What Are The Key Areas You Should Address In A Marine Fitout Contract?

First impressions are very important and for this reason, a lot of time and money is spent to ensure that the final look of a ship is the image that ship owners want to portray to customers. Despite this, the importance of fitout contract is often downplayed.

Cases are often reported where high valued fitout projects are procured based on flimsy contracts that always favor the contract. This can result in ambiguity of contracts, and invariably the loss of a lot of money on the part of the employer. As a result, it is very important that employers understand the key area they should address in any fitout contract.

Procurement

To determine the most effective contractor for a fitout, employers should consider running a tender process. Issues to put into account when selecting a contractor include pricing mechanisms, experience and quality. Also consider completing the tender in time so as to allow ample time for the fitout.

Payment

Payment

The nature and scope of ship fitout is fairly certain. However, the price of ship outs shouldn’t be described as completely fixed. This is because the employer reserves the right to instructing variation on the work to be done on the ship. It is important that the variations are subject to a clearly defined payment mechanism. The price should not be subject to the contractor’s approval as this may inconvenience the employer.

Design and construction

Employers can opt to give the design responsibility to a different contractor who specializes and intricate design. In other cases, fitout contractors also have their own design teams. Regardless of who is given the responsibility of design, the fitout contract should include a fitness for purpose warranty as well as a design review process.

Third parties

Ship fitouts should be carried out in such a way that they are not a nuisance for any third parties. On this account, contractors should have a public liability insurance cover that outlines the employer as a co-insured party.

Defects

In any fitout, defects are almost certain. These tend to compromise the final look of a ship and should therefore be remedied immediately by the contractor.

Timely completion

A fitout contract should define a commencement date as well as a completion date. In case of delays, the contract should define penalties to be paid by the contractor and how they’ll be paid for. Employers can also offer to pay bonuses if work is completed before the completion date agreed on.

In both cases of timely and late completions, the employer should be satisfied with the work done. Legal permits for marine fitouts should also be obtained by the contractor.

Incentivizing performance

In the event of breach by the contractor, the contract should include mechanisms that will enable the employer to recover the money lost. This also serves to motivate the contractor to meet his obligations. In addition, it incentivizes him to rectify any breaches that occur.

The employer should obtain a performance security from the contractor. The options here include a signed and undated check, on-demand performance bond or retention of 10%of all payments.

Termination

Fitout contracts should also clearly outline the termination rights following a breach of contract. Legal formalities affecting termination should also be defined.

All in all, marine fitouts are subject to risks that are not predictable most of the time; hence the importance of understanding the different aspects of fitout contracts to avoid losses on the part of the employer.