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Risks in superyacht construction and financing - decarbonization technology

New and experimental technologies are increasingly being used in superyacht construction to reduce carbon emissions, for example improved propeller design, hull optimisation, heat pumps, and incorporation of contra-rotating thrusters for drive (see e.g. Feadship's Project 710).

Allocation of risk for all of these innovative designs needs to be considered in the shipbuilding contract stage. The usual situation under a yacht building contract will be that design risk is borne by the builder, and it is normal to see an express term to such effect.

If there is no such agreement, the builder’s basic commitment to manufacture and sell the yacht will usually imply an obligation to ensure that the design will permit the yacht both to operate safely and to meet the performance criteria promised in the contract, and that the yacht will be built in accordance with a detailed technical specification; to that extent, design is one aspect of the workmanship that must be fulfilled by the yard when building the yacht.

If, however, the yacht is to be built to a design developed by the buyer or by a third party supplier, particularly if it is a novel one, like some of the new decarbonising technologies, then it might not be implied that the builder takes the risk of this design. Therefore the contract does need to be clear about design risks in that case.

If there is an issue with a yacht incorporating innovative designs after delivery, these can of course be addressed by making a warranty claim against the builder. It may be different warranty periods will apply to some of the new technology items.

There could be post-delivery continued trials and testing regimes for certain innovative items, and hold backs of price may be involved. There could also be maintenance regimes for some items to be managed by suppliers other than the yard.

These issues are explored in Reed Smith's new Trading Straits podcast: Decarbonization technology: Risks in superyacht construction and financing

New and experimental technologies are increasingly being used in superyacht construction to reduce carbon emissions


transportation, shipping, superyacht, yachts, podcast