A Study On The Risks Of Refund Guarantee In Ship Building

Refund guarantee in shipbuilding plays a vital role in balancing the risks of the two parties under shipbuilding contract and ensuring the smooth proceed of contract, thus is one of the essential documents in shipbuilding project. However, since refund guarantee is only one in many documents and shipowner and builder usually pay more attention to the price and specifications of ship rather than risks under refund guarantee, many disputes have risen and brought losses to relevant parties. Therefore, the analysis of risks of relevant parties under refund guarantee in shipbuilding is of practical and theoretical significance.This paper combines international conventions, common standard shipbuilding contract, the legislative and judicial practice of different countries and the latest trend of judicial explanation in China, to analyze and discuss the risks of builder, shipowner and guaranty bank in respect of the nature, validity, assignment and claimant of refund guarantee. This paper aims to provide some reference and advice of risk prevention for parties when applying refund guarantee.This paper consists of five parts:The first part is the summary of refund guarantee in shipbuilding. The paper summarizes the legal relationship and applying circumstances of refund guarantee, and makes brief introduction of the background, providing mode and risks of refund guarantee in shipbuilding.The second part is the risks caused by the difference in identifying the nature of refund guarantee. Based on the introduction of types of guarantees in Chinese and English law, this paper discusses the category of the nature of refund guarantee, and sums up the method of identifying independent guarantee. Dependent guarantee prejudices shipowner, while the strict payment system of independent guarantee brings risks to builder and guaranty bank. This paper analyzes risks and brings up advice of risk prevention, and then discusses the game playing of both parties in the nature of refund guarantee. The third part is the risks caused by the lack of validity of refund guarantee. This paper respectively studies the flaw of validity as a result of lack of right as principal or permitting procedure, together with the risks of shipowner; and the expiry of refund guarantee with the risks of shipowner and builder. On that basis, this paper gives advice to prevent the risks.The forth part is the risks caused by the assignment of refund guarantee. If the scope of assignment is different, the risk assumption of relevant parties under guarantee is different. This paper analyzes the risks of parties under assignment of refund guarantee and the risk preventing method.The fifth part is the risks caused by claimant under refund guarantee. This paper studies the obstruction to shipowner caused by the payment terms of refund guarantee, as well as the risks brought by shipowner’s fraud or mistaking claimant to builder and guaranty bank, and gives relevant advice to prevent the risks.