On 21 April 2022, BIMCO released a new standard contract for sale and purchase of vessels, SHIPSALE 22. We have set out the most important changes below.
While SHIPSALE 22 is clearly based on the widely used SALEFORM 2012, the new standard contract features some important differences.
Firstly, SHIPSALE 22 features some layout changes. BIMCO has implemented its standard box format with key contractual information to be inserted in boxes on the first page of the contract. Furthermore, BIMCO has re-arranged the order of the clauses in the contract to follow the chronology of a typical sale and purchase transaction, which makes the contract easier to navigate.
Secondly, some addition has been made to the existing wording to improve clarity, and some new clauses have been added. The new clauses reflect developments in the industry since the adoption of SALEFORM 2012 and will likely be welcomed as beneficial improvements. Bech-Bruun notes the following highlights in SHIPSALE 22:
In several sale and purchase agreements, the performance of one or both parties must be guaranteed by another entity. In SHIPSALE 22 a guarantee statement from the relevant guarantor and a signature field for the same have been included.
In SHIPSALE 22, a mechanism governing subjects which have to be satisfied within a specific time in order for the agreement to become effective has been included. SALEFORM 2012 does not include such a mechanism, and the current market practice is therefore to regulate the subject in an allonge.
SHIPSALE 22 – like its predecessor – assumes that the buyers are to lodge a deposit as security for the performance of their obligations under the agreement. Yet, some revisions have been made to SHIPSALE 22 compared with SALEFORM 2012. Firstly, the size of the deposit and the identity of the deposit holder must both be explicitly agreed. Secondly, a grace period of two banking days has been granted to the buyers if the deposit is delayed by certain disruptive banking events.
In SALEFORM 2012, the parties have the choice between (a) an outright sale, with inspection of the vessel and its classification records having occurred before contract signing, and (b) a sale subject to pre-delivery inspection. In addition, SHIPSALE 22 introduces alternative (c): an outright sale with the buyer waiving its right of inspection entirely.
As for alternative (b), some adjustments have been made to the wording regarding the buyer’s right of inspection. Where the inspection of the vessel under SALEFORM 2012 was to occur “without opening up”, it is to occur “without testing of the Vessel’s engines, machinery, equipment or systems” under SHIPSALE 22.
Moreover, the buyer’s deadline for accepting or declining the vessel following inspection has been expanded from 72 hours to five days.
It should also be noted that SHIPSALE 22 – unlike SALEFORM 2012 – does not stipulate which alternative applies if the parties should fail to make a selection. Therefore, care should be taken to ensure that the relevant box is filled out.
Underwater inspection and drydock inspection
Similar to SALEFORM 2012, SHIPSALE 22 allows the buyer to choose between (a) a right to underwater inspection of the vessel before delivery and subsequent drydock inspection in case of certain findings on the vessel, or (b) a right to drydock inspection of the vessel before delivery. If the parties should fail to make a selection, SHIPSALE 22 provides that alternative (a) must apply.
If an underwater inspection is chosen, the requirement under SALEFORM 2012 that the buyers, no later than nine days prior to the vessel’s intended date of readiness for delivery, declare whether they intend to carry out such an inspection, has been removed. However, SHIPSALE 22 provides that if the buyers fail to commence the underwater inspection within two days of the vessel being made available for inspection, they will be deemed to have waived their right to underwater inspection.
If a drydock inspection is chosen, SALEFORM 2012 provides a right for the buyers to require the tailshaft to be drawn and surveyed, even if this is not required by the vessel's classification society, with the costs allocated to one of the parties depending on the findings of the survey. This right of the buyers has been removed in SHIPSALE 22.
In the event that drydocking cannot be carried out at the port of delivery, the maximum extension of the cancelling date due to additional time required for the drydocking at an alternative port has been increased from 14 days under SALEFORM 2012 to 21 days under SHIPSALE 22.
SHIPSALE 22, as well as SALEFORM 2012, includes a warranty by the sellers that the vessel is delivered without any encumbrances. Still, the wording of the provision has been clarified to explicitly cover i.e. any trading commitments, security interests or charges as well as any arrests, detentions or restraints.
SALEFORM 2012 provides that the purchase price and all other sums must be paid “in full free of bank charges”. SHIPSALE 22 also includes this provision, but explicitly states that the payment must be made without any form of deduction, set-off or withhold.
Furthermore, SHIPSALE 22 features a gross-up clause, according to which the paying party under the agreement shall gross up the relevant payment so as to ensure that the other party receives and retains the full amount in cases where the relevant legislation requires the paying party to make any deduction from or withholding of the payment.
The period within which the parties must exchange copies, drafts or samples of the delivery documents has been reduced to five days after the earliest delivery notice under SHIPSALE 22 – whereas SALEFORM 2012 stipulates nine days before the intended date of readiness for delivery. According to the standard form, the earliest delivery notice is to be sent 20 days before the intended date of readiness.
SHIPSALE 22 outlines the closing procedure in slightly more detail than SALEFORM 2012. It is provided that the parties’ representatives “shall meet for documentary closing” after notice of readiness has been given by the sellers, and that this meeting may occur either remotely by electronic means or physically, at the choice of the parties.
In addition, a number of new clauses have been included in SHIPSALE 22. Firstly, a warranty by both parties to comply with the relevant legislation regarding sanctions and anti-corruption, a breach of which entitles the other party to terminate the contract and claim damages resulting from the breach. Secondly, a confidentiality clause which explicitly states that the party not in breach may not terminate the contract. And thirdly, an electronic signature clause which allows for the agreement and any other documents in connection herewith to be signed electronically and with the use of an electronic signature.
Comments by Bech-Bruun
In overall terms, some material changes to the standard contract haves been made besides the layout changes and wording clarifications. Nevertheless, SHIPSALE 22 remains quite similar to its predecessor and the changes made are likely to be received as beneficial improvements.