Global extreme weather conditions impact shipbuilding

Jhe heatwave in some parts of the world recently saw temperatures between 40 and 42C – and according to a TradeWinds article, “work in shipyards has become nearly impossible in the sweltering temperatures and workers have had to taking unscheduled breaks’, which meant that production was delayed.

Many yards therefore have to declare force majeure due to extreme weather conditions and, while owners may push back depending on their particular wording, it is difficult to see what yards could reasonably do to alleviate the current conditions.

Delivery date missing

Most shipbuilding contracts set an agreed “delivery date”, with liquidated damages payable to the buyer (via a reduced purchase price) in the event the yard fails to meet the delivery date. They tend to contain a system of calculating a long stoppage date, at which the buyer obtains the right to cancel the contract completely if the vessel has not been delivered. Most shipbuilding contracts also contain a mechanism by which the yard can extend the contractual delivery date in the event of certain types of delay. Typically, there will be “permissible delays”, which tend to include “force majeure” type delays. Usually a yard will be given enough leniency to be able to push back the contractual delivery date due to ‘permissible delays’, as these are considered relatively excusable delays, as long as the notice provisions of the contract are met. delay and attenuation.

Contracts usually also allow extensions for other delays, sometimes called “unauthorized” delays, but only to a limited extent, and again usually only if notice is given.

“Acts of God” or “weather conditions not included in normal planning”

The term “force majeure” is frequently used as a catch-all provision in force majeure clauses, such as Article VIII of the Form SAJ shipbuilding contract (“the Form SAJ”). It has been defined in English law as “such an operation of the forces of nature which reasonable foresight and ability could not foresee or reasonably foresee”. If the shipyard wants an extension of the delivery date on the basis of a “force majeure”, it must prove not only the impact of a natural phenomenon on the scheduled delivery date, but also that it does not could not reasonably be avoided.

The extent to which mere extreme weather conditions, as opposed to specified weather events such as storms or lightning strikes, can constitute an “act of God” has not been finally settled by the English courts. But it seems likely that weather conditions could constitute a “force majeure” if they are so extreme, judged in the light of the usual conditions at the place of contractual performance, that the site could not reasonably be expected to he takes steps in advance to avoid this.

There is also no clear ruling on whether extreme heat waves would be covered by the article’s “floods, typhoons, hurricanes, storms or other weather conditions not included in normal planning” clause. VIII of the commonly used SAJ Form”. Therefore, whether or not a heat wave counts as a “force majeure” event under this clause will be a matter of fact and degree. It is relatively common for Chinese shipbuilding contracts to be amended expressly to include as a potential “force majeure” delay any period in which temperatures outside the shipyard exceed 35°C may impact the interpretation of Chinese shipbuilding contracts, if those are clear, the words have been omitted.

Strikes in the yard

If workers abandon their tools due to extreme weather conditions, several types of shipbuilding contracts list strikes on the yard as a type of “permissible delay” alongside other typical “force majeure” events. For example, Article VIII of Form SAJ provides that delays due to strikes are considered “permissible delays” if “at any time prior to actual delivery, either the construction of the vessel or any performance required as a condition precedent to the delivery of the vessel is delayed due to… strikes, lockouts or other labor disputes”.

It will generally be open to the buyer to try to argue that the relevant delaying event did not trigger an “allowed delay” under the shipbuilding contract, because the yard acted unreasonably. Indeed, English law generally requires a person seeking to invoke a “force majeure” clause to demonstrate that they have taken reasonable steps in advance to avoid the impact of a “force majeure” event. and to lessen its effects.

For example, in a strike situation, the buyer could argue that the yard was unreasonable in its dealings with its workforce, i.e. the strike was not in fact outside the construction site control. The courts have been sympathetic to arguments like this. For example, in Channel Island Ferries Ltd v. Sealink Ltd (1987), the shipyard was only entitled to rely on a force majeure exception for strikes if there was nothing it could reasonably have done to avoid or mitigate the strike the results. For this reason, the type of strikes likely to generate force majeure delays and qualify as “permitted delays” under shipbuilding contracts will tend to be those affecting the whole or a substantial part of the industry. of shipbuilding in the country of construction, rather than just the particular yard in question.

Tips and tricks

Construction sites have often gone badly in court in the event of a delay. They would therefore do well to document and claim delays resulting from the current extreme conditions, including:

Claim authorized delays as they occur and ensure that records of delays supported by critical path analysis are maintained.

Comply with all formal notice provisions under the contract.

Keep track of how conditions impact work at other job sites, and even how they impact other industries in the area.

Keep a clear record of what has been done to try to overcome delays, with the aim of demonstrating that the yard has acted reasonably.
Source: Reed Smith Global Solutions By attorneys for Reed Smith, Thor Maalouf, Sally-Ann Underhill and Lianjun Li