Energy and offshore — the smart contracting bulletin

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Much debate has centred around whether sales of rigs or vessels using or based on the Norwegian Saleform 1987 or 1993 exclude the obligation on the seller to ensure that the vessel is of satisfactory quality and fit for purpose pursuant to the Sale of Goods Act 1979, as amended (SOGA). A recent decision of the Commercial Court in London clarifies the position.

This commentary looks at the recent case of Dalmare SpA v. Union Maritime Limited and Valor Shipping Limited (Union Power) [2012] which, to the surprise of many, has determined that implied terms of quality and fitness for purpose under SOGA do apply to the sale and purchase of second hand rigs and vessels using or based on the unamended Norwegian Saleform 1987 and 1993.

The sellers agreed to sell a 1994 built motor tanker to the buyers for US$7 million in accordance with a Memorandum of Agreement (the MOA) on the Norwegian Saleform 1993 (Saleform 93). The vessel was found to be in satisfactory condition both on pre-delivery inspection and in a survey conducted on delivery. However, about a month after delivery, the main engine broke down only some 30 hours into a voyage due to the failure of a crankpin bearing in the main engine. On investigation the crankpin was found to be significantly undersized and oval…

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