Many owners who are unable to spend the winter on their yacht in the Caribbean use the cold season to spruce up their yacht and optimise it if necessary. After all, there is always room for improvement. However, some people are confronted with unexpected costs when they take their yacht out of the shipyard's care. In some cases, the scope of the work has increased unexpectedly. This is because one or two defects only became apparent during the winter work and were then repaired at the same time.
In other cases, other causes are the reason for higher repair costs. In these cases in particular, it is important to check carefully whether there is a claim for payment in the amount requested. This is because compensation can only be demanded if the extra measures were ordered or necessary.
In the case of winter work, a fundamental distinction must be made between warranty work and separately commissioned improvement and/or modification work. While the customer does not have to pay for justified warranty work, the customer of a so-called refit contract must of course pay the shipyard owner the contractually agreed amount.
Warranty measures for material defects
Warranty measures for material defects to be provided free of charge by the shipyard first require a defect and then its timely assertion by the owner. A defect exists if the actual condition (the so-called actual condition) deviates unfavourably from the objective or subjective requirements (the so-called target condition).
The actual condition is to be understood as the actual state. The objective requirements demand that the item is suitable for normal use and has a quality that is usual for items of the same type. So if a certain type of yacht from a certain manufacturer typically has a range of "X", then the range "Y" below this constitutes a defect, without the range having to be agreed in the individual contract.
The subjective requirements demand that the item has the agreed quality and is suitable for the use assumed under the contract. If a certain feature or a certain quality has been agreed, a defect also exists if the item can be used perfectly but does not correspond to what was agreed (the sofa, on which you can sit very well, is turquoise instead of blue). A timely assertion of the defect requires that the owner notifies the defect within the contractually agreed period and, in the absence of an agreement, within the statutory limitation periods. The addressee of the notice of defect is typically the shipyard or the dealer from whom the yacht was built or purchased. However, it is also conceivable that the defect must be reported to the manufacturer or seller of a component of the yacht purchased under an individual contract.
More articles on the topic of law:
Even if the existence of a material defect is not in dispute between the parties, i.e. the contractor must carry out the warranty measure free of charge, it is not uncommon for disagreements to arise. These can initially relate to the question of when the work is to be carried out. This is because it is in the nature of things that the owner wants a defect to be rectified immediately, and in any case before the start of the season. In spring, however, most shipyards are very busy.
For this reason, shipyards sometimes try to postpone repairs until the future. After all, there are only 24 hours in a day and a repair during the peak season would simply be better in terms of capacity utilisation. Disagreements can also relate to the question of where. An owner lying off Tahiti with a defective rudder will not want to (or be able to) come to the shipyard in Europe.
Can the shipyard based in Northern Europe therefore refuse to honour the warranty for material defects?
The temporal
A contractor who is obliged to provide a warranty for material defects must rectify the defect within a "reasonable time" after proper notification of the defect. If he fails to do so despite a reminder and setting a deadline, or if he refuses to rectify the defect, the owner of the yacht has comparatively far-reaching rights. He can withdraw from the contract. He can reduce the price. He can have repairs carried out elsewhere at the shipyard's expense.
To the place of rectification
Typically, purchase and construction contracts contain detailed provisions on the location where defects in yachts are to be repaired. If such an agreement is missing from the contract in exceptional cases, according to the case law of the Federal Court of Justice, it depends on where the yacht is located at the relevant time in accordance with the contractually agreed purpose. It is therefore indeed conceivable that a larger, ocean-going yacht that is located in the Caribbean or in the southern hemisphere during the winter months (with a broken rudder off Tahiti) must also be repaired there. If the shipyard obliged to carry out the repair is unable to send employees there, it will have to involve another shipyard at its own expense. If this does not succeed, the owner is entitled to the above-mentioned rights.
The practice
In practice, there are not only disagreements about when and where. There are many other problem areas: For example, ancillary charges are often demanded during a shipyard stay. But is a shipyard obliged to carry out repairs entitled to demurrage charges, for example? Who has to bear the costs of the out-of-water crane? Does the owner have to pay the carpenter for the installation and removal of the interior, which was necessary because the shipyard would otherwise not have been able to carry out the repairs in the engine room? What rights does the owner of the yacht have if the repairs take (much) longer than planned? These are just some of the questions that some owners will have to deal with after the shipyard visit.
In principle, a shipyard that is obliged to provide a warranty for material defects must provide all preparatory and follow-up work that makes the repair possible in the first place free of charge. Demurrage costs can therefore not be charged if the yacht is only moored for the purpose of the repair work.
This shall not apply if other work is also carried out as part of the repair and the yacht occupies the berth because of this other work. Nothing else applies to the costs of the crane. If work on the underwater hull is the subject of the repair work, the crane cannot be invoiced separately; it is part of the mandatory preparatory work that makes the repair possible in the first place.
Lying time in dry dock
However, other arrangements can also be made here. If the owner also uses the dry dock time for other work that has nothing to do with the warranty for material defects, an agreement on sharing the costs is a good idea. The same applies to the costs of the carpenters. The installation and removal costs - even if they are a multiple of the actual repair costs in the engine room - are to be borne by the shipyard obliged to rectify the defect.
If the repair work takes an inappropriately long time and the shipyard is responsible for the delay, then, at least theoretically, the owner may be able to claim damages. The prerequisite is, of course, that damage has occurred. And in this respect, it is tough for the owner who only uses his yacht privately. This is because case law does not consider loss of use by the private owner to be recoverable. German courts only recognise lost holiday enjoyment in the case of package holidaymakers. The situation is different for charter yachts: The loss of charter income due to the late return of the yacht is generally recognised as damage and as such is fully recoverable.
Refit contract
In the case of refit contracts, some things are simpler insofar as the rights and obligations of the parties generally arise from the contractual agreements. In a properly negotiated contract, not only is the exact content of the service owed precisely formulated. The scope and costs of the ancillary services are also regulated. Accordingly, differences of opinion about the amount of the remuneration owed for the work cannot actually arise. If you then contractually regulate what is to apply if something unforeseen happens, you are highly likely to avoid a (in the vast majority of cases unnecessary) legal dispute. For example, it is typically stipulated that in the event of late return of the yacht, lump-sum compensation is to be paid on a daily or weekly basis. On the one hand, this avoids disputes about the amount of damage incurred due to loss of use. On the other hand, such regulations also protect the owner who uses his yacht exclusively for private purposes.
Experts for all questions of yacht law
The yacht lawyers Dr Tim Schommer (tim.schommer@clydeco.com) and Dr Volker Lücke (volker.luecke@clydeco.com) have been advising yacht clients in Germany and abroad for over 18 years. They advise on the planning and construction phase, purchase and sale, ownership structure, yacht operation including insurance, crewing and charter as well as the handling of damage and third-party claims.
