Norwegian Saleform 1993 ("NSF 93") currently remains the wording of choice for parties to most ship sale and purchase transactions. The recent landmark High Court decision in The "UNION POWER"  has challenged the perceptions of some practitioners regarding the application of the Sale of Goods Act 1979 ("SOGA") implied terms to NSF 93, and is therefore of great significance to the market.
The dispute arose following the sale of the 1994 built vessel "UNION POWER" for US$7 million in 2009. The vessel and her records had been inspected by the buyers in the usual way, on 18 August 2009, and the buyers' surveyor found nothing of significance. The parties entered into a Memorandum of Agreement ("MOA ") based on NSF 93, on 4 September 2009, which by clause 11 stated that the vessel was sold "as she was at the time of inspection". The vessel was delivered to the sellers on 1 October 2009, at Tuzla, Turkey. Following drydock repairs and special survey, the vessel sailed from Tuzla on a ballast voyage. Only some 30 hours after departure from Tuzla, the main engine broke down. Further investigation revealed that the no.1 crankpin bearing had failed, and that the crankpin was significantly undersize and oval.
The buyers argued that a term as to satisfactory quality was implied into the MOA by virtue of section 14(2) of SOGA, and that the sellers were in breach of that term. The sellers, on the other hand, maintained that the section 14(2) implied term was excluded because this was inconsistent with the stipulation in clause 11 that the vessel was sold "as she was at the time of inspection".
At arbitration, the tribunal rejected the sellers' argument, holding that the implied term as to satisfactory quality was to be implied into the MOA, that the sellers were in breach of that term and that the buyers' claim therefore succeeded.
The sellers appealed and, after hearing detailed argument on the point, the High Court upheld the approach of the tribunal. Flaux J concluded that the words "as she was", in the first sentence of clause 11, were merely a necessary part of a sentence which recorded the obligation to deliver the vessel in the same condition as she was when inspected but that this said nothing about what the sellers' obligations were, either on inspection or delivery, as regards the quality of the vessel, and as such they could not exclude the implied term as to satisfactory quality under section 14(2) of SOGA.
Although the Court's finding is of considerable significance to users of NSF 93, as the judge recognised, it is already common practice for additional language to be incorporated into MOAs based on NSF 93, with a view to excluding SOGA implied terms. Flaux J noted that, in order to be effective, such amendments must either expressly exclude the SOGA implied terms, or amount to an unequivocal statement of an alternative regime as to quality "which was wholly inconsistent with the section 14(2) implied terms as to satisfactory quality, such as an entire agreement clause."
The decision may also have a wider impact on any contract for the sale of goods on "as is, where is" or equivalent terms. This is because Flaux J considered the notion of "as is sales" generally, and expressed the provisional view that, in the absence of proven market practice, a mere stipulation that goods are sold on an "as is basis" may be insufficient to exclude SOGA implied terms. In particular, he indicated that such words may operate to exclude only a right to reject the goods but not the right to sue for damages if they are found to be of unsatisfactory quality.
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