Pricing, payment and financing for shipbuilding in Singapore

Pricing, payment and financing

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

Singaporean law does not have different provisions for fixed-price contracts and labour-and-cost-plus contracts. However, shipyards must be prepared to construct specific vessels on a turnkey basis or on cost-plus terms. This is typical in the construction of offshore vessels.

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 builder does not have any statutory remedies available to charge the buyer for price increases in labour and material, despite the contract having a fixed price.

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

Depending on the facts of the situation, a buyer may be able to retract consent to an increase in price by arguing that consent was induced by economic duress. English common law principles relating to economic duress can be of assistance in Singapore.

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

The builder and the buyer may agree to exclude the buyer’s right to set-off, suspend payment or deduct certain amounts. In practice, however, if the buyer exercises these rights and if this causes a delay in the delivery of the vessel, it is usual for the shipyard to obtain security by way of a banker’s guarantee and to deliver the vessel.

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 rules with regard to the form and wording of refund guarantees. No permission is required from any authority.

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

The guarantees must be in writing. For parent company guarantees, it would be prudent to obtain the resolutions of the board of directors of the parent company approving the issuance of the guarantee.

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

A mortgage over a vessel under construction can only be created if the vessel is registered with the MPA and title to the vessel vests with the mortgagor (see question 12). However, depending on who has title to the vessel (under construction), the builder and the buyer may create a charge over the vessel as constructed. In the event the builder or the buyer (as the case may be) is a Singapore incorporated company, such a charge must be registered with the Accounting and Corporate Regulatory Authority of Singapore within the time period stipulated in the Companies Act.