Loan agreement relating to yacht construction contract construed as ‘on demand’
The Court of Appeal case of Swallowfalls Ltd v Monaco Yachting & Technologies SAM & Anr  EWCA Civ 186 provides further support for the construction of contracts in the manner most consistent with ‘commercial common sense’. It also shows that the English Court will be slow to imply terms into commercial contracts beyond what is necessary to make such contracts effective. The Court of Appeal also held that the loan, which was the subject of the dispute, was repayable on demand.
Swallowfalls commissioned the construction of a yacht from Monaco Yachting & Technologies (MYT) in 2006. The construction agreement between Swallowfalls and MYT provided that Swallowfalls would pay the price of the yacht in 11 instalments, due when MYT had achieved certain milestones in respect of the yacht’s construction. It was understood that the actual construction work was to be carried out by a subcontractor of MYT. MYT had difficulty in meeting its obligations under the subcontract, and Swallowfalls realised that it would have to provide interim finance to MYT.
Swallowfalls made funds available to MYT in a series of four amendments to the original construction agreement. In 2008, a loan agreement was made at the same time as the second amendment…
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Affected parties must think about who will be the ’operator’ for the purposes of the new European regulations.
The commercial understanding of the phrases ‘as is’ or ‘as is where is’ has always been that a buyer must take a yacht in the condition in which she is found at the time defined in the contract.