Introduction
 
Globally, around 1,200 seagoing vessels are sold and purchased yearly.[1]  In terms of bulk carriers and tanker ships, approximately 1100 or so were sold during the first three quarters of 2022.[2]  From January 2019 until recently, cargo ship sales peaked around June 2021 in which almost 70 cargo ship sales were seen.[3]
 
Although cargo ship sales dropped recently, sale and purchase activity “remained strong” in the first half of 2022 and “above historical averages”.[4]  As of today, Mediterranean Shipping Co has bought the most second-hand container ships.[5]
 
Apart from typical commercial vessels, superyachts are also attractive to the shipping market.  A total of 887 transactions of superyachts took place in 2021.[6]  This was a 77% increase from the previous year and exceeded two times the figure in 2019.[7]  In 2022, the number of superyachts on order reached a historical high.[8]
 
Other ships are also sold in the market.  These include roll-on/roll-off ships, passenger ships, offshore vessels, fishing vessels, speciality vessels, high-speed crafts, and dredgers.  Ship sales are commonplace in the Malaysian market as well.  
 
A ship sale agreement is an agreement which records all the main terms and details relating to the sale of a ship^[9] as agreed between the contracting parties.  A standard form of the ship sale agreement is known as a “Memorandum of Agreement.”  There are many standard forms already available in the shipping market.  The Standard Forms include the Norwegian Sale Form (which has two versions, namely “Saleform 1993” and “Saleform 2012”), Nipponsale^[10], Singapore Ship Sale Form^[11] and Shipsale 22.  
 
The Norwegian Sale Form is the most commonly used standard form for ship sale and purchase.  The Nipponsale is typically used for the Japanese shipping market whereas the Singapore Ship Sale Form is occasionally used in the Asian shipping market.  In April 2022, the Baltic and International Maritime Council (BIMCO) released its ship sale form, known as the “Shipsale 22”.  The Shipsale 22 is a more modern agreement.  It retains the necessary familiarity for users transitioning from other forms used for buying and selling ships.  To reflect modern practice, it includes provisions such as the option for a virtual documentary closing and electronic signature of the contract, both of which are in response to the COVID-19 pandemic.  
 
These standard forms are not one-size-fits-all in nature.  In many cases, modifications will be needed to adapt the standard form to the particular circumstances of the transaction in question.  
 
This article is divided into two parts.  The purpose of this article is to highlight some of the key points which may be useful to a lawyer or legally trained person in drafting a ship sale agreement.
 
 
Key differences between the Standard Forms
 
In this Part of the article, the key differences between the Saleform 1993 and Saleform 2012 as well as the Saleform 2012 and the Shipsale 22 are set out. 
 

Saleform 1993 and Saleform 2012 

The Saleform 1993 pre-determines the deposit at 10% of the total purchase price.  But the Saleform 2012 provides flexibility to the parties to determine the amount of the deposit.

The Saleform 1993 requires, among others, the ship to be “in every respect” physically ready for delivery as a precondition for the seller’s tender of the Notice of Readiness (NOR).  However, the words “in every respect” are not found in the equivalent provision under the Saleform 2012.

The Saleform 1993 provides for two separate clauses for payment of “deposit” and “purchase price”^[12] whereas the Saleform 2012 consolidates the payment of “deposit” and “balance of the purchase price” in one clause.  

The Saleform 2012 provides an option to the buyers to arrange for an underwater inspection and the buyer is to declare the option latest 9 days before the ship’s intended date of readiness for delivery.  This is not found in the Saleform 1993.
 
Alternatively, if the buyer opts for inspection by way of drydocking, and the underwater parts of the vessel are found broken, damaged or defective that affects the vessel’s class, the sellers are to bear the costs for the repair, and the costs and expenses in connection with putting the vessel in and taking her out of the drydock.  This is also absent in the Saleform 1993.

If the buyers have been informed that the vessel will not be ready for delivery by the agreed Cancelling Date, the time frame for Buyers to accept or reject a new Cancelling Date has been reduced from 7 running days (as per the Saleform 1993) to 3 banking days (as per the Saleform 2012).
 

Saleform 2012 and Shipsale 22 

This is a new provision in the Shipsale 22 which provides for an option for documentary closing to be held virtually.  The same is not found in the Saleform 2012.

Unlike the Saleform 2012, the parties are allowed to electronically sign the Shipsale 22 and any documents to be signed in connection with the Shipsale 22.

As opposed to the Saleform 2012, the Shipsale 22 contains a sanction and anti-corruption clause.

Although there is no confidentiality clause in the Saleform 2012, parties generally amend the same to include such a clause in practice.  By contrast, the Shipsale 22 has already in place a confidentiality clause.
 

Conclusion
 
As can be seen above, there are several key differences between the standard forms of ship sale agreements.  The differences between the Saleform 2012 and Shipsale 22 are particularly noteworthy given the introduction of certain terms in the latter which are designed to, among others, address the practical hurdles brought by the Covid-19 pandemic to transactional parties.  Therefore, the Shipsale 22 may be a good choice for parties who prefer modern practices in response to the pandemic.  That said, the standard forms are distinct in their own ways.  In this respect, parties should be well aware of the key differences before choosing which best govern their nature of transactions. 

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