Participation and ownership

Restrictions on foreign participation and investment

Is the shipbuilding industry in your country open to foreign participation and investment? If it is open, please specify any restrictions on foreign participation.

The shipbuilding industry in Norway is open to foreign participation and investment. In general, there are very few restrictions on foreign investments in Norway and no such restrictions within the areas of construction and repair of vessels.

Government ownership of shipbuilding facilities

Does government retain ownership or control of any shipbuilding facilities and, if so, why? Are there any plans for the government divesting itself of that participation or control?

The Norwegian government does not retain ownership or control of shipbuilding facilities. Over the past 30 years, Norwegian shipyards have been through a significant transformation. From building traditional dry bulk and tanker vessels, around 10 to 15 years ago Norwegian shipyards made a shift into the offshore segment. Another shift took place recently, moving from a wide variety of offshore support vessels to more niche segments such as sophisticated offshore specialist vessels, large ocean trawlers, expedition cruise ships, well-boat and fish-farm vessels and battery-driven roll-on, roll-off (ro-ro) ferries. Norwegian shipyards are located along the southern and western coasts of Norway.

Key contractual considerations

Statutory formalities

Are there any statutory formalities in your jurisdiction that must be complied with in entering into a shipbuilding contract?

There are no statutory formalities that must be complied with when entering into a shipbuilding contract. There is, for instance, no requirement that the shipbuilding contract is signed, and an oral agreement would be valid and binding between the parties. Having said that, it is highly recommended that the parties enter into a written shipbuilding contract that is signed by both parties. It is also important to ensure that the persons representing each party are authorised to act on behalf of their employer or principal.

Choice of law

May the parties to a shipbuilding contract select the law to apply to the contract, and is this choice of law upheld by the courts?

The parties are free to choose the governing law of the contract. This choice will be upheld by the Norwegian courts, provided that the agreement can be demonstrated with reasonable certainty. The Norwegian standard shipbuilding contract Ship 2000 provides for Norwegian law as a default provision, but there is nothing in the contract that prevents the parties from changing the governing law. One should, however, keep in mind that the standard contract is drafted in a Norwegian legal context and that over the years several of the standard provisions have been scrutinised by Norwegian courts and arbitration tribunals, thus developing case law to some extent. Whenever the parties want to change the governing law in the Ship 2000 contract, they are advised to consider the application of the various contractual provisions in the context of the alternative governing law. Ship 2000 is also drafted to be compatible with English law.

Nature of shipbuilding contracts

Is a shipbuilding contract regarded as a contract for the sale of goods, as a contract for the supply of workmanship and materials, or as a contract sui generis?

In principle, a shipbuilding contract is regarded as a contract for the sale of goods. Unless the buyer provides a substantial part of the materials, the Norwegian Sale of Goods Act 1988 will apply. The provisions of the Act are not mandatory and will only apply to the shipbuilding contract to the extent that the particular question at hand is not regulated in the shipbuilding contract. In Ship 2000, certain areas, such as the shipyard’s liability for defects, are fully regulated in the contract, while other areas, such as liability for default (other than delay and defects), are less regulated, and one would have to rely on the rules under Norwegian background law.

Hull number

Is the hull number stated in the contract essential to the vessel’s description or is it a mere label?

The hull number is essential to the vessel’s description and is not merely a label. The hull number would, for instance, be a key element if the hull is to be registered in the Norwegian Shipbuilding Register. The hull number is supposed to identify the particular hull in question throughout the construction phase, and the buyer can request delivery of that particular hull, with that unique hull number, as identified in the shipbuilding contract. The issue with substitution of hulls or ‘hull swapping’, and whether the builder is entitled to deliver another hull in lieu of the one mentioned in the contract, was raised in the Norwegian arbitration awards of 27 November 2001 (Broström Tankers AB v Factorias Vulcano SA No. II) and 8 January 2008 (Factorias Vulcano SA v Arrow Seismic Invest II Ltd No. II), and in both matters the tribunals held that the substitution of hulls was not permitted unless there were clear reservations in the contract to the contrary.

Deviation from description

Do ‘approximate’ dimensions and description of the vessel allow the builder to deviate from the figure stated? If so, what latitude does the builder have?

The insertion of ‘about’, ‘ca’, ‘approximate’ or similar will allow the builder some degree of deviation from the figure stated. The actual deviation permitted will depend on an overall assessment of the particular circumstances at hand. To avoid this uncertainty, it is recommended either to apply specific figures or to properly define the ‘about’ margins that are to apply in each particular circumstance. Ship 2000 assumes that specific figures are used to describe the main dimensions and characteristics, and the contract contains a separate provision specifying that any ‘about’ qualifications shall be disregarded for the purposes of calculating liquidated damages and the right of cancellation for deviation from the stipulated figures.

Guaranteed standards of performance

May parties incorporate guaranteed standards of performance whose breach entitles the buyer to liquidated damages or rescission? Are there any trade standards in your jurisdiction for coating, noise, vibration, etc?

Yes, the parties are free to incorporate such standards of performance. The standard provisions of Ship 2000 include some key standards of performance covering speed, fuel consumption and cargo-carrying capacity (deadweight and cubic capacity). Deviation from these pre-agreed standards would entitle the buyer to liquidated damages or to a right of cancellation if the deviation exceeds the agreed maximum limit. There are trade standards within certain industries, the best example being NORSOK, the standard commonly used for the construction of units and equipment to be used in connection with oil and gas production on the Norwegian continental shelf.

Quality standards

Do statutory provisions or previous cases in your jurisdiction give greater definition to contractual quality standards?

There are no statutory provisions, nor any case law, that give greater definition to contractual quality standards in relation to shipbuilding.

Classification society

Where the builder contracts with the classification society to ensure that construction of the vessel leads to the buyer’s desired class notation, does the society owe a duty of care to the buyer, or can the buyer successfully sue the classification society, if certain defects in the vessel escape the attention of the class surveyors?

The normal arrangement in Norway is that the builder contracts with the classification society to ensure that the vessel is built and delivered in accordance with the requirements of the classification society. The classification society is considered as a subcontractor to the builder and, since there is no contractual relationship between the buyer and the classification society, as a starting point the classification society owes no contractual duty or liability to the buyer. This would of course be different if the classification society were engaged directly by the buyer; for instance, as consultants in connection with the supervision of the builder’s construction.

The buyer may, however, in principle hold the classification society liable in tort and as such the classification society owes a duty of care to the buyer. This duty of care may extend to certain other persons, such as a third party that buys the vessel from the buyer after it is delivered from the yard. The starting point for the assessment of such a claim in tort would be whether the classification society has acted negligently based on the particular circumstances of the case and viewed in light of the particular duty of care applicable in similar circumstances. Traditionally, there has been a high threshold for holding the classification society liable in tort, in particular in respect to defects in the vessel. There are indications that this position is shifting and that there is less reason to treat tort claims against classification societies differently - in other words, more strictly - than tort claims against other groups of professional service providers. However, there is very limited case law in Norway on this matter.

Flag-state authorities

Have the flag-state authorities of your jurisdiction outsourced compliance with flag-state legislation to the classification societies? If so, to what extent?

The flag-state authority in Norway, the Norwegian Maritime Authority, has appointed several classification societies as recognised organisations (ROs). These have been delegated certain tasks on behalf of the Norwegian authorities, such as the performance of inspections and surveys of ships to ensure compliance with flag-state requirements.

The societies currently appointed as ROs are:

  • the American Bureau of Shipping;
  • Bureau Veritas;
  • DNV GL;
  • Lloyd’s Register;
  • RINA; and
  • Nippon Kaiji Kyokai (ClassNK).

The authority that has been delegated by the Norwegian Maritime Authority to the ROs is set out in detail in the agreement with each particular RO.

Registration in the name of the builder or the buyer

Does your jurisdiction allow for registration of the vessel under construction in the local ships register in the name of the builder or the buyer? If this possibility exists, what are the legal consequences of this registration?

Vessels under construction in Norway, and contracts for the construction of vessels in Norway, can be registered into a separate chapter of the Norwegian Ship Register called the Shipbuilding Register. This registration also covers hulls, major hull sections or main engines built outside Norway, provided that delivery from the foreign subcontractor has taken place. The vessel or hull under construction can be registered in the name of either the builder or the buyer, depending on which party holds the title to the vessel during the construction period (as agreed in the shipbuilding contract). The party registered as the owner during the construction period can register mortgages over the vessel.

In most shipbuilding contracts, the yard will hold title to the vessel until the vessel is delivered to the buyer. It is common that the yard registers the vessel with the Shipbuilding Register in order to obtain financing for the cost of construction and provision of refund guarantees. Once the vessel under construction is registered in the Shipbuilding Register, the lenders can register a mortgage on the vessel, thus creating security for their loan. Even where the yard holds title to the vessel during the construction period, it is nevertheless possible for the buyer to register the shipbuilding contract with the Register, thereby securing priority for its rights under the shipbuilding contract to, inter alia, take delivery of the vessel upon completion.

Title to the vessel

May the parties contract that title will pass from the builder to the buyer during construction? Will title pass gradually, upon the progress of the vessel’s construction, or at a certain stage? What is the earliest stage a buyer can obtain title to the vessel?

The parties may agree that the title will pass from the builder to the buyer during construction. It is possible to agree that such transfer of title shall take place progressively during the course of the construction or in stages; for instance, in connection with milestone payments. The buyer can obtain title to the vessel from the earliest commencement of construction. In the Norwegian standard shipbuilding contract Ship 2000, it is agreed that the builder keeps title to the vessel during the entire construction period and that the buyer assumes title upon delivery of the vessel. In offshore construction projects, it is more common that title to the object is passed progressively during the course of construction.

In certain shipbuilding projects where the buyer is supposed to finance the construction period by paying larger instalments to the builder, it is more common to agree that title to the vessel passes to the buyer either gradually or in agreed stages. This will entitle the buyer to have the title to the vessel or hull registered in the Shipbuilding Register, thus allowing lenders to register a mortgage or mortgages on the vessel or hull.

Passing of risk

Will risk pass to the buyer with title, or will the risk remain with the builder until delivery and acceptance?

The parties are free to agree when risk will pass to the buyer, and it is possible to agree that the passing of risk and title takes place at different times. However, most commonly it is agreed that risk and title are passed on to the buyer simultaneously. This is also the standard position in Ship 2000, where title and risk are passed on to the buyer upon delivery of the vessel.

Subcontracting

May a shipbuilder subcontract part or all of the contract and, if so, will this have a bearing on the builder’s liability towards the buyer? Is there a custom to include a maker’s list of major suppliers and subcontractors in the contract?

Unless otherwise agreed in the shipbuilding contract, the builder is allowed to subcontract all or part of the contract. This will have no bearing on the builder’s liability, who remains liable to the buyer for the subcontractor’s performance as if such work had been performed by the builder itself. In Ship 2000, the default position is that the builder is free to subcontract all or parts of the work, except for construction of the hull and major sections of the hull. Even if the shipbuilding contract contains no explicit restrictions against subcontracting, there could be pre-contractual correspondence or dealings between the parties from which certain restrictions on subcontracting could be implied.

It is customary to include a ‘maker’s list’ as a schedule to the shipbuilding contract, which specifies the subcontractors and suppliers the builder has to choose between for each particular item or piece of equipment. The builder may freely choose between the named sub­contractors and suppliers.

Extraterritorial construction

Must the builder inform the buyer of any intention to have certain main items constructed in another country than that where the builder is located, or is it immaterial where and by whom certain performance of the contract is made?

Unless otherwise agreed, the builder is free to subcontract all or part of the work to any subcontractor of its choice and irrespective of the country in which this subcontractor is located. But even if the shipbuilding contract contains no explicit restrictions on subcontracting, there may be other provisions in the contract, or pre-contractual correspondence or dealings between the parties, from which it can be implied that that the main items of the vessel shall be built in Norway. It is common for Norwegian shipyards to subcontract the construction of the hull to shipyards in other countries and then arrange for towage to Norway and outfitting and completion at the Norwegian yard.

Pricing, payment and financing

Fixed-price and labour-and-cost-plus contracts

Does the law in your country have different provisions for ‘fixed-price’ contracts and ‘labour-and-cost-plus’ contracts?

There are no statutes or regulations with different provisions for fixed-price or labour-and-cost-plus contracts. The parties are free to agree on how to calculate price based on the two different methods. In shipbuilding contracts, it is most common to agree to fixed-price contracts, while labour-and-cost-plus is more commonly seen in offshore construction contracts. Ship 2000 provides for a fixed price that is adjusted in accordance with agreed variation orders, with any adjustment made to the final instalment.

Price increases

Does the builder have any statutory remedies available to charge the buyer for price increases of labour and materials despite the contract having a fixed price?

The clear starting point under Norwegian law is that if the parties have agreed a fixed price, then there are no statutory remedies available to the buyer to increase the price. There is a narrow exception in section 36 of the Contracts Act, which allows a party to request that a clause or contract is revised if it is deemed ‘unreasonable’ or ‘contrary to good business practice’. However, the courts rarely apply this provision, in particular in respect to contracts that have been entered into between professional parties.

Retracting consent to a price increase

Can a buyer retract consent to an increase in price by arguing that consent was induced by economic duress?

If an agreed price increase is made under economic duress, then there are provisions in the Contracts Act that could render the agreement invalid. However, there is a high threshold for establishing economic duress.

Exclusions of buyers’ rights

May the builder and the buyer agree to exclude the buyer’s right to set off, suspend payment or deduct certain amounts?

The parties are free to agree to exclude or limit the buyer’s rights and remedies such as a right to set off, suspension of payment or a right to deduct certain amounts.

Refund guarantees

If the contract price is payable by the buyer in pre-delivery instalments, are there any rules in regard to the form and wording of refund guarantees? Is permission from any authority required for the builder to have the refund guarantees issued?

There are no statutory requirements with regards to the form or wording of a refund guarantee. No permission or approval from any authority is required in order for the builder to have the refund guarantee validly issued.

In order for the refund guarantee to be treated as a guarantee and be enforceable as such, the wording must clearly state the guaranteed obligation or obligations and when the guarantee becomes due. The format and wording is usually in line with international banking practice, and the refund guarantees will commonly be issued by way of a SWIFT (Society for Worldwide Interbank Financial Telecommunication) message.

Advance payment and parent company guarantees

What formalities govern the issuance of advance payment guarantees and parent company guarantees?

There are no specific statutory requirements pertaining to advance payment guarantees or parent company guarantees. The beneficiary would, however, be well advised to make sure that the corporate requirements are fulfilled. This would include verifying that the issuing company has obtained all necessary corporate approvals and resolutions and that the person executing the guarantee is authorised to act on behalf of the company.

Financing of construction with a mortgage

Can the builder or buyer create and register a mortgage over the vessel under construction to secure construction financing?

The party that holds title to the vessel while it is under construction can enter the vessel in the Norwegian Shipbuilding Register. This would allow such party to create and register a mortgage over the vessel under construction. See also questions 12 and 13.

Default, liability and remedies

Liability for defective design (after delivery)

Do courts consider defective design to fall within the scope of poor workmanship for which the shipbuilder is liable under the warranty clause of the contract?

The contract would normally state explicitly that the shipbuilder is liable for the design and liable for defective design under the warranty clause of the contract. Thus, the question of whether defective design falls within the scope of poor workmanship would not be relevant. If the contract does not explicitly mention liability for design, one would likely interpret the contract to imply that the shipbuilder would still be liable for the design, as this is in line with the traditional division of risk in Norwegian shipbuilding contracts. The consequences of being liable for the design could be a heavy burden on the shipbuilder if the vessel does not perform properly due to an error in the design. Remedying design defects after completion of the vessel may be costly. The scope of the shipbuilder’s liability for the design may be regulated and differentiated in the contract.

Remedies for defectiveness (after delivery)

Are there any remedies available to third parties against the shipbuilder for defectiveness?

The shipbuilder could be liable to third parties for personal injury or death based on the Norwegian Product Liability Act. According to this Act, the shipbuilder would be liable for damage caused by the vessel (product) that is due to the vessel (product) not offering the security that a user or the public in general could reasonably expect (a security defect).

If the third party is the legal successor to the buyer, his or her legal rights against the shipbuilder are normally regulated in the ship­building contract. In the absence of explicit regulation, the legal successor to the buyer may, under certain conditions, make claims directly against the shipbuilder based on the Norwegian contract law principle of direct action.

Liquidated damages clauses

If the contract contains a liquidated damages clause or a penalty provision for late delivery or not meeting guaranteed performance criteria, must the agreed level of compensation represent a genuine link with the damage suffered? Can courts mitigate liquidated damages or penalties agreed in the contract, and for what reasons?

It is generally not a requirement that the agreed level of compensation represents a genuine link with the actual damage suffered. However, a court could set aside a liquidated damages provision, wholly or partly, if it is deemed to be unreasonable or against good business practice to enforce such provision. The threshold to set aside an agreed provision on this basis is fairly high, in particular when the contract has been entered into between professional parties.

Preclusion from claiming higher actual damages

If the building contract contains a liquidated damages provision, for example, for late delivery, is the buyer then precluded from claiming proven higher damages?

The answer to this question would depend on an interpretation of the contract. Normally, a claim for higher damages will be explicitly excluded in the contract. Even without such an explicit disclaimer, an interpretation of the contract could lead to the result that a claim for further damages is precluded.

Force majeure

Are the parties free to design the force majeure clause of the contract?

Yes, the parties are free to design the force majeure clause of the contract.

Umbrella insurance

Is certain ‘umbrella’ insurance available in the market covering the builder and all subcontractors of a particular project for the builder’s risks?

A shipbuilding project in Norway would normally be insured by the shipyard according to the Nordic Marine Insurance Plan 2013 (the Nordic Plan). The latest version of the Nordic Plan is version 2019. This would be an insurance policy (construction all risks) covering the builder’s yard or other premises in the port where the yard is situated, and transport between these areas. The insurance would not cover subcontractors prior to delivery to the yard or transport of parts from subcontractors to the yard.

Disagreement on modifications

Will courts or arbitration tribunals in your jurisdiction be prepared to set terms if the parties are unable to reach agreement on alteration to key terms of the contract or a modification to the specification?

A court or arbitration tribunal in Norway would be prepared and obliged to set the terms and decide if the parties were unable to reach agreement on the alteration to key terms of the contract or a modification to the specification.

Acceptance of the vessel

Does the buyer’s signature of a protocol of delivery and acceptance, stating that the buyer’s acceptance of the vessel shall be final and binding so far as conformity of the vessel to the contract and specifications is concerned, preclude a subsequent claim for breach of performance warranties or for defects latent at the time of delivery?

At the outset, the buyer’s signature of a protocol of delivery and acceptance, stating that the buyer’s acceptance of the vessel shall be final and binding, so far as conformity of the vessel to the contract and specifications is concerned, would preclude a subsequent claim for breach of performance warranties. However, the shipyard would normally be liable for latent defects based on the warranty provisions of the contract. If the parties do not agree on possible outstanding issues, both parties have the right to make reservations or notes in the protocol, or in a separate document signed by the parties, ‘for acknowledgement of receipt only’, which would reserve the party’s right to make a claim following delivery.

Liens and encumbrances

Can suppliers or subcontractors of the shipbuilder exercise a lien over the vessel or work or equipment ready to be incorporated in the vessel for any unpaid invoices? Is there an implied term or statutory provision that at the time of delivery the vessel shall be free from all liens, charges and encumbrances?

Suppliers or subcontractors of the shipbuilder would not be entitled to exercise a lien over the vessel after incorporation of the work or equipment into the vessel. Before such incorporation, the suppliers or subcontractors would be entitled to exercise a lien on the equipment if such a lien has been agreed between the shipbuilder and the respective supplier or subcontractor. It follows from section 41 of the Norwegian Sale of Goods Act that a lien, charge or encumbrance on the vessel at the time of delivery shall be considered a defect giving rise to a claim on the part of the buyer, unless it is agreed that the buyer shall assume such lien, charge or encumbrance.

Reservation of title in materials and equipment

Does a reservation of title by a subcontractor or supplier of materials and equipment survive affixing to or incorporation in the vessel under construction?

No, a reservation of title by a subcontractor or supplier of materials and equipment would not survive the affixing to or incorporation in the vessel under construction.

Third-party creditors’ security

Assuming title to the vessel under construction vests with the builder, can third-party creditors of the builder obtain a security attachment or enforcement lien over the vessel or equipment to be incorporated in the vessel to secure their claim against the builder?

If title to the vessel under construction vests with the builder, and provided such a third-party creditor has an enforceable basis for its claim, a third-party creditor of the builder could obtain a security attachment or enforcement lien over the vessel or equipment to be incorporated in the vessel to secure their claim against the builder. Such security attachment or enforcement lien would have priority after a prior registered mortgage, but only to the extent that the loan secured by the mortgage had been drawn by the shipbuilder before the taking out of the security attachment or enforcement lien. If the buyer has registered his or her right under the contract in the Norwegian Shipbuilding Register, the buyer will maintain his or her right to have the vessel delivered to the detriment of the security attachment or enforcement lien of such third-party creditors against payment of the purchase price.

Subcontractor’s and manufacturer’s warranties

Can a subcontractor’s or manufacturer’s warranty be assigned to the buyer? Does legislation entitle the buyer to make a direct claim under the subcontractor’s or manufacturer’s warranty?

Generally, a subcontractor’s or manufacturer’s warranty could be assigned to the buyer and the buyer would be entitled to make a direct claim under the subcontractor’s or manufacturer’s warranty. However, if the subcontractor or manufacturer has not been fully paid by the shipbuilder, the subcontractor or manufacturer would be entitled to withhold his warranty work until being fully paid, and the buyer may have to settle such outstanding payment to benefit from the sub­contractor’s or manufacturer’s warranty.

Default of the builder

Where a builder defaults in the performance of the contract, is there a legal requirement to put the builder in default by sending an official notice before the buyer’s remedies begin to accrue? What remedies will be open to the buyer?

There is no general legal requirement to put the builder in default by sending an official notice before the buyer’s remedies begin to accrue if the builder defaults in the performance of the contract. Specific performance will always be open to the buyer. Whether and to what extent the buyer will have a claim for damages will in practice always be regulated and limited in the contract and will normally be limited to:

  • liquidated damages for breach of technical warranties;
  • liquidated damages for delay; and
  • in case of cancellation by the buyer, refund of instalments paid.

If there is no explicit regulation of limitation on the buyer’s right to claim damages, the buyer will in principle be entitled to claim damages equal to his or her economic loss.

Remedies for protracted non-performance

Are there any remedies available to the shipowner in the event of protracted failure to construct or continue construction by the shipbuilder apart from the contractual provisions?

At the outset and apart from the agreed contractual provisions, there are no remedies available to the buyer in the event of protracted failure to construct or continue construction by the shipbuilder. However, if the shipbuilder is grossly negligent or wilfully failing to construct the vessel, the buyer may have a claim for damages and possibly a right of cancellation.

Builder’s insolvency

Would a buyer’s contractual right to terminate for the builder’s insolvency be enforceable in your jurisdiction?

The bankruptcy estate of the shipbuilder would have a right to step into the contract in lieu of the shipbuilder, in which case the estate would have to perform under the contract. If the estate elects to exercise such step-in right, then the buyer is prevented from terminating due to the builder’s insolvency. In practice, a bankruptcy estate would be reluctant to use such step-in rights in the case of a shipbuilding contract, and the outcome of such a situation would depend on negotiations between the buyer and the builder’s bank and other creditors.

Judicial proceedings or arbitration

What institution will most commonly be agreed on by the parties to decide disputes?

The parties would most commonly agree to ad hoc arbitration proceedings in Norway to be carried out pursuant to the Norwegian Arbitration Act. Following the launch of the Nordic Offshore and Maritime Arbitra­tion Association (NOMA) in 2017, it has been more common to agree that the arbitration proceedings shall be carried out pursuant to the NOMA rules. Such rules are similar to those of the London Maritime Arbitration Association. If ordinary courts are agreed, there would be no specialised judges or courts dealing with shipbuilding disputes.

Buyer’s right to complete construction

Would a buyer’s contractual right to take possession of the vessel under construction and continue construction survive the bankruptcy or moratorium of creditors of the builder?

A buyer’s contractual right to take possession of the vessel under construction and continue construction would not survive the bankruptcy or moratorium of creditors of the builder. A buyer could seek to obtain such a right by having registered title to the vessel or possibly a mortgage on the vessel under construction.

ADR/mediation

In your jurisdiction, do parties tend to incorporate an ADR clause in shipbuilding contracts?

Typical alternative dispute resolution clauses would allow the class to decide on class issues and to appoint a technical expert for other technical matters. General mediation clauses would be possible to agree, but are less common.

Default of the buyer

Where the buyer defaults in the performance of the contract, what remedies will be available to the builder? What are the consequences of the builder’s cancellation of the contract?

The remedies available to the builder in the event of the buyer’s default and the consequences of the builder’s cancellation would normally be agreed in the contract. Typically, in the case of non-payment by the buyer, the builder would be entitled to:

  • agreed default interest;
  • stop work and postpone delivery; and
  • cancel the contract after a certain number of days of delay.

In the case of cancellation, the builder would normally be entitled to:

  • complete or not to complete the building of the vessel;
  • sell the vessel in a finished or unfinished state; and
  • claim damages from the buyer equal to the builder’s economic loss.

Contract forms and assignment

Standard contract forms

Are any standard forms predominantly used in your jurisdiction as a starting point for drafting a shipbuilding contract?

The standard form predominantly used in Norway is the Ship 2000 standard shipbuilding contract. Ship 2000 has been negotiated and agreed between the Norwegian Shipowners’ Association on the one side, and the Norwegian Shipbuilders’ Sales & Marketing Organisation and the Norwegian Shipbuilders’ Association on the other side. The parties are free to agree to any changes in this standard. The SAJ, AWES or Newbuildcon forms are rarely seen.

Assignment of the contract

What are the statutory requirements for assigning the contract to a third party?

An assignment of a contract would require the agreement of both the assignor and the assignee, even without an express prohibition of assignment. An assignment would normally be done through a tripartite agreement. The original contract would not be discharged by the assignment, and the new contracting party would assume all rights and obligations under the contract unless otherwise agreed.