Today’s news story of a mother and a daughter successfully posing as shipyard owners in India “selling vessels” that they did not own and could not build.

Although an extreme scenario, it is a helpful reminder of paying attention to counterparty risk.

It is recommended that due diligence is carried out including checking: financial strength; how long the counterparty has been in existence; and the principals behind the counterparty.

In addition, check that the counterparty is named accurately in the contract (not misspelt or an entity that does not exist).

Obtaining a guarantee from a parent company should also be considered, and if so the guarantee must be written and signed by the guarantor.

And last, but not least, you should make sure you have a clear law and jurisdiction clause.