Possible issues in yacht construction

Turkish shipyards start super-yacht building projects without the signing of any formal contract. Without a well drafted, comprehensive yacht-building contract, the parties may fall into dispute easily, which may cause the whole project to fail

Most market reports suggest that Turkish shipyards start super-yacht building projects without the signing of any formal contract. Without a well drafted, comprehensive yacht-building contract, the parties may fall into dispute easily, which may cause the whole project to fail. Clearly, both the buyer and shipyard would benefit greatly from a well drafted contract. Design issues should be negotiated carefully and in detail between the buyer and the builder at the outset of the project, anticipating what may go wrong and what the consequences should be. Design faults are likely to be even more serious than those arising from inadequate workmanship or materials, which will frequently be detected during the construction of the yacht. In contrast to commercial shipbuilding projects, in super-yacht building projects the buyer wants to employ his own, chosen designer. New companies entering the super-yacht market may well have in-house resources, but they may not have the requisite experience in super-yacht projects. The buyer’s designers’ input will therefore be even more significant if the buyer’s design is to be used, the builder may refuse to provide any specific warranty or insurance of design-related issues. If so, the builder’s obligation is limited to the construction and assembly of the yacht in accordance with the design and drawings to be supplied to him. In such circumstances, the correct inference to draw from the contract may be that the builder does not provide any warranty as to the adequacy of the design

However, this does not remove the burden from the builder to build a yacht in accordance with the designs and drawings provided by the buyer. If the design risk is not addressed in a super-yacht building contract, in the event of a dispute it would be for the court or arbitrator to seek to establish the parties’ intentions by construing them as a whole in the light of all the surrounding circumstances. Resolving a dispute in court or at an arbitration tribunal would put serious financial burden on the both parties. Competition in the super-yacht building industry is high. In order to Turkish yards to maintain their place and grow their businesses, they may have to work closely with internationally-known professional experts in the super-yacht industry including designers, lawyers and project managers.