To avoid technical disputes during the construction of a superyacht, it is advisable to draw up a contract that protects both the owner’s right to receive what is promised by the shipyard, and the yard’s right to receive the agreed payment
by Federico Santini*
The construction of a super yacht is unquestionably a very complicated process which normally takes several years, a timeframe that depends on the size of the yacht. In the case of custom-built yachts, this will be preceded by architectural design and naval engineering work. This process is characterised by the commitment of the shipyard to creating a product that complies with the contract, meets the technical specifications and conforms to the general plans agreed with the buyer, within the agreed timeframe. There is thus great importance attached to the drafting and negotiation of a suitable construction contract that protects the buyer’s right to receive delivery of what is promised by the shipyard and, in turn, for the yard to be paid the agreed consideration.
Here, we focus our attention on an extremely important issue, namely the technical disputes that may arise between shipyards and owners both during construction and at the time of delivery and acceptance, as well as subsequently during the warranty period. This is an issue which, if not properly covered by the contract, is likely to generate serious delays in the construction schedule and, in the most serious cases, cause work to be stopped or make buyers refuse to take delivery of the yacht, all of which can bring about costly legal action. By technical disputes, we generally mean disagreements or disputes of a purely technical nature, the solution of which requires advanced technical skills.
THE BEST DISPUTE RESOLUTION METHOD INVOLVES REFERRAL TO AN INDEPENDENT TECHNICAL EXPERT WHO HAS ALREADY BEEN APPOINTED BY THE PARTIES IN THE CONSTRUCTION CONTRACT.
Some of the most common technical disputes concern verification that a particular milestone in the work has been reached, something which is normally linked to the payment of an instalment, since the buyer’s technical representative can dispute this, and thus claim that the payment is not due. Another type of technical dispute that commonly occurs during construction involves whether part of the work has been correctly carried out, or if the materials, fittings and machinery which have been used correspond with the technical specifications listed within the contract.
During delivery, it is not uncommon for buyers or their technical representatives to complain about defects and/or non-conformities which mean the yacht cannot be accepted. Technical disputes may also arise during the warranty period, after delivery, where the shipyard feels that a certain defect cited by the owner is not covered by the builder’s warranty, or when the owner complains to the yard that a defect has not been properly rectified.
Essentially there are a large number of situations which can lead to technical disputes between yards and buyers, and a definitive list cannot be drawn up. A now quite widely-used method for resolving these disputes effectively and thus avoid costly and lengthy judicial disputes or arbitration, is for the construction contract to include referral to an independent technical expert appointed by the parties for any technical dispute that may arise, both during the construction phase and the warranty period. Clauses of this kind are fairly standard and mean that any technical dispute will be decided by a technical expert who is independent of the builder and the owner, in the sense that they do not work and have never worked in any way with either of the parties, and are experts in the specific issue to which the dispute relates. The technical expert, after examining the technical documentation and having carried out the appropriate checks and tests, will issue a decision that will be final and binding upon the parties.
“Technical disputes” generally mean disagreements or disputes of a purely technical nature, which can only be resolved by somebody with a high degree of professional skill.
The technical expert can be named in the construction contract or the choice can be postponed to when a dispute arises, in which case the parties must jointly agree on a professional who is trusted by both. The first solution is surely preferable as it prevents discussion over the person to be chosen, something which is bound to become more complicated when a dispute already exists. However, naming somebody in the construction agreement could mean that person does not have expertise in a particular sector, like painting for example, which requires extremely specific know-how. An effective option is for the construction agreement to select not one but two or more technical experts, who, depending on the technical problems that arise, will be called to intervene from time to time.
(Technical disputes – Barchemagazine.com – December 2022)