• Performance warranties: Depending on the size of the yacht, the buyer should at a minimum expect to see speed, range, noise and vibration warranties, taking into account the specific type of superyacht and its use. An explorer will focus more on range than a fast day boat that will focus on speed. Paint quality criteria and warranties should also be considered. The amount of liquidated damages and acceptable deficiencies will depend on what features are important to your superyacht and its intended use. Our comments above regarding things a builder should consider when agreeing levels of liquidated damages apply equally to buyers. • Jurisdiction, forum and technical disputes: You need to know the law that will govern disputes and whether (and where) you will go to court or arbitration. If you intend for technical disputes to be settled by a technical expert, be sure that the contract says so, and that there is no scope to appeal the technical expert’s decision. An exercise in good customer service “where the customer is always right” could have unexpected contractual repercussions which might circumvent protections for a builder. Our Litigation and Brexit sections dive more deeply into these aspects.
• Subcontractors: The builder will sub- contract certain elements of the build and will be responsible for the subcontractors’ performance both as to quality and time. The chain of command for subcontractor management should be clear (typically, management of subcontractors and liability for their work is solely the right and responsibility of the builder). Builders must prevent owners circumventing that relationship. • Delivery and VAT: Where will delivery take place and what VAT structure should be set up? Taxes and VAT obligations apply to both parties and each party is responsible for taxes arising in its own jurisdiction, but if a buyer claims that VAT is exempt on the yacht purchase but then fails to meet such exemption criteria, will the builder be liable to pay VAT? As you will see within our section on tax, this should not be overlooked or viewed lightly.
instalment, request performance bonds from the buyer guaranteeing the payment obligation of (at least) the next pre-delivery instalment. This gives some comfort to the builder in securing a minimum cash flow to continue the build if the buyer steps out of the contract during construction when the builder has already invested its funds. Alternatively, where the contract is entered into by a single purpose vehicle company (the norm in the industry) it is not unheard of for the builder to request a personal guarantee from the beneficial owner or a corporate guarantee from a parent company securing the buyer’s payment obligations. • Project management: Depending on the complexities of the project, during the build you may have an on-site project manager to supervise the build process. The build contract should allow access and office space for the project manager and their team. A complex and bespoke project requires all parties (owner, builder and designers) to work closely together from as early a stage as possible and a clear demarcation of each party’s obligations — particularly when it comes to deadlines for producing and approving work.
If there is a valid reason to demand payment under the bank refund guarantee, ensure that the form of the demand conforms to the terms of such guarantee. Further, buyers should not consent to any amendments to the contract, without first ensuring that the right to call under the refund guarantee will be unaffected by any such variations. • Protecting the builder’s interests: Does the contract provide any mechanism to guarantee the buyer’s payment obligations during the build process? What if the buyer fails to pay the pre-delivery instalments when they fall due or if the buyer unlawfully terminates the contract or illegitimately refuses to take delivery? Will the builder be able to recover any of its losses from the buyer, or claim liquidated damages if the buyer causes the project to overrun, increasing the costs to the business? Note that liquidated damages clauses no longer need to be a genuine pre-estimate of a party’s losses — although an extravagant provision could still be seen by the courts as a penalty (and therefore unenforceable). As a general point, you should be able to articulate legitimate commercial justifications for the level of liquidated damages. In addition, or as an alternative to retaining title and ownership of the superyacht, some builders, upon payment of each pre-delivery
17
Made with FlippingBook - professional solution for displaying marketing and sales documents online