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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 and
void.
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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