The CTX Standard Tanker Newbuilding Guarantee

Here's a typical (shortened) ship building guarantee.
The Builder for the period of Twelve (12) months after delivery guarantees the Vessel and all her parts against all defects discovered within the this Guarantee period which are due to defective material, construction miscalculation or negligent or other improper acts of the Builder.


The Builder shall have no responsibility or liability for any other defect whatsover in the Vessel than the Defects specified in Paragraph 1.


Nor shall the Builder in any circumstance be responsible for any consequential losses or expense directly or indirectly occaisioned by the reason of the defects specified in paragraph 1.


The guarantee contained above replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise by reason of the construction and Sale of the Vessel to the Buyer.

Basically, the yard will fix anything that falls apart in the first 12 months, rewarranty of maybe six months, and that's it. You will get a much better guarantee when you buy a toaster.

With such a guarantee and with the builder explicitly absolved from all real responsibility, the yard's design objective becomes: build the cheapest possible ship that won't completely fall apart in the first 12 months -- something that the yards have become very good at. They really have no choice; it has become a commercial imperative.

Contrast this with the situation in the aircraft industry Here are the typical guarantee terms for a commercial aircraft purchase.

  1. Full warranty for five years.
  2. Rewarranty of two years.
  3. Service Life Policy. Primary structure including landing gear and movable surfaces are guaranteed for 12 years in the sense that cost of replacement is shared between builder and buyer with the builder proportion decreasing linearly from the end of the full warranty period to zero at 12 years.
  4. Similar terms are provided by the engine manufacturers.

If shipbuilders faced airplane warranty terms, their design objective function would change markedly. An aircraft style guarantee would take us thru the first special survey by which time the majority of design/manufacturing defects will have shown up.

And the service life policy would dictate that major failures anywhere in the first two special surveys would expose the yards to big financial penalties.

Such guarantees generate another benefit. Since the aircraft and engine builders are on the hook, they take a real interest in how the vehicles are maintained. For example, the airplane engine builder is involved in every major inspection and overhaul of his engines. He has a strong pecuniary interest in calling out poor maintenance and operating policies in a way that a regulator does not. If he can proves that the maintenance/operation is not per manual, he is off the hook. This in turn puts real pressure on the owner to do his maintenance correctly, pressure he can't affect by threatening to take his Classification fees elsewhere.

This project would borrow from the aircraft industry to develop a standard IMO tanker newbuilding guarantee. The project would also develop newbuilding contract clauses that make it quite clear that the builer is responsible for any consequential losses associated with defects in design or construction.

These clauses would then be presented to IMO in the hopes that regulation would develop which would require these clauses in any newbuilding contract.

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