We're planning a major refit in the next few months and I have been warned that yards tend to present contracts that basically leave the yacht owner unprotected. Does anybody have experience with getting contracts re-written in a way that balances the interests of each party? If not, does anybody have other advice on pitfalls, things to beware of, etc.? Any feedback is greatly appreciated. Thorwald Westmaas
Hi, R= Rarely E= Everything F= Finished I= In T=Time Having been through a few refits myself it is from my own experience that I say a Refit is by far one of the most difficult things to price and remain accurate on, it is especially true when the boat in question is a bit older and things that have not been able to be fully revealed reveal themselves at the worst possible time.
Beste Thorwald, In my experienced contracts are not a one way street. Both the buying and selling parties are entitled to negotiate their own terms in order to get an outline agreement for the project. Contracts that leave the buyer unprotected are common knowledge in every industry. Depending on your legal skills and common sense I would first start an open discussion about the terms and conditions with the contractor. When you discuss your concerns about their conditions, they will probably explain them in detail. They will probably have worked out contract conditions with their customers in the past. In case they reject the possibility for you to negotiate their terms I would be on guard. In case you think that you are legaly not capable of negotiating the terms, you should probably seek help at a legal counciler that has experience with (shipbuilding)construction contracts. It is also advisable to clearify pricing conditions and payment details upfront. Claerify at which stage of the refit you have to pay the installments and under what conditions. Try to define your own agreeable terms without using theirs as input and then find an agreeable way for both parties. Most contracts I've seen equally spread the risk between both parties. In my experience it also strengthens both parties commitment to the project when the risk is spread. Maybe someone else has a simpler solution. Good luck with the project
A simple solution if you will remain on site, is to negotiate the hourly fees for the workforce, try to obtain a net cost on all purchases and audit the whole operation yourself. This is even used in Dutch yachtbuilding sometimes. No risks involved, except the surprises you may stumble on with the yacht...
Refits appear to be a lot harder than a new build. Personally it's nothing I would like to get involved in. About the pricing. are "Time & material" contracts also done for refits?
Hi, T and M is not unheard of in refit or new build. I was just offered a cost plus deal for a new 74m Boat on Monday this week. The potential Owners main objection is the delivery date, not the unusual arrangement. There is a substantial yacht undergoing a T & M refit now to gauge just how much will need to be done and as a pre cursor to the main thing in 2009
That's what I meant. "Time&material" contracts are pretty common in custom yacht building. It is a very honest way to build when both parties have an open agenda. On the other hand I've seen a T&M contract build that almost ruined the yard. Yacht 1 was a big custom design on T&M contract. Halfway through the build the owner and his captain came up with all kinds of changes that in the end resulted in an extra 6 months of construction time. The owner didn't bother because he payed for the changes and was not obligated to take delivery at a certain point. Yacht 2 and 3 were conciderably smaller and build in another part of the yard. Progress on both yacht 2 and 3 started to delay because the workers all of a sudden had 3 projects at hand including a big one. The real horror came with yacht 4 which was the biggest contract ever that had a fixed delivery date and a planned construction time of 24 months. Yacht 4 needed to be build in the dry-dock building where yacht 1 was still in build. So in a period of approx. 6 month you have the delivery of yacht 1 and 2 and have to start working on your flagship 6 months behind schedule. What did we learn from this. Even a full order book is no guarantee for succes. T&M contracts are honest and transparent but can be a pain in the finger when you run into serious delays. On the other hand you want the owner of yacht 1 to get exactly what he wants because that's the nature of custom yachtbuilding. This to present the pro's en con's of T&M contracts. I guess in Thorwald's situation, it would be a good option even more so when you ad K1W1's input to the mix.
Time and Materials contracts can be a good way to to do business. Couple of things that should be looked at though. Don't be vague about anything even if you think that it might be to your advantage. Spec the materials as closely as possible. Provide for an audit avenue that both parties agree to at the onset and then use it as things go along. Agree to a time period with enough latitude for both parties to be comfortable with the progress.
