Dolphin Tankers, (the Buyer) applied to court to oblige China Shipbuilding Trading Co (the Builder) to allow it to carry out testing of welds on a ship under construction. The Buyer had asked the Builder if they could perform the tests but the Builder had refused. In its application to the court, the Buyer relied on the shipbuilding contract, which provided that materials and workmanship were subject to the Buyer’s approval, inspections and tests in accordance with the rules of the relevant Classification Society. The Builder argued that the Buyer had no right to reject the ship on completion of Sea Trials for poor workmanship in relation to welding, as the contract contained full provisions on the Buyer’s remedies after delivery had taken place.

The court held that: (1) the Buyer did have a right under the contract to require defects to be remedied before the vessel was accepted and before the vessel was delivered; (2) the court required a high degree of assurance that the Buyer had the right to carry out the tests under the contract or by an adhoc agreement; (3) on considering the terms of the contract, the court did not have a high degree of assurance as the wording of the shipbuilding contract was ambiguous; and (4) the court did not feel a high degree of assurance that an ad hoc agreement had been made to allow for testing of the welds.

Therefore, although the Buyer did have a right to require defects to be remedied before accepting delivery of the vessel, in terms of this contract, it was not permitted to carry out testing on welds while the vessel was under construction.