Empty Vessels
The problem of inaccurate drafting of contracts is a recurring theme in court cases. In the case of Wuhan Guoyu Logistics Group Co Ltd and Yangzhou Guoya Shipbuilding Co Ltd v Emporiki Bank of Greece SA [2012] EWCH 1715 (Comm) there is another instance of inaccuracy. The contract was for the construction of two 57,000 DWT bulk carriers.
Now read this very carefully! “The contract price for Hull GY 404 (“the Vessel”) was to be US$ 41,250,000 payable in instalments. Under Article 3 (b) of the Shipbuilding Contract for the vessel (“the Shipbuilding Contract”) the second Instalment of US$ 10,312,500 was payable within 5 New York banking days of receipt by the Buyer of a Refund Guarantee in the from annexed as ‘Exhibit A’ issued by the Seller’s bank together with a certificate of the cutting of the first steel plate of the vessel in the Seller’s workshop. The Article provided that the Seller:
“shall notify with a telefax notice to the buyer stating that the 1st 300mt of steel plate has been cut in its workshop approved by the Buyer’s representative and demand for payment of this instalment.”
Mr Justice Clarke said, “This phraseology leaves it unclear whether it is the workshop or the cutting that is to be approved.” Quite!
The first cutting of the steel for the Vessel is said by the Seller to have taken place on 18 April 2009. No representative of the Buyer was present and there is a dispute as to whether the steel cutting took place at all.
The Shipbuilding contract has come to an end, but the means by which it has done so is in dispute.
The question that needs to be asked, in a general risk sense, is “Who checks the accuracy of wording in a contract?” A failure to do so presents potentially unacceptable risk to the buying organisation.
Brian Farrington Limited creates different scenarios to test contract wording. This risk routine is effective and has led to many contract clauses being redrafted. We would be delighted to assist your organisation challenge contract wording in the endeavour to reduce the risk of contractual disputes.
