Is the yard responsible for ship design?

The definition of ship design should be understood as the basic design documentation of a ship, which is divided into four stages – concept design, preliminary design, contract design and detail design. The first two mentioned design processes are also collectively referred to as basic design.

International forms for ship construction contracts (and based on these individual forms of contracts) usually contain similar provisions, providing that"The Builder Shall Design, Construct (...) sell and remove the vessel to the Buyer"(screams)"The Builder must design, build... sell and deliver the ship to the Buyer"). When adopting such a provision in the contract, prima facie, the yard assumes full responsibility, based on the principle of"Design and build".

However, what (and such situations do not occur rarely) in ship building contracts, there is no clear provision that defines which parties to the contract – the yard (Builder/Seller) whether the shipowner/investor (Buyer) is responsible for preparing the design of the vessel (design).

In the meantime, this is one of the key issues relating to the construction agreement of a ship with potentially far-reaching effects, not only in the strictly contractual sphere, but in the general legal responsibility. This was clearly recalled by the ruling in the case"Re Oil Spill/Amomo Cadiz"of 1984, where the Illinois Court accepted that the Spanish shipyard that designed and built the tanker"Amoco Cadiz", is liable, jointly with the ship owner, for oil damage (pollution of the marine environment). The Court of First Instance found that the yard's faults in the design of the ship make the yard liable for the damage as much as the shipowner, even though the design was approved by the classification company and the technical supervision of the shipowner.

Since the 19th century, English jurisprudence has tended to hold that, in principle, even acceptancedesignby the shipowner before the construction begins, it does not relieve the yard of liability, in a situation where it is precisely the defective design of the ship that makes it impossible for the ship to achieve contractually agreed technical or navigational parameters.

On"Thorn v Mayor and Commonwealth of London"of 1876, the court examined the following case. The Contracting Authority (with the intention of starting a construction investment) invited contractors to submit tenders, based on detailed design and construction plans prepared by the Contracting Authority (specified plans and drawings). The contractor carried out the construction closely with such plans, which proved to be flawed enough, that the constructed structure was affected by many defects, making it completely unfit for practical use.

In spite of this, the court concluded that such defective plans of the contracting authority were not, at the same time on its side, a commitment that the object ordered according to such plans would be executed in accordance with the contract, generally applicable regulations and rules of construction art. In any event, it is up to the contractor, in accordance with the principles of construction art, to verify (and if any change) the plans received from the contracting authority, in order to meet all the technical requirements and regulations required for the construction and construction of such plans.

In order to avoid any interpretational doubts in this respect, the majority of negotiated agreements shall clearly identify the party responsible fordesign.

If, expressis verbis, the agreement provides that the yard is responsible for the project (design), it bears the associated risks (risk design). Therefore, if built on the basis of such a project, the ship does not meet the contractual conditions provided for inshipbuilding contract, there are reasonable grounds to believe that the shipyard will be responsible for this.

Similarly, if, due to a defective project, it was necessary, in the course of the construction of the ship, to significantly modify its design and additional work, then the costs of such modifications and works and the resulting need to extend the construction deadline will only be borne by the yard.

However, if the contract provides that it is the shipowner (buyer) will be responsible for the delivery of the project according to which the yard is to undertake the construction of the ship, the situation regarding the risks associated withdesignand the issues of responsibility for this can change significantly. In particular, the yard may (and often so does) refuse to take responsibility if it is found that a ship built according to a design provided by the shipowner does not meet the technical or operational requirements which have been reserved in the ship building agreement (as defined in the contract generally as"Description").

With this kind of shiftrisk designon the shipowner, it is recommended, on the side of the yard, to add additional contractual provisions, type‘design risk rests upon the BUYER, the BUILDER’s liability is limited to the construction and assembly of the venture in conformity with the terms and conditions of Contract as well as with plans and drawings with which it has been supported’.

In view of such contractual reservations, the yard will continue to be responsible for the correct, in accordance with the principles of shipbuilding (workmanship), construction of the ship. However, if the ship so built shows certain technical defects or fails to meet the contractual operating and technical parameters, and if such defects or standard parameters remain directly related to the defective design of the vessel, prepared by the shipowner/investor (Buyer), on the basis of which the ship was built, in this respect the yard is exempted from legal and contract liability.

When you saythe design of the vessel is provided by the shipownerThere's obviously a shortcut. Such a project, usually on behalf of the shipowner, carries out a specific, specialized design office. However, from the point of view of the legal relationship of the shipyard-armator, this is of no legal importance. Only the shipowner is responsible for the project (where the design office is itssubcontractor).

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At most, where the shipowner would have suffered damage (within the framework of the transfer to it)risk design) could, at most, consider the possibility of making a claim against a project office (under the conditions and to the extent laid down in the contract for the execution of a project between the shipowner and the office). Typically, however, in such agreements, they are introduced by design offices, far-reaching exemptions or limitations of liability. This may in practice result in a large part of the damage suffered by the shipowner due to the defective project being uncompensated at all.

In the case where the ship construction contract does not contain a separate, explicit contractual provision which parties to the contract are responsible for the project (design) and on whose side the related contractual risks lie, it will be necessary (as we mentioned above) to apply the general principles of English law. The matter is extremely important from a practical point of view. Let us therefore examine this issue in more detail.

In the first place, therefore, it is necessary to establish, on the basis of the provisions of the entire agreement and the circumstances of the terms and conditions of the will made by the parties in connection with the conclusion and implementation ofshipbuilding contractwhich, in fact, has accepted the obligation to carry out and deliver the project. In the absence of a clear contractual and interpretative finding of the party responsible fordesign, it should be assumed that, in principle, English law is far more likely to assign to the yard the obligation to execute the correctdesign(and possible liability for this).

Following Judge Donaldson's ruling on the case"Actiebolaget Gotaverken v Westminister Corporation of Monovia and Another"[1971] 2 Lloyd’s Rep. 505 – it seems reasonable to assume that"the yard's primary obligation to build and sell a ship usually implies an obligation to ensure that the ship's design permits such a built unit, both safe operation and compliance with the requirements and criteria laid down in the ship's construction contract".

This position is accepted by most of the judicature and doctrine of English law. In other words, it is assumed, following Judge Donaldson, that the definitiondesignis in practice one of the elements of a more basic yard obligation –good workmanship(correct execution) the construction of a ship, which is an obligation, no doubt, one of the essential obligations in each ship construction contract.

Of course, as in any case, this is ultimately dependent on the contractual and factual circumstances of the case. For example, in the case of a shipyard which enters into another contract based on a standard, for that shipyard, the ship design type, built bystandard designdiscussed abovepresumptionthe liability of the yard for the project is far more well established than in the case of a completely innovative structure with activeinteractivecooperation between the shipowner and the shipyard, at the stage of concluding the contract and establishing technical and structural details of the ship.

This situation, for example, occurred in the case"Dixon Kerly Ltd. v Robinson"[1965] 2 Lloyd’s Rep. 404. The design of the yacht, with very specific construction features, was made by a separate design office and delivered to the yard for execution. The Court confirmed that, in such circumstances, the yard’s obligation does not go beyond the proper construction of the ship on the basis of the project provided (and the technical plans and projects related thereto). In particular, the yard cannot be held liable whether the boat, in fact, will be able to achieve certain operational and technical parameters on the basis of such supplieddesign.

In conclusion, it should be concluded that, in a situation where there is no explicit contractual provision in the ship building contract, specifying which of the parties to the contract (shipyardisshipowner/investor) is responsible for preparing the design of the vessel (design), English law, in principle, is willing to impose this obligation (and the resulting responsibility) on the shipyard. This basic rule, however, and let us make this clear, is subject to great limitations and possibilities of modification.

In view of the above, and given the potentially far-reaching effects of the defective design of the vessel (with the judgment cited in this study)"Amoco Cadiz"[1984]), it is recommended, or you will reach out to the contract forms that prejudge this issue explicitly (e.g.NEWBUILDCON form), or supplement the contract form which does not have such a record (e.g.AWES formisSAJ forms) a clear separate contractual provision specifying which party will be responsible for the implementation of the contractdesignwith all the resulting legal and contractual effects.

Written by Marek Czernis