Ship-building Contracts - Late Delivery : Many of the Ship-Builders are not able to keep their contractual deadline; who are to blame and which concequences does this create?

The standard Norwegian contracts which are used are the Ship 2000 and New Contract of 1981. Shipbuilding contracts are comprehensive and are so detailed that they are supposed to be able so solve problems without referring to background law. A ship is such a valuable object that the contract which is used under shipbuilding is of outmost importance. The Sale of Goods Act is a useful interpretative aid when the contractual provision is unclear or the contract is incomplete. Arbitration is typically used to resolve maritime disputes due to advantages regarding enforceability, flexibility, expertise and cost effectiveness. The Builder undertakes a significant risk to deliver the ship in time and if the delivery date is not kept, the consequences are price reductions in form of liquidated damages or in worst case cancelling of the contract. The liquidated damages shall normally correspond to the loss the Buyer suffers if the ship is not delivered in time. The right to cancel is a right to the Buyer and not a duty. The Builder cannot speculate in this matter or demand the Buyer to cancel. The yard must be able to reduce or at least spread his risk when it comes to situations which are out of his control. Such a situation is called force majeure and he could under such circumstances demand extended delivery. The Builder must also show that such a situation was out of his control and that measures were taken to avert or minimise the delay. For the Buyer to be able to protect his investment, the Builder must bears the risk and insurance for the ship until delivery and acceptance even when there is a late delivery. Sub-suppliers which have a great impact on the delivery of the vessel have reported delays in meeting their order books, which has created a knock on effect with shipyard deliveries. Liquidated damages which shall be paid by the sub supplier in such a situation are based on the equipments value. The raise in the ship building market has resulted in increasing need of volume transported by sea. The traditional ship yards are almost fully booked and therefore have limited building capacity. The alternative is untraditional shipyards which have lacking experience. Even though, the Buyers are temped with attractive pricing and delivery time. Their competitive advantage is lower labour costs, but there are many other factors which to be taken into consideration such as poor organization, inexperienced management, inefficient production and combination of other factors which can result in serious problems in design, construction and eventual delivery. Increases in equipment and steel prices have often not been taken into consideration while they booked vessels. This issue have affected some of the Builders so hard that they have significant losses to projects. Some untraditional shipyards speculate intentionally by neglecting vessels, already delayed beyond the maximum number of days covered by the liquidated damages. They give priority to other vessels which they gain a higher price for and the only remedy the Buyer has is to cancel contract. The Builder would then be able to re-sell the vessel on the open market for a much higher price. Even though a bank guarantee secures the buyers return of his investments in case of cancellation or where the ship is not delivered as agreed, the interest which is returned is insignificant in relation to the loose of profit by having the ship in service.