Contractual considerations for shipbuilding in Singapore

Key contractual considerations

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

No.

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 to a shipbuilding contract may select the law to apply to the contract, and this choice of law will be upheld by the Singapore courts on condition that such law is not against public policy in Singapore.

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?

Shipbuilding contracts are regarded both as contracts for sale and purchase and as contracts for the supply of workmanship and materials.

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

The hull number stated in the contract is essential to the vessel’s 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?

Approximate dimensions and description of the vessel allow the builder to deviate from the figure stated. The builder has a latitude of about 5 per cent.

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?

Parties may incorporate guaranteed standards of performance, the breach of which would entitle the buyer to liquidated damages or rescission.

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

No. Statutory provisions and case law in Singapore have not given greater definition to contractual quality standards. However, previous decisions that deal with general good practice in shipbuilding will guide the court or the arbitration tribunal on such matters.

There are no trade standards in this regard in Singapore.

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 classification society owes a duty of care to the buyer and the buyer can successfully sue the classification society if certain defects in the vessel escape the attention of the class surveyors.

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 authorities in Singapore have fully outsourced compliance with flag-state legislation to the following classification societies:

• the American Bureau of Shipping;
• Lloyd’s Register of Shipping;
• Bureau Veritas;
• DNV GL;
• the Korean Register of Shipping;
• the China Classification Society;
• Registro Italiano Navale; and
• Nippon Kaiji Kyokai.

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?

Singapore does not permit registration of a vessel under construction with the Maritime and Port Authority of Singapore (MPA) in the name of the builder or the buyer until the builder’s certificate in favour of the party intending to register the vessel, the tonnage attestation and the class attestation are issued.

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 contract that title will pass from the builder to the buyer during construction. The issues of whether title passes gradually upon the progress of the vessel’s construction or at a certain stage and the earliest stage a buyer can obtain title to the vessel will depend on the terms of the shipbuilding contract.

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

The question of when risk will pass depends on the terms of the shipbuilding contract. If the issue is not addressed in the shipbuilding contract, the risk will pass with title.

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?

A shipbuilder may subcontract all or part of a contract. It will not, however, have a bearing on the builder’s liability towards the buyer. There is a practice to include a maker’s list of major suppliers and subcontractors in the contract.

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?

In the event title to the vessel passes to the buyer progressively, the builder must inform the buyer of its intention to have certain main items constructed in another country as it would have an impact on the security to be granted by the buyer to its financiers. Shipbuilding contracts may also specify that the vessel has to be constructed at the builder’s yard located in, say, Singapore and at no other location.