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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.

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