The Norwegian “Saleform 1993” has traditionally been the most commonly used form of standard ship sale and purchase contract. Following consultation with the industry, BIMCO and Norwegian Shipbrokers’ Association have issued a revised edition – “Saleform 2012”. The new edition seeks to better reflect commercial practice, and also addresses certain issues that might previously have resulted in ambiguity or dispute.
The key differences between the 1993 form and the 2012 form are as follows:-
- Deposit: the 1993 form set the deposit at 10% of the purchase price. The updated 2012 form gives the parties the ability to determine the amount of the deposit (which reflects the position in the current sale and purchase market where the agreed deposit is often less than 10%). In the absence of the parties agreeing an amount, a deposit of 10% will apply. The concept of a “Deposit Holder” has been introduced in the 2012 form, which could be, for example, a bank, law firm or ship broker. If no “Deposit Holder” is specified, the Seller’s bank will be appointed in default.
- The trigger for lodging the deposit is now also more clearly defined; having to be paid within 3 banking days (i) after the date that the Agreement is signed by the parties and exchanged in original or by e-mail/telefax, and (ii) after the deposit holder confirming in writing to the parties that the account has been opened (to reflect the increased regulation and due diligence requirements arising from anti financial crime legislation).
- Notice of Readiness: in the 2012 form the Seller is required to give notice of the date on which it intends to give notice of readiness. The inclusion of a date before which the notice of readiness may not be provided, creates a date range for delivery and increased certainty for the Buyer. The notice now includes both the date on which Sellers intend to tender notice of readiness and the intended place of delivery, which will be welcomed by Buyers when planning for delivery. The requirement for the vessel to be ready ‘in every respect’ provided for within the 1993 form no longer exists so that minor defects will not enable Buyers to reject the vessel under the MOA.
- Payment: the issuance of a notice of readiness by the Seller in the 2012 form will trigger payment of the purchase price within 3 banking days. The deposit is treated as part of the purchase price for the purposes of payment on delivery in the 2012 form. This avoids the problem that arose in the “Aktor”  2 Lloyd’s Rep 246, with the 1993 form in respect of conflicting provisions for the location of payment of the deposit and the balance (where the deposit was to be paid in accordance with clause 2 to “Seller’s nominated bank in Singapore” and the purchase price in full under clause 3 to “Seller’s nominated bank”, with subsequent nomination of a bank in Piraeus). The court held that the deposit, in law, was not a part payment of the purchase price and the Buyer was obliged to make full payment to the Seller’s nominated bank in Piraeus. In the 2012 form the payment obligations upon delivery is stated to comprise of release of the deposit and payment of the balance of the purchase price.
- Diver’s inspection: under the 2012 form the Buyers are now required to declare their option to complete a diver’s inspection nine days prior to delivery, and a Classification Society surveyor must be present for the inspection. These are new requirements. Furthermore, the Seller cannot tender Notice of Readiness before the diver’s inspection is completed. If the diver’s inspection reveals issues requiring repair that do not affect class, such repairs are now permitted to be deferred until the next scheduled drydocking, with the purchase price being amended accordingly.
- Drydocking: if the parties elect for inspection by way of drydocking (as an alternative to divers inspection), and damages or defects are found that will affect the vessel’s class under the 2012 form, the Sellers will be responsible for paying both the cost of the repairs, and the costs and expenses connected with taking the vessel in and out of drydock.
- Cancelling Date: where the Buyers have been notified that the vessel will not be ready for delivery by the agreed Cancelling Date, the time period for Buyers to accept or reject a new Cancelling Date has been reduced in the 2012 form from seven running days to three banking days.
- Lists: Sellers are under an increased responsibility in the 2012 form to accurately list items that do not belong to them, which are therefore intended to be excluded from the sale. Any items on board the vessel that are on hire or belonging to third parties are to be replaced by the Seller prior to delivery of the vessel.
- Bunkers etc.: the 2012 form contains two alternative mechanisms for calculating the amount to be paid by the Buyers for remaining bunkers, lubricating and hydraulic oils on board are provided; (a) the Sellers’ actual net price evidenced by invoices, or (b) the net current market price at the port and date of delivery (one of which is to be deleted, with (a) applying in default).
- Documentation: the documentary requirements on both parties have been updated in the 2012 form to reflect market practice where the 1993 clause was often heavily amended. The condition of class certificate needs to be issued within three banking days prior to delivery (72 hours under the 1993 form) and confirm that the Vessel is “in Class and free of condition/recommendation” which is likely to assist Buyers where there are defects which arise between the date of the Buyer’s inspection and delivery.
- The 2012 form has been amended to reflect the practicalities of a closing, and acknowledge the “chicken and egg” situation in discharging a mortgage and providing a certificate free from encumbrances upon delivery. This is the case where a Seller uses the sale proceeds to repay the loan to the financiers and enable discharge of the mortgage but where the Seller is unable to produce a free from encumbrances certificate with an existing mortgage in place. This is usually addressed by agreeing a closing agenda and issuing solicitors’ undertakings.
- The 2012 form provides for a copy of the free from encumbrances certificate to be faxed or e-mailed to the closing meeting with the original to follow as soon as possible following delivery. The Sellers will need to ensure that the mortgagee is ready to discharge the mortgage as soon as the purchase price is paid and make arrangements with the ship registry to act immediately in sending a copy of the certificate to the closing meeting by fax/e-mail. Whilst this does not entirely solve the problem, it does at least recognise it.
- Encumbrances The clause in the 2012 form has been expanded to warrant that the Vessel is not subject to a port state or other administrative detention.
- Condition on Delivery: the 2012 form expressly states that the vessel is to be delivered free of cargo and stowaways.
- Buyers’ representatives: the parties are free to agree when the Buyer’s representatives are to attend on board. The Buyer and their representatives will, under the 2012 form, be required to sign a letter of indemnity on the Seller’s P&I Club’s standard terms.
- Entire Agreement clause: the rights of the parties are limited to those found in the written terms of the contract. The inclusion of an entire agreement clause has the effect of excluding the terms implied by the Sale of Goods and Services Act 1979, relieving Sellers of the potentially difficult burden of ensuring that the vessel is of a “satisfactory quality” and “fit for purpose”.
- Law and Arbitration: this clause has been updated in the 2012 form in line with the standard BIMCO position. Saleform 2012 provides for the LMAA Small Claims Procedure to be used for claims under US$100,000, or the Shortened Arbitration Procedure of the Society of Maritime Arbitrators, Inc., if New York law is chosen.
The new Saleform 2012 is generally considered to be an improvement on the 1993 form and widespread use is expected. It provides clarity and useful additional provisions which bring the form in line with general commercial practice. The Saleform 1993 form has always been, and remains in the Saleform 2012 form, a Seller friendly contract.