MARITIME LAW CENTER

Mike Vaughn, Attorney at Law
17011 Beach Blvd., Suite 900
Huntington Beach, CA 92647
Direct Phone:  562-592-9350
Email: mike@vaughnlawoffice.com
CA State Bar No. 79661

BuiltWithNOF

NORWEGIAN SALES FORM

Often in a ship transaction, the issue will arise concerning the protocol and terms of an offer. In larger ships the phase that is used is "Will the offer be on NSF." The reference is to the Norwegian Shipbrokers' Association's Memorandum of Agreement for sale and purchase of ships, adopted by the Baltic and International Maritime Council (BIMCO) in 1956.

The NSF (Norwegian Sales Form) attempts to address all pertinent issues in a large ship transaction. I have placed a copy of the NSF in our computer under code #9006 for your view. I also have an offer form based on United States Law which is less complex and designed for general transactions. There is no firm rule that any particular form be used. Rather the form must be tailored to meet the needs of the parties. Never just "fill in the blanks" on any form. Read and understand the terms of the offer because it will become the basis of either a successful transaction or the beginning of a legal nightmare.

An offer to purchase must state all of the terms necessary. This will include a description of the vessel sufficient to identify it by name or document number. Also, the offer may be based upon conditions, i.e., inspection and survey or "as is, where is." The phrase "as is, where is" means that no inspection is necessary and the purchaser takes the vessel with no warranty from the owner and without dry docking or survey. A seller may sell "as is, where is" subject to "buyer's inspection". This means that the buyer offers no warranty or assurance of the condition of the vessel and the buyer must make whatever inspection he deems necessary. This is not an uncommon way for the bill of sale and agreement to be drawn.

Ordinarily, the agreement will provide for place and time of delivery, inspections, dry docking, spare parts and the like. The NSF is very thorough as to these points. The agreement must also provide for the amount offered.

Under the NSF, the deposit is made only if the offer is acceptable to the seller. The seller must sign and return the offer agreement. In many of our contracts, we specify that fax signatures are to be deemed as originals. This allows the parties to execute and respond to offers quickly and moves the process along without the delay of mail or express deliveries. Under the Norwegian Sales Form, the deposit is ordinarily held in a joint account by the buyer and seller. In reality buyers and sellers are seldom in the same location. We prefer the appointment of an escrow agent to hold the deposit subject to the terms of the agreement and then provide for the disbursement of funds. In the United States it is common for the deposit to be held by the broker for the buyer in a segregated trust account and for the broker to certify the deposit to the seller. We require, when this is done, that the broker provide to the seller the name and location of the bank, bank account number and verbal confirmation from the bank that the funds are on deposit. When my law firm holds the deposit, we place it in a segregated trust account subject to the terms of the agreement.

The terms of the sale (NSF) provide that the ship will be "in class and free of recommendations." This means that the ship meets all the requirements of the classification society that has classed the ship. This may be American Bureau of Shipping (ABS), Lloyd's Registry of Shipping; Det Norske Veritas (Veritas) or any of the other classification societies. If the vessel is not in class, the offer will be made subject to survey satisfactory to the buyer. The buyer then selects and pays his own surveyor to inspect the vessel. Based upon that report, the buyer may either complete the sale or change, or withdraw his offer. I have never seen a surveyor who did not save the buyer at least the cost of the survey. In most cases, if the surveyor discovers a defect in the worthiness of the vessel, the owner can be convinced to correct the defect at his expense prior to the sale, or to deduct the cost of the repair from the selling price.

The mechanics of the transfer of the selling price to the seller may be accomplished by simple certified check or electronic funds transfer (EFT). The EFT is the quickest and most effective. It guarantees very prompt completion of the transaction. Letters of Credit (LC's) are used in international transaction in the way that an escrow office is used in real estate transactions. Funds are transferred to a local bank by the foreign purchaser, based upon certain conditions. Those conditions may be inspection and approval or any other variety of terms. The bank must certify the LC to the owner and fully disclose all terms. Once the terms have been met, the bank transfers the actual cash into the seller's designated account. It is my practice in the United States for the LC to be paid prior to the vessel leaving U.S. waters. In other jurisdictions where there may be export problems, the LC may be contingent upon the vessel obtaining proper export license or to actually reaching international waters or a foreign port.

The most important thing to remember in formulating an offer is to be precise, clear and to fully understand the terms of your offer.


THE FOLLOWING IS THE NORWEGIAN SALES FORM 1993

 

MEMORANDUM OF AGREEMENT

Dated:



hereinafter called the Sellers, have agreed to sell, and




hereinafter called the Buyers, have agreed to buy

Name:
Classification Society/Class:
Built: By:
Flag Place of Registry;
Call Sign: Grt/Nrt
Register Number:

hereinafter called the Vessel, on the following terms and conditions:

Definitions

"Banking days" are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in the place of closing stipulated in Clause 8."In writing or "written" means a letter handed over from the Sellers to the
Buyers or vice versa, a registered letter, telex, telefax or other modern form
of written communication.

"Classification Society" or "Class" mean the Society referred to in Line 4.


1. Purchase Price


2. Deposit

As a security for the correct fulfilment of this contract, the Buyers shall pay a deposit of 10% - ten per cent - of the Purchase Money within banking days from the date of this agreement. This deposit shall be deposited with


and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited the Buyers. Any fee charged for holding said deposit shall be borne equally by the Sellers and the Buyers.


3. Payment

The said Purchase Money shall be paid free of bank charges to


on delivery of the vessel, but not later than three banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.




4. Inspections

a)* The Buyers have inspected and accepted the Vessel's classification records. The Buyers have also inspected the Vessel at / in on and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.

b) The Buyers shall have the right to inspect the Vessel's classification records and declare whether same are accepted or not within

The Sellers shall provide for inspection of the vessel at / in

The Buyers shall undertake the inspection without undue delay to the vessel. Should the Buyers cause such delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel's deck and engine log books shall be made available for examination by the Buyer's. If the vessel is accepted after such inspection, the sale shall become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice from the Buyers within 72 hours after completion of such inspection. Should notice of acceptance of the Vessel's classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this contract shall be null and void.

* 4a) and 4B) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.

5. Notices, time and place of delivery

a) The Sellers shall keep the buyers well informed of the Vessel's itinerary and shall provide the Buyers with , and days of estimated time of arrival at the intended place of dry-docking / underwater inspection / delivery. When the vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.

b) The vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at /in in the Sellers option.

Expected time of delivery:

Date of cancelling (see Clauses 5c), 6b), (III) and 14):

c) If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when that the vessel will be readyfor delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling his agreement in accordance with clause 14 within 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 7 running days of receipt of the Sellers notification or if the Buyers accept the new date, the date proposed in the Sellers' notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.

If this agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in clause 5a) and 5c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under clause 14 for the vessel not being ready by the original cancelling date.

d) Should the vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall released immediately to the Buyers whereafter this agreement shall be null andvoid.

6. Drydocking/Divers inspection

a)** The Sellers shall place the vessel in dry dock at the port of delivery for inspection by the Classification Society of the Vessel's underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society's rules.If the rudder, propeller, or bottom or other underwater parts below the deepest load line are found broken, damaged, or defective, so as to affect the Vessel's class, such defects shall be made good at the Seller's expense to the satisfaction of the Classification Society without condition / recommendation.

b)** (i)The Vessel is to be delivered without dry docking. However the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification Society prior to delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Seller's shall make the Vessel available at a suitable alternative place near to the delivery port.

(ii) If the rudder, propeller, bottom, other underwater parts below the deepest load Line are found broken, damaged or defective so as to affect the Vessel's class, then unless repairs can be carried out to the satisfaction of the Classification Society, the Seller's shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification Society of the Vessel's underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society's rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found damaged or defective so as to affect the vessel’s class such defects shall be made good by the Sellers at their expense to the satisfaction of the Classification Society without condition/recommendation*. In such event the Seller's are to pay for the cost of the underwater inspection and the Classification Society's attendance.

(iii) If the Vessel is to be drydocked pursuant to Clause 6B) (ii) and no suitable drydocking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5b) which shall, for the purpose of this clause, become the new port of delivery. In such event the cancelling date provided or in Clause 5 b shall be extended by the additionaltime required for the drydocking and extra steaming, but limited to a maximum of 14 running days.

c) If the Vessel is drydocked pursuant to Clause 6 a) or 6 b) above

(i) the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by the Classification Society, the extent of the survey being in accordance with the Classification Society rules for tailshaft survey and consistent with the current stage of the Vessel's survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection by the Classification Society. The drawing and refitting of the tail shaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to affect the Vessel's class, those parts shall be renewed or made good at the Seller's expense to the satisfaction of the Classification Society without condition / recommendation.

(ii) the expense relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to affect the Vessel's class*.

(iii) the expense in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society's fees shall be paid by the Sellers if the Classification Society issues any condition/ recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.

(iv) the Buyer's representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification Surveyor.

(v) the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers' or the Classification surveyors work, if any, and without affecting the Vessel's timely delivery, If, however, the Buyer' work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers' work shall be for the Buyers' risk and expense. In the event that theBuyers'work requires such additional time, the Sellers may upon completion of the seller's work tender Notice of Readiness for delivery in accordance with Clause 3, whether the Vessel is in drydock or not and irrespective of Clause 5 b). Notes, if any, in the surveyor's report which are accepted by the Classification Society without condition / recommendation are not to be taken into account.6 a) and 6 b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 6 a) to apply.

7. Spares/bunkers etc

The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail end shaft(s) and or spare propeller(s) if any, belonging to the Vessel at the time of inspection, used or unused, whether or board or not shall become the Buyers property, but spares on order to be excluded. Forwarding charges, if any, shall be for the Buyers account. The Sellers are not required to replace spare parts including spare tail end shafts(s) and spares propeller(s) which are taken out of store and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment, if the same is the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyer's without extra payment. The Sellers have the right to take ashore crockery, plate, cutlery, linen, and other articles bearing the Sellers flag or name, provided they replace same with similar unmarked items. Library forms etc, exclusively for use in the Sellers' Vessel(s), shall be excluded from the sale without compensation. Captain's, Officers' and Crew's personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):


The Buyers shall take over remaining bunkers, unused lubricating oils in storage tanks and sealed drums and pay the current net market price (excluding barging expenses) at the port and date of delivery of the Vessel.Payment under this clause shall be made at the same time and place and in the same currency as the Purchase Price.


8. Documentation

The place of closing:

In exchange for payment of the Purchase Money the Sellers shall furnish the Buyers with delivery documents, namely:

a) Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and maritime liens or any other debts whatsoever, duly notarially attested and legalised by the consul of such country or other competent authority.

b) Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.

c) Confirmation of Class issued within 72 hours prior to delivery.

d) Current Certificate issued by the competent authorities stating that the Vessel is free from registered encumbrances.

e) Certificate of Deletion of the Vessel from the Vessel's registry or other official evidence of deletion appropriate to the Vessel's registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel's registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the Purchase Price has been paid and the Vessel has been delivered.

f) Any such additional documents as may reasonably be required by the competent authorities or the purpose of registering the Vessel, provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.

At the time of delivery the Buyers and the Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.

At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) well as all plans etc which are on board the Vessel. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers possession shall promptly be forwarded to the Buyers at their expense, if they so request. The Sellers may keep the log books, but the Buyers have the right to take copies of same.

9. Encumbrances

The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages and maritime liens or any other debts whatsoever. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.



10. Taxes

Any taxes, fees and expenses connected with the purchase and registration under the Buyer's flag shall be for the Buyer's account, whereas similar charges connected with the closing of the Sellers register shall be for the Sellers' account.




11. Condition on delivery

The Vessel with everything belonging to her shall be at the Sellers risk and expenses until she is delivered to the Buyers, but subject to the conditions of this contract, she shall be delivered and taken over as she is at the time of inspection, fair wear and tear excepted.However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel's class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended with condition / recommendation* by Class or the relevant authorities at the time of delivery. “Inspection" in this clause 11, shall mean the Buyer's inspection according to Clause 4a) or 4b), if applicable, or the Buyer's inspection prior to signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

* Notes, if any, in the surveyor's report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.


12. Name /markings

Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings.


13. Buyers' default

Should the deposit not be in accordance with Clause 2, the Sellers have the right to cancel this contract, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.Should the Purchase Money not be paid in accordance with Clause 3, the Sellers have the right to cancel this Agreement, in which case the amount deposited together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, they shall be entitled to claim further compensation for their losses and for all expenses together with interest.


14. Sellers' default

Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given, the Buyers shall retain their option to cancel. In the event that the Buyers elect
to cancel this Agreement the deposit together with interest earned shall be released top them immediately.Should the Sellers fail to give Notice of readiness by the date stipulated in line 61 or fail to be ready to validly complete a ;legal; transfer as aforesaid
they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.

15. Buyer's representatives

After this agreement has been signed by both parties and the deposit has been lodged, the Buyers have a right to place two representatives on board the Vessel at their sole risk and expense upon arrival at on or about These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers' representatives shall sign the Sellers' letter of indemnity prior to their embarkation.


16. Arbitration

a)* This Agreement shall be governed by and construed according with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party's arbitrator, hat party shall appoint their arbitrator within fourteen days, failing which the decision of he single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.

b)* This Agreement shall be governed by and construed in accordance with Title 9 of the United States of America Code and Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of other the parties hereto, and nthe third by the two so chosen; their decision or that of any two of them shall be final, and for the purpose of enforcing any award, this Agreement may be made a rule of the Court. The proceedings shall be conducted in accordance with the rules of the Society or Maritime Arbitrators, Inc. New York.

c)* Any dispute arising out of this Agreement shall be referred to arbitration at, subject to the procedures applicable there.The laws of shall govern this Agreement.

* 16 a), 16 b) and 16 c) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16 a) to apply

Signed by......................................... Signed
by..........................................
for and on behalf of the Sellers for and on behalf of the Buyers

Signature.......................................
Signature........................................


Witness........................................
Witness..........................................
Occupation...................................
Occupation...................................
Address.......................................
Address....................................



Signature.........................
Signature......................


Copies
1) Sellers
2) Buyers
3) Brokers

 

 

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