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What is a Ship-Repair Contract?

7 min read

By Muskan Goel

Published On: October 7, 2021 at 14:21 IST

Introduction

Maritime vessels including tankers, ships etc., which transport goods in bulk through water transport and routes have their values ranging somewhere in millions of dollars. Not only the cost but the expenses born in the repair of such vessels also range in dollars. In this article we would talk about one such contract of repairing of the maritime vessels, the ship-repair contracts. The daily wear and tear along with consequential damages of ships can very well be anticipated, due to which the demand for ship-repair contracts arises.

Let’s have a look at what exactly are ship-repair contracts along with certain basic elements of the same.

What is a Ship-Repair Contracts?

Contract as defined under Section 2(h) of the Indian Contract Act, 1872[i] states: “An agreement enforceable by law is a contract.”

A maritime contract is an agreement concerning the operations, navigation, maintenance, and repair or provisioning of a vessel. When the contract is made in relation to a ship or if the parties are involved in overseas trade then it is known as a maritime contract. Maritime contracts are governed by specific laws which concern nautical issues on open water or maritime laws. This specific Act is known as the Admiralty Law[ii].

Ship-repair contract is a type of maritime contract. The name in itself suggests that this type of contract includes ship maintenance, major or trivial damage repairs, etc. Ships must be maintained and repaired perpetually to enable the proper functioning.

A ship-repair contract may be written or drafted orally. If the worker or repairer is careless in his work, the vessel owner can file a suit against him for foreseeable damages and seek compensation in the Admiralty court (high court which has jurisdiction for cases pertaining to admiralty law).[iii]

What is the difference between Major and Minor Ship-Repair Contracts?

Major Ship-Repair contracts are types which involve difficult or large-scale repairs. These repairs require the ultimate perfection and superintendence of specifically skilled labour.

Minor Ship-Repair contracts are types which include minor or not so difficult repairs and maintenance. These types of repairs can be performed by the crew members and no specific perfection or skills are required. Minor repairs include attending blocked drains, fixing electricity or a carpenter required on board.[iv]

What are the essential clauses to be added in a ship-repair contract?

  • Owner’s consent

It states that the work performed or to be performed on the ship (vessel) is with due permission and consent of the owner and not beyond their wish.

  • Delivery and Re-delivery Clause

A particular date and time for delivery are to be decided by the parties. In case of cancellation or other such situations, date of re-delivery is also to be decided in advance.

  • Financial terms to be clarified

The details including price, payment, taxes etc. should be decided by the parties beforehand.

  • Liabilities and Indemnities

Liability clause is to define the onus of each party in certain kinds of situations i.e. (for loss or damage, for death or injury, liability of third parties).

Whereas the indemnity clause would ensure the indemnifying party to cover the loss of the indemnified.  

  • Liquidated Damages for Delay

A particular amount of money specified that will be payable on account of default by either of the parties is to be decided by the parties.

  • Guarantee of work

The assurance by the contractors of the work done or the work that is to be done on the vessel (ship), to meet the expectations of the owner and to be of standard quality. 

  • Disturbances leading to non-fulfillment of the contract

Mainly referring to force majeure (unforeseeable situations that are beyond the control of the parties, under which the parties cannot be urged to perform their part of the contract)

  • Termination of contract

The situations, under which the agreement can be terminated either for convenience or breach, shall be decided upon by the parties.

Case Laws related to ship-repair contracts

  • All Engineering (Fiji) Ltd. Vs Owners of Bulou and Barge Pro Dive II[v]

FACTS: The plaintiff had made repairs to the owners’ vessels but there was a fault in payment by the owners claiming there was a down-turn in their business and needed time to decide the plan to make payments. The plaintiff kept the vessel under their custody until the payment.
HELD: The court decided the case in favour of the plaintiff and granted the application of arresting the vessel by the plaintiff. The court held that the law is settled in Fiji that a repairer of a vessel has an action in rem against the vessel despite the lack of a maritime lien.

  • Baobab Industries Ltd Vs Owners of the Yacht ‘Jubilant’[vi]

FACTS: On the request of the owners of the yacht, the plaintiff had done certain repairs on the yacht. When the plaintiff sought payment, the owners showed a default in payment to which the plaintiffs made an application under the Admiralty jurisdiction of the High Court for the arrest of the yacht.

HELD: It was held that the plaintiffs had a valid claim for repairs under a contract and that the arrest of vessel was justified on the part of the plaintiff.

  • Chandra Vs Kiribati Shipping Services Ltd. [vii]

FACTS: The plaintiff was appointed to make electrical repairs and maintenance to the owners’ vessel for which he was partially paid. But the substantial payment was due on the part of the owners. The plaintiff filed an application in the admiralty court for seizure/ arrest of the vessel to recover the payments.

HELD: After examining all the proofs and affidavits attached with the application, the court recognised the claims of the plaintiff as just and valid and granted the application for arrest of vessel to the plaintiff.

  • Federated States of Micronesia Vs MT HL Achiever[viii]

FACTS: The defendant’s vessel was anchored in Chuuk, and the Federated States of Micronesia (FSM) wanted to move it to Pohnpei to get certain repairs done on the ship also the skip keeping charges in Pohnpei were relatively lower. The FSM filed an application in court to lift the restraining order and allow it to move the ship.

HELD: The court decided that the ship cannot be moved without a court order because moving of the ship includes the link between jurisdiction and venue. Hence, the claim of the plaintiff was dismissed.

  • Rano Vs Melanesian Holdings Ltd[ix]

FACTS: The plaintiff had purchased an old wooden vessel on an ‘AS IS AS LIES’ basis without any guarantee except that the vessel was free from all debts and other such things. The plaintiff further hired the defendant to make certain full body repairs on the vessel along with installing an engine to it. The plaintiff after taking the delivery of the vessel sailed to Honiara without paying the substantial amount to the defendant. In Honiara, the plaintiff faced mechanical problems in the vessel, and afterwards filed a complaint against the defendant for breach of contract and negligence. The defendant filed a counter claim for payment of repairs.

HELD: There was a contract between the plaintiff and defendant for repairs to the vessel. It was evident that the defendant would carry out work on the vessel with utmost care and caution and in return the plaintiff would pay for the repairs done. On the evidence, the plaintiff was not able to establish that the defendant failed to complete the work with reasonable care and skill due to which plaintiff’s action for negligence and breach of contract was dismissed by the admiralty court. Whereas the action of the defendant for the payment of repairs done by him was held to be valid.

Conclusion

Ship-repair contracts are valid contracts enforceable in the Admiralty Court. Drafting of which is an important step, as every clause decided in the contract forms the solution for disputes arising in the future. The ship-repair contract like any other contract must cover the interests of both the parties, and must be clear to both of them. It must fulfill the essentials of a valid contract according to the Indian Contract Act, 1872[x]. The ship-owner can file a suit for the compensation of damages, as well as a suit for the tortuous actions of the contractor. While a contractor (the person/company who repairs the vessel) can file a suit for breach of payment.

ABOUT THE AUTHOR

Muskan Goel is a student of BA.LLB at Vivekananda School of Law and Legal Studies (VSLLS, VIPS). She believes that hard work is necessary for success but smart work is the ultimate mantra for success. She readily adjusts according to the environment and always strives for perfection. She also believes that everyday brings a new opportunity for her to learn new things.

Edited by: Aashima Kakkar, Associate Editor, Law Insider


[i] Indian Contract Act, 1872, s.2(h)

[ii] The Admiralty (Jurisdiction And Settlement Of Maritime Claims) ACT, 2017, (Act No. 22 of 2017)

[iii] What are ship repair contracts: Bimco Standard Ship-Repair Contracts Overhauled, and

Maritime Contract Law and Definition (Last visited on: 18.09.2021)

[iv] Difference between major and minor ship-repair contracts (Last visited on: 18.09.2021)

[v] All Engineering (Fiji) Ltd. Vs Owners of Bulou and Barge Pro Dive II [2009] FJHC 262; Admiralty Action 2 of 2009 (25 November 2009)

[vi] Baobab Industries Ltd Vs Owners of the Yacht ‘Jubilant’, [2009] FJHC 167; Admiralty Action 01.2009L (19 August 2009)

[vii] Chandra Vs Kiribati Shipping Services Ltd. [2010] FJHC 43; Admiralty Action 1.2010 (4 February 2010)

[viii] Federated States of Micronesia Vs MT HL Achiever (I) (30 August 1995)

[ix] Rano Vs Melanesian Holdings Ltd. [1999] SBHC 45; HC-CC 131 of 1996 (30 April 1999)

[x] Indian Contract Act, 1872