Professor Alkis John Corres Ship Sale and Purchase

Ladies and Gentlemen....we are going to deal with the main aspects of a very complex procedure which calls for a variety of skills on the part of the participating parties. These include, Specific understanding about the specific ship type Legal awareness Negotiation skills Ability to resolve issues arising during the procedure.

The essentials of an S&P deal are: The parties i.e. Sellers and Buyers The ship The consideration for the sale (price/payment) The conditions for the sale A dated and signed contract Ship sales are effected on basis of standard Sale Forms. There are presently three types used internationally,  the Norwegian Sale Form,  the Nippon Sale Form and  the Singapore Sale Form.  Although similar in many ways there are important differences which may lead to opposite judicial outcomes.

One can group the activities taking place in S+P into three broad phases.. I. Main details of the deal and contract preparation II. Ship and documents inspection, and III. Completion of the transaction

Phase I: Main details and contract preparation. The main details involve the object of the deal (the vessel), the time frame of the transaction and the main terms, i.e. The detailed description of the vessel, The laydays to be inserted in the MoA and The ship’s price and the main terms. The completion of the above will be confirmed to the contracting parties (the Sellers and the Buyers) with a recap . At this stage terms can be further negotiated. When everything is agreed and the deal is outright i.e. accepted without any reservations by the parties, the formal sale contract, the Memorandum of Agreement, will be drafted and signed, triggering the 10% of the ship price deposit in an escrow account.

Phase II :Inspection of Ship, Records and Documents Following the 10% deposit the Buyers can inspect the vessel and its classification society records. The latter will reveal the history of the ship’s maintenance and failures and the inspector will be looking for repetitive repairs of the same item. The former physical inspection of the ship, sometimes referred to as superficial inspection, involves the boarding of the vessel by a professional inspector to assess the general condition of the ship and the validity of its certificates. The Buyers should check the mortgage record of the vessel and the maritime lien record.

Phase III : Completion of the transaction – Closing - Delivery The final inspection of the vessel prior to delivery can take place afloat following a class approved diver’s inspection report that underwater parts and ship bottom are in good order, or in drydock. Once the Buyers give their final approval after the inspection of the vessel the date for the meeting for the closing can be agreed, i.e. the meeting of the two parties, their legal advisors, the shipbrokers and bank representatives, in which the deal will be concluded and the ownership will be transferred to the Buyers.

Phase III …continued (a). In case the vessel is mortgaged, the mortgage will have to be removed prior to the change of ownership. The lending bank representatives attending will agree that the mortgage will be removed simultaneously with the payment of the remaining 90% of the ship’s price, after they will have made sure that all debt to the bank has been deducted from the price paid by the Buyers. If the Buyers have obtained a loan to assist them in buying the ship, their lenders will also be keen to ensure that their own mortgage will be registered on the vessel as soon as there is ownership change. All that has to be arranged during the closing meeting.

Phase III…continued (b) There is a list of documents required during closing, such as: Certificate of ‘’Good Standing’’ Power of Attorney Class certificate of the vessel Documents pertaining to governmental consent to ship sale Bill of Sale Minutes of Sellers’ board meeting and so on. After the closing the vessel should be deleted from the registry and a deletion certificate be delivered to the Buyers.

Vessel delivery The physical delivery of the vessel follows after a Notice of Readiness has been issued by the Sellers. During delivery-which ideally should coincide with the end of the closing meeting – the remaining bunkers onboard are measured and paid for by the Buyers and a Protocol of Delivery and Acceptance is signed by the representatives of the parties at the place of delivery. Thereafter the responsibility for all matters is transferred to her new owners.

Vessel delivery..continued The vessel is delivered to her new Owners:  without crew onboard,  free of chartering obligations (unless otherwise agreed),  free of all weights and encumbrances (i.e. mortgages and liens) and  free of any other debts. Any outstanding encumbrances discovered after delivery do not constitute a reason for contract termination (as this is a breach of a Warranty under English law which only gives the right to claim compensation).

Main delivery obligations of the Sellers The ship must be delivered: 1. Substantially in the same condition as at the time of inspection. 2. With class maintained, free from any outstanding class recommendations or notations. 3. Free from any damage affecting class. 4. With clean and valid national and international certificates. 5. With clean cargo spaces, free from any cargo (Singapore Sale Form).