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The Buyer Journey: The value of good contracts

Legal professionals advise on the importance of a robust new-build contract…

Never before has the value of a good contract been more profound. With worldwide lockdowns, due to the COVID-19 pandemic, throwing many in-build projects off schedule, a light has been shone on the importance of robust new-build contracts, from both a client and shipyard perspective.

A client will find that disparities between stage payments and the transfer of title require clear and cogent legal protection, while changes to the original spec, or to the agreed schedule, are also considerations that require legal purview. Ultimately, for a project lasting multiple years, and with many variables, there is a degree of risk carried by all parties throughout. And this risk is best offset with a robust contract.

In the recently-published The Superyacht Buyer Report, the chapter entitled ‘The value of good contracts’ explores the ‘other’ primary contract, that of sale and purchase transactions. There is, as most clients will discover, a widely-adopted industry ‘template’ in the form of the MYBA Memorandum of Agreement sale and purchase contract. This is a contract advocated by the industry’s largest body of sales brokers. But, as with anything off the shelf, it cannot be applied whole-sale to every transaction and there are various nuances that must be considered.

“If you start the process incorrectly, and allow it to be driven by the inexperienced or those whose interests are not professional or transparent, then the sale and purchase experience will become expensive and disappointing.”

“Most owners will only ever use the MYBA form twice. Once when they buy their yacht and once when they sell her,” explains John Leonida, former partner at Clyde & Co and now PhD researcher and occasional consulting superyacht advisor with LP Squared. “For most, the experience is relatively painless. However, if you start the process incorrectly, and allow it to be driven by the inexperienced or those whose interests are not professional or transparent, then the sale and purchase experience will become expensive and disappointing. In the worst-case scenario, you end up becoming a spectator to your own investment.”

Leonida advises that clients shouldn’t think of any pre-printed contract as sacred text. “It’s only a tool to agree a deal,” he continues. “In many industries, where there is a large volume of transactions or all the stakeholders agree on what shouldn’t be negotiable, the standard form has a role. The  MYBA MOA demands explanation and necessary amendment.”

Jean-Philippe Maslin, partner at Delviso Avocats, cautions that a contract can never anticipate all situations. “It must remain adaptable, allowing for variations, so as to avoid leaving the parties stuck without a workable solution in unforeseen circumstances, as well as giving the owner the right to freely assign the contract to a company of its choosing,” he advises. “The reason is that last-minute changes to the intended use of the yacht, its area of navigation, or even a change in ownership before delivery, will have a direct impact on the applicable customs regime, in turn influencing the choice of the place of establishment of the owning company and the flag of the yacht.”

‘The value of good contracts’ chapter provides detailed accounts from some the market’s foremost legal advisors on how to perfect this part of the customer journey. If you wish to read the chapter in full, click here to download your complimentary version from The Superyacht Buyer Report.

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The Buyer Journey: The value of good contracts

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