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Understanding the complexity of yacht build contracts

Understanding the complexity of yacht build contracts

Naturally, prospective owners want to engage the very best individuals and companies to create their beautiful superyacht. There are, of course, many more parties involved in builds than the buyer, the naval architect and the yard. There will be interior designers, classification societies, tank testers, vibration analysts, and erudite engineers of every description.

With so many people providing opinions, potentially over a number of years, numerous technical issues may arise, which could lead to a disappointed buyer. It could be that objective specifications have not been met, or that the general build quality is lacking. It is also possible for the project to have cost more money or have taken more time than was originally envisaged. But perhaps the most serious potential issue is that the design contains inherent flaws which have only become evident during the build or following launch.

When a build doesn’t go to plan

When a build goes wrong, the responsibility has to lie somewhere among the many parties involved. This will, of course, be governed by the contract(s) by which they were all engaged. It may be possible to sue parties with whom the buyer hasn’t contracted for negligence, but this will be far harder.

Much depends on the applicable law, but normally liability under a contract is said to be ‘strict’: whether or not the contractor did what was agreed is a black-and-white issue. Without a direct contract in place there may be the need to prove that the party at fault owed a ‘duty of care’ to the buyer – a surprisingly difficult process.

Because some yachting lawyers are principally shipping lawyers, there can be a tendency to treat superyachts like supertankers. It’s tempting to try to save time by using standard shipbuilding contracts – which are available without charge on the internet if one knows where to look.

Such contracts are drafted for use where only very basic specifications must be met, relating to cargo capacity, speed and fuel consumption, and responsibilities can be unclear from the vague contract wording – or left out altogether. Trading ships are designed to meet specific technical criteria, using tried-and-tested designs.

But yachts are unique combinations of novel designs and innovative materials – and there’s always a risk particular combinations won’t work. Superyacht build contracts differ widely, and as they are always treated with the utmost secrecy, industry norms have never truly crystallised.

Allocating responsibilities

The clear allocation of responsibilities is vital if parties aren’t to blame each other for miscalculations.

In an ideal world, the yard would agree to take responsibility for every part of the design and build: this would leave all responsibility resting with one party and any liability would be clear-cut. But yards have widely differing views as to their function.

While some yards aspire to be an all-encompassing provider of the finished product, others see themselves as mere fabricators. Some yards prefer not to take on particular levels of responsibility for no other reason than because that’s how they have always approached builds, while others may have limited capabilities.

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