The Ferry ‘scandal’ story runs on typically ill-informed. The Herald today headlines supposed neglect in securing a contract refund guarantee or pledge as they put it.
US corporate law firm Haynes Boone reveal the often worthless nature of these:
The buyer’s position is made worse by the fact that many shipbuilding contracts provide that, where the buyer terminates the shipbuilding contract for delay, the buyer is entitled to a refund of the pre-delivery instalments of the contract price, plus interest, but the yard has no further
liability to the buyer. In circumstances where, after cancellation of the shipbuilding contract, the buyer will have to find another much later slot at another yard for a higher price, a refund of the pre-delivery instalments plus interest will not compensate the buyer for its losses arising out of the yard’s breach.
As explained above, in a rising market, the buyer may be very reluctant to terminate the contract, particularly if the buyer will only receive a refund of the pre-delivery instalments ofhttps://www.haynesboone.com/-/media/project/haynesboone/haynesboone/pdfs/practice-group-pdfs/shipping/hb_affinity_shipbuilding_booklet.pdf?rev=2f7369434c5941c98fe3501e061b74ac&hash=BCCA9A9CD842A5F8D039B02ACF0C8419
the contract price, plus interest. This will not compensate the buyer for the additional costs it will incur placing another order at another yard for a higher price, and the profit that the buyer will lose as a result of the very significant delay in obtaining the ship. In these circumstances, the termination right provided to the buyer may provide very limited protection in reality.
The Herald has not, of course, fully researched this matter.