During the refit, complications may arise that neither the owner nor the shipyard had foreseen. This raises the question of how to deal with the unexpected situation that has arisen. After the work has been carried out, the owner and shipyard may disagree as to whether the job was carried out in accordance with the contract. Both problems must be dealt with in the best possible way.
Unexpected complication during the refit
"There is always a surprise where you didn't expect it." (Wilhelm Busch) A refit is a project with a typically far-reaching scope of work. This inherently harbours the risk of unforeseen problems. In addition, the shipyard commissioned with the refit is often not the shipyard that originally built the yacht. Although the company does not know the ship in detail, it must correctly assess the project in terms of the scope of work and the associated time required.
Otherwise it cannot make a proper offer. Estimating the effort involved is not trivial. This is because areas of the yacht that are not readily accessible can surprise with unexpected conditions. It should also be borne in mind that many clients are owners who have only recently acquired their yacht. This is because buyers of a second-hand boat in particular want to customise it according to their wishes. However, these owners typically do not know their new investment well; at least not well enough to make the refit shipyard aware of any risks that are likely to occur during the refit. As a result, neither the shipyard nor the owner knows exactly what to expect at the start of an extensive refit.
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What to do and when?
The most important aspect is to recognise this uncertainty and implement it contractually. As a first step, this requires an open dialogue between the owner and the shipyard. The following questions should be discussed:
- What happens if the shipyard discovers something unexpected during the refit that needs to be repaired (because it is relevant to safety or to the planned conversion)?
- What if the shipyard discovers something that does not have to be done, but is sensibly dealt with, for example to prevent future damage?
- Within what period of time must the shipyard notify the owner and within what period of time must it describe and quantify the additional costs?
- Within what timeframe must the owner decide on the measure?
- What happens if the shipyard is unable to continue working while the relevant aspects are being clarified?
- Can the shipyard charge for waiting times?
- What wages can the shipyard charge for the additional work?
- Are there any additional costs, in particular due to the longer processing time?
- Can the owner outsource the work to a third party if he cannot find a satisfactory solution with the shipyard or if the costs of commissioning a third party are more favourable?
- What conditions should the shipyard agree to?
In a second step, what has been discussed should then be written down in a contract. Particular attention should be paid to the decision-making mechanism and its timing. It is also important to specify the costs for any unexpected work that may arise. Due to the nature of the matter, this is not possible in detail. However, it is possible, for example, to set hourly rates for specific, standardised work even if it is not yet clear exactly what needs to be done. The more precisely the decision-making mechanisms and likely costs are contractually regulated, the more likely it is that unexpected problems can be resolved quickly and without major negotiations. This not only helps in the respective situation, but also avoids unnecessary, time-consuming friction in the overall project.
Disagreement after carrying out the refit
Disagreements about whether the shipyard has carried out the work in accordance with the contract should be avoided at all costs. They are not only unsatisfactory for the owner. The shipyard also has no interest in dissatisfied customers. Accordingly, every party to the contract has an interest in avoiding disputes about whether the refit contract has been carried out in accordance with the contract. But how?
This is most likely to succeed if the parties agree the work to be carried out in as much detail as possible and record it in a binding specification attached to the contract. The overhaul work should then be monitored as closely as possible. On the one hand, this ensures that your own ideas are actually realised 1:1 as agreed. Secondly, discrepancies can be analysed and rectified more quickly during the refit phase than after the work has been completed.
A refit carried out according to the textbook should therefore not lead to disputes after the work has been completed. If these cannot be avoided, the question arises as to what action can be taken. These depend on the exact cause of the discrepancy. Typically, the owner alleges that the shipyard has not carried out one or more works as agreed. Whether this is actually the case depends on what the parties have agreed. The judgement can be easy. For example, if it was agreed to install a certain marble in the bathroom of the owner's cabin, but this was not done. The assessment is more difficult if the marble was installed but the owner claims that it was installed improperly. If the shipyard does not share this view, evidence would have to be obtained by obtaining an expert opinion in a court of law on the question of proper installation. The situation becomes more difficult if there are no technical faults involved, but aesthetic aspects are at the centre of the complaint. If the grain of the marble does not meet the owner's expectations, it is only a defect if the marble was specified in advance, for example by selecting a particular batch, and the shipyard has demonstrably installed a different batch.
In principle, a defect within the meaning of the law on contracts for work and services only exists if there is a deviation between the actual and target quality. The burden of proof lies with the claimant, i.e. the owner. In practice, the question of whether a defect exists often cannot be answered unequivocally. In the vast majority of cases, this is because the contractual specification is not detailed enough and/or certain materials are not selected in detail. If the target quality cannot be determined because the specification contains no information on the grain of the marble, the claimant will have difficulty proving a deviation between the "actual" and "target".
To summarise, the most effective protection against disputes is a precise contractual agreement including detailed specifications and close monitoring and control of the project on site.
Experts for all questions of yacht law
The yacht lawyers Dr Tim Schommer (tim.schommer@clydeco.com) and Dr Volker Lücke (volker.luecke@clydeco.com) have been advising yacht clients from Germany and abroad for over 18 years. They advise on the planning and construction phase, the purchase and sale, the owner structure, yacht operation including insurance, crewing and charter as well as the handling of damage and third-party claims.
