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Sector Insights

New Singapore Sale Form

07.01.2011 Maritime

There has been wide publicity surrounding the Singapore Ship Sale Form 2011 (“SSF”) which was launched at the Singapore Maritime Foundation's New Year Cocktail Reception 2011 on 6 January 2011. 

A day before the launch, the Singapore Business Times carried one and a half pages on the impetus behind the SSF, and a short table containing a summary of the differences between the SSF and the Norwegian Sale Form (NSF93).

This paper explores some of the clauses which we think will be of interest to potential signatories to the SSF.


It is common for contracting parties to want additional security (beyond the 10% deposit) for their counterpart's performance of the agreement. The SSF reminds the parties that they have this option [1]. A provision is also made in the signature box for the Guarantor's signature. This represents a change from other commonly-used existing sale forms. It will also mean that the guarantee is “in writing” signed by the guarantor so as to comply with the Statute of Frauds under English law.

The SSF provides for an innocent party to commence a single arbitration against both the defaulting party and the guarantor who are jointly and severally liable[2] This avoids the problem illustrated by the recent case of Stellar Shipping Co LLC v Hudson Shipping Lines [3]. Although Stellar has now clarified that, generally, a guarantor who has endorsed the underlying contract between the assured and his counterpart will be found to have also endorsed the arbitration clause in relation to its guarantee obligations, Clause 15 of the SSF puts this beyond doubt.

What if a guarantor does not endorse / execute the sale and purchase agreement, but chooses to enter into a separate guarantee document? In the latter case, the guarantor may wish to ensure that the benefits of Clause 15 of the SSF are retained. Amongst other things, this will avoid a situation where contradictory dispute resolution clauses are agreed in the SSF and in the guarantee document (see Transocean Offshore International Ventures Ltd v. Burgundy Global Exploration Corp [4]).


The second footnote on page 1 of the SSF provides that the Buyers' last chance to nominate their nominee is upon receipt of the 15-day notice by the Sellers of the estimated date of the vessel's arrival at the Delivery Place [5]. When read with Clause 8(d), which provides that the parties are to exchange drafts of their respective delivery documents not later than 14 days prior to the Vessel's expected readiness of delivery, a last-minute scramble by Sellers to amend their delivery documents to name the nominee as the new Buyers is minimised. The possibility of the Sellers having to throw away costs incurred in, for example, notarising / legalising documents reflecting the “old” Buyers' name is also avoided.

The SSF also makes it a formal requirement for an addendum to record the terms of the nomination [6]. It further makes clear that the nature of the nomination is a novation to be agreed upon by Sellers, original Buyers and nominee Buyers. This provides clarity to Buyers (and even Sellers) who may not be familiar with the intended legal effect of a nomination. In time, the drafting committee may wish to consider a simple standard form for the addendum to minimise protracted discussions on its wording.

Deposit and Payment of Balance Purchase Price (Clauses 1, 2)

The Deposit and Payment provisions are different from those in existing sale forms.

For one, it is made clear that the Deposit must be deposited with a “value date” no later than that specified in Box 8(i) of the SSF. The use of the “value date” mechanism makes clear that the date specified in Box 8(i) is the date on which the Deposit has to be received in the joint escrow account as freely transferable funds. Conversely, if the Deposit is to be paid within, say, 7 days from the date of execution of the Agreement, the Buyers may consider that they can make the remittance on the 7th day after the Agreement is executed, but the Sellers may expect the remittance to have been made by the 7th day.

The SSF also allocates to the Sellers the responsibility of the opening of the joint escrow account 2 banking days prior to the Value Date. Since the Sellers will be keen for the Deposit to be established by the Buyers by the Value Date, it is in the Sellers' interests to get the joint escrow account opened as soon as possible.

The SSF has been sensitive to key developments in English law concerning sale and purchase agreements, and has tried to avoid the problem which arose in The Aktor [7] by providing that the Deposit be released to the Sellers “as part of the Purchase Price”.[8]

There is an allowance of seven consecutive days for the Buyers to delay taking delivery of the vessel as long as they have declared their intention to do so prior to the expiry of the three banking days after Sellers' NOR is tendered.[9] The amount of daily compensation payable to the Sellers arising out of this delay is pre-determined by the sum specified in Box 8(iv). The parties should be careful to agree a figure that reflects a genuine pre-estimate of the Sellers' loss.

Lines 12 to 17 (which require the Buyers to arrange for bank-to-bank confirmation from the remitting bank to the Sellers' bank of the Buyers' credentials and of the source of funds) are a recognition of the increasingly strict money laundering regulations being implemented amongst the international banks. Both Sellers and Buyers have to comply with the money laundering regulations of the receiving bank. It remains to be seen, however, whether all remitting banks (particularly in jurisdictions with less sophisticated banking systems) will cooperate to provide such confirmation expeditiously, and a buyer would be well-advised to ascertain this ability prior to executing the SSF. Furthermore, it is submitted that a receiving bank will probably, despite the bank-to-bank confirmation provided by the remitting bank, still compel the parties to comply with the receiving bank's own internal procedures in relation to money laundering laws and regulations.

Inspections and Pre-Delivery Divers Inspection (Clauses 3, 6)

The inspection provisions in Clause 3 are uncontroversial and bear similarities to other existing sale forms.

The SSF puts the burden of proof on the Buyers to show what the condition of the vessel was at the time of inspection. [10] It would therefore be prudent for the Buyers / their surveyor to take proper contemporaneous notes during the Clause 3 inspection, as well as take photographs as is allowed pursuant to the definition of “Physical Inspection”. [11]

The choosing of the port, anchorage or berth for the underwater inspection of the Vessel prior to the execution of the Agreement removes the arguments that can arise when the Buyers wish the vessel to be available at Port X but the Sellers do not. Negotiations upfront as to the port at which underwater inspection is carried out can minimise such arguments.

Condition on Delivery (Clause 4)

A new obligation of Sellers not seen in other existing sale forms is that all cargo spaces of the vessel have to be clean and free of cargo at delivery, subject only to immovable residues. [12]

In relation to any difference in the condition of the vessel between the Clause 3 inspection and delivery, the SSF provides that the Buyers can reject the vessel only if the difference would result in “a substantial impact upon the Buyers' ability to trade the Vessel” [13], failing which the Buyers can only claim damages, although such drafting is likely to give rise to arguments over what “substantial impact” and “ability to trade the Vessel” really mean.

Clause 6(a)(i) provides that, where defects discovered after an underwater inspection can be deferred to the vessel's next scheduled drydocking as agreed by Class, the Buyers' “sole remedy” is the payment by Sellers of the estimated cost of repair which is deducted from the Purchase Price. This is a common addition to existing sale forms.

Documentation (Clause 8)

Trying to agree a list of documents at the point of executing a sale and purchase agreement may very well delay the same. As such, documentation is usually agreed as an addendum to the memorandum of agreement.

The comprehensive list at Clause 8 of SSF seems rather overwhelming but, these are documents commonly included in an addendum and/or required by financing parties and flag registries. It may well be easier for parties to delete documents from the Clause 8 list that they consider inapplicable to the particular transaction, instead of labouring over the wording of an addendum after the Agreement is executed, particularly when the Delivery Date is approaching. Equally, a party who is unfamiliar with some of these documents might end up delaying the execution of the agreement if he debates the inclusion of some of these documents.

Not only the Sellers, but the Buyers too, are to present documents at delivery. Indeed, Sellers should be diligent to check that the representative who signs the Agreement is authorised to act on behalf of the Buyers, and that his decisions are properly ratified by the appropriate buying company's resolutions.

It is noteworthy that the Sellers can only tender Notice of Actual Readiness of the vessel when the vessel is physically ready in accordance with Clause 4 for delivery and Sellers have ready all their documents required by Clause 8 (subject to certain provisos). [14]

It is a common practice for Sellers and Buyers to exchange drafts of their respective delivery documents for each other's review and comments, and Clause 8(d) formalises this. Sometimes, despite having reviewed and approved a counterpart's drafts, a party is surprised at the closing meeting when what is delivered is different from the drafts previously circulated. Lines 214 and 215 try to circumvent this by requiring the parties to circulate executed versions of their documents in “strict conformity” to the drafts at least 3 days prior to delivery. This term should make closing meetings more efficient as parties would merely be proof-reading each other's pre-approved documents as opposed to considering whether a document (which has been altered from a pre-approved draft) can be accepted.

Encumbrances (Clause 9)

The SSF makes clear that it is a condition, and not merely a warranty, that the Vessel must be free from all “encumbrances …” at the time of delivery. A breach of a condition entitles the Buyers to reject the vessel as opposed to being confined to a claim for damages only.

It is curious, perhaps, that Clause 9 makes an allowance for writs against the vessel “where security has been furnished”. It would appear from Clause 9 that a buyer, who is aware of a writ issued against the vessel pursuant to which security is provided, is obliged to take delivery of the vessel.

Is this security that has been furnished to the Buyers to protect the Buyers or security which has been furnished to the Seller's creditor? The wording is not clear. Presumably it is intended to be the latter, so the Buyers' protection over the new vessel very much depends on the ambit of the security given to the Sellers.

Buyers' Default (Clause 12)

In a situation where the Buyers have not paid the Deposit or provided the Clause 1 bank-to-bank transfer confirmation, the Sellers cannot assume that their claim against the Buyers will be for the full amount of the Deposit that ought to have been paid.

By contrast, a failure to pay the Purchase Price and additional amounts due under the Agreement at the time of delivery will enable the Sellers to keep the Deposit and interest. The Sellers are not precluded from claiming further compensation insofar as their losses and expenses exceed the amount of the Deposit.

Sellers' Default (Clause 13)

There is a significant difference between SSF's Clause 13(d) and the Sellers' default provision in NSF93. Under NSF93, where the Sellers fail to give Notice of Actual Readiness by the Cancelling Date or are not able to provide the delivery documents required, the NSF93 places the burden on the Buyers to prove that such failure has arisen from the Sellers' negligence. The SSF, on the other hand, allocates the burden on the Sellers to show that its failure was caused by matters outside of its reasonable control.

Buyers' Representatives (Clause 14)

Unlike NSF93, there is no express provision that Buyers' representatives onboard the vessel are there at Buyers' “sole risk and expense” [15]. Sellers should therefore be careful to pass such risk and expense to Buyers successfully by carefully wording the letter of indemnity (to be signed by the Buyers).

The scope of Buyers' representatives' familiarisation with the vessel is set out in lines 268-270 but is always subject to the Master's control.

Arbitration and Governing Law (Clause 15)

It is unsurprising that Clause 15(i) gives parties the option of agreeing Singapore law or English law.

Since the main motivation for the genesis of the SSF is to give a boost to Singapore arbitration, it is logical that the proponents of this form would encourage parties to agree Singapore law. The roots of Singapore's legal system can be traced back to the English legal system although Singapore law has evolved over the years [16]. Singapore has inherited the English common law tradition and thus enjoys the attendant benefits of stability, certainty and internationalisation inherent in the British system (particularly in the commercial sphere). The Application of the English Law Act states that the common law of England (including the principles and rules of equity), so far as it was part of the law of Singapore before 12 November 1993, shall continue to be part of the law of Singapore, subject of course, to modifications as circumstances dictate. [17] The sovereign state of Singapore has, of course, made some departures from English common law since gaining its independence in 1965.

In providing the option to agree English law as the governing law, the SSF recognises that parties may nevertheless be more familiar with English law, having chosen English law to govern their sale and purchase transactions for many years. It is a fact that there is a relatively larger body of English case law than Singapore case law on the sale and purchase of second-hand vessels.

Clause 15(i) provides that any disputes are to be submitted to arbitration in Singapore in accordance with the Rules of the Singapore Chamber of Maritime Arbitration (“SCMA”). The SCMA was reconstituted in May 2009 [18] and since then, 20 arbitrations have commenced under its auspices. [19]

Naturally, there will be parties who will still prefer to agree other governing law and/or arbitral institution's rules and this freedom is accorded to the parties in Clause 15(ii).

Entire Agreement (Clause 17)

In the lead-up to the signing of an agreement, there can be many exchanges (written and oral) between the parties and/or their respective technical personnel, brokers and/or legal representatives. This can lead to claims based on alleged misrepresentation.

Clause 17 provides that it is only that which has been agreed in the Agreement and any addenda that constitute the agreement between the parties, rendering certainty to the Agreement, and precluding misrepresentation claims. Such clauses are often added to existing sale forms.

Possible Improvements

It is early days yet for the SSF but, “Learning and innovation go hand in hand.” [20] so here are some things that the SSF committee may wish to consider.

Whereas “Value Date” and “same day value” may be terms that roll easily off the tongues of bankers and the financially-savvy, these terms could benefit from some definition for lay persons using the SSF. Similarly, lawyers might be expected to be familiar with what the “constitutive documents” of a company include but lay parties may not be so familiar, and it is not so uncommon for Sellers and/or the Buyers to be unrepresented by legal counsel in these transactions.

Since the SSF has taken pains to try to cover most of the practical issues that commonly arise with sale and purchase transactions, it could consider including a ‘counterparts' term, a term which expressly defines the footnotes as being part of the Agreement, as well as provide simple standard forms for the protocol of delivery and acceptance, novation agreement and guarantee. In respect of the guarantee, although the footnote on page 1 of the SSF makes clear that “the Guarantor by signing [the] Agreement irrevocably and unconditionally guarantees the due performance of the relevant party”, a sample short form guarantee wording could clarify whether the guarantee is an ‘on demand' one or whether it is conditional upon proof of default by the guaranteed party, set out the precise nature of the guarantor's obligations and circumstances of the guarantor's release (if any).

A Final Muse

Will the SSF replace the NSF93 as the sale form of choice? The SSF seeks to be commercially-savvy and aims to be fair to both Sellers and Buyers. However, it may be supposed that how often it becomes used will depend upon the take up by shipowners and equally important the world's shipbrokers. The NSF93 took many years to become the form of choice (in place of NSF87) for the sale and purchase of second-hand ships (at least in the western hemisphere). It remains to be seen whether the SSF becomes a regularly used form and, if so, whether that is limited to parties operating in Asia.

Tricia Tong - Ince Singapore

Paul Herring - Ince London

January 2011

[1] Boxes 1 and 2

[2] See the first footnote on page 1 and Clause 15

[3] [2010] EWHC 2985 (Comm); See also Ince & Co's commentary at

[4] [2010] 2 SLR 821

[5] Footnote 2 of page 1 of the SSF

[6] Footnote 2 of page 1 of the SSF

[7] PT Berlian Laju Tanker TBK v. Nuse Shipping Ltd (The Aktor) [2008] 2 Lloyd's Rep 246. See Ince & Co's Shipping E-Brief 2008 for a commentary on this case.

[8] Line 10

[9] Clause 2(b)

[10] Line 61

[11] Second footnote to Clause 3(b)

[12] Lines 57-58

[13] Line 54

[14] Clause 5(b)

[15] NSF93 line 257

[16] Source:

[17] Source:

[18] Source:

[19] More details about SCMA arbitration can be found at

[20] William Pollard