WARRANTY
However, with fairly small changes to the wording of a warranty, or a carelessly drafted clause, this complete code can be disrupted, such that the warranty becomes less effective, and potentially opens up the builder to liability for all of the losses suffered by a buyer in connection with a defect. The extent of the warranty is not the only issue to be aware of in this context: warranty works can also raise jurisdictional issues, and there have been instances of builders attempting to seize jurisdiction (undermining that of the build contract) by trying to characterise warranty works as local refit work. Ensure you maintain a consistent line in communications and in any new contractual documentation to avoid any ambiguity. This is an especially high risk where non-warranty works are co-mingled with warranty works. Management of warranties under a build contract have also proven challenging for both sides: there are procedures for validating warranty claims, procedures the buyer has to follow to avoid losing their rights under the contract. Further, the builder should be very careful when dealing with warranties under the contract ensuring they are taken care of in a timely manner. During the various lockdowns effected around the world due to COVID -19 restrictions, the owners were not able to exercise their rights under the
warranty provisions because of yard closures or unavailability of materials. In many cases a commercial fix was found, however, parties now are urged to address this issue properly.
The financial and market problems over recent years have seen a run of unprecedented claims in the English courts and London arbitration that were absent pre-2008 addressing the nature and extent of the obligations of a builder in terms of after sales service to its buyer. Further, the exclusion of implied terms in a business to business contract enables the builder to limit or exclude liability for breach of some conditions that are implied in a contract for a sale of goods that the goods correspond with their description, are of satisfactory quality, and are fit for purpose.
While much of the attention in concluding a contract will focus on the specification and pricing, we recommend that equal attention is given to what could come after delivery.
established legal concepts, emphasizing the importance of the parties’ intentions when entering into the contract. With appropriate wording, the warranty clause replaces any liability on the part of the builder for breach of both express and implied terms of the contract with an obligation solely to repair or replace defective workmanship, and permits the exclusion of liability for broader losses ranging from towage fees to lost charter income. Essentially the clause becomes an indemnity under which all other damage or financial losses suffered by the buyer would be excluded and it is for the buyer to establish that it ‘qualifies’ for the assistance of the yard.
There have been a rising number of contracts in which buyers have raised numerous and extensive claims that frequently go well beyond what the builder is obliged to perform under their post-delivery warranties. There is then a tension between the legal obligations under the contract and the commercial desire of the builder to assist and satisfy its customer. The English courts have indicated, following a particularly interesting case in 2000 (reinforced in 2016 in the commercial shipbuilding case known as Star Polaris ), that a properly worded warranty clause can represent a complete code that governs what is or is not covered by the builder after delivery. The English courts therefore seem to support a more flexible interpretation of
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