The following Explanatory Notes are designed to provide some background information on the clauses of the various parts of the contract.
Part I of REPAIRCON is set out in the traditional BIMCO box-layout style. The boxes are used to enter details that are intended to cover the main commercial terms that the parties would need to agree at the time the contract is concluded. It should be noted that for convenience the boxes, where appropriate, contain cross-references to the relevant clauses found in Part II.
As is common practice, the date and place (normally the name of the city) of the formation of the contract is entered in this box.
The shipowners’ name and full postal address should be entered in this box along with contact details such as phone, fax and e-mail, if applicable. If a third party ship manager on behalf of the owners concludes the contract, then the name of the vessel’s owners “c/o” (i.e. “care of”) the manager’s details should be entered in Box 2. The owners’ signature box at the bottom of Part I should indicate clearly, if signed by the ship managers, that the managers are signing as agents for and on behalf of the owners.
It is important to note that Box 2 requires the owners to declare whether they are or are not the bareboat charterers of the vessel. This distinction is made to ensure that the contractors are aware of any potential credit risks that may arise as a result of contracting repairs with a party other than the registered owners of the vessel.
It should be noted that although BIMCO is aware of the potential difficulties that contractors might have with bareboat chartered vessels (as mentioned above), it was felt that it would be inappropriate to try to cover terms of security in a general-purpose repair contract. REPAIRCON is designed for international use and therefore the payment terms applied by users will differ from jurisdiction to jurisdiction. BIMCO believes that the most practical solution is for contractors to ask for terms of security on a case-by-case basis when concluding a contract.
The contractors’ name and full postal address should be entered in this box along with contact details such as phone, fax and e-mail, if applicable.
The full name of the vessel plus any descriptive prefixes, such as “m.v.” or “t.s.s.” should be entered here.
The contractors, whose business address and contact details are stated in Box 3, may have more than one repair yard. For this reason it is important that the address details of the actual repair yard in which the repairs will take place is stated in this box.
The period to be entered here is the agreed amount of time for the repairs. The period will run from the first working day after the delivery of the vessel to the yard. The stated period will vary depending on any additional work or reductions in work agreed or due to delays stated in Clause 8 (Disruption).
The vessel description required in Box 7 is a summary of the key characteristics of the vessel such as flag/year built; port of registry and deadweight.
The anticipated date of delivery of the vessel to the contractors’ yard should be entered in this box. This date may change for a variety of reasons after the contract is concluded and it is the owners’ responsibility to keep the contractors fully advised of any change to the expected delivery date (see Clause 4(a)(ii)).
The Cancellation Date is the agreed latest date on which the vessel can be delivered to the contractors’ yard. If the vessel is delivered after 1500 hours on the stated Cancellation Date, the contractors will have the right to cancel the contract and recover certain costs and expenses incurred (see Clause 4(b)(i)).
The Contract Price stated in Box 10 is the amount agreed by the parties for the work to be carried out under the contract. The actual amount will vary from the Contract Price depending on any subsequently agreed additions or reductions to the specified repair work. The currency in which the owners will pay the Contract Price should also be stated in this Box. If any reductions are agreed then the owners will be credited with any cost savings in the currency stated. As per Clause 5(b)(i) the Contract Price is to be paid free of all taxes, bank charges, and exchange control regulations.
The intention is that the Contract Price stated in Box 10 for the work to be carried out will be calculated on the basis that the work will take place during normal working hours (Clause 2(a)(ii)). Box 11 should contain details of what periods lie outside “normal working hours” and what rates will then apply.
The names of the owners’ appointed representatives should be stated in Box 12. If the owners wish to appoint a new representative during the performance of the contract they should inform the contractors in writing in accordance with Clause 3(a)(i). If Box 12 is left blank, then the vessel’s Master will be assumed to fulfil the role on behalf of the owners (Clause 3(a)(iii)).
The period of the guarantee is subject to the agreement of the parties and the total number of months should be entered in Box 13. The Guarantee Period runs from the date of completion of the repair works.
Box 14 is the largest of the boxes contained in Part I of REPAIRCON, reflecting the fact that payment terms are usually individually negotiated and will reflect the duration and complexity of the contract. In practice, the payment terms vary between short and simple contracts where payment is usually made at redelivery, to more complex and lengthy contracts where payments are usually made by instalments during the contract period, as well as (by way of credit) after redelivery. If credit terms are being offered, especially if the “Owners” are bareboat charterers, it may be appropriate for the Payment Terms to include a requirement for security to be provided by owners.
It is common practice for contractors to cap their liability to a maximum figure. Consistent with the balanced approach of REPAIRCON, not only is the contractors’ total liability figure to be agreed at the time of negotiation, but the owners will be entitled to set a contractual limit on their own liability.
This Box is split into two sections to allow a total liability figure for each party to be entered separately. It should be noted that the limit of the contractors’ liability arising out of or in connection with the contract excludes any liability under the guarantee provisions of Clause 7.
It is also common practice for owners to expect a ship repairer to pay liquidated damages for every day of delay beyond the contractual repair period (as may be extended by various events such as force majeure). It is also usual for the liquidated damages to be capped, either to a stated figure or to a percentage of the original contract price. Consequently, two figures should be entered in Box 16: The first figure is the agreed daily rate in the event the contractors delay redelivery of the vessel beyond the end of the Contract Period. The second figure is the maximum amount the contractors should pay due to delays in redeliver-ing the vessel. It should be noted that the maximum amount stated in Box 16 should not exceed the contractors’ total liability figure stated in Box 15(a).
If the parties agree to payment terms that require instalments to be paid and the owners fail to make payments on the due dates, then the contractors will be entitled to charge interest on the outstanding sum at the interest rate per annum stated in Box 17.
Completion of Box 18 determines the applicable law and jurisdiction governing the contract consistent with the provisions of Clause 12 (BIMCO Dispute Resolution Clause). It is important that this Box is filled in correctly, especially if the parties intend that the law and jurisdiction governing the contract is to be other than English law and London arbitration (which is the default should the parties fail to make an election or make an inappropriate election). It should also be noted that the mediation provisions of Clause 12 will apply in all cases.
The completion of Box 19 is optional as it is recognised that in many circumstances the amount of work to be carried out on the vessel may change significantly after the vessel arrives at the yard - thus making the definition of a termination date impractical.
However, there will be circumstances where the owners may have an absolute commitment for the employment of the vessel and will need to have the contractors’ agreement to a Redelivery Termination Date. It should be noted that as a safeguard for the contractors, even if the parties agree to a redelivery termination date, this date might automatically be extended or shortened by virtue of Clause 2(a)(iii) to reflect alteration to the Contract Period occasioned by additional works or reductions and permitted disruptions under Clause 8(a)(ii).
This Box should be used to insert the numbers of any additional clauses added to the contract by the parties. By listing the numbers of additional clauses in Part I the parties are agreeing that in the event of a conflict of conditions, the provisions of the additional clauses shall prevail over those of Part II.
Part II of REPAIRCON consists of a set of commercial terms that provide a contractual framework against which the main terms are agreed. It is open to the parties to amend the Part II terms, by deleting parts thereof and/or by adding their own terms by way of additional clauses (see Part I, Box 20). Nevertheless, changes to the liability provisions could disturb the carefully balanced allocation of risk and responsibility between the respective parties. Where appropriate, each clause contains a cross-reference to the relevant boxes in Part I of the form as well as general cross-references to other clauses contained in Part II.
In common practice with many modern shipping contracts, REPAIRCON has been drafted with a definitions clause. It should be noted that where a term has been defined in Part I of the contract, this definition is used throughout Part II and, for this reason, is not repeated in Clause 1 of Part II.
This Clause requires the contractors to perform the agreed repair works “to the reasonable satisfaction of the Owners”. Any variations to the original specification must be recorded in writing, together with agreed adjustments to the price and, if necessary, the length of time to be taken. Any reductions in work that are agreed are to be credited to the owners. It should be noted, however, that any variation to the original specification by reduction is subject to the agreement of the parties - this has been done to ensure that an owner does not substantially reduce the value of the contract and gain from an agreed tariff that was based on the scale of the original specification (see Clause 2(a)(iv)).
In Clause 2(b) - Contractors’ right to sub-contract - the contractors are given the qualified right to employ sub-contractors to perform any of the agreed repair works. The contractors cannot, however, sub-contract their liabilities and responsibilities under the contract and they remain responsible at all times for the actions of the sub-contractors and are liable for the due performance of the agreement.
The contractors and owners are each responsible for obtaining any approvals or certificates required by their respective regulatory bodies - with each to assist the other as necessary (Clause 2(c) - Approvals and Certificates). The term “regulatory bodies” is intended to denote the local authorities, governmental and supervisory bodies regulating the operations of each party. For the avoidance of doubt, the vessel’s classification society will be one of owners’ regulatory bodies.
In Clause 3(a) the owners are required to have a representative on hand throughout the repairs who is authorised to take all decisions on behalf of the owners - including, most importantly, the authority to agree and sign Work Variation Forms and invoices. In the absence of a nominated representative, the Master will fulfil this function (Clause 3(a)(iii)).
The contractors are obliged by Clause 3(a)(iv), at their own expense, to provide the owners’ representative with suitable office accommodation and facilities. The facilities should include communication equipment such as phone and fax, but all communication expenses are to be for the owners’ account.
The contractors are also required to provide the owners’ representative with reasonable access to the contractors’ workshops where work on parts of the vessel is being carried out. It should be noted that access to workshops is not necessarily limited to normal working hours as it may be the case that the yard is working round the clock.
Provided it does not conflict with the work of the contractors (and complies with the yard’s safety systems), the owners may undertake their own work on the vessel in accordance with Clause 3(b) - Owners’ work. For reasons of safety, however, the prior written agreement of the contractors is required before any such work by the owners or their sub-contractors is undertaken. It remains the responsibility of the owners to ensure that their work on the vessel does not interfere with or delay the contractors’ work on the vessel.
The owners are required to deliver the vessel in the agreed condition and at the agreed place and time, failing which the contractors may cancel the contract. The contractors must exercise their option to cancel the contract within two hours of the cancelling time on the cancelling date, failing which their right to cancel will be lost.
Conversely, the owners will be able to cancel the contract if the repair work is not started promptly. Clause 4(b)(ii) requires the contractors to commence work within 48 hours of the time and date of delivery, failing which the owners have a further 24 hours in which to cancel the contract and demand immediate redelivery of the vessel without compensation to the contractors.
Owners should take note of the requirement in Clause 4(a)(i) that states that the vessel is, among other things, to be free of “any substances in the structure of the Vessel in way of the Works which are dangerous or harmful to health”. The owners are also obliged to keep the contractors fully advised of any changes to the vessel’s delivery date stated in Box 8.
Any defects or faults in the performance of the Works are to be listed and corrected by the contractors before redelivery, unless agreed otherwise. Nevertheless, the work and parts will be covered during the agreed guarantee period.
Inspections, test and/or trials specific to the work carried out by the contractors are to be carried out in the presence of the owners’ representative. The provisions of Clause 4(c)(ii) are open as to who should carry out such inspections, tests and/or trials.
Consistent with the principle that the parties will determine their own payment arrangements in Box 14, Clause 5 sets out a framework for such terms as are agreed and provides a default mechanism where terms have not been agreed. Consequently, Clause 5(a) provides alternative methods to establish the price where a Contract Price has not been stated in Box 10. Alternative pricing methods include reference to the contractors’ published tariff or by reference to prevailing rates in other yards in the locality. The latter provision is to be used as a fallback position only if the rates have not been agreed with the owners.
Clause 5(c) deals with title to the vessel, which remains with the owners at all times during the contract period. Clause 5(c)(iii) confers on the contractors an entitlement to exercise a lien on the vessel for sums due on or before redelivery. The contractors may not, however, allow a lien to be created on the vessel due to their work or that of their sub-contractors.
The liabilities of REPAIRCON are intended to be balanced as much as possible and, with the exception of liquidated damages, to exclude what are colloquially known as “consequential losses” suffered by the parties (see Clause 6(b)(i)(5)). The general principle is that a party to the contract will only be liable to the other contractual party when proven loss or damage has been caused by their negligence, gross negligence or wilful default. The principle applies equally to loss or damage caused by the negligence, gross negligence and wilful default of those for whom the owners and contractors are responsible, such as sub-contractors and agents.
Clause 6(a) - Liquidated Damages - deals with the liability of the contractors to pay liquidated damages in the event that the vessel is delayed beyond the end of the contract period. Liquidated damages are to be paid to the owners at the agreed daily rates as stated in Box 16 up to an agreed maximum amount (which is not to exceed the contractors’ total liability amount).
Clause 6(b)(i) should be studied carefully. It deals with liabilities that may arise under the contract for loss or damage such as contractor’s liability for repair work which is not in accordance with the provisions of the contract. It should be noted that Clause 6(b)(i)(4) makes it clear that any tests, trials or movements of the vessel are done at the sole risk and responsibility of the owners. The contractors would be liable for loss or damage only where they had intervened in or influenced the tests, trials or movements.
Liability for death or personal injury in Clause 6(b)(ii) is essentially a knock-for-knock agreement with each party accepting responsibility and liability for death or personal injury to their own personnel. The provision also requires each party to indemnify the other party against the consequences of claims for death or personal injury pursued by personnel or dependents against the party that is not responsible for them. The rationale behind the knock-for-knock provision is the avoidance of the need for double insurance.
In a similar fashion, Clause 6(b)(iii) - Third Parties - provides a mutual indemnification agreement against all claims made by third parties (i.e. parties for whom neither the owners nor contractors are contractually responsible).
For the purposes of insurability, the liability of both parties is contractually limited by Clause 6(b)(iv) - Contractual Limitation. The agreed limits of liability for owners and contractors are those stated in Box 15 of Part I. It should be noted, however, that the contractual limits of liability do not affect the right of either party to limit their liability statutorily (see Clause 6(c) - Limitation)
Clause 6(b)(v) is intended to take effect as a “Himalaya clause” by extending the protection of the limitation provisions of Clause 6(b) - Liabilities - to the employees, servants, agents and sub-contractors of the owners and the contractors.
This Clause contains the sole exception to the Total Liability limits imposed by Clause 6 (Liquidated Damages, Liabilities and Indemnities). The contractors remain liable for a set period stated in Box 13 for any defects in their work, or parts supplied, provided written notification is given within a mutually agreed timescale. The contractors are liable to undertake the necessary remedial work and repair or replace any other parts damaged as a direct consequence. If it is not practicable to return the Vessel to the original yard then, in consultation with the contractors, the work can be carried out at the contractors’ expense elsewhere.
It should be noted that the guarantee provisions of Clause 7 also extend to any repairs or renewals undertaken by the contractors in accordance with the guarantee. This means that if a guarantee period of six months has been agreed and a defect is found and rectified two months after redelivery, then the specific repair or renewal will enjoy a further six months guarantee from the date of completion of the repair.
In essence this Clause covers force majeure events (Clause 8(a)(i)) and excuses the contractors for delay due to a number of defined failures on the owners’ part (Clause 8(a)(ii). The contractors, however, must make all reasonable efforts to avoid or minimise the effects of the stated events on the performance of the repair works. In order for the contractors to avail themselves of the exceptions in Clause 8(a) they must comply with the provision of Clause 8(b). This Clause requires the contractors to notify the owners in writing within 2 working days of any delaying event occurring. If the contractors fail to properly notify the owners then they will not be entitled to claim any extension to the contract period. The contractors are also obliged to inform the owners when the delaying event has come to an end.
This sets out the owners’ and the contractors’ rights to terminate the contract in the event of either party’s insolvency; the contractors’ failure to perform the contracted repair work or redeliver the vessel by the agreed Termination Date; or the owners’ failure to pay sums due.
In the event of a default by the contractors entitling the owners to terminate the contract, the owners are obliged to pay any sums due for repair work carried out up to the date of the termination. The owners may, however, set-off this payment against any liquidated damages due under Clause 6(a) and against any non-excluded losses or claims they may suffer as a result of the termination. Once the owners have paid any sums due to the contractors they have the right to remove the vessel from the contractors’ yard without hindrance or interference.
Where the default lies with the owners, the contractors are entitled upon termination of the contract to recover any unpaid part of the contract price for repair work performed up to the point of termination. The contractors may also recover any losses they suffer as a result of the termination and are entitled to claim expenses for accommodating the vessel while the recovery of unpaid amounts is effected, but always within the overall limit set by Owners’ Total Liability.
Clause 9 also applies where the cost of repairing any damage to the vessel caused by the contractors (Clause 9(a)(iv)) or damage to the contractors’ property caused by the owners (Clause 9(b)(iii)), exceeds the responsible party’s Total Liability obligation.
This Clause requires each party to effect, maintain and pay the costs of its own insurance and third party cover up to the extent of all potential liabilities arising under the contract. The contractors are required to effect and maintain what is generally known as “ship repairers liability insurance”, while the owners must effect and maintain P&I insurance, hull and machinery insurance and war risks insurance. Both the owners and the contractors must at the request of the other party make available copies of insurance policies to evidence the required insurance cover.
This includes Assignment; Severance; No Waiver; Entire Agreement; Intellectual Property; and Scrap Materials provisions.
Clause 11(f) - Scrap Materials - allocates ownership of scrap materials removed from the vessel as a result of the repair works. With the exception of propellers, tailshafts and heavy machinery parts, all scrap materials become the property of the contractors once ashore.
This Clause is the latest edition of BIMCO’s standard suite of dispute resolution provisions. The provision incorporates a mediation clause that is designed to function in conjunction with the chosen arbitration option, whether that is English law, London arbitration, US law, New York arbitration, or law and arbitration as agreed. Mediation is a technique that is recognised as offering significant savings in costs and time over traditional methods of dispute resolution. BIMCO’s mediation clause is only triggered once arbitration proceedings have commenced and then runs in parallel with those proceedings, if the parties so choose. This has been done to ensure that one party cannot invoke mediation as a delaying technique.
It should be noted that if the parties do not elect a choice of governing law and jurisdiction by entering the required information in Box 18 then, by default, English law and London arbitration will be applied to disputes arising out of or in connection with the contract.
In an attempt to consolidate and rationalise the many references to notices often found in standard contracts, BIMCO has developed a standard Notices Clause. Clause 13(a) provides that all notices given by either party in compliance with the terms of the contract should be in writing.
Clause 13(b) defines what “in writing” means and provides a non-exclusive list of acceptable effective means of sending notices, such as telex, fax, e-mail and registered or recorded mail.
The REPAIRCON contract has three annexes:
This is a flexible concept reflecting the different ways in which the technical specifications for repair contracts evolve. In a scheduled dry-docking, the specification will usually be developed by the owners’ technical department over a number of months ahead of the scheduled classification society dry-docking. In contrast, for an emergency repair, the specification may be developed after the vessel has reached the yard. It is intended that the parties will use a one page “Annex A” either to provide a front sheet to whatever detailed technical specification has been developed, or to provide a list of references to existing documents which together comprise the specification.
REPAIRCON includes a “Work Variation Form” to ensure that its terminology matches the rest of the contract, and that the form provides boxes for the parties to agree all of the issues that, pursuant to the contract, need to be agreed in respect of any Additional Works to or Reductions from the original specification. It is essential that all changes to the specifications works set out in Annex A, are agreed and recorded (see Clause 2).
Owners, as part of the tendering process, commonly ask contractors to quote steel and labour prices for any additional works that might become necessary during the course of the repair period. For this reason BIMCO considered it useful to create a standard form of “Tariff Price List” to assist owners in comparing the prices for competing yards, as well as to reduce the scope for disputes over the cost of such Additional Works as may be commissioned during a contract.