
and systems, 134
The list of the materials known to be potentially hazardous shall contain the location and 135
the approximate quantity/volume of each identiíied material on board the Vessel. 136
5. Protective Coatings 137

The Vessel’s double-side skin spaces and dedicated seavvater ballast tanks shall be coated 138
in accordance with the Specitication. In any event the minimum coating Standard shall 139
be in accordance with the requirements of the IMO Períormance Standard for Protective 140
Coatings for dedicated seavvater ballast tanks in all types of ships and double-side skin 141
spaces of bulk carriers (IM O P SP C , Resolution MSC. 215(82)) and, where applicable, in 142
accordance with the lACS Com mon structural Rules for Bulk Carriers and for Oil Tankers 143
or subsequent modiíications or replacement applicable in accordance with Clause 3(a) 144
(Classiíication, Rules and Regulations). 145
6. Source of Origin 146

lf so requested by the Buyer, the Builder shall identity the country of origin of all the main 147
components listed in the M aker’s List and Specitication. 148

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NEVVBUILDCON - Standard Nevvbuilding Contract - PART I
SbủnON 2 - p in a n c i AL
7. Contract Price 149
The Contract Price shall be the amount stated in Box 9(a) as may be adjusted in 150
accordance with the terms of this Contract. 151
The Contract Price and any other payments to be made to the Builder pursuant to this 152
Contract shall be paid in the currency stated in Box 9(b) and in accordance with the 153
payment terms stated in Box 11 and Clause 15 (Payments). 154
8. Speed Deticiency 155

lf the speed of the Vessel as stated in B ox4D (ii) is not achieved in the manner stated 156
in the Speciíication or Clause 2(bKÌ) the following shall apply: 157
(a) There shall be no adjustment of the Contract Price except to the extent provided in 158
SÚb-clause 8(b). 159
(b) lf the reduction in speed is greater than 2/1 oths of a knot, the Contract Price shall be 160
reduced by the amount stated in Box 13(1) for each whole 1/1 oth of a knot reduction in 161
speed in excess of 2/10ths of a knot as liquidated damages up to the maximum amount 162
stated in Box 13(10. 163
(c) lf the reduction in speed would entitle the Buyer to a reduction in the Contract 164
Price greater than the maximum amount stated in Box 13(ii). the Buyer shall have the 165
option to terminate this Contract in accordance with Clause 39(aHiv) (Suspension and 166
Termination). 167
9. Excessive Fuel Consumption 168

lf the fuel consumption of the Vessel’s main engine on the test bed using the fuel specitied 169
in Box 4C(viì) exceeds the figure stated in Box 4C(iv) the following shall apply: 170
SÚb-clause 9(b). 172
(b) lf the excess fuel consumption is greater than 2% (two percent) of the speciíied fuel 173
consumption the Contract Price shall be reduced by the amount stated in Box 14(i) for 174
each wtiole percentage in excess of 2% as liquidated damages up to a maximum amount 175
as stated in Box 14(ii). 176
(c) lf the excess fuel consumption vvould entitle the Buyer to a reduction in the Contract 177
Price greater than the maximum amount stated in Box 14(iiì. the Buyer shall have the 178
optionto: 179
(i) accept the main engine at a reduction in the Contract Price corresponding to the 180
maximum amount stated in Box 14(ii) or 181
(ii) re je c t th e m a in e n g in e a n d e ith e r 182
(1) require the Builder to rectify the deíiciency and repeat the trial or replace the main 183
engine with one that contorms to the requỉrements of the Contract. (The time taken 184
to rectiíy the deíiciency and repeat the trial or replace the main engine in accordance 185
with this Sub-Clause shall not be a Permissible Delay) or 186
(2) terminate this Contract forthwith in accordance with Clause 39(a)(\/) (Suspension 187
and Termination). 188
Ship Sale and Purchase 25 I

10. Deadvveight Deficiency 189

lf the actual deadvveight of the Vessel determined in accordance with the Speciíication 190
is less than the deadvveight stated in Box 4A(iii) the following shall apply: 191
SÚb-clause 10(b) 193
(b) lf the re d u c tio n in deadweight is greater than the number of metric tonnes stated in 194
Box 15(i) then for each whole metric tonne in excess of the figure in Box 15(1) below the 195
deadvveight stated in Box 4A(iii) the Contract Price shall be reduced by the amount stated 196
in Box 15(ii) as liquidated damages up to a maximum amount as stated in Box 15(iii). 197
(c) lf the reduction in deadweight would entitle the Buyer to a reduction in the Contract 198
Price greater than the maximum amount stated in Box 15(iiì) the Buyer shall have the 199
option to terminate this Contract in accordance with Clause 39(a)(viì (Suspension and 200
Ternnination). 201
11. Cubic Capacity Deficiency 202

lf the actual cubic capacity of the Vessel determined in accordance with the Specification 203
is less than the cubic capacity speciíied in Box 4B1(i) the following shall apply: 204
SÚb-clause 11(b) 206
(b) lf the reduction in cubic capacity is greater than the number of cubic metres stated in 207
Box 16(i) then for each full cubic metre in excess of the íigure in Box 16(1) belovv the cubic 208
capacity stated in Box 4B1(i) the Contract Price shall be reduced by the amount stated in 209
Box 16(ii) as liquidated damages up to a maximum amount as stated in Box 16(iii). 210
(c) lf the reduction in cubic capacity would entitle the Buyer to a reduction in the Contract 211
Price greater than the maximum amount stated in Box 16(iii) the Buyer shalt have the 212
option to terminate this Contract in accordance with Clause 39(aHvii) (Suspenslon and 213
Termination). 214
12. other Defìciencies (optional Clause) 215

NOTE: This Clause has been left blank intentionally to allow the parties to insert, where 216
appropriate, a liquidated damages provision covering deỉiciencies in any special technical 2 17
requirements for a particular vessel type and specitied by the parties in Box 4E and Box 2 18
17. (See also Clause 39(a}(viiiì). 2 19
13. Late Delivery for non-permissible delays 220

lf delivery takes place more than 30 days after the Delỉvery Date then for each day 221
thereaíter the Contract Price shall be reduced by the amount stated in Box 18 per day 222
as liquidated damages up to a maximum delay of 180 days (comprising a 30 day grace 223
period plus 150 days). 224
lf the delay exceeds 180 days the Buyer shall have the option to terminate this Contract 225
in accordance with Clause 39(a)(iii) (Suspension and Termination). 226
14. Guarantees 227

(a) Buyer’s InstalmenưPertormance Guarantee 228
To secure the Buyer’s obligation to pay the instalments of the Contract Price prior to 229
delivery the Buyer shall, vvithin the number of days stated in Box 19(aKi) after the signing 230
of this Contract, deliver to the Builder an irrevocable and unconditional guarantee issued 231

by the bank or party stated in Box 31 substantially in the form and substance set out in 232
Annexes A(i) (Instalments) or A(ii) (Pertormance) as stated in Box 19(aKii). íailing which 233
the Builder shall have the option to terminate this Contract inaccordance withClause 234
3 9 íb K M (Suspension and Termination). 235
(b) Builder’s Refund Guarantee 236

To secure the Builder’s obligation to retund the Buyer's pre-delivery instalments pursuant 237
to this Contract the Builder shall, within the number of days stated in Box 19(bUi) after 238
the signing of this Contract and before the date for payment of the first instalment in 239
accordance with Clause 15(aHi) (Payments - Instalments), provide the Buyer with a 240
Refund Guarantee issued by the bank or party named in Box 32 substantially in the form 241
and substance set out in A N N EX A(iii)(Refund Guarantee), failing which the Buyer shall 242
Have the option to terminate this Contract in accordance with Clause 39(aUix) (Suspension 243
and Termination). 244
(c) G uarantee Compliance and Expiry 245

The Parties shall ensure that any guarantee issued on their behalf shall: 246
(i) comply with the laws, regulations, constitution and procedures of the guarantor and 247
its country of issue, including but not limited to, its registration with any necessary 248
authorities; and 249
(ii) on expiry be returned to the guarantor; and 250
(iii) in the case of the Refund Guarantee (sub-Clause 14(b)). remain in force until either 251
(1) a date at least 300 days after the Contractual Date of Delivery stated ỉn Box 10 or 252
30 days after the final resolution of any dispute under Clause 42 (Dispute Resolution), 253
vvhichever is the later; or 254
(2) delivery of the Vessel to, and acceptance of the Vessel by, the Buyer 255
whichever is the sooner. 256
15. Payments 257

(a) Instalments 258
The Contract Price shall be paid by the Buyer to the Builder by Instalments, when due 259
and payable in accordance with Box 11 and this Clause, the pre-delivery Instalments 260
being paid as advances and not deposits as follows: 261
(i) Unless othervvise stated in Box 11 the first Instalment shall be due and payable by 262
the Buyer five (5) Banking Days after the Refund Guarantee has been provided in 263
accordance with Clause 14(b) (Builder’s Retund Guarantee). 264
(ii) The Builder shall give the Buyer invoices for each Instalment under this Contract. 265
With the exception of the first and Final Instalment the Builder shall give the Buyer 266
an invoice to cover the sum due to it not less than ten (10) Banking Days prior to the 267
due date of each Instalment. 268
(iii) All Instalments other than the first and Final Instalment shall be payable within four 269
(4) Banking Days of the due date thereoí. 270
(iv) The Final Instalment shall be due and payable upon delivery of the Vessel in 271
accordance with Box 11 and Clause 28 (Delivery). 272
(b) Payment for Modifications and other ite m s 273

A p p e n d ìx 8 Nevvbuildcon
(i) The sums due or reíundable as a result of modiíications and changes, and changes 274
in Rules and Regulations under Clause 24 (Modiíications and Changes) and Clạụse 275
2^(C h an ges in Rules and Regulations) shall be added to or deducted from the Final 276
Instalment. 277
(ii) All expenses payable in accordance with Clause 27(cHiii) (Conduct of the Sea Trial) 278
and Clause 22(b) shall be paid together with the Final Instalment, 279
(iii) Sums due for other items shall be pald within fifteen (15) Banking Days after receipt 280
by the Buyer of the Builder’s invoice. 281
(c) Payment of Liquidated Damages 282

Any amounts for liquidated damages under Clause 8 (Speed Deticiency), Clause 9 283
(Excessive Fuel Consumption), Clause 10 (Deadweight Deíiciency), Clause 11 (Cubic 284
Capacity Deíiciency), Clause 12 (O ther Deficiencies) and Clause 13 (Late Delivery for 285
non-permissible delays) shall be calculated and determined before delivery and may be 286
deducted from the Finai Instalment. 287
(d ) Payment Procedures 288

(i) lf the date on which any payment is due in accordance with the provỉsỉons of this 289
Contract does not fall on a Banking Day, paym ent shall be m ade on the next Banking 290
Day. 291
(ii) Payment of sums due in accordance with the provisions of this Contract shall be made, 292
in the case of payments to the Builder, by electronic transíer to the Builder’s account 293
stipulated in Box 12 and, in the case of payments to the Buyer by electronic transíer 294
to such bank as the Buyer by notice to the Builder nominates to receive payments 295
on its behalí. 296
(iii) The cost of remitting payments shall be for the account of the payer. 297
(iv) Payments by either Party to the other under this Contract, and their receipt, shall not 298
be deemed a waiver of any right or claim either Party may have against the other, 299
(v) In the event of late payment of Instalments by the Buyer, the Builder shall have the right 300
to suspend work under this Contract in accordance with Clause 39(c) (Suspension 301
ofW ork). 302
16. Taxes, duties, stamps, dues and fees 303

(a) The Builder shall bear and pay all taxes, duties, stamps, dues and fees imposed in 304
the place stated in Box 2 in connectlon with the execution and/or períorm ance of this 305
Contract, excluding any taxes, duties, stamps, dues and fees imposed in the place stated 306
in B o x 2 upon the Buyer's Supplies which shall be for the Buyer’s cost and expense. 307
(b) The Buyer shall bear and pay all taxes, duties, stamps, dues and fees imposed 308
outside the place stated in Box 2 in connectlon with the execution and/or pertormance 309
of this Contract, except for taxes, duties, stamps, dues and fees imposed upon those 310
items and services procured by the Builder for construction of the Vessel. 311
(c) lf either Party pays any taxes, duties, stamps, dues and fees for vvhich the other Party 312
is responsible under this Clause, the other Party shall reimburse the paying Party within 313
fifteen (15) Banking Days of receipt of notice to that effect, together with evidence of the 314
am ountpaid. 315

17. Right to set-off 316

The Buyer shall not have the right to retain or set-off any amount against any payment 317
due to the Builder under this Contract except in relation to the Final Instalment as 318
speciíically provided in this Contract (see Clause 15 (Paym ents) and Clause 30 (Final 319
Instalment)). 320
18. Interest 321

lf either Party fails to pay any sum due in accordance with the terms of this Contract, the 322
other Party shall have the right to charge interest from the due date at the rate stated in Box 323
30 on such outstanding sums (see also Clause 39 (Suspension and Termination)). 324

A p p e n d ix 8 Newbuildcon
19. Sub-contracting 325

T he Builder shall employ the sub-contractors as set out in the Speciíication or M a k er’s 326
List. Except for minor work, the Builder shall not employ other sub-contractors vvithout 327
the Buyer’s approval, vvhich shall not be unreasonably vvithheld. 328
Notvvithstanding any sub-contracting, the Builder shall remain fully responsible for the 329
due pertormance of such work as if undertaken by the Builder at the Shipyard. 330
20. Approvals 331

T he times and numbers speciíied in this Clause shall apply unless othervvise stated in 332
the Specification. 333
(a) As soon as possible and not later than sixty (60) mnning days after the effective date 334
of the Contract (see Clause 44 (Effective date of Contract)) the Builder shall provide the 335
Buyer with proposed detailed bùilding and testing schedulés. T he Buyer shall com m ent 336
on the schedules as soon as possible and at the latest within tourteen (14) running days 337
after receipt of the proposals. The Builder shall thereatter prepare and issue in vvriting 338
am ended building and testing schedules incorporating the Buyer’s comments within 339
fourteen (14) running days thereafter. 340
(b) T he Builder shall despatch to the Buyer a total of three (3) full sets of the Plans and 341
Dravvings for the Buyer’s approval and shall also submit such other technical iníormation 342
as the Buyer may reasonably require, not less than thirty (30) running days before any 343
construction works commence. The Builder shall give notice to the Buyer advlsing the 344
date of despatch of the Plans and Dravvings and the Buyer shall give notice to the Builder 345
coníirming receipt thereof. The Buyer shall within íourteen (14) running days of receipt 346
send to the Builder one (1) set of the Plans and Dravvings with the Buyer’s approval or 347
approval with comments, amendments or reservations. 348
In the event that the Buyer needs additional time to consider the Plans and Dravvings 349
submitted pursuant to this Clause, it shall request the sam e in writing of the Builder w hose 350
agreem ent shall not be unreasonably vvithheld. In the event that the Buyer’s comments, 351
amendments or reservations are unciear, unspeciíied or iilegible, the Builder m ay give 352
notice requesting clarification. If the Buyer fails to respond to the request to provide 353
clariíication within five (5) running days of receipt of the Builder’s notice, the Builder 354
shall determine vvhether and to what extent it can adopt the comments, am endm ents or 355
reservations. 356
lf requested by the Buyer in vvriting, the Plans and Drawings shall also be sent in an 357
agreed electronic format. 358
(c) T h e Builder shall take due note of the Buyer’s comments, am endm ents or reservations 359
(if any) on Plans and Dravvings submitted pursuant to this C lause and, if such comments, 360
amendments or reservatỉons are not of such a nature or extent as to constỉtute a 361
modiĩication or change of the Speciíication vvithin the m eaning of Clause 24 (Moditications 362
and Changes), then the Builder shall com m ence or continue construction of the Vessel 363
In accordance with the corrected or am ended Plans and Drawlngs. 364
(d ) lf the Builder considers the comments, am endm ents or re s e rv a tio n s to the Plans 365
and Dravvings are of a nature or extent that constitutes a modìtication or change under 366
Clause 24 (Moditìcations and Changes), the Builder shall notity the Buyer accordingly 367
and proceèd in accordance with Clausé 24 (Modiíications and Changes). If the Buỳér 368
disagrees the matter shall be resolved in accordance with Clause 2A (e). 369

A p p en d ìx 8 Newbuildcon
(e) In the event that the Buyer fails to return any Plans and Dravvings to the Builder with 370
approval or approval with comments, am endm ents or reservations, if any, within the time 371
limit stated above, such Plans and Dravvings shall be d eem ed to have been approved by 372
the Buyer. 373
(f) T he Buyer’s approval or d e e m e d approval of any Plans and Dravvings shall not 374
affect the obligations of the Builder to design, construct and deliver, or the obligations 375
of the Buyer to take delivery of, and pay for, the Vessel in accordance with the other 376
provisions of this Contract; nor shall it diminish the Builder’s responsibiiity in respect of 377
its obligations under this Contract nor shall it constitute any acceptance by the Buyer of 378
any responsibility for any defect in the Vessel. 379
(g) T he Builder shall give the Buyer, as soon as practicable, copies of all relevant 380
correspondence relating to the V essel to and from the Classitication Society and the 381
Regulatory Authorities, together with all plans approved by the Classification Society. 382
21. Buyer’s Supplies 383

(a) Buyer 384
(i) T he Buyer shall, at its own risk, cost and expense, supply and deliver to the Builder 385
all of the Buyer’s Supplies. Such items shall be delivered at a vvarehouse or other 386
storage íacility at the Shipyard or as othervvise directed by the Builder in a proper 387
condition ready for installation by the Builder or Sub-contractor in or on the Vessel 388
(hereinaíter “Installation”), in accordance with the building and testing schedules in 389
C lause 2 0 (a ) (Approvals) or as m ay reasonably be required by the Builder. 390
(ii) To assist Installation, the Buyer shall provide the Builder with the necessary 391
documentation including speciíications, plans, drawings, instruction books, manuals, 392
test reports and certiticates required to comply with all applicable rules and regulations. 393
lf so requested by the Builder, the Buyer shall, if reasonably possible and at no cost 394
to the Builder, arrange for the representatives of the manutacturers of the Buyer’s 395
Supplies to assist the Builder in Installation and/or to carry out the Installation of the 396
Buyer’s Supplies by them selves or to m ake necessary adjustments at the Shipyard 397
in accordance with the m anufacturer’s instructions, Including commissioning. 398
(iii) T he Builder may reject any and all of the Buyer’s Supplies when and if found on 399
reasonable grounds to be unsuitable or in improper condition for Installation or not in 400
com pliance with the Classitication Society or Regulatory Authorities’ requirements. 401
(iv) lf delay in delivery of any of the Buyer’s Supplies in accordance with Sub-Clause (a) 402
íi) exceeds thirty (30) days and will cause actual delay to the delivery of the Vessel, 403
the Builder shall have the right to proceed with the construction of the Vessel vvithout 404
Installation of the delayed ỉtems. T h e Buyer shall accept and take delivery of the 405
Vessel so constructed! 406
(b) Builder 407

(i) T he Builder shall sately store and handle the Buyer’s Supplies after delivery thereof 408
at a vvarehouse or other storage íacllity at the Shipyard or elsevvhere as determined 409
by the Builder and shall, at its own cost, expense and responsibility, install them in 410
or on the Vessel in accordance with the Specification, provided that the Builder shall 411
not be responsible for the quality, efficiency and/or pertormance of any of the Buyer’s 412
Supplies. 413
(ii) T he Buyer’s Supplies shall be at all tim es the property of the Buyer but shall be at 414
the Builder’s risk from the tim e of their delivery to the Shipyard until the time of their 415
redelivery to the Buyer vvhether or not as part of the Vessel. 416

22. Buyer’s Representative, Assistants, Officers and Crew 417

(a) The Buyer may, at its own cost and expense, have one representative present at the 418
Shipyard throughout the construction together with a reasonable number of assistants 419
and, as appropriate, officers and crew. The Buyer shall notify the Builder in advance in 420
vvritỉng of: 421
(i) the names of the Buyer’s Representative, assistants and, as appropriate, officers 422
and crew; and 423
(ii) the scope of the Buyer’s Representative’s authority vvhich, in particular, shall include 424
the extent to which the Buyer’s Representative has authority to approve plans, 425
dravvings and calculations, agree modiíỉcations and invoices and attendance at and 426
approval of tests, trials and inspections relating to the Vessel at the Shipyard and/or 427
premises of Sub-contractors; and 428
(iii) any other iníormation reasonably requỉred by the Builder to tacilitate access to the 429
Shipyard and/or premises of Sub-contractors. 430
(b) T he Builder shall, at its own cost and expense, provide the Buyer’s Representative and 431
assistants with reasonable office accommodation and tacilities (including communication 432
equipment, such as telephone, fax and appropriate internet access, and printers or a 433
connection to the Builder’s printers) as the Buyer may reasonably require. The Buyer 434
shall bear the costs of all communication expenses arising from the use by the Buyer’s 435
Representative and assistants of the Communications equipment provided by the Builder. 436
Such expenses shall be payable by the Buyer on receipt of an invoice from the Builder 437
in accordance with Clause 15(b) (Payments - Payment for Modiíications and other 438
items). 439
(c) T he Builder shall have the right to request the Buyer to replace the Buyer’s 440
Representative or any assistants but only if the Builder shows that they are carrying 441
out their duties in an unreasonable manner detrimental to the proper progress of the 442
constmction of the Vessel, ỉn vvhich case the Buyer shall m ake proper replacement as 443
soon as possible. 444
(d) T he Buyer’s Representative shall have the right to communicate directly with the 445
Classiíication Society, provided such communication does not unreasonably interíere 446
with the Builder’s communication with the Ctassiíication Society. 447
(e) T he Builder shall render reasonable assistance to the Buyer in helping to provide 448
suitable accommodation, obtain necessary visas, residence and work permits and any 449
other administrative assistance as the case may be for the Buyer’s Representative, 450
assỉstants and, as appropriate, officers and crew. 451
23. Inspections, Tests and Trials 452

(a) T o enable the Buyer’s Representative and assistants to carry out their duties and 453
inspect the work being done, the Buyer’s Representative and/or assistants shall have 454
the right to inspect the Vessel throughout the period of the construction of the Vessel and 455
until its delivery and acceptance. 456
(b) T he Buyer’s Representative and/or a s s is ta n ts shall have the right to attend all tests, 457
trials and inspections, including those supervised by the Classiíìcation Society and Regulatory 458
Authorities, on any parts of the Vessel whether or not installed. The Builder shall give the 459
Buyer reasonable notice in advance of all such tests, trials and inspections to enable the 460
Buyer’s Representative and/or assistants to attend. If the Buyer’s Representative and/or 461

assistants becomes aware of non-conformity of any aspect of the design, construction, material 462
or workmanship arising out of such tests, trials and inspections he/they shall notify the Builder 463
as soon as possỉble. 464
(c) For the purposes of attending such inspections, tests and trials the Builder shall, at 465
Any tỉme during working hours or at any other time when work is being períormed, provide 466
The Buyer’s Representative and/or assistants with unimpeded access to the Shipyard, 467
Vessel, vvorkshops, and anyvvhere else where work on or storage of items connected with 468
The construction of the Vessel is being períormed. The Builder shall use its best efforts 469
to arrange similar access for inspection purposes to sub-contractor’s premises during 470
vvorking hours or at any time when work is being pertormed, 471
(d) Neither the Buyer’s Representative's and/or assistants’ inspection and/or a tte n d a n c e 472
at any Inspection, test or trial, nor the Buyer’s Representative’s and/or assistants’ failure to 473
notify the Builder of any non-conformity shall relieve the Builder from its obligations under 47 4
this Contract or be deemed to be or construed as a waiver of any objection to, or any 475
acceptance of, faulty design, construction, material and/or workmanship, or any admission 4 76
that any materials or vvorkmanship are of the Standard required for due pertormance of 4 77
this Contract. 4 78
24. Moditications and Changes 479

(a) The Buyer shall have the right at any time to request reasonable moditications or 480
changes in the Speciíication and/or Plans and Drawings. The Buyer shall request such 481
modifications and/or changes in vvriting, giving sufficient particulars, documentation and 48 2
details fully to describe the modifications and/or changes requested. 483
(b) The Builder shall, as soon as possible after receipt of the vvritten request for 484
modifications or changes, give the Buyer a vvritten proposal of the consequences of 485
implementing such modiíications and/or changes. These consequences may include 48 6
changes in the Contract Price, Delivery Date, capacity, draft, speed, fuel consumption, 48 7
or any other provisions of this Contract. If in the Builder’s reasonable judgement, such 488
modiíications and/or changes will adversely affect the Builder’s planning or programme 489
in relation to the Builder’s other commitments, the Builder shall notify the Buyer that it 490
declines to give such a proposal for the requested moditìcations and/or changes or part 491
thereoí. 492
(c) The Builder shall use reasonable efforts to minimise the extra costs, delay or other 493
negative impact on the Vessel’s capacity, pertormance or other íactors caused by the 494
Buyer's request. The Builder’s proposal shall be reasonable for such work. 495
(d) On the basis of the Builder’s proposal the Buyer may elect in vvriting to agree to the 496
necessary amendments to this Contract, in which case the Builder shall build the Vessel 497
in accordance with this Contract so amended. 49 8
(e) lf the Buyer does not accept the Builder’s notice as provided in Clause 20(d) 499
(Approvals) or if in the Buyer’s opinion the Builder’s proposal for modiíications and/or 500
changes under this Clause is unreasonable, the Buyer may, by giving notice to the Builder, 501
order the Builder to proceed with the requested modiĩications and/or changes but the 502
consequences of implementing such modifications and/or changes shall be decided in 503
accordance with Clause 42 (Dispute Resolution). 504
(f) lf the Buyer elects not to continue with the request for modifications and/or changes, 505
the Buyer shall notity the Builder accordingly. 506

NEVVBUILDCON - Standard Newbuilding Contract - PART II
(g) lf the Buyer does not respond within seven (7) running days after receipt of the 507
Builder’s notice in Sub-Clause (b). the Buyer shall be deemed to have withdrawn the 508
request for modiíìcations and/or changes. 509
25. Builder’s Modifications and Substitution of Materials 510

The Builder shall have the right to make minor modiíications and/or changes to the 511
Specitication and/or plans if so required by virtue of changes to the Builder's local 512
conditions or íacilities, the availability of materials and equipment, the introduction of 513
improved methods or for any other reason of a similar nature provided that the Builder 514
shall first obtain the Buyer’s vvritten approval, which shall not be unreasonably vvithheld 515
ordelayed. 516
Such modiAcations and/or changes shall satisfy the requirements of the Classiíication 517
Society and the Regulatory Authorities and shall not relieve the Builder from its obligation 518
to othervvise deliver theV essel in accordance with this Contract. Any savings obtained 519
shall be credited to the Buyer and the Buyer shall not be obliged to pay any extra for, or 520
suffer any delay in delivery or other adverse consequences of, such modiíications and/ 521
or changés, 522
26. Changes in Rules and Regulations 523

lf, after the date of Contract, there are any changes in applicable laws, rules, regulations or 524
requirements (or their applicatỉon) of the ClassiAcatlon Society or Regulatory Authorities, 525
the following shall apply: 526
(a) Upon receipt of notice of such changes either Party shall promptly notiíy the other 527
Party thereoí. 528
(b) lf such c h a n g e s will be compulsory for the Vessel at the time of delivery, the 529
Builder shall, unless the Buyer at its sole discretion seeks and obtains a vvaiver from 530
the Classiíication Society or Regulatory Authorities (as appropriate), incorporate such 531
modiíications and/or changes into the construction of the Vessel. The Parties shall 532
endeavour to agree on such adjustments to the Contract Price, Delivery Date or other 533
Contract terms as are a direct consequence of the change in applicable laws, rules, 534
regulations or requirements. If the Parties fail to agree on the adjustments, the Builder 535
shall proceed with the required changes and the matter shall be decided in accordance 536
With Clause 42 (Dispute Resolution). 537
(c) lf such changes are not compulsory but the Buyer requires the changes to be 538
incorporated, Clause 24 (Modifications and Changes) shall apply. 539
27. Sea Trials 540

The times and numbers speciíied in this Clause shall apply unless otherwise stated in 541
the Specification. 542
(a) Notice 543

The Buyer's Representative, together with a suitable number of assistants, officers and 544
crew, shall have the right to be present at sea trials. The Builder shall give the Buyer at 545
least tourteen (14) running days notice of the time and place and expected duration of 546
Sea trials and the Buyer shall promptiy acknovvledge receipt cf such notice. 547
lf neither the Buyer’s Representative nor any authorised assistants attend the sea trials 548
for any reason after such notice to the Buyer, such absence shall be deemed to be a 549
vvaiver by the Buyer of its right to be present. The Builder may then conduct the sea trials 550
vvithout the Buyer’s Representative being on board, provided that a representative of the 551
Classitìcation Society and Regulatory Authorities is present. In such circumstances, the 552

results and conditions of the sea trials shall beas coníirmed in writing by the Classiíication 553
Society and/or Regulatory Authorities, 554
(b) VVeather Conditions 555

The sea trials shall be conducted in weather conditions as described in this Contract 556
and/or Specitìcation. If the sea trials are interrupted or prevented by weather conditions 557
in excess of the stated conditions, any resulting delay in delivery of the Vessel shall be 558
deem ed a Permissible Delay in accordance with Clause 34 (Permissible Delays). In such 559
an event, the sea trials shall be discontinued or postponed until the first tavourable day 560
thereafter vvhen vveather conditions permit. 561
(c) Conduct of the Sea T ria ls 562

(i) T h e sea trials shall be conducted in the presence of representatives from the 563
Classification Society and Regulatory Authorities and in the manner described in this 564
Contract. The sea trials shall be of sufficient scope and duration to enable the Parties 565
to verify and establish that the Vessel coníorms in all respects with the períormance 566
requlrements of this Contract. The Builder shall have the right to repeat any sea trials, 567
subject to appropriate notice to the Buyer. 568
(ii) T he Buỉlder shall provide sufficient crew necessary for the safe navigation of the 569
Vessel. 570
(iii) All expenses in connection with the sea trials, including the provision of bunkers, 571
lubricating oil, grease, fresh water and stores needed to undertake the sea trials shall 572
be for the Builder’s cost and expense. Together with the Final Instalment, the Buyer 573
shall reimburse the Builder at cost price for any quantities of bunkers and unbroached 574
lubricating oil, grease, fresh water and stores remaining on board at delivery. 575
(d) Method of Acceptance or Rejection 576

(i) Upon completion of the sea trials the Builder shall give the Buyer the results of the 577
sea trials in vvriting. If the Builder considers that the results thereof demonstrate that 578
the Vessel conforms to the requirements of this Contract, the Builder shall give the 579
Buyer notice of when delivery will take place. Such notice shall State where and 580
when the Vessel will be ready for delivery, which will be at least fifteen (15) running 581
days atter the notice is given. VVithin five (5) running days after receipt of this notice 582
and the trial results, the Buyer shall notify the Builder in vvriting of its acceptance for 583
delivery or rejection of the Vessel. 584
(li) lf the results of the sea trials demonstrate that the Vessel or any part or equipment 585
thereoí does not coníorm to the requirements of this Contract, or if the Buyer rejects 586
the Vessel for other reasons vvhich the Builder accepts as valid, the Builder shall take 587
all necessary steps to rectity such non-conformity. If necessary the Builder shall for its 588
own cost and expense carry out a further sea trial in accordance with this Clause to 589
ascertain that the Vessel complies with the terms of this Contract. Upon demonstration 590
by the Builder that the deíidencies have been corrected, the procedure set out in this 591
Sub-Clause (d) shall apply. 592
(iii) lf the Buyer gives notice of rejection under (i) above or rejects the Vessel under (ii) 593
above, the Buyer shall State in which respects the Vessel does not coníorm to the 594
requirements of this Contract (hereinaíter “Delivery Deíects"). 595
(iv) lf the Delivery Deíects are of minor importance and do not affect Class or the operation 596
of the Vessel in its intended trade but the Builder is unable to rectiíy the matter 597
within a reasonable time and in any event betore the accrual of the Buyer’s right to 598
terminate in accordance with Clause 39 (Suspension and Termination), the Builder 599

may nevertheless require the Buyer to take delivery of the Vessel, on condition that 600
the Builder first: 601
(1) undertakes to remedy the Delivery Detects for its own cost and expense as soon 602
as possible; and 603
(2) agrees in vvriting to indemnity the Buyer for any loss incurred as a consequence 604
thereoí, including loss of time; and 605
(3) provides the Buyer with a guarantee issued by the party nam ed in Box 32 (or if 606
Box 32 is not filled in, a bank guarantee from a first class bank) substantially in the 607
form and substance set out In Annex A(iv) for a sum which the Buyer reasonably 608
requests to cover (1) and (2) above, tailing agreem ent such sum to be resolved in 609
accordance with Clause 42 (Dispute Resolution); 610
vvhereupon the Buyer shall accept delivery of the Vessel. 611
(v) lf the Builder disputes the rejection of the Vessel by the Buyer, the dispute shall be 612
resolved in accordance with Clause 42 (Dispute Resolutỉon). 613

NEWBUILDCON - Standard Nevvbuilding Contract - PART I
1w
i
n o i f 4 -- ------- ----------------------- ------------------------------------------------------------------ —
'^ D e ĩív ẽ rỹ ... ... 6Ũ '

Subject to Clause 27(d) (S ea Trials - Method of A cceptance or Rejection) the Vessel 615
shall be delivered to the Buyer on or after the Delivery D ate at the Shipyard or at a safe 616
place in the im m ediate vicinity th ereo í in a clean and orderly condition, ready for Service, 617
upon: 61 8
(a) exchange and acceptance by the Parties hereto of a Protocol of Delivery and 619
A cceptance signed by each Party acknowtedging delivery of the Vessel by the Builder 620
and acceptance thereot by the Buyer; and 621
(b) the provision by the Builder of the other documents listed in Clause 29 (Documents 622
on delivery); and 623
(c) payment by the Buyer of the Final Instalm ent in accordance with Clause 30 (Final 624
ìnstalment). 625
29. Documents on Delivery 626

Upon exchange of the Protocols of Delivery and A cceptance the Builder shall provide at 627
no cost to the Buyer the following additional documents: 628
(a) Protocol of Trials m ade p u rs u a n t to the Speciíication. 629
(b) Protocol of Inventory and Equipm ent of the Vessel, including spare parts,as detailed 630
in the Speciíication. 631
(c) Protocol of Surplus Consum able Stores which are payable by the Buyer to the 632
Builder. 633
(d) Plans and Dravvings pertaining to the V essel together with all necessary instruction 634
manuals, as detailed in the Specification. 635
(e) All certiticates including the documents required to be íurnished on delivery pursuant 636
to this Contract. All certiticates shall be issued without qualitication. 637
lf, hovvever, the Classiíication certificate and/or other required certiticates are not available 638
at the time of delivery, the Buyer shall accept interim certiticates provided that the Builder, at 639
its cost and expense, provides the Buyer with final certiticates as promptly as possible. 640
T he Builder w arrants that: 641
(ị) such interim certiíicates shall enable the Vessel to be registered and trade and operate 642
without restriction; and 643
(ii) final certiíicates shall be provided as above. 644
lf the Builder fails to períorm (i) and/or (ii) above, the Builder shall compensate the Buyer 645
for any loss incurred as a consequence thereoí, including loss of time. 646
(f) Declaration of VVarranty by the Builder that the Vessel is free and clear of any liens, 647
claims, charges, m ortgages and other encum brances, 64 8
(g) Builder’s Certiíicate. 649

(h) Certiticate of Non-Registration. 650
(i) Commercial invoices covering Final Instalment and modiíications. 651
(j) Bill of Sale or other document that certiíies that the title of the V essel passes to the 652
Buyer. 653
(k) IMO Hazardous Material Inventory statem ent of Com pliance in accordance with 654
IMO Resolution A .962(23) (as reíerred to in Clause 4 (IM O Hazardous Materials 655
Inventory)). 656
657
(I) Any other documents reasonably required by the Buyer.
The Buyer may require the Builder by giving reasonable notice, prior to delivery, to 658
arrange for any documents listed above to be duly notarised and, if required, legalised 659
at the Buyer’s cost and expense. 660
30. Final Instalment 661

(a) The Final In s ta lm e n t shall be adjusted in accordance with this Contract and notiíied 662
by the Builder to the Buyer not later than seven (7) Banking Days prior to the notiíied date 663
of delivery (see Clause 27(d)(Sea Trials - Method of A cceptance or Rejection)). Not later 664
than two (2) Banking Days prior to the notiíied date of delivery the am ount of the Final 665
Instalment, as adjusted, shall be deposited with the Builder’s Bank as set out in Box 1 2 . 666
with irrevocable instructions that, subject to S ub-C lause (c) below, the am ount shall be 667
released to the Builder against presentation by the Builder of a copy of the Protocol of 668
Delivery and Acceptance of the Vessel signed by the Builder and the Buyer. Interest, if 669
any, accruing on such deposit shall be for the beneíit of the Buyer. 670
(b) lf the Buyer does not agree the amount of the Final Instalment as adjusted and notiíied 671
by the Builder, the Buyer shall notiíy the Builder within five (5) running days. Thereatter 672
the Buyer may take delivery of the Vessel on paym ent of the Final Instalment as adjusted 673
(or such other amount as the Builder m ay agree) but vvlthout prejudice to the Buyer’s 674
rights and remedies under this Contract and the dispute shall be resolved in accordance 675
with Clause 42 (Dispute Resolution). 676
(c) lf the Protocol of Delivery and Acceptance is not so presented within seven (7) days 677
following the date for delivery of the V essel as notified by the Builder in accordance with 678
Clause 27(d) (S ea Trials - Method of A cceptance or Rejection), the Buyer shall have the 679
right to withdraw the said deposit plus accrued interest. Hovvever, if and w hen a new date 680
for delivery of the Vessel is notiíied to the Buyer by the Builder in accordance with Clause 681
27(d) (S ea Trials - Method of Acceptance or Rejection), the Buyer shall m ake a turther 682
cash deposit for the Final Instalment in accordance with the sam e term s and conditions 683
as set out above. 684
31.Titleand Risk 685

Title and risk of loss of or dam age to the Vessel shall rest with the Builder until exchange 686
of the Protocols of Delivery and Acceptance is effected, im mediately upon vvhich title and 687
risk shall pass to the Buyer. 688
At the time of delivery the Vessel shall be free of all liens, claỉms, charges, m ortgages 689
and other encumbrances. 690
32. Possession and Removal of the Vessel 691

(a) The Buyer shall take physical possession of the Vessel im mediately upon Delivery 692
and Acceptance thereot. 693

(b) T he Buyer shall rem ove the V essel from the place of delivery vvithin five (5) running 694
days after Delivery and A cceptance as aforesaid. If the Buyer does not so remove the 695
Vessel within the said period, the Buyer shall pay to the Builder reasonable mooring 696
charges for the Vessel. T h e Builder shall also have the right to move the Vessel from the 697
Place of delivery to another safe place at its convenience at any time after the five (5) 698
running days’ period has expired provided the Buyer is notiíied accordingly. 699
33. Vessel Registration 700

The Buyer shall register the V essel at its own cost and expense. 701

NEVVBUILDCON - Standard Newbuilding Contract - PART I
5 rw B n a m - ịM m r~ ^ — -----------------------------------------------------------------------------------------------------------------------------------
34. Permissible Delays 702

(a) The Delivery Date shall be extended if any of the following events cause actual delay 703
to the delivery of the Vessel: 704
(i) Force majeure events 705
(1) a c ts o íG o d ; 706
(2) any government requisition, control, intervention, requirement or interterence; 707
(3) threat or act of war, vvarlike operations, terrorism or the consequences thereoí; 708
(4) riots, civil commotions, blockades or embargoes; 709
(5) epidemics; 710
(6) earthquakes, landslides, tìoods, tidal vvaves or extraordinary vveather 711

conditions; 712
(7) strikes, lockouts or other industrial action, but only if of a general nature and not 713
limited solely to the Builder and/or the sub-contractors or their employees; 714
(8) fire, accident, explosion (vvhether in the Shipyard or elsewhere); 715
(9) any interruption to the supply of public Utilities to the Builder; 716
(10) any other cause of a similar nature to the above beyond the control of the Builder 717
or its Sub-contractors; 718
(11) delavs to sea trials in accordance with Clause 27(bì (Sea Trial - VVeather 719
Conditions), 720
(ii) o th e re v e n ts 721
(1) Late delivery of, or delivery of, any deíective Buyer’s Supplies in accordance with 722
Clause 21(aHiv) (Buyer’s Supplies), 723
(2) Delays due to modiíications and changes in accordance with Clause 24(b) or (e ) 724
(Modifications and Changes); 725
(3) Delays due to changes in rules and regulations in accordance with Clause 26 726
(Changes in Rules and Regulations); 727
(4) An actual or constructive total loss in accordance with Clause 38(b)(ii) (Insurances 728
- Allocation of Insurance Proceeds); 729
(5) Suspension of work pursuant to Clause 39(c) (Suspension and Termination - 730
Suspension of Work); 731
(iii) Provided that in respect of (i) and (ii) above: 732
(1) such events were not caused by the error, neglect, act or omission of the Buỉlder 733
or its Sub-contractors; and 734

(2) were not, or could not reasonably have been, toreseen by the Builder at the date of the 735
òóntract; and 736
(3) the Builder shall have complied with Sub-Clause (b) hereunder; and 737
(4) the Builder shall have made all reasonable efforts to avoid and minimise the effects 738
such events have on the delivery of the Vessel. 739
The Builder shall notify the Buyer vvithin ten (10) running days of when the Builder 740
becomes aware of the occurrence of any event of delay on account of which the Builder 741
asserts that it may have the right to claim an extension of the Delivery Date. A íailure to 742
so notiíy shall bar the Builder from claiming an extension to the Delivery Date. The Builder 743
shall also advise the Buyer in vvriting (A) within two (2) running days of the ending of any 744
event notified under this Clause that the event has ended, and (B) as soon as reasonably 745
possible after (A), the length of extension of the Delivery Date claimed by the Builder. 746
35. Builder’s Guarantee 747

(a) The Builder shall guarantee the Vessel against any Deíects (see Detinitions) provided 748
such Deíects are: 749
(i) discovered vvithin the number of months stated in Box 20 (hereinaíter “the Guarantee 750
Period”) after delivery of the Vessel in accordance with Clause 28 (Delivery); and 751
(ii) notice thereoí is given to the Builder as soon as reasonably possible after the discovery 752
thereoí and latest thirty (30) running days after the expiry of the Guarantee Period 753
describing such Deíects so far as reasonably practical 754
(hereinafter called “Guarantee Deíects”). 755
(b) The Builder shall make any necessary repairs or replacements to rectify any G uarantee 756
Deíects or dam age to the Vessel caused as a dỉrect and immediate consequence of such 757
Guarantee Defects. Such repairs and replacements shall be m ade at the Shipyard at the 758
Builder’s cost and expense. 759
(c) The Buyer shall have the right to arrange for the necessary repairs to rectiíy 760
Any Guarantee Deíects or damage to the Vessel caused as a direct and immediate 761
consequence of such G uarantee Defects to be made elsewhere or obtain any necessary 762
replacement parts and materials; 763
(i) if it is impractical to bring the Vessel to the Shipyard; or 764
(ii) if the Builder cannot supply necessary replacement parts and materials vvithout 765
impairing or delaying the operation or vvorking of the Vessel. 766
(d) In th e e v e n t th a t th e Buyer makes th e necessary repairs or re p la c e m e n ts at a n y other 767

shipyard or works other than the Shipyard, the Buyer shall first, but as soon as possibie, 768
give the Builder notice of the time and place such repairs will be made. The Builder shall 769
have the right, vvithout prejudice, to inspect through its own representative the nature and 770
extent of the Guarantee Deíects to be replaced or repaired. The Builder shall, in such 771
case, promptly advise the Buyer in writing, after such examination has been completed, 772
of its acceptance or rejection of such G uarantee Deíects as ones that are covered by 773
the guarantee. 774
(i) The Builder shall pay the Buyer in the currency stated in Box 9 the reasonable cost 775
Ship Sate and Purchase 267

NEVVBUILDCON - S tandard Nevvbuilding C on tract - PA R T II
and expenses of such repairs or replacem ents. 776
(ii) W here applicable, the Buyer shall return replaced parts to the Builder at the Builder’s 777
request and cost and expense provided the Builder m akes such request at the tim e of 778
the replacement. In the event that they are the subject of a dispute under Clause 42 779
(Dispute Resolution), the Builder shall hold the replaced parts available for inspection 780
by the Buyer. Upon their replacem ent, the ownership of replaced parts shall revert 781
to the Builder. 782
(e) The Builder guarantees repalrs or replacem ents to the V essel m ade under sub-Clause 783
(b) above for an additional G uarantee Period of the num ber of months stated in 784
21 from the date of completion of such repairs or replacem ents provided such work has 785
been períormed by the Builder or its Sub-contractors. T h e additional G u aran tee Period 786
shall, hovvever, not end on a date earlier than the end of the original G u aran tee Period 787
for any such item, 788
(f) lf, a s a result o f th e g u a ra n te e works, th e Vessel h a s been lylng idle continuously 789
for a period in excess of thirty (30) days, the G uarantee Period shall be extended by the 790
total number of such days (counting from the first day the Vessel is idle) that fall within 791
The Guarantee Period, vvhether or not other work w as carried out during such period. 792
(g) VVithout prejudice to any other rights the Buyer m ay have under this Contract, 793
following the expiry of the G uarantee Period or in the event that the Builder is in breach 794
of its obligation to rectỉíy G uarantee D eíects in accordance with this Clause, the Builder 795
shall at the Buyer’s request assign (to the extent to which it m ay validly do so) to the 796
Buyer, or as the Buyer may dlrect, the right, title and interest of the Builder in and to all 797
guarantees or vvarranties given by the Sub-contractors or suppliers of any of the materials 798
or equipment used in the construction of the Vessel. 799
36. Guarantee Engineer 800

(a) The Buyer shall have the right to require the Builder to, or the Builder may, appoint 801
a Guarantee Engineer to attend onboard the Vessel for such portion of the G u aran tee 802
Period as the Buyer may reasonably require, T h e Buyer and its em ployees shall provide 803
the Guarantee Engineer with full co-operation in carrying out his duties. T h e G u aran tee 804
Engineer shall act as the Builder's representative on board and shall give the Buyer full 805
co-operation to enable the Buyer to obtain the most efficient use of the V essel’s machinery 806
and equipment. 807
(b) The Buyer shall provide the G uarantee Engineer with accommodation and provisions 808
to a Standard comparable to the V e s s e rs C hieí Engineer, at no cost to the Builder, T h e 809
Buyer shall pay the Builder the monthly lump sum stated in Box 2 4 . or pro rata thereoí 810
for part of a month, as compensation for part of the cost and charges to be borne by the 811
Builder in connection with the G uarantee Engineer. T h e Buyer shall also arrange and 812
pay for the transportation of the G u aran tee Engineer betvveen the V essel and his hom e 813
coúntry. 814
(c) The Guarantee Engineer shall, at all times and in all respects, be deem ed to be the 815
employee of the Builder. 816
(d) lf the Buyer decides not to exercise its right to require the Builder to provide a 817
Guarantee Engineer on board the Vessel, this shall not prejudice the Buyer’s rights under 818
the provisions of Clause 35 (Builder’s G uarantee). 819
37. Responsibilities and exclusions from liabilities 820

NEVVBUILDCON - S tandard Nevvbuilding C on tract - PART II
Builder's exclusion Clauses 821

(a) Liability for D eíects discovered beíore or at the tim e of delivery 822
T h e Buyer’s rem edy for delay in delivery of the Vessel, or for Defects discovered beíore 823
or at the tim e of such delivery, are set out in Clauses 8 to 13_inclusive and Clause 27(d) 824
(S ea Trials - Method of Acceptance or Rejection). 825
(b ) Liability for Defects discovered after delivery 826

Except to the extent expressly provided in C lause 35 (Builder’s Guarantee), the Builder 827
shall have no liability in contráct, tort (including negligènce), breach of statútory duty or 828
othervvise for: 829
(i) any D eíect discovered after delivery of the V essel or 830
(ii) any loss, d am ag e or expenses caused as a consequence of such Detect (vvhich shall 831
include, but not be limited to, loss of time, loss of proíit or earnings or demurrage 832
directly or indirectly incurred by the Buyer). 833
(c) Liability for third party replacem ent or repair 834

The Builder shall not be responsible for any D eíects in any part of the Vessel which may, 835
subsequent to delivery of the V essel, have been replaced or in any w ay repaired by any 836
contractor, other than the Builder or its Sub-contractors, or for any such Deíects which 837
have been caused in whole or part by omission or improper use or maintenance of the 838
Vessel on the part of the Buyer or by ordinary w e a r and tear. 839
(d) Implied term s 840

T h e guarantee contained in C lause 35 (Builder’s G u aran tee) replaces and excludes any 841
other liability, guarantee, vvarranty and/òr condition and/or innorininate term imposed or 842
implied by the law, customary, statutory or othervvise, by reason of the construction and 843
Sale of the V essel by the Builder for and to the Buyer. 844
Mutual exclusion C lauses 845

(e ) Liability following termination 846
In the event of termination in accordance with the provisions of Clause 39 (Suspension and 847
Term ination), neither Party shall have any liability to the other whatsoever òr hovvsoever 848
arising, except as expressly provided in that Clause. 849
In the event, however, that a Party fails to pertorm the Contract, or unequivocally indicates 850
its intention not to pertorm it, in a w ay vvhich thereby permits the other Party to treat the 851
Contract as at an end other than under the term s of the Contract, any such claim that 852
the other party m ay have shall not be limited or excluded by the terms of this Contract. 853
Responsibility Clauses 854

(f) Responsibility for death and personal injury 855
Each Party to this Contract shall accept responsibility and liability for the death and 856
personal injury of its Personnel, unless the death or personal injury was inAicted by the 857
other Party or its Sub-contractors with the intent to cause such death or injury, or recklessly 858
And with knovvledge that such death or injury would probably result. 859
Each Party íurther agrees to indemnity and hold harm less the other Party, as regards 860
both liability and legal costs, in the event of claims relating to or resulting from death or 861
personal injury of its Personnel against the Party who is not responsible for them under 862
This S ub-C lause 3 7 (fì. 863
(g ) Responsibility for d am age to or loss of property 864

Unless othervvise provided in this Contract, each Party shall accept responsibility and 865
liability for damage to or loss of its property and the property belonging to its Personnel 866
unless such dam age or loss was caused by the other Party or its Sub-contractors with 867
the intent to cause such dam age or loss, or recklessly and with knovvtedge that such 868
dam age or loss would probably result. 869
Each Party íurther agrees to indemnify and hold harmless the other Party, as regards 870
both liability and legal costs, in the event of claims relating to or resulting from dam age 871
to or loss of property against the Party who is not responsible for them under this Sub- 872
Clause 37(g ). 873
38. Insurances 874

(a) Builder’s In s u ra n c e s 875
From the time of first Steel cutting or equivalent (or delivery of the Buyer’s Supplies, 876
vvhichever is earlier) until the Vessel is completed, delivered to and accepted by the 877
Buyer, the Builder shall (in the joint names (as assureds) of the Builder and the Buyer) 878
effect and maintain at no cost to the Buyer, Builder’s Risk Insurance for the Vessel and 879
Buyer's Supplies. Such Builder’s Risk Insurance shall: 880
(i) be provided by insurers reasonably acceptabỉe to the Buyer; and 881
(ii) be on terms no less wide than Institute Clauses for Builder’s Risk terms (1/6/88) 882
including Institute W ar and Institute strike Clauses ; and 883
(iii) be in an amount not less than the aggregate of the payments made by the Buyer to 884
T he Builder plus the vaiue of the Buyer’s Supplies at the Shipyard, 885
lf speciíically requested by the Buyer, the Builder shall increase the amount insured under 886
the policy to cover the rebuilding costs of the Vessel or such other amount as the Buyer 887
may request, Any additional premium charged for this shall be paid by the Buyer. 888
T h e Builder shall provide the Buyer with copies of the Insurance policy as placed. 889
T h e Buyer shall notiíy the Builder of the value of any subsequent changes in the value of 890
the Buyer’s Supplies for Insurance purposes. Upon receipt of notice of change in value 891
the Buiider shall amend the insured value for the Buyer’s Supplies accordingly. 892
(b) Allocation of Insurance Proceeds 893

(i) In the event that the Vessel is at any time prior to or at delivery damaged by any insured 894
cause and provided such dam age does not constitute an actual or constmctive total 895
loss of the Vessel, the Buỉlder shall make good such dam age and shall apply any 896
amounts recovered under the Insurance reíerred to in Sub-Clause (a) to the costs of 897
Any repair or replacement, including repair or replacement of lost or damaged Buyer’s 898
Supplies. Such damage shall be made good so as to comply with this Contract and a!l 899
repairs shall be carried out in compliance with the requirements of the Classiíication 900
Society and Regulatory Authorities as appropriate vvithout qualiíicatỉon, 901
(ii) Should the Vessel become an actual or constructive total loss from any insured 902
cause: 903
(1) the Builder and the Buyer may agree that a new vessel is built or the Vessel 904
reconstructed in accordance with the terms of this Contract provided agreement is 905
reached in vvriting to an extension of the Delivery Date and/or any other necessary 906
amendment to the Contract, in which case any amounts recovered under the Insurance 907
reíerred to in Sub-Clause (a) will be applied to the construction or reconstruction of 908

the Vessel if appropriate; or 909
(2) lf the Builder and Buyer are unable to agree within a reasonable time on an 910
extension to the Delivery Date and/or any other necessary amendment to the Contract 911
as provided for in Sub-Clause (b H ii)n) the Builder shall: 912
(1) promptly reíund to the Buyer the full amount of sums paid by the Buyer to 913
the Builder together with interest thereon at a rate per annum as stated in Box 30 914
from the date of payment to the date of retund; and 915
(ii) m ake payment to the Buyer of the insured value of the Buyer’s Supplies 916
or alternatively, at the Builder’s cost, deliver the Buyer’s Supplies to the Buyer in 917
undamaged condition. 918
Once all payments have been made by the Builder to the Buyer in accordance with 919
Sub-Clause (b)(iì)(2^ this Contract shall be deemed terminated and all future rights and 920
obligations of each of the Parties to the other shall cease vvhereuponthe guarantees 921
provided under this Contract shall be returned. 922
39. Suspension and Termination 923

(a) Buyer’s Termination 924
The Buyer shall have the right to terminate this Contract forthwithupongiving notice in 925
the event that: 926
(i) the guarantor providing the Refund Guarantee on behalí of the Builder in accordance 927
With Clause 14(b) (Guarantees - Builder’s Refund Guarantee) is deemed insolvent 928
pursuant to Sub-Clause (d) below, unless the Builder provides a replacement Refund 929
Guarantee acceptable to the Buyer vvithin 30 days of the Buyer's notice requiring 930
a replacement Retund Guarantee to be provided, during which period no íurther 931
payments shall be made to the Builder by the Buyer and provided that notice of 932
termination is given before an acceptable replacement Refund Guarantee is received 933
by the Buyer, or 934
(ii) the Builder fails to períorm any work relating to the construction of the Vessel for a 935
running period of at least the number of days stated in Box 22(1). excluding Permissible 936
Delays, provided that thereatter the Buyer gives the Builder at least the number of 937
days’ written notice stated in Box 22(ii) of its intention to terminate this Contract 938
under this Clause and within that period the Builder fails to remedy its breach and 939
provided further that the notice of termination is given before the Builder has remedied 940
its breach; or 941
(iii) (1) the delivery of the Vessel is delayed by more than 180 days by virtue of events 942
that fall vvithin Clause 34(aKi) (Permissible Delays - Porce Majeure events); or 943
(2) the delivery of the Vessel is delayed by more than 180 days by virtue of events 944
which do not fall vvithin Clause 34(a)(i) or 34(a)(li) (Permissible Delays); or 945
(3) the aggregate of delays to the delivery of the Vessel in (1) and (2) above is more 946
thán 270 days. 947
The Builder may at any time after the right to terminate has occurred give notice 948
requesting that the Buyer either agrees to a new delivery date or terminates this 949
Contract. Such new delivery date shall be a reasonable estimate by the Builder of 950
the date when the Vessel will be ready for delivery. VVithln fifteen (15) days of the 951
Builder’s request, the Buyer shall notify the Builder of its decision. lf the Buyer does 952
not terminate this Contract then the new delivery date shall be deem ed to be the 953
Delivery Date provided it does not occur later than thirty (30) days prior to the expiry 954

NEVVBUILDCON - Standard Nevvbuilding C on tract - PART II
of the Reíund Guarantee (Clause 14(b) (G uarantees - Builder’s Reíund Guarantee)). 955
Notvvithstanding Clause 34(a)(i) (Perm issible Delays - Force m ajeure events) and 956
thỉs Clause 39(a)(iiiH iỵ (2) or (3) but subject to Clause 34(aHiì) (Perm issible Delays 957
- o th e r events), ỉf the Vessel is not delivered by that date, the Buyer shall have the 958
right to terminate this Contract. T he Builder's right to request the Buyer to agree a 959
new delivery date shall operate on each and every occasỉon the events stated in this 960
Sub-Clause give rise to the Buyer’s option to terminate. 961
(iv) The reduction in speed would entitle the Buyer to a reduction in the Contract Price 962
greater than the amount stated in Box 13(ii): or 963
(v) T he Buyer rejects the main engine and terminates the Contract in accordance with 964
Clause 9(cUiiU2^: or 965
(vi) T he reduction in deadweight would entitle the Buyer to a reduction in the Contract 966
Price greater than the amount stated in Box 15(iiiì: or 967
(vii)The reduction in cubic capacity would entitle the Buyer to a reduction inthe Contract 968
Prlce greater than the amount stated in Box 16(iii): or 969
(viii)The condition of the Vessel is deficient in the m anner stated in Clause 12 (O ther 970
Deficiencies) and Box 17: or 971
(ix) T he Builder is in breach of Clause 14 (G uarantees). 972
(b ) Builder’s Termination 973

T h e Builder shall have the right to term inate this Contract forthwith upon giving notice to 974
the Buyer in the event that: 975
(i) T he guarantor providing the Instalment G uarantee or Pertorm ance G uarantee on 976
behalt of the BŨyer under Clause ^4(a) (Buyer’s InstalmenưPertormance G uarantee) 977
is deemed insolvent pursuant to Sub-C lause (d) below, unless the Buyer can provide 978
a replacement Pertormance G uarantee acceptable to the Builder vvithin 30 days and 979
provided that notice of termination is given beíore an acceptable Buyer’s Instalment 980
or Períormance Guarantee is received by the Builder, or 981
(ii) T he Buyer fails to pay any sums due under this Contract for a period of twenty-one 982
(21) Banking Days provided that the Builder thereaíter gives the Buyer at least 5 983
Banking Days notice of its intention to term inate under this Clause, and vvithin that 984
period the Buyer fails to remedy the breach and provided that notice of termination 985
is given before the Buyer pays the outstanding sums due, or 986
(iii) T h e Buyer fails to take delivery of the V essel tendered in accordance with this Contract, 987
Or 988
(iv) T he Buyer is in breach of Clause 14 (G uarantees). 989
(c) Suspension of Work 990

Without prejudice to Sub-Clause íb) above the Builder shal! have the right to suspend 991
work under this Contract if the Buyer fails to pay any instalment stated in Box 11 due for 992
a period of fifteen (15) Banking Days until payment of such outstanding sums. 993
(d ) Deem ed Insolvency 994

A Party or the guarantor providing the Refund G uarantee shall be d eem ed insolvent if 995
proceedings are commenced against the insolvent Party or the guarantor for vvinding 996

NEVVBUILDCON - Standard Nevvbuilding Contract - P A R T II
up, dissolution or reorganisation (othervvise than for the purpose of amalgamation or 997
reconstruction), liquidation, the appointment of a receiver, trustee or similar offìcer, 998
bankruptcy, suspension of payments or similar events. 999
A Party shall have the right to term inate this Contract forthwith upon giving notice if the 1000
other Party or the guarantor is deem ed insolvent. 1001
(e) Effect of Buyer’s Termination 1002

lf this Contract is terminated by the Buyer, the Builder shall reíund all sums paid by the 1003
Buyer to the Builder under Clause 7 (Contract Price) and Clause 15 (Payments) hereoí 1004
plus interest thereon at the rate stated in Box 30 per annum from the date of payment to 1005
the date of refund. T he Builder shall also return the Buyer’s Supplies, or if they cannot 1006
be returned, the Builder shall pay to the Buyer an amount equal to the Buyer’s cost for 1007
such Buyer’s Supplies. 1008
(f) Effect of Builder’s Termination 1009

lf this Contract is terminated by the Builder, the Builder shall have the right to retain the 1010
Buyer’s Supplies together with any instalments paid by the Buyer and shall have the right 1011
And povver either to complete or not to complete the Vessel as it deems fit but in any event 1012
shall sell the Vessel (either in its complete or incomplete form), including those Buyer’s 1013
Supplies which are installed or have been utilised on board the Vessel, at the best price 1014
reasonably obtainable at a public or private sale on reasonable terms and conditions. 1015
(i) In th e e v e n t o f th e s a le o f th e V e s s e l in its c o m p le te fo rm th e p ro c e e d s o f th e sa le 1016

received by the Builder shall be applied in the following order; 1017
(1) to payment of all expenses incurred by the Builder ỉn respect of the sale and 1018
othervvise incurred by the Builder as a result of the Buyer's detault; 1019
(2) to payment of all unpaid instalments of the Contract Price including any which 1020
would have been payable after the date of termination and interest on such instalments 1021
at the rate of interest stated in Box 30 from the respective due dates thereof to the 1022
date of application. 1023
(ii) In the event of the sale of the Vessel in its incomplete form the proceeds of sale 1024
received by the Builder shall be applied in the following order: 1025
(1) to payment of all expenses incurred by the Builder in respect of the sale and 1026
otherwise incurred by the Builder as a result of the Buyer’s default; 1027
(2) to payment of all unpaid instalments of the Contract Prlce to the extent due but 1028
Not yet paid at the date of termination and interest on such instalments at the rate 1029
of interest stated in Box 30 from the respective due dates thereoí to the date of 1030
application; 1031
(3) to payment of all costs of part construction of the Vessel less any paid instalments 1032
And less any sums credited under (2) above; 1033
(4) to payment of the Builder’s reasonable net loss of profit caused by the Buyer's 1034
deíault. 1035
(iii) In either of the above events if the proceeds of sale exceed the sums to which such 1036
proceeds are to be applied as aforesaid the Builder shall promptly pay any such 1037
excess to the Buyer vvithout interest thereon, provided that the amount of such 1038
payment to the Buyer shall in no event exceed the total amount of instalments paid 1039
by the Buyer. The Builder shall at the sam e time either permit the Buyer to remove 1040

the Buyer’s Supplies which are not installed or utilised onboard the Vessel (if any) 1041
from the Shipyard for the cost and expense of the Buyer, or give credit to the Buyer 1042
for the full valúe thereoí. 1043
(iv) lf the proceeds of sale are insufficient to pay the Builder the total amounts due from 1044
the Buyer as aíoresaid, the Builder may sell the Buyer’s Supplies which are not 1045
installed or utilised onboard the Vessel (if any) at the best price reasonably obtainable 1046
at a public auction or private sale on reasonable terms and conditions, applying the 1047
proceeds of such sale toward the unsatisíied amounts due from the Buyer, and giving 1048
credit to the Buyer for any excess. 1049
(v) lf the proceeds of sale are still insufficient to pay the Builder the total amounts due 1050
from the Buyer as aíoresaid, the Buyer shall pay to the Builder the amount of such 1051
deíiciency, plus interest at the rate stated in Box 30 to cover periods vvhenever 1052
payments from the Buyer became overdue. 1053
40. Copyrights, Trade Marks and Patents 1054

(a) Where they are owned and s u p p lie d by a Party, that Party shall retain all Copyright, 1055
trade mark, patent or similar rights (hereinaíter called “Intellectual Property Rights”) with 1056
respect to the Speciíication, Plans and Dravvings, technical descriptions, calculations, 1057
Test results and other data, and iníormation and documents concerning the design and 1058
construction of the Vessel. The other Party undertakes not to disclose the same or divulge 1059
Any iníormation contained therein to any third parties vvithout the prior written consent of 1060
the first Party, except where it is necessary for usual operation, repair and maintenance 1061
of the Vessel and tò subsequent owners. 1062
(b) Each Party shall ensure that any manuíacture and/or supply according to speciíications, 1063
dravvings, models or other instructions supplied by it shall not iníringe any Intellectuaỉ 1064
Property Rights of third parties. Should claims nevertheless be made against the other 1065
Party in respect of Intellectual Property Rights arising out of or in any way related to the 1066
pertormance of the Contract, the first Party shall keep the other Party indemniíied against 1067
the cost of such claims, including any legal costs in connection therevvith. 1068
(c) For the purpose of this Sub-Clause (c). “Iníormation'' means technical iníormation 1069
relating to the Vessel designated by one Party as coníìdential, except iníormation which 1070
corresponds in substance to iníormatỉon which: 1071
(i) was developed by and in possession of the other Party prior to first receipt from the 1072
first Party; and/or 1073
(ii) at the date hereoí or hereafter, through no wrongful act or íailure to act on the part 1074
of the other Party, enters the public domain. 1075
Where it is necessary during the pertormance of this Contract for the tirst Party to make 1076
lnformation available to the other Party, the other Party shall hold all such Iníormation 1077
in contidence and not disclose it to any third parties or use it for any purpose other than 1078
as provided hereỉn vvithout the prior written consent of the first Party, which shall not be 1079
unreasonably vvithheld. 1080
41. Governing law 1081

This Contract shall be subject to English law unless another law Is stated in Box 23(a) 1082
in which case the law stated in Box 23(a) shall apply. 1083
42. Dispute R esolution 1064

(a) Classification/Regulatory Authorities 1085
Any dispute concerning the Vessel’s compliance or non compliance with the rules, 1086

regulations and requirements of the Classiíication Society or other Regulatory Authorities 1087
shall be reíerred to the Ciassiíication Society or other Regulatory Authorities, as the case 1088
may be, the final decision of which shall be final and binding upon the Parties hereto. All 1089
other disputes shall be reíerred to expert determination or arbitration in accordance with 1090
Sub-Clauses (b) through (e). 1091
(b) Expert determination 1092

Unless Sub-Clause (a) applies or Sub-Clauses (c) to íê ) apply, in the event that a dispute 1093
arises under this Contract either Party may require by notice in vvriting to the other Party 1094
That such dispute be referred to an independent third party (an “Expert") as the Parties 1095
jointly nominate in vvriting, subject to the following procedure: 1096
(i) if the Parties fail to nominate an Expert within seven (7) days of the date of the notice 1097
reterred to in this Sub-Clause (b). the dispute shall be resolved in accordance with 1098
Sub-Clauses (c) to (e ) below; 1099
(ii) the Expert shall act as an expert and not as an arbitrator and his decision shall be 1100
final and binding upon the Parties; 1101
(iii) the Expert’s determination shall be conducted in accordance with the following rules, 1102
unless othervvise agreed by the Parties: 1103
(1) the Parties may make vvritten representations vvithin seven (7) days of the Expert’s 1104
appointment and shall copy in full such vvritten representations to the other Party 1105
vvithin such time period; 1106
(2) the Parties shall have a further seven (7) days to make vvritten comments on each 1107
other’s representations and shall copy in full such vvritten comments to the other Party 1108
vvithin such time period; 1109
(3) the Expert may call for such other documents and vvritten evidence from the Parties 1110
a s th e E x p e rt m a y re a s o n a b ly require a n d th e P a rtie s sh a ll p ro v id e su ch d o c u m e n ts 1111
and vvritten evidence within the period speciíied by the Expert. The Parties shall 1112
copy, in full, such documents and vvritten evidence to the other Party vvithin such 1113
time period provided that if either Party claims any such information is coníidential 1114
to it then, provided in the reasonable opinion of the Expert that Party has properly 1115
claimed the same as confidential, the Expert shall not disclose the same to the other 1116
Party or to any third party; 1117
(4) the Expert shall decide vvhether or not to take oral representations from or on 1118
behalí of either Party, but if he does so he shall give the other Party the opportunity 1119
to be present; 1120
(5) the Expert shall have regard to all representations and evidence before him when 1121
making his decision, vvhich shall be in vvriting, and give full reasons for his decision; 1122
and 1123
(6) the Expert shali use all reasonable endeavours to publish his decision vvithin 1124
tvventy-eight (28) days of his appointment. 1125
(iv) Unless the Parties agree othervvise, each Party shalỉ bear its own costs of a reference 1126
to the Expert, and fees and expenses of the Expeii shall be borne equally betvveen 1127
theParties. 1128

NEVVBUILDCON - Standard Nevvbuilding C ontract - PART II
(v) VVithout prejudice to the rest of this Sub-Clause (b) the Parties shall consider on an 1129
ongoing basis whether or not it would be suitable to refer any dispute to an Expert 1130
o r to e n te r in to m e d ia tio n in a c c o rd a n c e w ith S u b -C la u s e (e). 1131
(c) *) Arbitration and Mediation 1132
Unless Sub-Clause (a) or applies and unless Box 23(b) states a place other than 1133
London, any dispute arising out of or in connection with this Contract shall be reíerred 1134
to arbitration in London in accordance with the Arbitration Act 1996 or any statutory 1135
modification or re-enactment thereoí save to the extent necessary to give effect to the 1136
provisions of this Clause. 1137
The arbitration shall be conducted in accordance with the London Maritime Arbitrators 1138
Association (LMAA) Terms current at the time when the arbitration proceedings are 1139
commenced. 1140
The reíerence shall be to three arbitrators. A Party wishing to refer a dispute to arbitration 1141
shall appoint its arbitrator and send notice of such appointment in vvriting to the other Party 1142
requiring the other Party to appoint its own arbitrator within íourteen (14) calendar days of 1143
that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other 1144
Party appoints its own arbitrator and gives notice that it has done so within the íourteen 1145
(14) days specified. If the other Party does not appoint its own arbitrator and give notice 1146
that it has done so vvithin the fourteen (14) days speciíied, the Party reterring a dispute 1147
to arbitration may, vvithout the requirement of any íurther prior notice to the other Party, 1148
appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The 1149
award of a sole arbitrator shall be blnding on both Parties as if he had been appointed 1150
byagreem ent. 1151
Nothing herein shaỉl prevent the Parties agreeỉng in vvriting to vary these provisions to 1152
provide for the appointment of a sole arbitrator, 1153
In cases where neither the claim nor any counterclaim exceeds the sum of us$100,00 0 1154
(or such other sum as the Parties may agree) the arbitration shall be conducted in 1155
ac(X )rdance with the LMAA Small Claims Procedure current at the time when the arbitration 1156
proceedings are commenced. 1157
(d) 'Unless Sub-Clauses (aV or (c l apply, any dispute arising out of or in connection 1158
with this Contract shall be reíerred to arbitration at the place stated in Box 2 3 (b ). subject 1159
to the procedures applicable there. 1160
(e) Notvvithstanding Sub-Clauses (c) and above, the Parties may agree at any time to 1161
refer to mediation any difference and/or dispute arising out of or in connection with this 1162
Contract. 1163
In the case of a dispute in respect of which arbitration has been commenced under ís l 1164
or above, the following shall apply: 1165
(i) Either Party may at any time and from time to time elect to refer the dispute or part 1166
of the dispute to mediation by Service on the other Party of a vvritten notice (the 1167
“Mediation Notice”) calling on the other Party to agree to mediation. 1168
(ii) The other Party shall thereupon within íourteen (14) calendar days of receipt of the 1169
Mediation Notice coníirm that they agree to mediatỉon, in vvhich case the Parties 1170
shall thereatter agree a mediator vvithin a íurther íourteen (14) calendar days, tailing 1171
which on the application of either Party a mediator will be appointed promptly by the 1172
Arbitration Tribunal (“the Tribunal”) or such person as the Tribunal may designate for 1173
that purpose. The mediation shall be conducted in such place and in accordance 1174

with such procedure and on such terms as the Parties may agree or, in the event of 1175
disagreement, as may be set by the mediator. 1176
(iii) lf the other Party does not agree to mediate, that fact may be brought to the attention 1177
of the Tribunal and may be taken into account by the Tribunal when allocating the 1178
costs of the arbitration as betvveen the Parties. 1179
(iv) The mediation shall not affect the right of either Party to seek such relief or take such 1180
steps as it considers necessary to protect its interest. 1181
(v) Either Party may advise the Tribunal that they have agreed to mediation. The arbitration 1182
procedure shall continue during the conduct of the mediation but the Tribunal may 1183
take the mediation timetable into acx:ount when setting the timetable for steps in the 1184
arbitration. 1185
(vi) Unless otherwise agreed or specified in the mediation terms, each Party shall bear its 1186
own costs incurred in the mediation and the Parties shall share equally the mediator’s 1187
cx)sts and expenses. 1188
(vii)The mediation process shall be vvithout prejudice and coníidential and no iníormatỉon 1189
or documents disclosed during it shall be revealed to the Tribunal except to the extent 1190
that they are disclosable under the law and procedure governing the arbitration. 1191
(Note: The Parties should be aware that the mediation process m ay not necessarily 1192
interrupt time limits.) 1193
* Sub-Clauses (c^ and are alternatives; State place of dispute resolution in Box 1194
23(b ). 1195
lf Box 23(b) is not appropriately íilled in, Sub-Clause (c) of this Clause shall apply. 1196
Shlp Sale and Purchase 277

NEVVBUILDCON - Standard Nevvbuilding C ontract - PAR T II
' s|QII|OH<ì - sundrỹ~ 1
43.Notices 1197
(a) All notices given by either Party or their agents to the other Party or their agents 1198
in accordance with the provisions of this Contract shall be in writing and shall, unless 1199
speciíically provided in this Contract to the contrary, be sent to the address for that other 1200
Party as set out in Box 2 or Box 3 as appropriate or to such other address as the other 1201
Party may designate in vvriting. 1202
(b) A notice may be sent by post, íacsimile, electronically or delivered by hand in 1203
accordance with Sub-Clause (a ì. 1204
(c) Any notice given under this Contract shall take effect on receipt by the other party 1205
And shall be deem ed to have been received: 1206
(i) if posted, on the seventh (7th) day after posting; 1207
(ii) if s e n t b y ía c s im ile o r e le c tro n ic a lly , o n th e d a y o f tra n s m is s io n ; 1208
(iii) if delivered by hand, on the day of delivery. 1209
And in each case proof of posting, transmission or handing in shall be proof that notice 1210
Has been given. 1211
44. Effective date of Contract 1212

(a) This Contract shall become effective when the conditions stated in Box 25 have been 1213
satisíied. If no conditions are stated in Box 25 then the effective date of the Contract 1214
shall be the date stated in Box 1. The Parties shall immediately notify each other when 1215
the conditions stated in Box 25 relevant to that Party have been satisfied. 1216
(b ) lf a n y o f th e c o n d itio n s re íe rre d to a b o v e h a v e n o t b e e n s a tis fie d vvithin th e n u m b e r 1217

of days stated in Box 26 atter the date of this Contract stated in Box 1, this Contract shall 1218
be deem ed null and void and both Parties shall immediately be relieved of any obligations 1219
or liabilities to the other Party under this Contract. 1220
45. A s s ig n m e n t 1221
(a) Builder’s assignment 1222
The Builder shall have the right to assign the beneíìts of this Contract to the Builder’s 1223
financiers for the purpose of securing the Builder’s íinancing. 1224
(b) Buyer's assignment 1225

(i) The Buyer shall have the right to assign the benefits of this Contract to the Buyer’s 1226
íinanciers for the purpose of securing the Buyer’s financing. 1227
(ii) The Buyer shall have the right, subject to the Builder s consent which shall not be 1228
unreasonably vvithheld, to assign, transíer or novate this Contract to any other third 1229
party. 1230
46. O p tio ns 1231

The Buyer shal! have the option for the construction by the Builder of additional vessels as 1232
stated in Box 27 at the (Xìntract price and delivery dates stated in Box 2 8 . but othervvise 1233
on the sam e terms and conditions as this Contract with logical amendments. Such option 1234
must be declared by the Buyer to the Builder within the number of months stated in Box 1235
29 following the Effective date of this Contract reíerred to in Clause 44 (Effective date of 1236
Contract). 1237

47. E ntire A g re e m e n t 1238

This Contract constitutes the entire agreem ent betvveen the Partles and no promise, 1239
undertaking, representation, vvarranty or statement by either Party prior to the date of 1240
this Contract stated in Box 1 shall affect this Contract. Any modification of this Contract 1241
shall not be of any effect unless in writing signed by or on behalf of the Parties. 1242
48. Third party righ ts 1243

Unless expressly identitied in this Contract, no third parties shall have the right to eníorce 1244
any term of this Contract. 1245

NEVVBUILDCON - Standard Nevvbuilding Contract - PARTI
ANNEX “A” - (GUARANTEES)

CODE NAME: NEVVBUILDCON
ANNEX A(i)
BUYER’S IRREVOCABLE LETTER 0 F GUARANTEE FOR THE 2ND & 3RD INSTALMENTS
To: [here insert name and address of the Builder]
1. In this Guarantee, the following terms have the following meanings:
‘Award Interest’ means any interest which may be avvarded against the Buyer ìn connection with the final determination
of any dispute notified to us in accordance with paragraph 5 below.
‘C ontract’ means the contract dated [here insert date] made betvveen the Buyer and you for the construction of the
Vessel, as the same is amended at any time.
'Contractual Interest’ means the sum payable on an Instalment at the Interest Rate in accordance with the tenms of
the Contract.
‘Dem and’ means a written demand for payment under this Guarantee.
'Instalment' means the amount of each of the [here identify the instalments to be guaranteed] payments in respect
of the contract price under the Contract (to the extent that it has not been paid) which is made on, betore or after the
date of this Guarantee to you by the Buyer.
'Interest Rate' means the rate of interest prescribed by the Contract as applicable to any part of an Instalment which
the Buyer Is obliged to pay under the terms of the Contract calculated from such date as is prescribed by the Contract
to the date of your receipt of the payment.
'Maximum Liability' means our maximum liability under this Guarantee, including Contractual Interest which shall be
[here insert amount] plus any Award Interest.
'Buyer’ means [here insert name and address of Buyer]
'Vessel' means [here insert technical descriptíon and/or name]
2. In consideration of you entering into the Contract, agreeing to construct the Vessel in accordance with the te m s of the
Contract, and agreeing to accept this Guarantee pursuant to the Contract, at the request of the Buyer we irrevocably
and unconditionally guarantee (but as primaty obligor and not by way of secondary liability only) that in the event that
the Buyer fails punctually to pay to you any Instalment we shall, upon receipt by us from you of a Demand for the
same (together with a copy of a demand made by you against the Buyer for payment), pay to you or to your order
upon the expiry of thirty (30) days from receipt of such Demand the sum demanded by you by way of the payment
o f any Instalment together with Contractual Interest and Award Interest (if any) provided that our total liability shall
not exceed the Maximum Liability.
This Guarantee shall become effective in the amount corresponding to the amount of each Instalment with effect
from the date when it becomes due to you under the Contract together with Contractual Interest, if any.
3. This Guarantee shall not be affected by any indulgence or delay allowed to the Buyer nor by any amendment to, or
variation of, the Contract vvhether as to time or othervvise that may be agreed between you and the Buyer nor by any
circumstances that vvould otherwise díscharge our líability as guarantor.
4. Subject to paragraph 5 belovv, this Guarantee shall remain in force until the first to occur of (a) due dellvery of the
Vessel to, and ăccéptance of the Vessel by, the Buyer, (b) the payment to you by the Buyer or by us of all sums
secured by this Guarantee, and (c) the Buyer’s valid and lawful cancellation and/or rescission of the Contract pursuant
to the terms of the Contract. Hovvever, notwilhstanding the íoregoing, lf within twenty-eight (28) days of our receipt
of a Demand we receive a vvritten notice from you or the Buyer that your claim for payment of the sums referred to in
the Demand has been disputed and that such dispute will be resolved in accordance with the Contract, the period
of validity of this Guarantee shall be extended until thirty (30) days atter the dispute has been finally determined in
accordance with paragraph 5 below.

5. Notwithstanding the other terms of this Guarantee, if within twenty-eight (28) days of our receipt of a Demand we
receive vvritten notice from you or from the Buyer stating that your claim for payment of the sums reíerred to in the
Demand has been disputed and that such dispute will be resolved in accordance with the Contract (including, as
may be, by Class, an Expert, a Mediator or in arbitration), then we shall not be obliged to make any payment to you
under this Guarantee until thirty (30) days after the dispute has been finally determined or in the event of an appeal
from an arbitration award, until thirty (30) days after delivery of the final unappealable judgment; or in the event that
the court remits the matter to the arbitrator, until thirty (30) days after the publication of the revised final award or in
the event of an appeal from the award, until thirty (30) days after delivery of the fmal unappealable judgment.
6. All payments to be made under this Guarantee shall be made vvithout any set off or counterclaim and without deduction
or withholding for or on account of any taxes, duties or charges whatsoever unless we are compelled by law to
deduct or vvithhold the same in vvhich case we shall make the minimum deduction or vvithholding permitted and will
pay such additional amounts as may be necessary in order that the amount received by you after such deductions
or vvithholdings shall be equal to the amount which would have been received had no such deduction or withholding
been made.
7. All payments to be made under this Guarantee shall be made in [here insert currency].
8. Notwithstanding any provision in the Contract, this Guarantee shall be íreely assignable by you and by any assignee.
Upon assignment, all reíerences in this Guarantee to “you" shall be read as reíerences to the assignee or subsequent
asslgnees.
9. This Guarantee is governed by the laws of [here State applicable law. In the absence of any statement the law of
England and VVales shall apply] and we hereby submit to the exclusive jurisdlction of [here State place of dispute
resolution. In the absence of any statement the High Court of England and VVales shall apply]. [We hereby authorise
and nominate the following agent to accept Service of any court proceedings on our behalf: [here insert name and
address.]]
10. Any notice, claim or Demand to be given or made by you under this Guarantee shall be in vvriting signed by one of
your officers and may be served on us either by post or by tested telex/authorised SWIFT or equivalent, and if sent
by post to [here insert address] (or such other address as we may notify to you in vvriting) and if by tested telex at
[here insert number] or if by SWIFT or equivalent at [here insert number] vía your bank and shall be effective only
upon actual receipt.
11. To the extent that w e m ay be or m ay hereafter becom e entitled, in any jurisdiction, to claim for ourselves or our property,
assets or revenue immunity (vvhether by reason of sovereignty or othervvise) in respect of our obligations under this
Guarantee from Service of process, suit, jurisdiclion, judgment, order, award, attachment (beíore or after judgment
or award), set off, execution of a judgment or other legal process and to the extent that in any such jurisdiction there
may be attributed to us or any of our property, assets or revenue such an immunity (vvhether or not claimed) we
hereby irrevocably agree not to claim and hereby irrevocably vvaive such immunity to the fullest extent permitted by
the laws of such jurisdiction.
12. We hereby vvarrant that we are permitted by any relevant law to which we are subject (including, where relevant, the
laws of the place or places of each of our incorporation, establishment, regulation, reglstration and residence) to:
12.1 issue a guarantee in this form,
12.2 make payment under this Guarantee in a currency other than that of the place of (where relevant) each of our
incorporation, establishment, regulation, registration and residence in case of a Demand for payment under this
Guarantee, and
12.3 designate the place stated in paragraph 9 above as the forum and the place of jurisdiction to which we irrevocably
submit.
13. W e hereby vvarranl that this Guarantee has been, or will be, duly registered with the relevant State authority in any
legal jurisdiction in which such registration is required for any reason,
14. W e hereby vvarrant that we have obtained all necessary approvals and authorisations to issue this Guarantee.
Dated the day of 2
............................................................................................... (signature)
for and on behalí of [here insert name of Guarantor]

ANNEX A (ii)
IRREVOCABLE LETTER 0 F GUARANTEE FOR PERPORMANCE 0 F BUYER’S OBLIGATIONS
To: [here insert name and address of the Builder]
1. In this Guarantee, the following terms have the following meanings;
‘C ontract’ means the contract dated [here insert date] made betvveen the Buyer and you for the construction of the
Vessel, as the same may be amended at any time.
‘Buyer’ means [here insert name and address of Buyer]
V e s s e l’ means [here insert technical description and/or name]
2. In consideration of you entering into the Contract, agreeing to construct the Vessel in accordance with the terms of the
Contract, and agreeing to accept this Guarantee pursuant to the Contract, at the request of the Buyer we irrevocably
and uncx)nditionally guarantee (but as primary obligor and not by way of secondary liability only) períormance by
the Buyer of all its llabilities and responsibílitles under the Contract, including but not llmlted to due and punctual
paym ent of any instalment of the contract price by the Buyer to you under the Contract, and we shall, upon receipt
by us from you of a written demand for the same (together with a copy of a demand made by you against the Buyer
for payment), pay to you or to your order upon the expiry of thirty (30) days from receipt of such written demand the
sum demandeđ by you together with interest due under the Contract.
3. This Guarantee is governed by the laws of [here State applicable law. In the absence of any statemenl the law of
England and W ales shall apply] and we hereby submit to the exclusive jurisdiction of [here State place of dispute
resolution. In the absence of any statement the High Court of England and VVales shall apply]. [We hereby authorise
address.]]
Dated the day of 2
................................................................................................. (slgnature)
for and on behalt of [here ỉnsert name of Guarantor]

NEVVBUILDCON - Standard Newbuilding Contract - PART I
ANNEX A(iìì)
REPUND GUARANTEE
To: [here insert name and address of the Buyer]
'Avvard Interest’ means any interest vvhich may be avvarded against the Builder in connection with the final determination
of any dispute notified to us in accordance with paragraph 5 below.
‘Contract’ means the contract dated [here insert date] made betvveen the Builder and you for the construction of the
Vessel, as the same is amended at any time.
'Contractual Interest’ means the sum payable on an Instalment at the Interest Rate in accordance with the terms of
the Contract.
'Demand’ means a vvritten demand for payment under this Guarantee.
'Instalment' means the amount of each payment in respect of the contract price under the Contract (to the extent
that it has not been refunded) which Is made on, before or after the date of this Guarantee to the Builder (or at the
Builder’s direction) by you or on your behalí.
'Interest Rate’ means the rate of interest prescribed by the Contract asapplicable toany part of an Instalment which
the Builder is obliged to repay under the terms of the Contract calculated from the date onwhich the Builder received
the Instalment to the date of your receipt of the repayment.
'Maximum Liability’ means our maximum liabllity under this Guarantee, including Contractual Interest which shall be
[here insert amount] plus any Award Interest.
'Builder' means [here insert name and address of shipbuilder]
Vessel’ means [here insert technical description and/or name]
2. In consíderation of you entering into the Contract, agreeing to pay an Instalment or Instalments to the Builder,
and agreeing to accept this Guarantee pursuant to the Contract, at the request of the Builder we irrevocably and
uncondítionally guarantee (but as prímary obligor and not by way of secondary liability only) that if the Builder becomes
llable under the Contract to repay any part of any Instalment we shall, upon receipt by us from you of a Demand
for the same (together with a copy of a demand made by you against the Builder for repayment), pay to you or to
your order upon the expiry of thirty (30) days from receipt of such Demand the sum demanded by you by way of
the repayment of any Instalment together with Contractual Interest and Avvard Interest (if any) provided that our total
liabillty shall not exceed the Maximum Llability.
This Guarantee shall become effective in the amount corresponding to the amount of each and every Instalment paid
to the Builder under the Contract together with Contractual Interest as and when each such Instalment has been
recelved by the Builder.
3. This Guarantee shall not be affected by any indulgence or delay allovved to the Builder nor by any amendment to,
or varlation of, the Contract vvhether as to time or othervvise that may be agreed betvveen you and the Builder nor by
any circumstances that would othervvise discharge our liability as guarantor.
4. Subject to paragraph 5 below, this Guarantee shall remain in force until the first to occur of (a) due delivery of the
Vessel to, and acceptance of the Vessel by, you (b) the paytpent to you by the Builder or by us of all sums secured by
this Guarantee[, and (c) three-hundred (300) days after the Contractual Date of Delivery]. Hovvever, notvvithstanding
the foregoing, if within twenty-eight (28) days after our receipt of a Demand we receive a written notice from you or
the Builder that your claim fo rth e repayment of any sums referred to in the Demand has been disputed and that such
dispute will be resolved in accordance with the Contract, the period of validity of this Guarantee shall be extended
until thirty (30) days after the dispute has been finally determined in accordance with paragraph 5 below.
5. Notvvithstanding the other terms of this Guarantee, ịf vvithin twenty-eight (28) days after our receipt of a Demand we
receive a vvritten notice from you or from the Builder stating that your claim for repayment of any sums reíerred to in
the Demand has been disputed and that such dispute will be resolved In accordance with the Contract (íncludlng, as

under this Guarantee until thirty (30) days after the dispute has been tinally determined or in the event of an appeal
from an arbitration award, until thirty (30) days after delivery of the final unappealable judgment; or in the event that
the cxiurt remits the matter to the arbitrator, until thirty (30) days after the publication of the revised final avvard or in
the event of an appeal from the award, until thirty (30) days after delivery of the flnal unappealable judgment.
6. All payments to be made under this Guarantee shall be made vvithout any set off or counterclaim and vvithout deduction
or withholding for or on account of any taxes, duties or charges vvhatsoever unless we are compelled by law to
deduct or vvithhold the same in which case we shall make the minimum deduction or withholding permitted and will
pay such additional amounts as may be necessary in order that the amount received by you after such deductions
or withholdings shall be equal to the amount which would have been received had no such deduction or withholding
been made.
8. Notvvithstanding any provision in the Contract, this Guarantee shall be íreely assignable by you and by any assignee.
Upon assignment, all reíerences in this Guarantee to “you" shall be read as reíerences to the assignee or subsequent
assignees.
9. This Guarantee is governed by the laws of [here State applicable law. In the absence of any statement the laws of
England and VVales shall apply] and we hereby submit to the exclusive jurisdiction of [here State place of dispute
resolution. In the absence of any statement the High Court of England and Wales shall apply]. [We hereby authorise
and nominate the following agent to accept Service of any court proceedings on our behalí: [here insert name and
address.]]
10. Any notice, claim or Demand to be given or made by you under this Guarantee shall be in vvriting signed by one of
your officers and may be served on us either by post or by tested telex/authorised SWIFT or equivalent, and if sent
by post to [here insert address] (or such other address as we may notify to you in vvriting) and if by tested telex at
[here insert number] or if by SWIFT or equivalent at [here insert number] Via your bank and shall be effective only
11. To the extent that we may be or may hereafter become entitled, in any jurisdiction, to claim for ourselves or our property,
assets or revenue immunity (vvhether by reason of sovereignty or otherwise) in respect of our obligations under this
G uarantee from Service of process, suit, jurisdiction, juđgment, order, award, attachment (before or after judgment
may be attributed to us or any of our property, assets or revenue such an immunity (vvhether or not claimed) we
here b y irrevocably ag re e not to clalm and hereby irrevocably w aive such immunity to the fullest exten t perm itted by
12. W e hereby warrant that we are permitted by any relevant law to which we are subject (including, where relevant, the
laws of the place or places of each of our Incorporation, establishment, regulation, registration and residence) to:
incorporation, establishment, regulatlon, registration and residence in case of a Demand for payment under this
Guarantee, and
submit.
13. W e hereby warrant that this Guarantee has been, or will be, duly registered with the relevant State authority In any
legal jurisdiction in whlch such reglstration is required for any reason.
Dated the day of 2
................................................................................................(signature)
for and on behalf of [here insert name of Guarantor]

A p p en d ix 8 New buildcon
ANNEX A(iv)
IRREVOCABLE LETTER 0 F GUARANTEE FOR BUILDER’S OBLIGATIONS UNDER CLAUSE 27
To: [here insert name and address of the Buyer]
'Award Interest’ means any interest which may be avvarded against the Builder in connection with the final determination
of any dispute notified to us in accordance wlth paragraph 5 below.
‘Contract' means the contract dated [here insert date] made between the Builder and you for the construction of the
Vessel, as the same may be amended at any time.
'Demand' means a written demand for payment under this Guarantee.
‘Maximum Liability’ means our maximum liabillty under this Guarantee, including Award Interest which shall be [here
insert amount].
'Builder' means [here insert name and address of shipbuilder]
‘Vessel’ means [here insert technical description and/or name]
2. In consideration o f you entering into the Contract, ag reeing to take delivery o f the V essel, and agreeing to ac cep t
this Guarantee pursuant to the Contract, at the request of the Builder we irrevocably and unconditionally guarantee
(but as primary obligor and not by way of secondary liability only) that if the Builder becomes liable to pay any sum
to you in accordance with the terms of Clause 27(d)(iv) of the Contract in respect of Delivery Deíects, as defined in
the Contract, we shall, upon receipt by us from you of a Demand for the same (together with a copy of a demand
made by you against the Builder for payment), pay to you or to your order upon the expiry of thirty (30) days from
receipt of such Demand the sum demanded by you and Award Interest (if any) provided that our total liability shall
not exceed the Maximum Liability.
3. This Guarantee shall not be affected by any indulgence or delay allovved to the Builder nor by any amendment to,
or variation of, the Contract whether as to time or otherwise that may be agreed betvveen you and the Builder nor by
any circumstances that would otherwise discharge our liabillty as guarantor.
4. Subject to paragraph 5 below, this Guarantee shall remain in force until the first to occur of (a) the repair of the Delivery
Deíects and (b) the payment to you by the Builder or by us of all sums secured by this Guarantee.
5. Notvvithstanding the other terms of this Guarantee, if within twenty-eight (28) days atter our receipt of a Demand we
receive vvritten notice from you or from the Builder stating that your claim to payment of the sums reíerred to in the
Demand has been disputed and that such dlspute wlll be resolved in accordance with the Contract (includlng, as
under this Guarantee until thirty (30) days after the dispute has been tinally determined or ìn the event of an appeal
from an arbltration avvard, until thirty (30) days after delivery of the final unappealable judgment; or ìn the event that
the court remits the matter to the arbitrator, until thirty (30) days after the publication of the revised final award.
6. All payments to be made under this our Guarantee shall be made vvithout any set off or counterclaim and vvithout
deduction or vvithholding for or on account of any taxes, duties or charges whatsoever unless we are compelled by
law to deduct or vvithhold the same in which case we shall make the minimum deduction or vvithholding permitted and
will pay such additional amounts as may be necessary in order that the amount received by you after such deductions
or withholdings shall be equal to the amount which would have been received had no such deduction or vvithholding
been made.
8. Notvvithstanding any provision in the Contract, this Guarantee shall be íreely assignable by you and by any assignee.
Upon assignment, all reíerences in this Guarantee to “you” shall be read as references to the assignee or subsequent
assignees.
9. This Guarantee is governed by the laws of [here State applicable law. In the absence of any statement the laws of
England and VVales shall apply] and we hereby submit to the exclusive jurisdiction of [here State place of dispute
resolution. In the absence of any statement the High Court of England and Wales shall apply]. [We hereby authorise

address.]]
10. Any notice, claim or Demand to be given or made by you under this Guarantee shall be in writing signed by one of
your officers and may be served on us elther by post or by tested telex/authorised SWIFT or equivalent, and if sent
by post to [here insert address] (or such other address as we may notíty to you in writing) and if by tested telex at
[here insert number] or if by SWIFT or equivalent at [here insert number] Via your bank and shall be effective only
11. To the extent that we may be or may hereafter become entitled, in any jurisdiction, to claim for ourselves or our property,
assets or revenue immunity (vvhether by reason of sovereignty or otherwise) in respect of our obligations under this
Guarantee from Service of process, suit, jurisdiction, judgment, order, award, attachment (before or after judgment
may be attributed to us or any o f our property, assets or revenue such an immunity (vvhether or not claimed) we
hereby irrevocably agree not to claim and hereby irrevocably waive such immunity to the íullest extenl permitted by
12. W e hereby warrant that we are permitted by any relevant law to which we are subject (including, where relevant, the
laws of the place or places of each of our incorporation, establishment, regulation, registration and residence) to:
incorporation, establishment, regulation, registration and residence in case of a Demand for payment under this
Guarantee, and
submit.
13 . W e hereby w a rra n t that this G u a ra n te e has been, or will be, duly registered with the relevant S tate authority in any
legal jurisdiction in which such registration is required for any reason.
Dated the day of 2
................................................................................................ (signature)
for and on behalf of [here insert name of Guarantor]

NEVVBUILDCON - Standard Nevvbuilding C on tract- PART I
ANNEX “B” - (SPECIPICATION)


NEVVBUILDCON - Standard Nevvbuilding Contract - PART I
ANNEX “C” - (MAKER’S LIST)


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Ship Sale & Purchase

Institute of Chartered Shipbrokers 2014Edition

Institute o f Chartered Shipbrokers

London EC3V OAA

Telephone: +44 20 7623 I I I I

© Institute o f Chartered Shipbrokers 2014

British Library Cataloguing in Pubiication Data

A catalogue record ío rth is book is available from the British Library.

Printed and bound in Great Britain by CPI

Design and book production by Jacamar (www.jacamanco.uk)

Front Cover Image: Portpictures.nl

li Institute of Chartered Shipbrokers

William'Biir V. Packard ( 1946 - 2 0 1 I )

Ship Sale and Purchase iii

The Baltic Exchange

iv Institute of Chartered Shipbrokers

A ndrew Lansdale comes from a seafaring íamily. His father served in

He w ent to sea as a cadet at the age o f 17 in ships o f the British India

Ship Sale and Purchase

1.3 Modern Shipping andTrade 2

1.4 Crude Oil and Products 3

1.5 Gas Carriers 3

1.7 Development o f the Container Ship 5

1.8 Tonnage and Capacity 6

1.9 Cargo Categories 9

i.io .l Bulk Cargo Carriers -Tankers 11

1.10.2 Tankers and Oil Poỉlution 17

1.10.3 Buik Carriers - D ry Cargo 19

1,10.4 General Cargo Ships 20

1.10.5 Reírigerated Cargo Ships 21

1.10.6 Container Ships 22

1.10.7 Ro-ro Cargo Ships 23

1.10.8 Passenger Ships 24

1.10.9 The Short Life o f the Combination Carrier 24

l.l 1 Machinery and Consumables 27

l.l l.l Fuel 27

l.l 1.2 Main Ppropulsion 27

l.l 1.3 Auxiliary Power 27

1.12 General Arrangement Plans 29

vi Institute of Chartered Shipbrokers

2.2.6 O th e r bulk d ry cargoes 34

2.2.7 Containerised cargo 34

2.3 Natural Phenomena and Navigation 35

2.3.2 Ocean currents 36

2.3.5 VVeather routeing 39

2.3.6 Salinity o f the oceans 39

2.4 Navigational and Seasonal Zones 40

3.2 The G row th o f'O p e n ’ Registries 49

3.3 The C urren t Scene 50

3.4 The Positive and Negative Aspects o f Open Registries 51

3.5 The Response byTraditional Maritime Countries 53

3.6 Registration and the Ship Sale and Purchase Broker 54

3.7 Call Sign 57

3.8 Trading Certiíicates 57

Ship Sale and Purchase vii

4.1 l.l Inspection and Surveys 69

4.1 1.2 Certification 70

4 .12 Change o f Ships Name 71

5.2 The Structure o f an O ffer 75

5.4 Inspection and Inspection o f Records 77