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SHIPBUILDING CONTRACT 
FOR 
CONSTRUCTION OF ONE
(HULL NO. )
BETWEEN
as BUYER
and 
SHIPYARD
as SELLER
SHIPBUILDING CONTRACT
FOR
CONSTRUCTION OF ONE DEADWEIGHT (HULL NO. )
This CONTRACT, entered into this day of by and between , a corporation organized
and existing under the Laws of , having its registered office at (hereinafter
called the "Buyer" ) on one part; and Shipyard, a corporation organized and
existing under the Laws of People’s Republic of China, having its registered
office at , the People’s Republic of China (hereinafter called the "Seller") 
WITNESSES
In consideration of the mutual covenants contained herein, the Seller agrees to
build, launch, equip and complete at the Seller’s Shipyard and to sell and
deliver to the Buyer after completion and successful trial one (1) Vessel as
more fully described in Article I hereof, to be registered under the flag of and
the Buyer agrees to purchase and take delivery of the aforesaid Vessel from the
Seller and to pay for the same in accordance with the terms and conditions
hereinafter set forth.
ARTICLE I DESCRIPTION AND CLASS
1. DESCRIPTION:
The Vessel is a metric tons deadweight, at designed draft of meters (hereinafter
called the "Vessel") of the class described below. The Vessel shall have the
Seller’s Hull No. and shall be constructed, equipped and completed in accordance
with the following "Specifications":
(1)Specification (Drawing No. )
(2)General Arrangement (Drawing No. )
(3)Midship Section (Drawing No. )
(4)Makers list (Drawing No. )
Attached hereto and signed by each of the parties to the Contract (hereinafter
collectively called the "Specifications"), making an integral part hereof.
2. CLASS AND RULES
The Vessel, including its machinery and equipment, shall constructed in
accordance with the rules and regulations (hereinafter called the
"Classification Society") and shall be distinguished in the record by the symbol
of ＋ , , , , , and shall also comply with the rules are regulations as fully
described in the Specifications.
The Seller shall arrange with the Classification Society assign a representative
or representatives (hereinafter called the "Classification Surveyor") to the
Seller’s Shipyard for supervision of the construction of the Vessel.
All fees and charges incidental to Classification and to comply with the rules,
regulation and requirements of this Contract as described in the Specifications
issued up to the date of this Contract as well as royalties, if any, payable on
account of the construction of the Vessel shall be for the account of the
Seller, except as otherwise provided and agreed herein. The key plans, materials
and workmanship entering into the construction of Vessel shall at all times be
subject to inspections and tests in accordance with the rules and regulations of
the Classification Society. 
Decisions of the Classification Society as to compliance or noncompliance with
Classification rules and regulations shall be final and binding upon the parties
hereto.
3. PRINCIPAL PARTICULARS AND DIMENSIONS OF THE VESSEL
(a) Hull:
Length overall abt: . m
Length between perpendiculars . m
Breadth . m
Depth . m
Design Draft . m
(b) Propelling Machinery
The Vessel shall be equipped, in accordance with the Specifications, with type
Main Engine.
4. GUARANTEED SPEED
The Seller guarantees that the trial speed, after correction, is to be not less
than nautical miles per hour on the loaded condition stipulated in the
Specification.
The trial speed shall be corrected for wind speed and shallow water effect. The
correction method of the speed shall be specified in the Specifications.
5. GUARANTEED FULE CONSUMPTION
The Seller guarantees that the fuel oil consumptions of the Main Engine is not
to exceed grams/ brake horse power/ hour at normal continuous output at shop
trial based on diesel fuel oil having a lower calorific value of , kilocalories
per kilogram.
6. GUARANTEED DEADWEIGHT
The Seller guarantees that the VESSEL is to have a deadweight of not less than,
metric tons at the designed loaded draft of meters in sea water of 1.025
specific gravity.
The term, "Deadweight", as used in this Contract, shall be as defined in the
Specifications.
The actual deadweight of the Vessel expressed in metric tons shall be based on
calculations made by the Seller and checked by the Buyer, and all measurements
necessary for such calculations shall be performed in the presence of the
Buyer’s supervisor (s) or the party authorized by the Buyer.
Should there be any dispute between the Seller and the Buyer and the Buyer in
such calculations and/ or measurements, the decision of the Classification
Society shall final.
7. SUBCONTRACT:
The Seller may, at its sole discretion and responsibility, subcontract any
portion of the construction work of the Vessel to experienced subcontractors,
but delivery and final assembly into the Vessel of any such work subcontracted
shall be at the Seller’s Shipyard. The Seller shall remain responsible for such
subcontracted work.
8. REGISTRATION:
The Vessel shall be registered by the Buyer at its own cost and expense under
the laws of at the time of delivery and acceptance thereof.
ARTICLE I CONTRACT PRICE & TREMS OF PAYMENT
1. CONTRACT PRICE:
The purchase price of the Vessel/7 is United States Dollars (US $), net
receivable by the Seller (hereinafter called the "Contract Price"), which is
exclusive of the cost for the Buyer’s Supplies as provided in Article V hereof,
and shall be subject to upward or downward adjustment, if any, as hereinafter
set forth in this Contract.
2. CURRENCY:
Any and all payments by the Buyer to the Seller under this Contract shall be
made in United States Dollars.
3. TERMS OF PAYMENT:
The Contract Price shall be paid by the Buyer to the Seller in installments as
follows:
(a) 1st Installment:
The sum of United States Dollars (US $ ) , representing percent ( %) of the
Contract Price, shall become due and payable and be paid by the Buyer
concurrently with this contract being singed and provided that Seller shall have
submitted to the Buyer the Refund Guarantee in the form annexed hereto as
Exhibit "A" issued by Bank of China, Beijing, the People’s Republic of China,
and provided further that the Seller shall have received the first class
international bank’s Letter of Guarantee in accordance with Paragraph 6 of this
Article.
(b) 2nd Installment:
The sum of United States Dollars (US $ ), representing percent ( %) of the
Contract Price, shall become due and payable and be paid within three (3) bank
business days after the cutting of the first steel plate of the Vessel in the
Seller’s workshop. The Seller shall notify with a telex or telefax notice to the
Buyer stating that the 1st steel plate has been cut in its workshop and demand
for payment of the installment as soon as the cutting of the steel is made.
(c) 3rd Installment:
The sum of United States Dollars (US $ ), representing percent ( %) of the
Contract Price, shall become due and payable and be paid with in three (3) bank
business days after keel-laying of the first section of the Vessel. The
keel-laying shall be notified by the Seller with a telex or telefax notice to
the Buyer stating that the said keel-laying has been carried out. The Seller
shall send to the Buyer a telex or telefax demand for payment of this
installment as soon as the keel-laying is carried out.
(d) 4th Installment:
The sum of United States Dollars (US $ ), representing percent ( %) of the
Contract Price, shall become due and payable and be paid within three (3) bank
business days after launching of the Vessel. The launching of the Vessel shall
be notified by the Seller with a telex or telefax notice to the Buyer stating
that the launching of the Vessel has been carried out. The Seller shall send to
the Buyer a telex or telefax demand for payment of this installment as soon as
the Vessel is launched.
(e) 5th Installment (Payment upon Delivery of the Vessel):
The sum of United States Dollars (US $ ), representing percent ( %) of the
Contract Price plus any increase or minus any decrease due to modifications and/
or adjustments of the Contract Price in accordance with provisions of the
relevant Article hereof, shall become due and payable and be paid by the Buyer
to the Seller concurrently with delivery of the Vessel. The Seller shall send to
the Buyer a telex or telefax demand for this installment ten (10) days prior to
the scheduled date of delivery of the Vessel.
4. METHOD OF PAYMENT
(a) 1st Installment:
The Buyer shall remit the amount of this installment in accordance with Article
Ⅱ, Paragraph 3 (a) by telegraphic transfer to the receiving bank nominated by
the Seller, for credit to the account of the Seller, or through other receiving
bank nominated by the Seller.
(b) 2nd Installment:
The Buyer shall remit the amount of this installment in accordance with Article
Ⅱ, Paragraph 3 (a) by telegraphic transfer to the receiving bank nominated by
the Seller, for credit to the account of the Seller, or through other receiving
bank to be nominated by the Seller from time to time and such nomination shall
be notified to the Buyer at least 10 days prior to the due date for payment.
(c) 3rd Installment:
The Buyer shall remit the amount of this installment in accordance with Article
Ⅱ, Paragraph 3 (a) by telegraphic transfer to the receiving bank nominated by
the Seller, for credit to the account of the Seller, or through other receiving
bank to be nominated by the Seller from time to time and such nomination shall
be notified to the Buyer at least 10 days prior to the due date for payment.
(d) 4th Installment:
The Buyer shall remit the amount of this installment in accordance with Article
Ⅱ, Paragraph 3 (a) by telegraphic transfer to the receiving bank nominated by
the Seller, for credit to the account of the Seller, or through other receiving
bank to be nominated by the Seller from time to time and such nomination shall
be notified to the Buyer at least 10 days prior to the due date for payment.
(e) 5th Installment (Payable upon delivery of the Vessel):
The Buyer shall, at least three (3) bank business days prior to the scheduled
date of delivery of the Vessel, make an irrevocable cash deposit in the name of
the Buyer with the bank nominated by the Seller, for a period of thirty (30)
days and covering the amount of this installment ( as adjusted in accordance
with the provisions of this Contract), with an irrevocable instruction that the
said amount shall be released to the Seller against presentation by the Seller
to the said Bank, of a copy of the Protocol of Delivery and Acceptance signed by
the Buyer’s authorized representative and the Seller. Interest, if any, accrued
from such deposit, shall be for the benefit of the Buyer.
If the delivery of the Vessel is not affected on or before the expiry of the
aforesaid 30 days deposit period, the Buyer shall have the right to withdraw the
said deposit plus accrued interest upon the expiry date. However, when the new
scheduled Delivery Date is notified to the Buyer by the Seller, the Buyer shall
make the cash deposit in accordance with the same terms and conditions as set
out above.
5. PREPAYMENT:
The Buyer shall have the right to make prepayment of any and all installments
before delivery of the Vessel, by giving to the Seller at least thirty (30) days
prior written notice, without any price adjustment of the Vessel for such
prepayment.
6. SECURITY FOR PAYMENT OF INSTALLMENTS BEFORE DELIVERY:
The Buyer shall, concurrently when this Contract being signed, deliver to the
Seller an irrevocable and unconditional Letter of Guarantee in the form annexed
hereto as Exhibit "B" in favor of the Seller issued by a first class
international bank (hereinafter called the "Guarantor") acceptable to Bank of
China and the Seller. This guarantee shall secure the Buyer’s Obligation for the
Payment of all 2nd, 3rd and 4th installments of the Contract Price.
7. REFUNDS
All payments made by the Buyer prior to delivery of the Vessel shall be in the
nature of advance to the Seller, and in the event this Contract is rescinded or
canceled by the Buyer, all in accordance with the specific terms of this
Contract permitting such rescission or cancellation, the Seller shall refund to
the Buyer in United States Dollars the full amount of all sums already paid by
the Buyer to the Seller under this Contract, together with interest (at the rate
set out in respective provision thereof) from the respective payment date (s) to
the date of remittance by telegraphic transfer of such refund to the account
specified by the Buyer. As security to the Buyer, the Seller shall deliver to
the Buyer, concurrently with this Contract being signed, a Refund Guarantee to
be issued by the Bank of China, Head Office, Banking Department, Beijing, the
People’s Republic of China in the form as per Exhibit "A" annexed hereto.
However, in the event of any dispute between the Seller and the Buyer with
regard to the Seller’s obligation to repay the installment or installments paid
by the Buyer and to the Buyer’s right to demand payment from Bank of China, Head
Office, under its, guarantee, and such dispute is submitted either by the Seller
or by the Buyer for arbitration in accordance with Article Ⅷ hereof or for
appeal or appeals in accordance with the English laws, Bank of China shall
withhold and defer payment until the arbitration award between the Seller and
the Buyer is published. Bank of China shall not be obligated to make any payment
unless the arbitration award orders the Seller to make repayment and any right
of appeal available to the Seller under English laws is waived or is not
exercised by the Seller in accordance with English laws. If the Seller fails to
honor the award or judgment, then Bank of China shall refund to the extent the
arbitration award (or any court judgment) orders.
ARTICLE Ⅲ ADJUSTMENT OF THE CONTRACT PRICE
The Contract Price of Vessel shall be subject to adjustments as hereinafter set
forth. It is hereby understood by both parties that any reduction of the
Contract Price is by way of liquidated damages and not by way of penalty.
1. DELIVERY
(a) No adjustment shall be made, and the Contract Price shall remain unchanged
for the first thirty (30) days of delay in delivery of the Vessel beyond the
Delivery Date as defined in Article Ⅶ hereof, then, in such event, beginning at
twelve o’clock midnight of the thirtieth day after the date on which delivery is
required under this Contract, the Contract Price of the Vessel shall be reduced
by deducting there from the sum of United States Dollars (US $ ) per day.
Unless the parties hereto agree otherwise, the total reduction in the Contract
Price shall be deducted from the fifth installment of the Contract Price and in
any event (including the event that the Buyer consents to take the Vessel at the
later delivery date after the expiration of days delay of delivery as described
in Paragraph 1 (c) of this Article) shall not be more than one hundred and ( )
days at the above specified rate of reduction after the thirty (30) days
allowance, that is United States Dollars (US $ ) being the maximum.
(c) If the delay in the delivery of the Vessel continue for a period of ( ) days
(being the total of non-permissible delays and permissible delays) after the
Delivery Date as defined in Article Ⅶ, then in such event, the Buyer may, at its
option, rescind or cancel this Contract in accordance with the provisions of
Article X of this Contract. The Seller may at any time after the expiration of
the aforementioned ( ) days, if the Buyer has not served notice of cancellation
pursuant to Article X, notify the Buyer of the date upon which the Seller
estimate the Vessel will be ready for delivery and demand in writing that the
Buyer make an election, in which case the Buyer shall, within thirty (30) days
after such demand is received by the Buyer, either notify the Seller of its
decision to cancel this Contract, or consent to take delivery of the Vessel at
an agreed future date, it being understood and agreed by the parties hereto
that, if the Vessel is not delivered by such future date, the Buyer shall have
the same right of cancellation upon the same terms, as hereinabove provided.
(d) For the purpose of this Article, the delivery of the Vessel shall not be
deemed delayed and the Contract Price shall not be reduced when and if the
Delivery Date of the Vessel is extended by reason of causes and provisions of
Article Ⅴ, Ⅵ, Ⅺ, Ⅻ and ⅩⅢ hereof. The Contract Price shall not be adjusted or
reduced if the delivery of the Vessel is delayed by reason of permissible delays
as defined in Article ⅩⅢ hereof.
(e) If the Seller notifies the Buyer by telex that the delivery of the Vessel
shall be made earlier than the specified Delivery Date as defined in Article Ⅶ
of the Contract and such notification being given not less than ( ) months prior
to the newly planned delivery date, be certain amount of bonus shall be given by
the Buyer to the Seller as follows:
In the event that the delivery shall be made within fifteen (15) days earlier
than the specified Delivery Date the Contract Price shall remain unchanged. In
the event that the delivery shall be made more than fifteen (15) days earlier
than the specified Delivery Date, then a bonus shall be added to the Contract
Price at a rate of United States Dollars (US $ ) per day for each full day
earlier than the 15th day earlier than the Delivery Date.
The total increase of the Contract Price for the earlier delivery shall be added
to the fifth installment of the Contract Price, however, shall not be more than
the sum of United States Dollars (US $ ).
For the purpose of determining the increase of the Contract Price under this
Paragraph 1(e), the Seller shall not be entitled to be bonus contemplated under
Paragraph 1(e) of this Article for the period between the Delivery Date defined
in Article Ⅶ and the date to which the delivery of the Vessel is extended by
reason of the permissible delays.
(f) In the event that the Seller is unable to deliver the Vessel on the newly
planned delivery date as declared, the Vessel can, nevertheless, be delivered by
the Seller at a date after such declared newly planned date.
In such circumstances, and for the purpose of determining the liquidated damages
to the Buyer (according to the provisions of Paragraph 1 (b) of this Article)
and the Buyer’s right to cancel or rescind this Contract (according to the
provisions of Paragraph 1 (c) of this Article), the newly planned delivery date
declared by the Seller shall not be in any way treated or taken as having
substituted the original Delivery Date as defined in Article Ⅶ. The Buyer’s
aforesaid right for liquidated damages and to cancel or rescind this Contract
shall be accrued, operated or exercised only to the extent as described in
Paragraph 1(a), 1(b) and/ or 1(c) of Article Ⅲ. In whatever circumstance, the
Delivery Date as defined in Article Ⅶ (not the newly planned delivery date as
declared by the Seller), shall be used to regulate, as so described in Paragraph
1(a), 1(b) and/ or 1(c)of Article Ⅲ, the Buyer’s right for liquidated damages
and to rescind this Contract and the Seller’s liability to pay the aforesaid
liquidated damages resulting from the delay in delivery of the Vessel.
If the Vessel is actually delivered on a date after the newly planned date as
declared by the Seller but before the Delivery Date as defined in Article Ⅶ,
then a bonus shall nevertheless be accrued and paid to the Seller in accordance
with Paragraph 1(e) of Article Ⅲ.
2. INSUFFICIENT SPEED
(a) The Contract Price of the Vessel shall not be affected nor changed by reason
of the actual speed (as determined by the Trial Run after correction according
to the Specifications) being less than 0.3 of one knot below the guaranteed
speed as specified in Paragraph 4 of Article I of this Contract.
(b) However, commencing with and including a deficiency of 0.3 of one knot in
actual speed (as determined by the Trial Run after correction according to the
Specifications) below the guaranteed as specified in Paragraph 4, Article I of
this Contract, the Contract Price shall be reduced as follows:
In case of deficiency of less than 0.30 knot US＄
In case of deficiency
at or above 0.30 but below 0.40 knot US＄
at or above 0.40 but below 0.50 knot US＄
at or above 0.50 but below 0.60 knot US＄
at or above 0.60 but below 0.70 knot US＄
at or above 0.70 but below 0.80 knot US＄
at or above 0.80 but below 0.90 knot US＄
at or above 0.90 but below 1.00 knot US＄
(c) If the deficiency in actual speed (as determined by the Trial Run after
correction according to the Specifications) of the Vessel upon the Trial Run, is
more than 1.00 knot below the guaranteed speed of knots, then the Buyer may at
its option reject the Vessel and rescind this Contract in accordance with
provision of Article X of this Contract, or may accept the Vessel at a reduction
in the Contract Price as above provided, by United States Dollars only (US＄ )
being the maximum.
3. EXCESSIVE FUEL CONSUMPTION
(a) The Contract Price of the Vessel shall not be affected nor changed if the
actual fuel consumption of the Main Engine, as determined by shop trial in
manufacturer’s works, as per the Specifications, is greater than the guaranteed
fuel consumption as specified and required under the provisions of this Contract
and the Specifications if such actual excess is equal to or less than percent (
%).
(b) However, if the actual fuel consumption as determined by shop trial is
greater than percent ( %) above the guaranteed fuel consumption then, the
Contract Price shall be reduced by the sum of United States Dollars (US＄ ) for
each full one percent (1%) increase in fuel consumption in excess of the above
said percent ( %) (fractions of one percent to be prorated).
(c) If as determined by shop trial such accrual fuel consumption of the Main
Engine is more than the percent (10%) in excess of the guaranteed fuel
consumption, i.e. the fuel consumption exceeds gram/ BHP/ hour, the Buyer may,
at its option, reject the Vessel and rescind this Contract, in accordance with
the provisions of Article X of this Contract or may accept the Vessel at a
reduction in the Contract Price by United States Dollars (US＄ ) being the
maximum.
4. DEADWEIGHT
(a) In the event there is a deficiency in the actual deadweight if the Vessel
determined as provided in the Specifications, the Contract Price shall not be
decreased if such deficiency is ( ) metric tons or less below the guaranteed
deadweight of metric tons at assigned designed draft.
(b) However, the Contract Price shall be decreased by the sum of United States
Dollars (US＄ ) for each full metric ton of such deficiency being more than ( )
metric tons.
(c) In the event that there should be a deficiency in the Vessel’s actual
deadweight which exceeds ( ) metric tons below the guaranteed deadweight, the
Buyer may, at its option, reject the Vessel and rescind Contract in accordance
with the provisions of Article X of this Contract, or may accept the Vessel with
reduction in the Contract Price in the maximum amount of United States Dollars (
US＄ ).
(d) In the event that the actual deadweight of the Vessel is in excess of the
guaranteed deadweight of metric tons at assigned designed draft, the Contract
Price shall not be increased for the first ( ) metric tons in excess of the
guaranteed deadweight of metric tons. However, the Contract Price shall be
increased by the sum of United States Dollars (US＄ ) for each full metric ton of
the excess being more than ( ) metric tons.
The total increase of the Contract Price for the increase of the deadweight
shall be added to the fifth installment of the Contract Price, however, shall
not be more than the sum of United States Dollars (US＄ ).
5. EFFECT OF RESCISSION
It is expressly understood and agreed by the par,ties hereto that in any case as
stated herein, if the Buyer rescinds this Contract pursuant to any provision
under this Article, the Buyer, save its rights and remedy set out in Article X
hereof, shall not be entitled to any liquidated damages or compensation whether
described above or otherwise.
ARTICLE Ⅳ SUPERVISION AND INSPECTION
1. APPOINTMENT OF THE BUYER’S SUPERVISOR
The Buyer shall send in good time to and maintain at the Seller’s Shipyard, at
the Buyer’s own cost and expense, one or more representative(s) who shall be
duly accredited in writing by the Buyer (such representative(s) being
hereinafter collectively and individually called the "Supervisor") to supervise
and survey the construction by the Seller of the Vessel, her engines and
accessories. The Seller herby warrants that, the necessary visa for the
Supervisor to enter China will be issued in order to demand and without delay
provided that the Supervisor meets with the rules, regulations and Laws of the
People’s Republic of China. The Buyer undertakes to give the Seller adequate
notice for the application of visa.
2. APPROVAL OF PLANS AND DRAWINGS
The parties hereto shall, within ( ) days after signing of this Contract,
mutually agree a list of all the plans and drawing, which are to be sent to the
Buyer for approval (hereinafter called "the List"). Before arrival of the
Supervisor at the Seller’s Shipyard, the plans and drawings specified in the
List shall be sent to the Buyer, and the Buyer shall, within ( ) days after
receipt thereof (excluding mailing time), return such plans and drawings
submitted by the Seller with approval or remarks, if any.
Concurrently with the arrival of the Supervisor at the Seller’s Shipyard, the
Buyer shall notify the Seller in writing, stating the authority which the said
Supervisor shall have, with regard to the Supervisor can, on behalf of the
Buyer, approve or disapprove, as the case may be, which of the plans and
drawings specified in the List but not yet been sent to the Buyer, nevertheless
in line with the Supervisor’s authority. The Supervisor shall, within ( ) days
after receipt thereof, return those plans and drawing with approval or remarks,
if any. Unless notification is given to the Seller by the Supervisor or the
Buyer of approval or disapproval of any plans and drawings within the above
designated period of time for each, case, the said plans and drawings shall be
deemed to have been automatically approved.
The plans and drawings approved by the Buyer or Supervisors shall be final, and
any alteration thereof shall be regarded as modification specified in Article V
of this Contract.
3. SUPERVISION AND INSPECTION BY THE SUPERVISOR
The necessary inspection of the Vessel, its machinery, equipment and outfitting
shall be carried out by the Classification Society, and/ or inspection team of
the Seller throughout the entire period of construction in order to ensure that
the construction of the Vessel is duly performed in accordance with the Contract
and Specifications.
The Supervisor shall have, at all times until delivery of the Vessel, the right
to attend tests according to the mutually agreed test list and inspect the
Vessel, her engines, accessories and materials at the Seller’s Shipyard, its
subcontractors or any other place where work is done or materials stored in
connection with the Vessel. In the event that the Supervisors discovers any
construction or material or workmanship which does not or will not confirm to
the requirements of this Contract and the Specifications, the Supervisor shall
promptly give the Seller a notice in writing as to such nonconformity, upon
receipt of which the Seller shall correct such non-conformity if the Seller
agrees with the Buyer. However the Buyer undertakes and assures the Seller that
the Supervisor shall carry out his inspections in accordance with the agreed
inspection procedure and schedule and usual shipbuilding practice and in a way
as to minimize any increase in building costs and delays in the construction of
the Vessel.
The Seller agree to furnish free of charge the Supervisor with office space, and
other reasonable facilities according to Seller’s practice at, or in the
immediate vicinity of the Seller’s Shipyard. At all times, during the
constructions of the Vessel until delivery thereof, the Supervisor shall be
given free and ready access to the Vessel, her engines and accessories, and to
any other place where the work is being done, or the materials are being
processed or stored, in connection with the construction of the Vessel,
including the yards, workshops, stores of Seller, and the premises of
subcontractors of the Seller, who are doing work, or storing materials in
connection with the Vessel’s construction. The travel expenses for the said
access to Seller’s subcontractors outside of (city) shall be at Buyer’s account.
The transportation within (city) shall be provided to the Supervisor by the
Seller.
4. LIABITITY OF THE SELLER
The Supervisor engaged by the Buyer under this Contract shall at all times be
deemed to be in the employ of the Buyer. The Seller shall be under no liability
whatsoever to the Buyer, or to the Supervisor or the Buyer’s employees or agents
for personal injuries, including death, during the time when they, or any of
them, are on the Vessel, or within the premises of either the Seller or its
subcontractors, or are otherwise engaged in and about the construction of the
Vessel, unless, however, such personal injuries, including death, were caused by
gross negligence of the Seller, or of any of the Seller’s employees or agents or
subcontractors of the Seller. Nor shall the Seller be under any liability
whatsoever to the Buyer for damage to, or loss or destruction of property in
China of the Buyer or of the Supervisor, or of the Buyer’s employees or agents,
unless such damage, loss or destruction was caused by gross negligence of the
Seller, or of any of the employees, or agents or subcontractors of the Seller.
5. SALARIES AND EXPENSES
All salaries and expenses of the Supervisor, or any other employees employed by
the Buyer under this Article, shall be for the Buyer’s account.
6. REPORT OF PROGESS
The Buyer is entitled to require the Seller to report the condition of progress
as to the construction of the Vessel whenever the Buyer requires during the
construction of the Vessel.
7. REPLACEMENT OF SUPERVISOR
The Seller has the right to request the Buyer in writing to replace any of the
Supervisors who is deemed unsuitable and unsatisfactory for the proper progress
of the Vessel’s construction together with reasons. The Buyer shall investigate
the situation by sending its representative to the Seller’s yard, if necessary,
and if the Buyer considers that such Seller’s request is justified, the Buyer
shall effect the replacement as soon as possible.
ARTICLE V MODIFICATION CHANGES AND EXTRAS
1. HOW EFFECTED
The Specifications and Plans in accordance with which the Vessel is constructed,
may be modified and/ or changed at any time hereafter by written agreement of
the parties hereto, provided that such modifications and/ or changes or an
accumulation thereof will not, in the Seller’s reasonable judgment, adversely
affect the Seller’s other commitments and provided further that the Buyer shall
assent to adjustment of the Contract Price, time of delivery of the Vessel and
other terms of this Contract, if any, as hereinafter provided. Subject to the
above, the Seller hereby agree to exert their best efforts to accommodate such
reasonable requests by the Buyer so that the said changes and/ or modifications
may be made at a reasonable cost and within the shortest period of time which is
reasonable and possible. Any such agreement for modifications and/ or changes
shall include an agreement as to the increase or decrease, if any, in the
Contract Price of the Vessel together with an agreement as to nay extension or
reduction in the time of delivery, providing to the Seller additional securities
satisfactory to the Seller, or any other alterations in this Contract, or the
Specification occasioned by such modifications and/ or changes. The
aforementioned agreement to modify and/ or to change the Specifications may be
effected by an exchange of duly authenticated letters or telex, manifesting such
agreement. The letters and telexes exchanged by the parties hereto pursuant to
the foregoing shall constitute an amendment of the Specifications under which
the Vessel shall be built, and such letters and telexes shall be deemed to be
incorporated into this Contract and the Specifications by reference and made a
part hereof. Upon consummation of the agreement to modify and/ or to change the
Specifications, the Seller shall alter the construction of the Vessel in
accordance therewith, including any additions to, or deductions from, the work
to be performed in connection with such construction. If due to whatever
reasons, the parties fail to agree on the adjustment of the Contract Price or
extension of time of delivery or providing additional security to the Seller or
modification of any terms of this Contract which are necessitated by such
modifications and/ or changes, then the Seller shall have no obligation to
comply with the Buyer’s request for any modification and/ or changes.
2. CHANGES IN RULES AND REGULATIONS
(1) If, after the date of signing this Contract, any requirement as to the rules
and regulations as specified in this Contract and the Specifications to which
the construction of the Vessel is required to confirm, are altered or changed by
the Classification Society or the other regulatory bodies authorized to make
such alterations or changes, the Seller and/ or the Buyer, upon receipt of the
notice thereof, shall transmit such information in full to each other in
writing, whereupon within ( )days after receipt of the said notice by the Buyer
from the Seller or vice versa, the Buyer shall instruct the Seller in writing as
to the alterations or changes, if any, to be made in the Vessel which the Buyer
in its sole discretion, shall decide. The Seller shall promptly comply with such
alterations or changes, if any in the construction of the Vessel, provided that
the Buyer shall first agree.
(a) As to any increase or decrease in the Contract Price of the Vessel that is
occasioned by the cost for such compliance; and/ or
(b) As to any extension in the time for delivery of the Vessel that is necessary
due to such compliance; and/ or
(c)As to any increase or decrease in the guaranteed deadweight and speed of the
Vessel, if such compliance results in increased or reduced deadweight and speed,
and/ or
(d) As to any other alterations in the terms of this Contract or of
Specifications or both, if such compliance makes such alterations of the terms
necessary.
(f) If the price is to be increased, then, in addition, as to providing to the
Seller additional securities satisfactory the Seller.
Agreements as to such alterations or changes under this Paragraph shall be made
in the same manner as provided above for modifications and/ or changes of the
Specifications and/ or Plans.
(2) If, due to whatever reasons, the parties fail to agree on the adjustment of
the Contract Price or extension of the time for delivery or increase or decrease
of the guaranteed speed and deadweight or providing additional security to the
Seller or any alternation of the terms of this Contract, if any, then the Seller
shall be entitled to proceed with the construction of the Vessel in accordance
with, and the Buyer shall continue to be bound by, the terms of this Contract
and Specifications without making any such alterations or changes.
3. SUBSTITUTION OF MATERIALS AND/ OR EQUIPMENT
In the event that any of the materials and/ or equipment required by the
Specifications or otherwise under this Contract for the construction of the
Vessel cannot be procured in time to effect delivery of the Seller, the Seller
may, provided the Seller shall provide adequate evidence and the Buyer so agrees
in writing, supply the materials and/ or equipment of the equivalent quality,
capable of meeting the requirements of the Classification Society and of the
rules, regulations, requirements and recommendations with which the construction
of the Vessel must comply.
4. BUYER’S SUPPLIED ITEMS
The Buyer shall deliver to the Seller at its shipyard the items as specified in
the Specifications which the Buyer shall supply on its account by the time
designated by the Seller. Should the Buyer fail to deliver to the Seller such
items within the time specified, the delivery of the Vessel shall automatically
be extended for a period of such delay, provided such delay in delivery of the
Buyer’s supplied items shall affect the delivery of the Vessel. In such event,
the Buyer shall pay to the Seller all losses and damages sustained by the Seller
due to such delay in the delivery of the Buyer’s supplied items and such payment
shall be made upon delivery of the Vessel.
Furthermore, if the delay in delivery of the Buyer’s supplied items should
exceed ( ) days, the Seller shall be entitled to proceed with construction of
the Vessel without installation of such items in or onto the Vessel, without
prejudice to the Seller’s right hereinabove provided, and the Buyer shall accept
the Vessel so completed.
The Seller shall be responsible for storing and handling of the Buyer’s supplies
as specified in the Specifications after delivery to the Seller and shall
install them on board the Vessel at the Seller’s expenses. Upon arrival of such
shipment of the Buyer’s supplied items, both parties shall undertake a joint
unpacking inspection. If any damages are found to be not suitable for
installation, the Seller shall be entitled to refuse to accept the Buyer’s
supplied items.
ARTICLE Ⅵ TRIALS
1. NOTICE
The Buyer and the Supervisor shall receive from the Seller at least thirty (30)
days notice in advance and seven (7) days definite notice in advance and seven
(7) days definite notice in advance in writing or by telex confirmed in writing,
of the time and place of the Vessel’s sea trial as described in the
Specifications (hereinafter referred to as "the Trial Run") and the Buyer ad the
Supervisor shall promptly acknowledge receipt of such notice. The Buyer’s
representatives and/ or the Supervisor shall be on board the Vessel to witness
such Trial Run, and to check upon the performance of the Vessel during the same.
Failure of the Buyer’s representatives to be present at the Trial Run of the
Vessel, after due notice to the Buyer and the Supervisor as provided above,
shall have the effect to extend the date for delivery of the Vessel by the
period of delay caused by such failure to be present. However, if the Trial Run
is delayed more than seven (7) days by reason of the failure of Buyer’s
representatives to be present after receipt of due notice as provided above,
then in such event, the Buyer shall be deemed to have waived its right to have
its representatives on board the Vessel during the Trial Run, and the Seller may
conduct such Trial Run without the Buyer’s representatives being present, and in
such case the Buyer shall be obliged to accept the Vessel on the basis of a
certificate jointly signed by the Seller and the Classification Society
certifying that the Vessel, after Trial Run subject to minor alterations and
corrections as provided in this Article, if any, is found to confirm to the
Contract and Specifications and is satisfactory in all respects. The Seller
herby warrants that the necessary visa for the Buyer’s representatives to enter
China will be issued in order on demand and without delay otherwise the Trial
Run shall be postponed until after the Buyer’s representatives have arrived at
the Seller’s Shipyard and any delays as result thereof shall not count as a
permissible delay under Article Ⅷ thereof. However, should the nationalities and
other personal particulars of the Buyer’s representatives be not acceptable to
the Seller in accordance with its best understanding of the relevant rules,
regulations and/ or Laws of the People’s Republic of China then prevailing, then
the Buyer shall, on the Seller’s telex demand, affect replacement of all or any
of them immediately.
Otherwise the Delivery Date as stipulated in Article Ⅶ hereof shall be extended
by the delays so caused by the Buyer. In the event of unfavorable weather on the
date specified for the Trial Run, the same should take place on the first
available day thereafter that the weather condition permit. The parties hereto
recognize that the weather conditions in Chinese waters in which the Trial Run
is to take place are such that great changes in weather may arise momentarily
and without warning and, therefore, it is agreed that if during the Trial Run of
the Vessel, the weather should suddenly become unfavorable, as would have
precluded the continuance of the Trial Run, the Trial Run of the Vessel shall be
discontinued and postponed until the first favorable day next following, unless
the Buyer shall assent by telex and confirm in writing of its acceptance of the
Vessel on the basis of the Trial Run made prior to such sudden changes in
weather conditions. In the event that the Trial Run is postponed because of
unfavorable weather conditions, such delay shall be regarded as a permissible
delay, as specified in Article Ⅷ hereof.
2. HOW CONDUCTED
(a) All expense in connection with Trial Run of the Vessel are to be for the
account of the Seller, who, during the Trial Run and when subjecting the Vessel
to Trial Run, is to provide, at its own expense, the necessary crew to comply
with conditions of safe navigation. The Trial Run shall be conducted in the
manner prescribed in the Specifications and shall prove fulfillment of the
performance required for the Trial Run as set forth in the Specifications.
The course of Trial Run shall be determined by the Seller and shall be conducted
within the trial basin equipped with speed measuring facilities.
(b) The Seller shall provide the Vessel with the required quantities of water,
fuel oil and greases with exception of lubrication oil and hydraulic oil which
shall be supplied by the Buyer for the conduct of the Trial Run of Trial Runs as
prescribed in the Specifications. The fuel oil and greases supplied by the
Seller, and lubricating oil and hydraulic oil supplied by the Buyer shall be in
accordance with the applicable engine Specifications, and the cost of the
quantities of water, fuel oil, lubricating oil, hydraulic oil and greases
consumed during the Trial Run or Trial Runs shall be for the account of the
Seller.
3. TRIAL LOAD DRAFT
In addition to the supplies provided by the Buyer in accordance with
sub-paragraph (b) of the preceding Paragraph 2 hereof, the Seller shall provide
the Vessel with the required quantity of fresh water and other stores necessary
for the conduct of the Trial Run. The necessary ballast (fresh and sea water and
such other ballast as may be required ) to bring the Vessel to the trial load
draft as specified in the Specifications, shall be for the Seller’s account.
4. METHOD OF ACCEPTANCE OF REJECTION
(a) Upon notification of the Seller of completion of the Trial Run of the
Vessel, the Buyer or the Buyer’s Supervisor in writing shall within six (6)
business days thereafter, notify the Seller by telex confirmation in writing of
its acceptance of the Vessel or of its rejection of the Vessel together with the
reasons therefore.
(b) However, should the result of the Trial Run indicate that the Vessel or any
part thereof including its equipment does not confirm to the requirements of
this Contract and Specifications, then the Seller shall investigate with the
Supervisor the cause of failure and the proper steps shall be taken to remedy
the same t and shall make whatever corrections and alterations and/ or re-trial
run or runs as may be necessary without extra cost to the Buyer, and upon
notification by the Seller of completion of such alteration of corrections and/
or re-trial or re-trials, the Buyer shall, within six (6) business days
thereafter, notify the Seller by telex confirmed in writing of its acceptance of
its Vessel or of the rejection of the Vessel together with the reason therefore
on the basis of the alterations and corrections and/ or re-trial or re-trials by
the Seller. 
(c) In the event that the Buyer fails to notify the Seller by telex confirmed in
writing of its acceptance of rejection of the Vessel together with the reason
therefore within six (6) business days period as provided for in the above
sub-paragraph (a) and (b), the Buyer shall be deemed to have accepted the
Vessel.
(d) Any dispute arising among the parties hereto as to the result of any Trial
Run of further tests or trials, as the case may be, of the Vessel shall be
solved by reference to arbitration as provided in Article ⅩⅢ hereof.
(e) Nothing herein shall preclude the Buyer from accepting the Vessel with its
qualifications and/ or remarks following the Trial Run and/ or further tests or
trials as aforesaid and the Seller shall be obliged to comply with and/ or
remove such qualifications and/or remarks (if some qualifications and/ or
remarks are acceptable to the Seller) at the time before effecting delivery of
the Vessel to the Buyer under this Contract.
5. DISPOSITION OF SURPLUS CONSUMABLE STORES
Should any amount of fuel oil, fresh water, or other consumable stores furnished
by the Seller for the Trial Run or Trial Runs remain on board the Vessel at the
time of acceptance thereof by the Buyer, the Buyer agrees to buy the same from
the Seller at the current market price at the port of delivery thereof, and
payment by the Buyer shall be effected as provided in Article II 3 (f) and 4 (f)
of this Contract.
The Buyer shall supply lubricating oil and hydraulic oil for the purpose of the
Trial Runs at its own expensed and the Seller will reimburse for the amount of
lubricating oil and hydraulic oil actually consumed for the said Trail Run or
Trial Runs at the original price incurred by the Buyer and payment by the Seller
shall be effected as provided in Article II 3 (f) and 4 (f) of this Contract.
6. EFFECT OF ACCEPTANCE
The Buyer’s acceptance of the Vessel by written or telex notification sent to
the Seller, in accordance with the provisions set out above, shall be final and
binding so far as confirmation of the Vessel to this Contract and the
Specifications is concerned, and shall preclude the Buyer form refusing formal
delivery by the Seller of the Vessel, as hereinafter provided, if the Seller
complies with all other procedural requirements for delivery as hereinafter set
forth.
ARTICLE Ⅶ DELIVERY
1. TIME AND PLACE
The Vessel shall be delivered safely afloat by the Seller to the Buyer at the
Seller’s Shipyard, in accordance with the Specifications and with all
Classification and Statutory Certificates and after completion of Trial Run (or,
as the case may be, re-trial or re-trials) and acceptance by the Buyer in
accordance with the provisions of Article Ⅵ hereof on or before , 20 provided
that, in the event of delays in the construction of the Vessel or any
performance required under this Contract due to causes which under the terms of
the Contract permit extension of the time for delivery, the aforementioned time
for delivery of the Vessel shall be extended accordingly.
The aforementioned date or such date to which delivery is extended pursuant to
the terms of this Contract is hereinafter called the "Delivery Date".
2. WHEN AND HOW EFFECTED
Provided that the Buyer and the Seller shall each have fulfilled all of their
respective obligations as stipulated in this Contract, delivery of the Vessel
shall be effected forthwith by the concurrent delivery by each of the parities
hereto, one to the other, of the Protocol of Delivery and Acceptance,
acknowledging delivery of the Vessel by the Seller and acceptance thereof by the
Buyer, which Protocol shall be prepared in quadruplicate and executed by each of
the parties hereto.
3. DOCUMENTS TO BE DELIVERED TO THE BUYER
Upon acceptance of the Vessel by the Buyer, the Seller shall deliver to the
Buyer the following documents (subject to the provision contained in Article V 2
hereof) which shall accompany the aforementioned Protocol of Delivery and
Acceptance:
(a) Protocol of Trials of the Vessel made by the Seller pursuant to the
Specifications.
(b) Protocol of Inventory of the equipment the Vessel including spare part and
the like, all as specified in the Specifications, made by the Seller.
(c) Protocol of Stores of Consumable Nature made by the Seller referred to under
Paragraph 5 of Article VI hereof.
(d) Finished Drawing and Plans pertaining to the Vessel as stipulated in the
Specifications, made by the Seller.
(e) Protocol of Deadweight and Inclining Experiment, made by the Seller.
(f) All Certificates required to be furnished upon delivery of the Vessel
pursuant to this Contract and the Specifications which shall be:
Certificates shall be issued by relevant Authorities or Classification Society.
The Vessel shall comply with the above rules and regulations with are in force
at the time of signing this Contract. All the certificates shall be delivered in
one (1) original to the Vessel and two (2) copies to the Buyer.
If the full term certificate or certificates are unable to issued at the time of
delivery by the Classification Society or any third party other than the Seller.
Then the provisional certificate or certificates as issued by the Classification
Society or the third party other than the Seller with the full term certificates
to be furnished by the Seller after delivery of the Vessel and in any event
before the expiry of the provisional certificates shall be acceptable to the
Buyer.
(g) Declaration of Warranty issued by the Seller that the Vessel is delivered to
the Buyer free and clear of any liens, charges, claims, mortgages, or other
encumbrances upon the Buyer’s title thereto, and in particular, that the Vessel
is absolutely free of all burdens in the nature of imposts, taxes or charges
imposed by the province or country of the port of delivery, as well as of all
liabilities of the Seller to its sub-contractors, employees and crews and/ or
all liabilities arising from the operation of the Vessel in Trial Run or Trial
Runs, or otherwise, prior to delivery.
(h) Commercial Invoice made by the Seller.
(i) Bill of Sale made by the Seller.
4. TITLE AND RISK
Title to and risk of the Vessel shall pass to the Buyer only upon delivery
thereof. As stated above, it being expressly understood that, until such
delivery is affected, title to the Vessel, and her equipment, shall remain at
all times with the Seller and are at the entire risk of the Seller.
5. REMOVEAL OF VESSEL
The Buyer shall take possession of the Vessel immediately upon delivery and
acceptance thereof, and shall remove the Vessel from the premise of the Seller
with seven (7) days after delivery and acceptance thereof is affected. The Buyer
shall not remove the Vessel form the premise of the Seller within the aforesaid
seven (7) days then, in such event, without prejudice to the Seller’s right to
require to remove the Vessel immediately at any time thereafter, if the Buyer
shall pay to the Seller to the reasonable mooring charges of the Vessel.
6. TENDER OF THE VESSEL
If the Buyer fails to take delivery of the Vessel after completion thereof
according to this Contract and the Specifications without justified reason, the
Seller shall have the right to tender the Vessel for delivery after compliance
with all procedural requirements as above provided.
ARTICLE Ⅷ DELAYS&EXTENSIONOF TIME FOR DELIVERY
1. CAUSE OF DELAY
If, at any time before actual delivery, either the construction of the Vessel or
any performance required hereunder as prerequisite of delivery of the Vessel, is
delayed due to war, blockade, revolution, insurrection, mobilization, civil
commotions, riots, strikes, sabotage, lockouts, local temperature higher than 35
degree centigrade, Acts of God or the public enemy, plague or other epidemics,
quarantines, prolonged failure or restriction of electric current from an
outside source, freight embargoes, if any, earthquakes, tidal waves, typhoons,
hurricanes, storms or other causes beyond the control of the Seller or of its
sub-contractors, as the case may be, or by force majeure of any description,
whether of the nature indicated by the forgoing or not, or by destructions of
the
Seller or works of the Seller or its sub-contractors, or of the Vessel or any
part thereof, by fire, flood, or other cause beyond the control of the Seller or
its sun-contractors as the case may be, or due to the bankruptcy of the
equipment and/ or material supplier or suppliers then, in the event of delay due
to the happening or any of the aforementioned contingencies, the Seller shall
not be liable for such delay and the time for delivery of the Vessel under this
Contract shall be extended without any reduction in the Contract Price for a
period of time which shall not exceed the total accumulated time of all such
delays, subject nevertheless to the Buyer’s right of cancellation under
Paragraph 3 of this Article and subject however to all relevant provisions of
this Contract which authorize and permit extension of the time of delivery of
the Vessel.
2. NOTICE OF DELAY
Within seven (7) days from the date of commencement of any delay on account of
which the Seller claims that it is entitled under this Contract to an extension
of the time for delivery of the Vessel, the Seller shall advise the Buyer by
telex confirmed in writing, of the date such delay commenced, and the reasons
thereof.
Likewise within seven (7) days after such delay ends, the Seller shall advise
the Buyer in writing or by telex confirmed in writing, of the date such delay
ender, and also shall specify the maximum period of the time by which the date
for delivery of the Vessel is extended by reason of such delay. Failure of the
Buyer to acknowledge of Seller’s notification of any claim for extension of the
Delivery Date within thirty (30) days after receipt by the Buyer of such
notifications, shall be deemed to be a waiver by the Buyer of its right to
object of such extension.
3. RIGHT TO CANCEL FOR EXCESSIVE DELAY
If the total accumulated time of all permissible delays and non-permissible
delays aggregate to days or more, excluding delays due to arbitration as
provided for in Article Ⅷhereof or due to default in performance by the Buyer,
or due to delays in delivery of the Buyer’s supplied items, and excluding delays
duet to causes which, under Article V, Ⅵ, Ⅺ, and Ⅻ hereof, permit extension or
postponement of the time for delivery of the Vessel, then in such event, the
Buyer may in accordance with the provisions set out herein cancel this Contract
by serving upon the Seller telexed notice of cancellation which shall be
confirmed in writing and provisions of Article Ⅹ of this Contract shall apply.
The Seller may, at any time, after the accumulated time of the aforementioned
delays justifying cancellation by the Buyer as above provided for, demand in
writing that the Buyer shall make an election, in which case the Buyer shall,
within thirty (30) days after such demand is received by the Buyer either notify
the Seller of its intension to cancel, or consent to an extension of the time
for delivery to an agreed future date, it being understood and agreed by the
parties hereto that if any further delay occurs on account of causes justifying
cancellation as specified in this Contract, the Buyer shall have the same right
of cancellation upon the same terms as hereinabove provided.
4. DEFINITION OF PERMISSIBLE DELAY
Delays on account of such causes as provided for in Paragraph 1 of this Article,
but excluding any other extensions of a nature which under the terms of this
Contract permit postponement of the Delivery Date, shall be understood to be
(and are herein referred to as) permissible delays, and are to be distinguished
from non- permissible delays on account of which the Contract Price of the
Vessel is subject to adjustment as provided for Article Ⅲ hereof.
ARTICLE Ⅸ WARRANTY OF QUALITY
1. GUARANTEE OF MATERIAL AND WORKMANSHIP
The Seller for a period of twelve (12) months following delivery to the Buyer of
the Vessel, guarantees the Vessel, her hull and machinery and all parts and
equipment hereof that are manufactured or furnished or supplied by the Seller
and/ or its sub-contractors under this Contract including material, equipment
(however excluding any parts for the Vessel which have been supplied by or on
behalf of the Buyer) against all defects which are due to defective materials,
and/ or poor workmanship.
2. NOTICE OF DEFECTS
The Buyer shall notify the Seller in writing, or by telex confirmed in writing,
as promptly as possible, after discovery of any defect or deviations for which a
claim is made under this guarantee. The Buyer’s written notice shall describe
the nature of the defect and the extent of the damage caused thereby. The Seller
shall have no obligation under this guarantee for any defects discovered prior
to the expiry date of the guarantee, unless notice of such defects, is received
by the Seller not later than thirty (30) days after such expiry date. Telexed
advice with brief details explaining the nature of such defect and extent of
damage within thirty (30) days after such expiry date and that a claim is
forthcoming will be sufficient compliance with requirements as to time.
3. REMEDEY OF DEFECTS
The Seller shall remedy at its expense any defects, against which the Vessel or
any part of the equipment thereof is guaranteed under this Article by making all
necessary repairs and/ or replacement. Such repairs and/ or replacement will be
made by the Seller.
However, if it is impractical to make the repair by the Seller, and if
forwarding by the Seller of replacement parts, and materials can not be
accomplished without impairing or delaying the operation or working of the
Vessel, then, in any such event, the Buyer shall, cause the necessary repairs or
replacements to be made elsewhere at the discretion of the Buyer provided that
the Buyer shall first and in all events, will, as soon as possible, give the
Seller notice in writing, or by telex confirmed in writing of the time and place
such repairs will be made and, if the Vessel is not thereby delayed, or her
operation or working is not thereby delayed, or her operation or working is not
thereby impaired, the Seller shall have the right to verify by its own
representative(s) or that of Classification Society the nature and extent of the
defects complained of. The Seller shall, in such cases, promptly advise the
Buyer, by telex, after such examination has been completed, of its acceptance or
rejection of the defects as ones that are subject to the guarantee herein
provided. In all minor cases, the Guarantee Engineer, as hereinafter provided
for, will act for and on behalf of the Seller.
In any circumstances as set out below, the Seller shall immediately pay to the
Buyer in United States Dollars by telegraphic transfer the actual cost for such
repairs or replacements including forwarding charges, or at the average cost for
making similar repairs or replacements including forwarding charges as quoted by
a leading shipyard each in Japan, South Korea and Singapore, whichever is lower:

(a) Upon the Seller’s acceptance of the defects as justifying remedy under this
Article, or
(b) If the Seller neither accepts nor rejects the defects as above provided, nor
request arbitration within thirty (30) days after its receipt of the Buyer’s
notice of defects.
Any dispute shall be referred to arbitration in accordance with the provisions
of Article ⅩⅢ　hereof.
4. EXTENT OF THE SELLER’S LIABILITY
The Seller shall have no obligation and/ or liabilities with respect to defects
discovered after the expiration of the period of guarantee specified above.
The Seller shall be liable to the Buyer for defects and damages caused by any of
the defects specified in Paragraph 1 of this Article provided that such
liability of the Seller shall be limited to damage occasioned within the
guarantee period specified in Paragraph 1 above. The Seller shall not be obliged
to repair, or to be liable for, damages to the Vessel, or to any part of the
equipment thereof, due to ordinary wear and tear or caused by the defects other
than those specified in Paragraph 1 above, nor shall there be any Seller’s
liability hereunder for defects in the Vessel, or any part of the equipment
thereof, caused by fire or accidents at sea or elsewhere, or mismanagement,
accidents, negligence, or willful neglect, on the part of the Buyer, its
employees or agents including the Vessel’s officers, crew and passengers, or any
persons on or doing work on the Vessel other than the Seller, its employees,
agents or sub-contractors. Likewise, the Seller shall not be liable for defects
in the Vessel, or the equipment or any part thereof, due to repairs or
replacement which made by those other than the Seller and/ or their
sub-contractors.
Upon delivery of the Vessel to the Buyer, in accordance with the terms of the
Contract, the Seller shall thereby and thereupon be released of all
responsibility and liability whatsoever and howsoever arising under or by virtue
of this Contract (save in respect of those obligations to the Buyer expressly
provided for in this Article Ⅸ) including without limitation, any responsibility
or liability for defective workmanship, materials or equipment, design or in
respect of any other defects whatsoever and any loss or damages resulting from
any act, omission or default of the Seller. Neither CSTC nor the Seller shall,
in any circumstances, be liable for any consequential loss or special loss, or
expense arising from any cause whatsoever including, without limitation, loss of
time, loss of profit or earnings or demurrage directly from any commitments of
the Buyer in connection with Vessel. The Guarantee provided in this Article and
the obligations and the liabilities if the Seller hereunder are exclusive and in
lieu of and the Buyer herby waives all other remedies, warranties, guarantees or
liabilities, express or implied, arising by Law or otherwise (including without
limitation any obligations of the Seller with respect to fitness,
merchantability and consequential damages) or whether or not occasioned by the
Seller’s negligence. This guarantee shall be extended, altered or varied except
by a written instrument signed by the duly authorized representatives of the
Seller, and the Buyer.
5. GUARANTEE ENGINEER
The Seller shall appoint one or two Guarantee Engineer(s) to serve the Vessel as
the Seller’s representative(s) for a period of twelve (12) months from the
delivery of the Vessel. The Buyer, and its employees, shall give such guarantee
Engineer(s) full co-operation in carrying out his/ their duties as the
representative(s) of the Seller on board the Vessel. The Buyer shall accord the
Guarantee Engineer(s) the treatment comparable to the Vessel’s Chief Engineer,
and shall provide him with accommodation and subsistence at no cost to the
Seller and/ or the Guarantee Engineer(s).
The Buyer shall pay to the Guarantee Engineer(s) the sum of United States
Dollars only (US＄ ) per month to cover his/ their miscellaneous expenses
including wages and also the Buyer shall pay the expense of repatriation to
Beijing, the People’s Republic of China by air upon termination of his/ their
service, the expense of his/ their communications with the Seller when made in
performance of his/ their duties as the Guarantee Engineer(s) and the expense,
if any, of his/ their medical and hospital care. The Buyer, its successor(s)
and/ or assign(s), shall be liable to and indemnify the Seller and/ or the
Guarantee Engineer(s) and/ or the Seller for personal injuries, including death
and damages to, or loss or destruction of property of the Guarantee Engineer(s),
if such death, injuries, damages, loss and / or destruction were caused by gross
negligence or willful misconduct of the Buyer, its successor(s) and/ or
assign(s) or its employees and/ or agents.
Pertaining to the detailed particulars of this Paragraph, and agreement will be
made according to this effect between the parties hereto upon delivery of the
Vessel.
ARTICLE Ⅹ CANCELLATION, REJECTION AND RESCISSION BY THE BUYER
1. All payments made by the Buyer prior to the delivery of the Vessel shall be
in the nature of advance to the Seller. In the event the Buyer shall exercise
its right of cancellation and/ or rescission of this Contact under and pursuant
to any of the provisions of this Contract specifically permitting the Buyer to
do so, then the Buyer shall notify the Seller in writing or by telex confirmed
in writing, and such cancellation and/ or rescission shall be effective as of
the date the notice thereof is received by the Seller
2. Thereupon the Seller shall refund in United States Dollars immediately to the
Buyer the full amount of all sums paid by the Buyer to the Seller on account of
the Vessel, unless the Seller disputes the Buyer’s cancellation and/ or
recession by instituting arbitration in accordance with Article ⅩⅢ. If the
Buyer’s cancellation or recession of this Contract is disputed by the Seller by
instituting arbitration as aforesaid, then no refund shall be made by the
Seller, and the Buyer shall not be entitled to demand repayment from Bank of
China under its guarantee, until the arbitration award between the Buyer and the
Seller or, in case of appeal or appeal by the Seller on the arbitration award or
any court orders, by the final court order, which shall be in favor of the
Buyer, declaring the Buyer’s cancellation and/ or rescission justified, is made
and delivered to the Seller by the arbitration tribunal or final competent
London Court having jurisdiction on the dispute. In the event of the Seller is
obliged to make refund, the Seller shall pay the Buyer interest in United States
Dollars at the rate of percent ( %) if the cancellation or rescission or
rescission of the Contract is exercised by the Buyer for the delay of aggregate
( ) days in accordance with the provision of Paragraph 3 of ArticleⅧ or/ by the
events described in Article Ⅲ 1(c), 2(c),3(c) or 4(c) hereof, however in the
event of total loss as described in Article X, IV of this Contract, then, no
interest will be refunded on the amount required herein to be refunded to the
Buyer, computed from the respective dates when such sum were received by Bank of
China, New York Branch or any such other bank account as nominated by the Seller
pursuant to Article II 4(b) or 4(d) from the Buyer to the date of remittance by
telegraphic transfer of such refund to the Buyer by the Seller.
3. Upon such refund by the Seller to the Buyer, all obligations, duties and
liabilities of each of the parties hereto the other under this Contract shall be
forthwith completely discharged.
ARTICLE Ⅺ BUYER’S DEFAULT
1. DEFINITION OF DEFAULT
The Buyer shall be deemed in default of its obligation under the Contract if any
of the following events occurs:
(a) The Buyer fails to pay the Second or Third or Fourth installment to the
Seller when any such installment becomes due and payable under the provisions of
Article Ⅱ hereof and provided the Buyer shall have received the Seller’s demand
for payment in accordance with Article Ⅱhereof, or
(b) The Buyer fails to pay the fifth installment to the Seller in accordance
with Paragraph 3(e) and 4(e) of Article Ⅱ hereof provided the Buyer shall have
received the Seller’s demand for payment in accordance with Article Ⅱ hereof; or