A ship buyer succeeded in its claim to rescind two shipbuilding contracts following the shipbuilder's failure to comply with the agreed sea trial dates. Adyard Abu Dhabi v SD Marine Services (2011)

A shipbuilder was unable to establish successfully before the Commercial Court that there had been a variation of two shipbuilding contracts entitling it to claim breach of contract against the buyer SDMS, a commercial supplier which had commissioned a number of vessels for the UK Government.

Under the shipbuilding contract, the vessels were to be built in compliance with the requirements of the UK Maritime Coastguard Agency (MCA) and the relevant safety codes for special purpose ships (SPS). The shipbuilder argued that new design items imposed by the MCA or SDMS had prevented it from completing the vessels on time for the sea trials. Following the shipyard's failure to comply with the sea trial dates, SDMS purported to exercise its contractual right to rescind the agreements which led to the shipbuilder's claim for breach of contract.

The Court held that there had been no changes in the requirements as compliance with the SPS Safety Code was always expected, and further found that the construction project was already critically delayed long before the dates set for the sea trial. The contracts contained a mechanism entitling the shipbuilder to seek an extension of time by means of notice which it had not exercised. In any event, the Court found that the delay had not resulted from any of the contractual default events which would have given rise to the right to seek an extension.

The Court ruled in favour of the buyers and concluded that SDMS were entitled to rescind the contracts. SDMS also succeeded on their counterclaim for the return of the instalments previously paid under the agreements.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.