How to conclude an Agreement for the construction, modification and repair of the ship
Avoid typical mistakes and find out how the law protects you
The Act Amending and Supplementing the Maritime Code (The Official Gazette Narodne Novine 17/19) came into force on 1 January 2020 and changed some provisions of the Maritime Code (The Official Gazette Narodne Novine 26/15). Unfortunately, the numerous rapid and constant changes (in the form of the so-called Act Amending and Supplementing...) lead to various legal ambiguities and uncertainties as regards the performing of your activities in the maritime domain.
Special attention should be paid to the provisions contained in Part Seven, Title I, Articles 430-441 regulating the institute of the AGREEMENT FOR THE CONSTRUCTION, MODIFICATION AND REPAIR OF THE SHIP, which includes maintenance, servicing and similar works on the ship or any of its parts. In conformity with the said provisions, we must remember that such agreements, to be legally binding, do not have to be in writing. For instance, if an ordering party contacts you by phone enquiring about a boat repair service and you inform the said party about the cost of the service and the party accepts it, an agreement shall be presumed to have been made. Obviously, everything is fine unless there is a dispute. Yet, should any dispute arise, it falls under the competency of the Commercial Court in conformity with the provisions of the Maritime Code.
A special benefit resulting from the new Maritime Code concerns the protection of rights in the case of construction/repair or modification of the ship – the so-called retention right, i.e. the right to retain the vessel. In fact, should the ordering party be unwilling to pay the duly presented bill for the service you provided, you have the right to retain the vessel until payment. A careful reading of these provisions indicates that lawmakers wanted to protect the status of persons performing the activities of ship repair, therefore in a way putting them in the same position as shipbuilders when it comes to their rights.
However, we should not neglect the fact that the ordering party shall have the right to supervise both the construction and the repair and notify the shipbuilder in writing about any objections which the shipbuilder and the person in charge of repairs is then obliged to act upon by either eliminating the defects or offering the ordering party a price reduction. In a worst-case scenario, there is always the option to terminate the agreement. There is a one-year limitation period, i.e. the ordering party has the right to file a complaint requesting elimination of any defects in a one-year period. Naturally, the shipbuilder or the person who performed the repair is responsible for any defects, except when they were not able to notice the said defects in spite of exercising due diligence.
How do you avoid the risk of being contacted by the ordering party after 11 months with the request to eliminate a defect? In that case, it would be effective for the ordering party to perform inspection of the ship after any kind of repair and sign a Works Handover Certificate stating that there are no further complaints. Of course, although such Certificate will not protect you against some “hidden defects”, it nevertheless provides excellent material evidence of customer satisfaction.
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