Jiangsu Guoxin Corporation Ltd (formerly known as Sainty Marine Corporation Ltd) v Precious Shipping Public Co. Ltd [2020] EWHC 1030 (Comm)

The Prevention Principle in Shipbuilding Contracts

Case Summary

The Appellant Shipyard had agreed to construct and sell 14 vessels to the Respondent Buyer on an amended Shipbuilders’ Association of Japan (“SAJ”) form.

The first two vessels were delivered, but the Buyer rejected the next four which remained at the yard occupying berths, which prevented the Shipyard from delivery of vessels seven and eight.

The court held that the Shipyard was not entitled to an extension of time ("EOT") on the grounds claimed:

  • application of the prevention principle; and/or
  • for vessel modifications that had not been agreed.
The prevention principle was considered not to apply because the Buyer’s actions were a cause of delay beyond the Shipyard’s control and therefore fell within Article VIII.1 of the contract, for which the Shipyard was required to notify the Buyer pursuant to Article VIII.2.

Extract from the contract, Article VIII.1

Cause of Delay:

If, at any time before actual delivery, either the construction of the VESSEL, or any performance required hereunder as a prerequisite of delivery of the VESSEL, is delayed due to … other causes beyond the control of the SELLER …, then, in the event of delay due to the happening of any of the aforementioned contingencies, the SELLER shall not be liable for such delay and the time for delivery of the VESSEL under this Contract shall be extended…for a period of time which shall not exceed the total accumulated time of all such delays…

Extract from the contract, Article VIII.2

Notice of Delay:

Within seven (7) business days from the date of commencement of any delay on account of which the SELLER claims that it is entitled under this Contract to an extension of the time for delivery of the VESSEL, the SELLER shall advise the BUYER by telefax or e-mail confirmed in writing, of the date such delay commenced, and the reasons therefore.

Similarly, as the Shipyard had not notified the Buyer of the modifications, which it was required to do under Article VIII.2 of the contract, it was not entitled to an EOT under the contract.

The Judgment can be accessed here.

Lessons Learnt

Where the same contractual provisions exist in a shipbuilding contract, then In the event of a delay caused by the Buyer that is beyond the Shipyard’s control, the Shipyard should follow the relevant notification provision, notifying the Buyer in order to secure an EOT.

Similarly, where a Shipyard pursues a modification, the Buyer should be notified pursuant to the relevant notification clause in the contract.

Authored by Michael Dickin