Cat-Building Contract

[downunder]

The vessel could well be an Alpha 42.

Am I close?

[Katiusha]

Make sure you have detailed specs and put compliance to the specs (plus any further correspondence between you and the builder) in the contract.

You can also ask the builder's bank for "performance guarantee", i.e. if the boat is not done on time or to the specs or if the builder goes bankrupt, the bank will refund you paid money. Know that you will lose your boat if you call on that guarantee.

It's not as scary as people above make it out to be. I would suggest visiting the factory several times to make sure of the progress though.

[Cotemar]

You all maybe in an empty room.

This is page two and "cruisingkrol" the OP never came back.
Never answered any questions.

Maybe the medication started to take effect

[cruisingkrol]

OK, this is the third try at posting a Reply. They keep vanishing.

You all have not been talking to an "empty room." No meds. Sorry for the silence. Our cat is in Galesville MD on the Chesapeake and we live about an hour NW of there. We've been busy dealing with Sandy. Happily the cat and the house are both jes fahn.

We are pretty inexperienced with the boat-building world. I am very very risk-adverse; the Skipper is not so much. I am always very impressed with the depth of knowledge to be mined on the Cruiser's Forum and was hoping that you'd come through with some thoughts that that hadn't occurred to us. Thanks for all the responses, mostly with good advice.

Ex-Calif, thanks for taking the time with your thoughtful response.
SVNeko, I had to chuckle at your suggestion.
downunder, you wouldn't happen to be acquainted with the Aussies buying Hull #5, would you?

Yes, the designer and builder are experienced, reputable and very accessible. Yes, it is a BIG financial deal for us. Yes, we have legal advice.
Yes, there are lots of nice cats out there; we love our Lavezzi. But, Skipper wants a good Blue Water cat that's the right size and the right price. Sooooo...

Thanks again.

Krol

[Boatguy30]

Columbus, Neal Armstrong, James Cook would never have had a chance if we all thought like this!

Originally Posted by ArtM

Krol, come clean. What is your motivation in this? Why buy an unproven design, in advance, when there are so many existing boats already on the water?

If the builder is experienced and reliable as well as the designer he will surely have sample contracts he has worked from in the past. Assuming he's small builder you will have to provide large amounts up front with perhaps the build paid for in 4 or 5 equal amounts. A larger builder might be able to do with somewhat less up front and maybe 1/2 on competition.

[Sabbatical II]

Having just completed a building contract for a semi-custom one off yacht with an experienced builder with an excellent reputation I would advise you to be very careful. Doing it this way has meant that I have the boat that I wanted and in my particular case, the quality of the build is far superior than could be bought with a production boat. If you can't guarantee this then there is no point going through the hassle of building a one off boat. If I was doing it again, I would probably go and look at what I could get in a production boat that was close to my requirements and save the hassle of dealing with small builders who can get consumed with their own difficulties to the detriment of their customers. With the current economic climate I could have bought a production boat that was 80% of what I wanted for 50% of the price of a one off. However my requirements of an integral keel, skeg hung rudder, shaft drive and high ballast ratio were important enough to me to justify the price. There was also a degree of customer input allowed that you can't get with production boats.

To me, the main contractual consideration is, "Who owns what and when? To his credit, my builder had an excellent contract that gave protection to both the owner and the builder. Regular progress payments were made at the start of each stage. Because payment was made prior to each stage at all times, ownership of the boat to wherever it was up to was contractually mine as were any materials purchased for the boat. If I was doing it again, I would insist on paying for each stage only after it was completed to my satisfaction. However, this would give rise to 2 problems.
1. From a cash flow perspective most small boat builders could not fund it and they need the purchasers funds to build the boat.
2. If the builder were to go broke (a serious consideration at the moment) the customer would not be the owner of the last stage and therefore the builder would have a lien over the whole boat, even the part that you had paid for. This means the customer is taking a significant risk.

Seriously, are you up to it?

[downunder]

Originally Posted by Katiusha

Make sure you have detailed specs and put compliance to the specs (plus any further correspondence between you and the builder) in the contract.

You can also ask the builder's bank for "performance guarantee", i.e. if the boat is not done on time or to the specs or if the builder goes bankrupt, the bank will refund you paid money. Know that you will lose your boat if you call on that guarantee.

It's not as scary as people above make it out to be. I would suggest visiting the factory several times to make sure of the progress though.

No. Just researching, but a interested observer.

In Australia, if making progressive payments and the payments can be linked directedly to the vessel under construction (eg progressive for purchase of motors, etc and components) keeping photos as evidence you would take posession of an infinished vessel with components in a worst case senario. I did this with an unfinished agricultural machine some years ago and had to fight Cummins diesel for some motors. We won because of the documentation and progressive paymenul to know some other aussies thing so also.

Cheers

Will be an interesting vessel.

[ArtM]

Originally Posted by cruisingkrol

Yes, there are lots of nice cats out there; we love our Lavezzi. But, Skipper wants a good Blue Water cat that's the right size and the right price. Sooooo...

Ok, so this a matter of getting the boat you want at a better price than you could get elsewhere - and of course, there is the obligatory financial risk in getting that "good deal". It makes sense.

The classical formula for this is simply "can you afford to lose this money". If not, then you will need insurance - the classical means for ordinary people to protect against financial loss. The problem with insurance, of course, is that if you insure every dollar against every possibly contingency, the insurances will add up to more than the actual amount of risk.

If you can afford the risk, then you have nothing to lose! Get your boat built and enjoy the prestige of being #2! If possible, I would try to find a way to take title of the hull and it's components before it is even built. Unfortunately, this security may already be promised to the business's financial backers.

[cruisingkrol]

Well, you have all given me a bit more peace of mind. We have - had - no idea what should be in a standard contract for a boat-build. Some items in our contract gave us pause but turns out most of them are items you all consider to be most important for our protection. There are scheduled payments at the start of each stage. We do own the boat from the get-go. Etc. Still a few fine points to negotiate.

We have been to the 'factory' and are encouraged by the builders to come whenever we like. I (ex-physicist) have done a bit of reading on construction techniques/materials and have asked some technical questions which have been answered very quickly and very thorougly.

The basic specs for the boat are fixed but we do have some input re use of interior space. Usual list of options, more or less. It is hoped that the design will be successful so that it ultimately will be a production boat.

As I wrote, I am risk adverse. From years in the lab, I also know the problems that can arise with prototypes. Hull#2 is slightly better than Hull#1.

The Skipper intends to die with a zero bank balance. Not quite the path I would have chosen...

[Cotemar]

cruisingkrol,

What size Cat?
Who is the builder?
Have you spoken to the owners of hull#1 to see how their build went?

[downunder]

Originally Posted by Cotemar

cruisingkrol,

What size Cat?
Who is the builder?
Have you spoken to the owners of hull#1 to see how their build went?

Alpa 42 I deduce.

[downunder]

Originally Posted by cruisingkrol

Well, you have all given me a bit more peace of mind. We have - had - no idea what should be in a standard contract for a boat-build. Some items in our contract gave us pause but turns out most of them are items you all consider to be most important for our protection. There are scheduled payments at the start of each stage. We do own the boat from the get-go. Etc. Still a few fine points to negotiate.

We have been to the 'factory' and are encouraged by the builders to come whenever we like. I (ex-physicist) have done a bit of reading on construction techniques/materials and have asked some technical questions which have been answered very quickly and very thorougly.

The basic specs for the boat are fixed but we do have some input re use of interior space. Usual list of options, more or less. It is hoped that the design will be successful so that it ultimately will be a production boat.

As I wrote, I am risk adverse. From years in the lab, I also know the problems that can arise with prototypes. Hull#2 is slightly better than Hull#1.

The Skipper intends to die with a zero bank balance. Not quite the path I would have chosen...

Steve Dashew has a chapter in his crusing encyclopedia and an example contract.


http://setsail.com/category/cruising-tools/

sounds like you have a progressive payment system in place.

[ozskipper]

If you browse the commercial areas of this site, you may find a boat builder willing to share his current blank contract with you as a base template for your lawyer to work on.. The most likely candidate would be someone in another state or country with similar laws. But conceptually, even if different laws are in place, the contract would still cover the same common points.

[marshmat]

According to my engineering law textbooks, the proper approach in this situation is:

Hire a lawyer who is familiar with commercial contract law in the builder's jurisdiction.

Have the lawyer draft clauses (or review the builder's clauses) to cover things like:
- Payment schedule
- How progress milestones are certified
- Limitations on liability
- What delays / surcharges are permissible
- What liquidated damages / cost adjustments will be made if milestones aren't met
- Who owns what at what times, and how ownership is transferred
- How the contract may be amended (change orders, cancellation, etc.)
- Who covers what risks in the event of fire, flood, theft, etc.

Ensure that all instructions (change orders, etc.) are in writing, unambiguous and properly authorized, lest you invoke the wrath of equitable estoppel or contra proferentem.

About two-thirds of the contract law case studies I've come across involved poorly drafted (or missing) contract clauses- things like "s**t, I forgot the exculpatory clause, now I'm out the entire cost of the failed project" or "if only the contract had explicitly assigned existing-conditions survey responsibility to the contractor, then someone would have seen this mess coming". This is where lawyers earn their keep- you pay them a few thousand up front to ensure that you aren't inviting a hundred-thousand-dollar court case two years from now.

[cruisingkrol]

Cotemar, the cat is 42 feet. Hull#1 is due to be finished in June but may be ready sooner. I have asked for permission to identify the builders. Haven't yet because I don't want anybody to get the idea that I'm a promoter for the company.

The builders continue to be thoroughly cooperative and transparent in their dealings with us... happy to address all our concerns with the contract.

The Skipper is an Aussie so he's a bit chuffed with all the helpful posts coming from Oz - and elsewhere in the Commonwealth, marshmat. We'll be very careful to address all your points and to be precise with wording.

Thanks again for all the helpful posts. There sure is a lot of wisdom in this crowd and a terrific willingness to share it. If folks continue to show interest I'll continue to share our cat-building experience. But, it will hopefully be perfectly boring rather than 'interesting', as in the Chinese curse.