Tips for designers when contracting with boat builders
On occasion, a naval architect or marine designer will directly engage a boat builder to construct a vessel. When engaging a builder to construct a boat, from the designer’s perspective it is important to ensure that there is an appropriate agreement in place that fully protects the designer’s rights. This article outlines some of the key issues to consider when entering into a construction agreement.
Build Timeframes: If there is a timeframe for delivery of the boat(s), this should be expressly specified in the agreement. Timeframes for completion of important milestones during the build should also be set out prominently so that both parties have clear expectations.
Equipment and Resources: It should be made clear in the agreement what equipment and resources are to be supplied by the builder, and which are to be supplied by the designer. If the designer is to supply equipment or materials, the agreement should cover this usage. Storage of materials (and the vessel itself) can also be important to cover, especially where weather-sensitive parts are involved. This should include a requirement that the vessel/parts must not be stored at a location separate from the builder’s premises.
Intellectual Property: Intellectual property is a vital asset for designers, and should be managed carefully. Copyright (and any other intellectual property rights) in the design of the vessel should be clearly addressed in the agreement. Any licence to the builder should be clearly defined. If the engagement may result in new intellectual property being created (by either party), it is important that the agreement expressly covers this.
Royalties: The Agreement should detail royalties payable to the designer, usually on a per boat basis. The royalty is usually paid in full at the completion of the hull of the vessel, and should be payable whether or not the boat building contractor receives any immediate payment for the vessel.
Access: If the boat(s) is being built on the builder’s premises, it is important that rights to access and inspect the boat are included in the agreement.
Project management: A clear disclaimer of responsibility for project management by the designer should be included in the agreement to avoid any possible liability for mismanagement of the boat building process at a later date.
Delivery, Risk and Insurance: The agreement should record the delivery condition, and seaworthiness testing should be completed. Acceptance of the boat(s) should not be given unless tests have been completed. Risk should only pass to the designer upon delivery of the boat(s). The builder should be required to insure the vessel for the duration of the build.
Security Interests: Registering a security interest over the boat(s) under the Personal Property Securities Act 1999 assists the designer in retaining some control over uncompleted boats, and enables enforcement of royalty entitlements. Registration of the security interest on the Personal Property Securities Register should be carried out as soon as possible, especially if the designer has concerns regarding the cash flow of the builder.
Health and Safety: The contract should record the builder’s health and safety obligations and the designer’s status under relevant laws.
Builder Warranties: The agreement should specify warranties appropriate to the nature of the services performed e.g. a warranty to perform the contracted services to meet certain classifications, rules and regulations, in accordance with any instructions given by the designer.
Indemnity: A clause requiring the builder to indemnify the designer for misuse of the designer’s intellectual property may also be appropriate.
Confidentiality: Unfortunately, there is limited copyright in industrially applied designs (usually 16 years). For this reason, it is important to specify that all copyright and other intellectual property is confidential and must not be used without licence, in perpetuity.
Dispute Resolution: Putting in place an appropriate mechanism for resolving disputes can be advisable to save both time and cost should a dispute arise.
The specific terms of a boat building agreement should always be carefully considered and tailored to the specific situation.
This article is provided to assist clients to identify legal issues on which they should seek legal advice, and by its nature cannot be comprehensive and cannot be relied on as advice. Please consult the professional staff of Clendons for advice specific to your situation.
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