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Contractually, is it a Good Deed or a Misdeed? (Part 2 of 2)

If you haven’t done so, be sure to check out Part 1 of this article.  Here are some more examples and lessons learned in regards to good deeds turning out to be contractual misdeeds:

Shipyard, not Storage Yard

A shipyard had contracted to convert a vessel into a floating restaurant. Upon completion, the vessel would be permanently moored at a pier undergoing modification to receive the new floating restaurant. The vessel conversion was completed prior to the pier being ready to receive the floating restaurant. The shipyard, temporarily having extra dock space available, agreed to keep the vessel at its dock, for a daily fee, while the pier was completed.

Several weeks later, the restaurant vessel capsized at the shipyard’s dock due to the accumulation of water in the bilges. This blocked the shipyard’s dock, impacting other projects, until salvage was completed. The restaurant owner, not being a traditional ship owner, had not understood the need to continuously monitor the bilges. The shipyard considered its only obligation for the daily fee was to provide the dock to temporarily secure the vessel, but not to provide any form of guard service. The fundamental cause of this incident was that the shipyard offered to provide a service (keeping an idle, unmanned vessel at its dock) that it doesn’t normally provide, without defining to the owner the limited scope of services it would provide at that time.

Fixed Schedule, but No Fixed Workscope

A shipyard, constructing a large public vessel, made a commitment to launch the vessel on a specific future date so that highly-placed public officials could be scheduled, far in advance, to participate in the launching, with TV and newspaper reporters present in large numbers. Some time after making that commitment, but still long before launching, the public agency requested numerous changes that had construction schedule impacts, but the launch date was not allowed to be altered.

As the long-planned launching date approached, the vessel was far from ready for exterior hull painting. But in order to keep to the schedule of the public officials, the shipyard could quickly paint only one side of the vessel (so the TV cameras would have a good view). This meant that the vessel had to be drydocked later to complete the hull painting, which drydocking had not been planned as part of the ship construction process. The extra costs were borne by the shipyard. Thus, the shipyard paid for doing the good deed of accepting changes without altering the launching date.

Expanded Skills means Expanded Risks

In the course of planning the replacement of the entire propulsion system in an older ferry, a shipyard retained a specialist subcontractor to perform the required lead-paint abatement in the hull before bringing in the new machinery.

Just as the subcontractor was finishing its several- week assignment, the vessel owners decided that, in addition to the contractually required lead-paint abatement in the machinery spaces, the ferry’s entire deckhouse should also be subjected to a lead-paint abatement. The subcontractor was already committed to another job elsewhere, and could not stay at the shipyard. Other specialist subcontractors were not timely available, either.

The shipyard agreed, under pressure from the vessel owner, to send some of its own personnel for training to manage the abatement of toxic materials, and rented the special equipment, as well. Being the first lead-paint abatement job that the shipyard’s own personnel directed and accomplished, it went far over budget and schedule. Moreover, it required the suspension and delay of much of the work originally planned.

Only after lengthy litigation, did the shipyard get some compensation for that extra effort, but was never compensated for all of its direct litigation costs. Though Fisher Maritime assisted in settling the matter, it would have been beneficial and less costly if the shipyard had contacted Fisher Maritime for advice at the time that such substantial changes to the contract work were requested by the vessel owners.

Contractual Difficulties

Fisher Maritime hopes that your organization does not find itself facing contractual difficulties similar to those described above. We work with organizations to plan and contract for major shipyard projects so that the likelihood of contractual difficulties is minimized.

If you are planning a major project, please contact us to learn of the variety of support services we provide to make your entire contracting process and project management run smoothly. If you find yourself facing contractual difficulties, utilizing our many years of experience in a wide variety of contract-related support services, we can help restore the project to a less-troubled status.

Contractually, is it a Good Deed or a Misdeed? (Part 1 of 2)

“No Good Deed Goes Unpunished”

Fisher Maritime has helped scores of clients deal with difficult contractual situations associated with shipyard projects. Our clients have included

  • ship owners
  • shipyards
  • major subcontractors
  • consultancies
  • government agencies
  • navies

We have often observed that, during contract performance, some of the problems that arose  were triggered by one of the parties doing a good deed for the other party. Unfortunately, we have observed, good intentions sometimes backfire. This doesn’t mean that good deeds should be avoided, only that the risks of them becoming misdeeds instead of good deeds should be assessed before embarking on them. In the spirit of helping others learn from the unfortunate outcomes of attempted good deeds, we offer the following vignettes. The consistent theme that becomes obvious is this: Do not relieve the other contracting party of any of its contractual obligations without first assessing all the risks and consequences that may arise.

Use of Shipboard Equipment

A government agency’s vessel was undergoing repairs, including hot work in the machinery space. The agency’s representative complained to the shipyard that the space was not being adequately ventilated, allowing too much smoke and fumes to impair work and inspections. The shipyard agreed to increase the ventilation as required by the contract, but lacking sufficient equipment, sought to borrow the blowers from the vessel’s bosun’s locker. The agency allowed the blowers to be used, including the long spiral-wound hoses attached to them.

On the second day of use of the blowers, the sparks from hot work ignited one of those hoses, and the fire spread. The damage to the vessel and project delays were significant. The agency tried to hold the shipyard responsible, since the fire was started by the contractor’s hot work. But the shipyard considered the agency responsible, for not having alerted the shipyard to the fact that the hose was flammable, even though the agency knew the hose was going to be used in the presence of hot work. The agency replied by pointing out that the shipyard’s fire watch personnel were ill-equipped to snuff out the incipient fire, allowing it to spread. The outcome was the shipyard’s (and its insurer’s) accepting the cost of repairing the damage, and the owner accepting the loss of the blower and the delay as force majeure.

Next time the agency should simply insist that the shipyard comply with its contractual obligation to supply all the equipment needed for proper accomplishment of the work.

Advance Material Purchases

As part of a 12-week vessel modification project, a shipyard was obligated to obtain special materials for integration into a shipboard cargo-handling system.  Although the contract was executed about six weeks before the refit period was to commence, the contractor had not placed an order for the materials by the time the vessel arrived. The contractor reported to the vessel owner that it was having trouble securing the materials, and requested the owner to obtain them on the basis that the owner’s staff was more familiar with the equipment. The owner’s staff then ordered the materials, but the lengthy lead time for their arrival delayed completion of the refit.

The delay would have been avoided if materials had been ordered shortly after contract execution. But in agreeing to relieve the contractor of the obligation to obtain the materials, the owner’s staff neglected to address the schedule impacts, resulting in the owner being responsible for the delay. Adding insult to injury, the shipyard sought additional fees for maintaining the vessel at the shipyard extra weeks while awaiting the owner-purchased materials. Next time the owner should monitor the shipyards’ pre-arrival purchasing efforts whenever long-lead time materials are an essential part of the contract workscope.

Place of Delivery

A vessel owner was obligated to deliver to the shipyard’s warehouse an overhauled replacement for a dredge’s combination pump/motor. The 18-ton replacement unit was located at the owner’s warehouse, on the other side of the river from the shipyard.

Shortly before the replacement unit was needed by the shipyard, the owner’s staff requested the shipyard to send a truck across the river to the owner’s warehouse to pick-up the unit. The shipyard complied. But during transit from the owner’s warehouse to the shipyard, a roadway accident caused the truck to roll into a ditch, resulting in damage to the replacement unit. Project completion was delayed more than a week while repairs were made to the unit that had been on that truck.

The owner alleged the shipyard was responsible for not providing appropriate transportation. The shipyard responded that the owner was responsible for the delay since the pump/motor was late in being delivered to the shipyard’s warehouse as required by the contract, which had not been amended when the shipyard agreed to send a truck. Next time, the shipyard should politely insist that it looks forward to receiving the owner’s equipment at the warehouse, per the contract.