Thoroughly understand that knowledge of ship design and construction is
required of a Sale & Purchase Broker such that they may communicate effectively
with a potential Buyer.
Thoroughly understand the fundamental differences between dry bulk cargo ships,
general-purpose ships, liners (container, break-bulk and Ro-Ro) and tankers,
including Ore/Oil and Ore/Bulk/Oil carriers. (Students are expected to be able
produce fairly detailed sketches)
Understand that Tankers sub-divide into several categories, including carriers
for crude oil, petroleum products, chemicals, liquid gases, vegetable oils etc.
Be aware of size ranges of bulk carriers including Capesize, Panamax, Handy-
size.
Understand the purpose, basic design and construction features of decks, holds,
hatches, derricks, winches, cranes and other cargo handling gear.
Be aware of ballasting and ballast systems.
Understand the terminology of measuring ships.
Thoroughly understand the importance of displacement (especially light
displacement) and tonnage in ship sales for demolition. Understand what
information is contained in General Arrangement Plans.
Thoroughly understand the basic characteristics of a ship’s propulsion
machinery, also other machinery and equipment that may feature in ship sale
negotiations.
Understand the trends in ship development, especially those which are affected
by legislation and/or international convention (eg double skinned tankers). Be
aware of perceptions of future developments which may affect a purchaser’s
thinking.
Geography
Understand the location of the main areas of current shipbuilding; be aware of
the size, capabilities and specialisation of the major yards. Understand the
location of the major Buyers of tonnage for demolition.
Understand cargoes, trade routes and meteorological phenomena to the extent
that these may influence the types and sizes of ships to be employed.
Registration
Thoroughly understand the need for a ship to be registered.
Thoroughly understand the differences between registration in the Owner’s own
country (flag state) and registration in another country (offshore
registration). Understand the differences between flags of convenience and
’open registers’ operated by traditional maritime nations.
Understand the advantages and disadvantages of each form of registration.
Be aware of the advantages both real and hoped-for arising out of the
introduction of tonnage tax.
Be aware of the manner in which an S & P Broker may become involved in changing
a ship’s registration.
Classification
Thoroughly understand the need for a ship to be classified and what
classification entails.
Understand the role and function of classification societies and the names of
the principle societies. Understand what membership of the International
Association of Classification Societies (IACS) entails.
Be aware of the considerable number of real and quasi-classification societies
which do not qualify for membership of IACS.
Be aware of the manner in which an S & P Broker may become involved in changing
a ship’s classification.
The Parties Involved
Understand how an S & P Broker must be able to differentiate among the
different types of Shipowners – the Buyers and the Sellers – including
individual entrepreneurial Owners; limited companies large and small; divisions
in conglomerates; investment groups which may purchase for immediate bareboat
charter to an Operator; shipping pools. Understand how their attitude in S & P
negotiations may differ.
Understand the role and function of other major players in the S & P market
including other Brokers; ship breakers; Charterers (for example a ship may be
sold with an existing charter commitment), bankers and other financiers.
Understand the role and function of those who may become involved at the time
of completion of a sale including lawyers; notaries; consuls; registrars;
classification society representatives.
Be aware of the structure of a typical S & P Broker’s office and the
importance of record-keeping.
Markets
Thoroughly understand the differences and interrelationships between the
markets for newbuildings, second hand tonnage and demolition. Be aware of how
the information each requires differs in emphasis.
Understand what factors influence the state (firmness or weakness) of the S & P
market generally and what factors influence each of these markets particularly.
Understand what factors influence the chartering market and how these directly
impinge on the second hand market and indirectly on the demolition market and
how current views on the future of world economy affect the newbuilding market.
Understand the influence on markets of external factors including natural
catastrophes; political crises; environmental disasters; aid programmes.
Be aware of the markets for tramps, liners and tankers and how different
countries may react to different factors.
Understand the skill required to prepare and to interpret market reports
including both statistical and written reports.
Contracts and Documentation
Thoroughly understand the basic anatomy of an agreement to sell a ship and the
essential differences depending upon whether it is for a newbuilding, a second
hand ship or a ship destined for scrap.
Understand the existence of all the standard Memorandums of Agreement in
current use. Thoroughly understand the most widely used, namely the Norwegian
Saleform.
Understand that there are two Norwegian Saleforms in current use, the 1987
version and the 1993 version. NB Because many practitioners prefer the tried
and trusted to the new and improved, students should be able to compare the two
versions.
Understand the intention of each clause in a saleform, be aware of the Clause
numbers of the more crucial clauses.
Understand the practicalities of the inspection and dry-docking clauses and
when these are customarily carried out.
Understand how to compile additional clauses when these are desirable to
supplement or replace those in the printed form.
Understand the role and function of all other documentation which Buyers and
Sellers normally must produce at the time of completing the sale and the legal
transfer of the ship, including safety and other compliance certificates. Be
aware of the issuing authorities for these documents. Be aware of
representatives of other parties whose presence or electronic contact may be
required at time of handover.
Negotiation
Thoroughly understand the basics of firm offer and counter offer in the
negotiating process and the manner in which it is customary for the two parties
each to have their respective Brokers. Understand the importance of time limits
in offers.
Understand how to draft an opening offer encompassing all the Principal’s
requirements including the wording of any clauses not covered by the printed
form and which may have to be specifically compiled.
Understand how the negotiating process leads to a conclusion necessitating a
recapitulation together with a completion agenda. Be aware of the various
’subjects’ particularly ’subject inspection’ which have to be lifted before the
sale is finally complete.
Understand the manner in which a ship’s particulars are usually compiled when
placing a ship on the market for sale. Thoroughly understand that such primary
information is given on a ’believed to be correct but not guaranteed’ basis.
Be aware of the etiquette and ethics customary among S & P Brokers including
the commitment to clients when certain information has been requested and
given.
Finance and Insurance
Thoroughly understand the different ways a Buyer may raise the funds to finance
the purchase.
Understand the sources of such funds and the type of information such
financiers will require.
Thoroughly understand the role and function of a mortgage when used as security
for a loan to finance the purchase.
Understand the procedures of leasing and bareboat chartering as methods of
acquiring tonnage.
Be aware of the effect of interest rates, foreign currency and currency
fluctuation on the raising of finance and servicing the loan.
Understand the manner in which the Seller’s and Buyer’s insurable risk changes
as the negotiations progress and the importance of ensuring cover is obtained
at the correct time. Be aware of the providers of insurance including the role
of a P & I Club.
Valuations
Thoroughly understand the duties of a valuer in ship sale and purchase; be
aware of the reasons for and types of bodies requiring valuations.
Understand the legal liabilities upon and protection needed by valuers.
Understand how a valuation is presented with particular attention to ppropriate
caveats.
Understand the information upon which a valuation is based and the method of
assessing a value. Be aware that it does not involve physically surveying the
actual vessel.
Legal Aspects of Sale and Purchase
Thoroughly understand the legal position of the Broker in S & P and the
relationship with the Principal.
Understand the principle of the Broker acting under the specific authority of
the Principal and the liability likely to arise if this authority is not acted
upon meticulously.
Understand what is involved in breach of warranty of authority both with and
without negligence.
Understand what is implied with the words ’free of all encumbrances and
maritime liens’.
Understand the importance of a valid Notice of Readiness and of the ship
arriving within her cancelling date.
Be aware of the principle areas of dispute including alleged misrepresentation
in the description of the vessel, condition of the vessel on delivery, quantity
of bunkers on delivery, alleged absence of items of equipment on delivery.
Be aware that the Buyer is not obliged to give any reason for declining a ship
on inspection.
Understand the Broker’s right to a commission and the manner of ensuring this
right is protected.
Be aware of the effect of international conventions and legislation on existing
and new ships.
