The Ship Under Construction, Some Legal Issues

To date, China's rapid growth as a shipbuilding powerhouse is seeing all around the world. In the record year of 2004, her shipbuilding industry confirmed its third-place ranking in the world. In the 12 months up to the end of 2004, her yards increased their backlog of work from 17 million gt to 26 million gt, accounting 17% of the world whole volume. Meanwhile, the shipping giant, say, COSCO, has finalized contract for more boxships at Nangtong-based shipbuilder Nacks. The aforesaid booming of the shipbuilding makes it urgent to take a close look at the shipbuilding contract, which as well explains the Writer's choice of this challenge topic.Considering the problems arising domestically from classifying the shipbuilding contract into the work contract, the paper hereinafter, swimming with the current international trend, catalogues the shipbuilding contract into the sales contract and takes the principal form of contract in use, namely the form published in January 1974 by The Shipbuilders' Association of Japan (colloquially known as the "SAJ form") as the study target. In the research and discussion thereof, the Writer selects the title of the vessel under construction and the breaches and remedies in the performance of the aforesaid contract as the cut points. The general frameworks are as follows:Due to its subject's special nature the Writer starts his research with the necessity to affirm the ownership of the vessel under construction. As is universally acknowledged that the ownership is the origin of the mortgage which is vital to the shipbuilding industry, it is out of great necessity for the industry to confirm the foregoing ownership. As to the possibility comes after the necessity, the Writer considering the unique physical nature of the vessel firstly defines the vessel under construction. After the discretion of the vessel's building procedures and the legal statuses thereof, it is held that the separated and semi-separated materials, machineries and equipments to be equipped into a vessel could as well as shouldconstitute the ownership. The section followed casts the lights upon the advantages and disadvantages of terms on ownership under the different contracts in practice whose nature varies from one to another.The paper secondly touches upon the mortgage of the vessel under construction. As the capital-intensive product, the project without the finance from the bank cannot be successfully completed by neither the shipyard nor the buyer single-handedly. And in practice, it is very common to mortgage the vessel under construction for finance. In this section, the Writer mainly focuses upon the mortgage parties, register, subject, etc., and especial in the fulfillment of the mortgage, to maximize the effect of the mortgage, the alienation of guaranty is introduced.To properly serve as the reference to the parities of the shipbuilding contract, the Writer shifts the limelight upon the breach and remedies thereof under the most-used "SAJ form". Since the long history of study and great achievement made as to the shipbuilding contract under the Common Law, the Writher thereby applies the methodology of the Common Law to the paper, namely, supporting the points by the leading case. After the research and perusal of the voluminous Llord's Reports, and to be more easy for reference, the Writer combs the issues into the breach and remedies of ship yard on the one hand and of the buy on the other. For the yard's side, the breaches cluster at the defects guarantee and delivery delays yet the due payment of installment and the acceptance of the vessel duly delivered by the yard for the buyer's side.