unexpected major repairs are required can be extremely damaging to a shipowner. Yet this clause can preclude recovery of such losses from the Yard -- even when the problem was clearly caused by the Yard and it occurred within the guarantee period. Now for the really bad news for buyers. The above exclusions and limitations generally are enforceable absent evidence of overreaching or unconscionability, which would be very difficult, if not impossible, to demonstrate in a commercial shipbuilding context. Now for the good news. Judicial decisions and the laws of most states have provided some limited relief from the exclusions and limitations. The following are some examples: � Clauses drafted by the Yard that exclude or limit a buyer's rights will be construed strictly against the Yard. Thus, if a clause is fairly subject to two interpretations-one that favors the Yard and one that favors the buyer -- courts will interpret the clause favorable to the buyer. � The guarantee period may be extended where the Yard was notified of the problem within the guarantee period and the Yard either did not fix it or the repair was inadequate. This at least addresses the issue of chronic or recurring problems and obligates the Yard to continue efforts to remedy such problems even after the guarantee period has expired. Courts also may extend the guarantee period by the amount of days the vessel spends in the Yard during that period. � Damages considered as "incidental" (i.e. out-of-pocket expenses reasonably incurred as a result of the problem) will not be excluded by clauses excluding "consequential" damages unless the contract contains specific language excluding such types of damages. � The "repair or replacement" limitation will not be enforced where a court finds that remedy has failed in its essential purpose. Thus, if the Yard is unable to satisfactorily remedy the problem, the buyer may have the right to avoid the contractual limitation and obtain monetary compensation. The law thus can provide some assistance in avoiding or mitigating the effects of limitations and exclusions in shipyard contracts, particularly with respect to chronic problems. But the old saying "an ounce in prevention is worth a pound of cure" is particularly relevant here. Focusing on modifying the exclusions and limitations when negotiating the contract is a more certain way of obtaining what may be some much needed relief later on.
July 2008
SHI Wins Intergraph Award
At the Intergraph 2008 annual user's conference, held in early June in Las Vegas, Intergraph presented to Phil Jung Nam of Samsung Heavy Industries a Golden Valve Awards for first place in the "Visually Complex" category. His image, provided here, shows the stern portion of the hull design of Samsung's newest arctic icebreaking oil tanker. This tanker is one of three that was commissioned by Sovcomflot, a Russian state-owned shipping company, and is the first ice-breaking tanker in the world. This 70,000 ton tanker can move at 15.7 knots. The additional image shows a rendering of the completed tanker full-scale, and won an honorable mention in the Golden Valve competition as well. www.intergraph.com
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