Maritime Law Center

Our firm works with individuals, corporations, shipping companies and universities in selling and acquiring, transferring and evaluating vessels in all parts of the world.

    Mike Vaughn
    Vaughn Law Offices
    17011 Beach Blvd., Suite 900
    Huntington Beach, CA 92647
    Phone:  562-592-9350
    Email: mike@vaughnlawoffice.com

     

Buyer’s Inspection

BUYER’S INSPECTION
By Mike Vaughn
March 2000

Almost all purchases of a ship begin with an initial inspection by the buyer. The initial inspection is designed to provide only the rudimentary basis for an offer to purchase.

What should the buyer look for in the Initial Inspection?

First, will the vessel do the job or project that you intend for it to do? By this I mean is this a purpose-built boat such as a tug boat, jack up barge, drill ship or dinner boat. If it is a purpose-built boat you must realistically determine if it can be converted. Last month's article dealt with the problems of conversion.

However, for the initial inspection, we look at general items. On the initial inspection the owner will not permit you to operate the machinery, open tanks or do any invasive inspection. You will be limited to what you see on the surface.

Here are some items about which to think:

  • Are the operating certificates and class documents up to date?
  • Is the vessel clean and operational?
  • Is the engine room bilge clean and free of oil?
  • What is the attitude of the crew about the ship? Do they take pride and interest in the ship or is it just a job?
  • Is the waterline clean of growth?
  • Is the vessel "ship shape" or are there items, tools, machinery and equipment strewn about?
  • What is your initial reaction when you first see the vessel? (It is probably the best determiner of what your passengers, clients and partners will also think)

If the vessel meets your needs, you must then make an offer. Assuming that you come to terms on price with the owner and put up your deposit, you will be permitted an in-depth inspection. Offers contain generally one of the following phrases:

  • All class certificates and inspection in place and will be up to date.
  • Or

  • Subject to inspection, survey, dry-docking and sea trial all to buyer's satisfaction.

If the vessel is a "classed" ship, the surveying will be done by a "class" surveyor who will assure you that all requirements of the classification society, i.e. ABS, Lloyds, etc. , are up to date and in place. This is your assurance that the vessel is in complete and full compliance with all maintenance, repair and construction requirements. You basically buy the ship on the strength of the class certificate.

However, if the vessel is not in class or has fallen out of class you will need to inspect, survey, dry dock and sea trial the vessel.

The surveyor is chosen by the buyer at his expense and you should direct the surveyor to any unusual item you are concerned about. The surveyor will generally act as your agent, open all the tanks on the ship, inspect and test the machinery, examine the engineering records and repair records, and review all previous dry docking records.

Also either in the water or at the time of dry docking, the steel in the vessel should be audio-gauged to determine the amount of wastage since the time of construction. Wastage is very common in steel boats. This is extremely important and should not be neglected.

The surveyor will prepare a written report which will reflect the status of the vessel as he sees it. The report is only as good as the surveyor. Check his credentials and reputation if you have not used him before. Listen to his advice and be very candid in what you are looking for in the ship and what you intend to do with it.

The survey is generally done "in the water". If the report on the ship is satisfactory, then the vessel is moved to a dry dock for further inspection. Again, this is all done at the buyer's expense. Generally, the buyer will be required to pre-pay any work done at the shipyard including the hauling of the vessel and the subsequent launching, whether he purchases the boat or not.

Many times we do a sea trial while the vessel is being moved to the shipyard for dry-docking. Depending upon the extent of the sea trial this will save time and money, since the ship must be crewed and operated by qualified personnel whether the ship goes on sea trials or just motors to the shipyard.

The Sea Trial may be as extensive or limited as the parties wish, or in some cases, may be dispensed with entirely. I have gone on sea trials that lasted several days in the case of a small cruise ship where the buyers were very concerned about her ability to handle large seas and rough conditions. The only problem encountered on the sea trial was that my cabin was above the ship's galley and I spent the entire trip eating all of the delicious foods prepared by the chef. The buyer may terminate the contract if he is not satisfied with the sea trial.

Generally, the owner incurs the cost of a short sea trial. If the buyers wants a long sea trial or particular types of sea trials, he will be responsible for fuel, crew, insurance and incidental costs, which he must pre-pay. You must realize that most sea trials consist of less than four hours and are designed for the surveyor to watch and test run every piece of equipment on the ship. You want to see every thing on the vessel work as it is designed to work. The sea trial will test everything from the auto-pilot to the bilge and fire pumps.

At the time of dry docking, the surveyor will continue his inspection. While in dry dock, the audio-gauge test should be done if not already completed and if there are any questionable reading, the audio-gauge should be re-done on those places.

The surveyor will interpret the results for you and explain the problems, if any. At the same time, the shipyard will give you a good idea of the amount of costs involved if there are repairs needed.

The surveyor will also inspect the shafts, tail shafts, propellers, rudders and through hulls. While the boat is still in dry dock, the surveyor will give you an oral report on problems that he has encountered. This is the proper time to negotiate with the owner regarding the costs of repairs and a possible reduction in the price of the ship to cover part or all of the costs.

The surveyor is your best ally. He can give you expert advice and generally save you much more than his costs.

Usually, we try to complete the sale of the vessel while it is still in the dry dock. If this can be accomplished, the buyer may then have work started on the ship, bottom paint applied and any necessary repairs carried out. This is entirely up to the determination by the buyer and seller.

Remember that each ship is different and the way you approach your inspection should be in a very deliberate manner. I recommend that you sit down and write a list of what you "want" the ship to do. Then make a list of the things you want to inspect on your initial inspection. Check off the list as you go and make notes.

When you leave the ship, write a brief report to yourself so that you have your best recollection of the good and bad points of the ship.

Good luck on your ship hunting.

END