Shipbuilding Contracts – how much “wiggle room” do buyers and their banks have?

By John Forrester, Partner, Holman Fenwick Willan

One of the key questions being asked by shipowners with newbuildings on order is to what extent they can legitimately walk away from those orders. For buyers who are unwise enough – or unfortunate enough – not to have their post-delivery financing in place, this will be motivated partly by the difficulty of raising that finance. But in most cases it will be driven by the fact that ship values have declined and that the buyer wants to avoid paying a contract price, which far exceeds the current market value.

Similar questions are being asked by banks who have agreed to provide construction finance to their customers. If pre-delivery instalments have already been financed by the buyer’s bank, can it somehow

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