“The Dark Side of Shipping”

DEMOLITION

C.P. ORPHANOS

INTRODUCTION Merchant ship may change ownership several times at some point she will be sent to the ship-breaker

Average lifetime of vessel 20-25 years but can be much longer depending on market conditions, care from owner and type of trade

No exceptions for single hull tankers after 2015

Some owners prefer to scrap to avoid being sold to a competitor, could be a tax advantage

Ship for scrap barest conditions for seaworthiness and cargo worthiness. Class must be maintained or issued on the way to thegrave yard

IF, ship is damaged, laid up, cannot operate on her own power then she must be towed and must obtain TOWAGE CERTIFICATE. (everything welded shut tight and water tight)

4

MEASURMENTS

Measuring the Ship’s size / Carrying Capacity:

GRT (Gross Registered Tonnage) / GT (Gross Tonnage)NRT (Nett Registered Tonnage) / NT ( Net Tonnage)

Whereas:“Gross” – being the total enclosed space – including machinery & accommodation

“Net” – just the total space for cargo – excluding machinery & accommodation

Still being used for calculating canal dues and passenger vessels…

6

Displacement Tonnage

“DT” – Displacement Tonnage The actual loaded displacement of the ship. Useful in measuring Navy ships.

Light displacement

“LT” – Light TonnageIs the actual weight of an empty ship, its ‘metal content’, useful in scrapping.

Deadweight

“DWT” & “DWAT” – Deadweight All ToldTotal carrying capacity of vessel incl. max. bunkers, stores, etc

or“DWCC” – Deadweight Cargo Capacity Same as above but provisions may fluctuate, thus cargo size

Note: Deadweight is the difference of DT less LT

THE SHIP-BREAKER’S WORK PLACESome countries where demolition done:

United States, U.K., Denmark, Korea, Taiwan, India, Pakistan, Bangladesh, China, Turkey and other small yards usually non-competitive

Most done in 3rd world countries cheap labor and less concern for environment

Just a stretch of sandy beach

Buyer removes anything they can sell in the second hand market:

electric generators, crew accommodation, from galley

Precautions that need to be taken for tankers is they have to be gas-freed and sludge removed so that cutting torches can be used

**who is responsible for this cleaning subject to negotiation

Fuel tanks must be cleaned

Cranes or derricks may be retained as long as possible to assist in cutting out sections

THE SHIP-BREAKER’S WORK PLACE CONTINUED………..

• Some of the steel is re-melted, even steel production from raw materials needs a certain amount of scrap to help the molten steel flow

• Usually ship’s plating just sufficiently heated to re-roll it for use in other ways

• The uniformity of quality from the ship’s plates is of a higher caliber than miscellaneous scrap

• Very little capital investment and labor intensive.

• Minimum technical skill required; health hazards enormous with toxic dangers for the environment

WHY DO WE SCRAP?

Demand for steel globally to manufacture and buildi.e. cars, trains, airplanes, ships, sky scrapers, weapons,etc.

Especially important in emerging economies

General infrastructure – bridges, underground transportation facilities, rail systems

The politics and common sense from recycling “Green Policies”

TOP STEEL PRODUCERS

• India had produced 70.115 million tonne (MT) steel till November 2012, clocking 4.2 per cent growth over the first 11 months of the last year.

• The second highest growth was recorded by the US at 3.2 per cent, followed by Russia at 3 per cent. China's steel production grew by 2.9 per cent. In South Korea, it grew by 1.6 per cent.

• Barring Japan, which was hit by a super cyclone, all the major steel producing nations had staged a better show in 2011, growing by up to 17.9 per cent, compared to their January-November, 2012 performance.

• The world order of steel production is also set to remain unchanged with China at the top, followed by Japan and the US, placing India at its last year's place - fourth.

• Russia and South Korea are closely contesting to be the fifth largest steel producer in the world. Till November 2012, Russia had produced 64.763 MT steel, and South Korea, 63.497 MT.

SHIP BEACHING (VIDEO)

DEMOLITION IN ACTION

GMS WEEKLY

18

BREAK

THE OTHER SIDE OF THE COIN

BASIC PRINCIPLES OF A DEMOLITION CONTRACT From Buyers prospective what he see’s is: 86% scrap steel 7% cast iron 1% non-ferrous metals (e.g. brass, copper, bronze) 6% non-metallic materials (e.g. timber, plastics)

What dictates the price is the actual weight of metal which is the hull, machinery, boilers, water in the boilers and spare parts but excludes cargo, bunkers, provisions stores etc.

Prices quoted in usd per light displacement ton (lightweight or LDT)

Care must always be taken to check whether it is the ton of 2240 pounds our metric tons of 1000 kilograms

Or we can say 1 metric ton = to .984206528 long ton

Prudent buyers will insist on independent confirmation of ship’s light displacement from original builder’s plans or a letter from them.

Usually used is the ship’s deadweight scale or trim stability booklet

BASIC PRINCIPLES CONTINUED………

• Items included in the sale can make a big difference on the final price; e.g.

spare tail-shaft is of particularly good quality

Usually spare propeller is usually of cast iron but if made of bronze this is a bonanza

Nature of other spares like anchor needs to be checked

Cruise ships can be rich in high quality secondary materials like brass

SELECTING THE RIGHT BUYER

From Sellers prospective what he see’s is:

Identity and credibility of Buyer 100 alone in India Imagine an owner preparing to deliver the ship for scrap and Buyer fails to perform Subject to renegotiation at disadvantageous terms Making payment as foolproof as possible through Letter of Credit

LETTER OF CREDIT Buyer obliged to open LC in a bank convenient to Seller. Two parties agree documents to be submitted to bank which Seller presents to the bank at time of delivery

LETTER OF CREDIT IS IRREVOCABLE Sellers bank receives confirmation from the Buyers bank and then cash is released IRREVOCABLE means cannot be taken back Unless the LC is established and deposit has not been made within 3 banking days of signing contract the Seller

has the OPTION to cancel

BROKER REPRESENTING BUYING PRINCIPLE MUST HAVE PERFORMED DUE DELIGENCE REPUTATION EASILY DAMAGED BUT DIFFICULT TO REPAIR

THE SALE CONTRACT• SALESCRAP 87 has been standardized by the Baltic and International Maritime Council (BIMCO)

***Excellent example for studying the structure of a sale form for demolition***

Boxes 1-15 indentifiying and parties, main engine, generators, spare propellers and spare tail shaft

Box 18 Price and the currency paid. The rest deals with LC’s

Box 21-25 position of ship and her place of delivery, expected readiness and cancelling date. Remaining clauses cover documentation, rates of interest in the event of default, arbitration

THE SALE CONTRACT CONTINUED………• Unlike sales for further trading bunkers remaining on board tend to take a disproportionate

amount of concern

• Bunkers become Buyers property

• Can be a useful source of fuel for the dismantling process but can be a nuisance too

CLAUSE 2: removal of Seller’s property, for example if tail shaft has to be installed after signing and before delivery it must remain on board, still recyclable

CLAUSE 3: displacement has to be verified.

CLAUSE 4: price

CLAUSE 5: deposit

CLAUSE 6: Letter of Credit—to establish fool proof method of paymentOpening bank MUST be a “first class bank”Makes contact with the Advising Bank in Sellers country

Opening bank will not accept instructions form the Buyers unless adequate funds Advising bank will not accept instructions unless satisfied that opening bank 1st Class Sellers can’t collect money until documents presented and ship in fact has reached Buyers Buyers cannot withhold payment if L/C satisfied

• CLAUSE 7,8 &9: where ship is and how she will get to where she is going. Sometimes near enough is good enough. Actual delivery.

• CLAUSE 10,11&12: cancelling date procedure should ship be delayed. Keeping Buyers fully advised of vessels progress, actual NOR. Notification to bank

**tanker would not be ready unless a certificate presented that her tanks are gas and sludge free

• CLAUSE 13,14&15: documents to be released by Advising Bank…Seller can still demand payment if bank fails to confirm receipt of the NOR. Once ship has been accepted by Buyer there should be no argument about condition of ship

• CLAUSE 16&17: regarding encumbrances, taxes, dues and charges. Though safety certificates not required.

• CLAUSE 18 : Deratisation Certificate demanded due to risk of disease like Bubonic Plague

• CLAUSE 19,20: Buyers reps on board. And prevention from a scrap buyer to further trade ship in order to avoid competition. Obliges Buyer to proceed with scrapping

• CLAUSE 21,22&23:

Exemptions preventing delivery

Buyer’s Default

Sellers Default

• CLAUSE 24: Deals with arbitration. Also deals with safety and health issues for demolition workersleading to the Industry Code of Practise on Ship Recycling.

BIMCO has revised SALESCRAP 87 and renamed it to DEMOLISHCON

APPENDIX 13

TURNED OUT TO BE INEFFICIENT…HENCE….• DEMOLISHCON 2004

DEMOLISHCON 2004Chapter 10

OTHER SALE FORMS FOR DEMOLITION BIMCO standard form is by no means universal

Different buying areas can have various favored terms

Not only will different ship breaking areas tend to favor certain forms but individual breakers may include special clauses to suit their needs

THE DEMOLITION MARKET Specialized and different than second hand for further trading

Ships are being demolished continuously; as soon as one ship is demolished another ready to occupy berth

Breakers can take a bigger bite than they can chew and have to digest, often depends on fluctuation of prices as well

BULK CARRIERS SCRAP VALUES

2,7

3,56

5,2

7,44

6,5

7,8

9,4

5,4

6,6

9,2 9,2

8,2

1,74

2,3

3,35

4,8

4,19

5,03

6,06

3,48

4,26

5,93 5,93

5,29

1,1

1,46

2,12

3,04

2,64

3,12

3,76

2,16

2,64

3,483,64

3,24

0

1

2

3

4

5

6

7

8

9

10

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Capesize Scrap Value $ Million Panamax Bulker Scrap Value $ Million Handysize Bulker Scrap Value $ Million

TANKERS SCRAP VALUES

4,51

5,91

9,05

12,46

10,42

14

17,42

9,73

11,61

16,7316,39

14,34

3,22

4,32

6,6

9,36

7,92

9,84

12,6

6,84

8,16

11,88 11,64

10,32

1,141,53

2,34

3,322,8

3,48

4,46

2,422,89

4,21 4,123,66

2,28

3,06

4,68

6,63

5,61

6,97

8,92

4,84

5,78

8,42 8,24

7,31

0

2

4

6

8

10

12

14

16

18

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

VLCC Scrap Value $ Million Suezmax Scrap Value $ Million MR Tanker Scrap Value $ Million Aframax Scrap Value $ Million

DEMO QUESTIONNAIRE NO. PARTICULAR DETAILS

1 Vessel Name and Type M/V JAIKURI / GENERAL CARGO - BULK2 Type GENERAL CARGO3 Light Weight (LDT) in Metric or Long ton 5597 MTS4 Place & Year Built SPAIN 1977 DELIVERED

5 Length Overall x LBP x Breadth x Depth 159 M6 Draft of the Vessel (FWD/AFT) F:- 3.5M / A:-5.5M APPROX7 GRT/NRT (International) 12474 / 7754

8 PARTICULAR DETAILS

(i) Main Engine (Make, Model, BHP, Present working Condition) A.E.S.S SULZER 6RND 68 / 9900 HP- GOOD WORKING CONDITION CONPITION

(ii) Auxiliary Engine 3(iii) Generator(s) (Number, Make, Model, Kw/KVA, Volts, HZ, AC/DC) MAN 3 x 450 . 50 HZ / 60 HZ AC(iv) Emergency Generators VOLVO / CATERPILLAR / 410 KVA EACH

9 PARTICULAR DETAILS(i) Working Propeller (Please confirm Material and weight of the same) BRONZE / 4 TONS APPROX(ii) Spare Propeller (Please confirm Material and weight if present) TO ADVISE(iii) Spare Anchor ONE(iv) Spare Tailshaft TO ADVISE

10 Location of Ballast Tanks FP. 1 PS + STBD / 2 PS + STBD / PS + STBD / 4PS + STBD / 5PS + STBD / AP(FW)

11 Ballast Tanks Coated YES12 Permanent Ballast (Material, Weight, Location) NIL

13 Under own power or undertow UNDER TOW14 Delivery Dates PROMPT AT SALALAH / OMAN 7-8 /04/201115 Last Port of Discharge

16 Last 5 cargoes carried by the Vessel CEMENT , SUGAR STEEL PILLETS , TIMBER , GEN. CARGO

17 Any Removals 18 Any Exclusions19 Any Conversions to the vessel ? (if yes, please answer the following) NO(i) Type of vessel prior conversion ///(ii) Date converted, ///(iii) LDT proofs of before and after conversion confirming new LDT ///20 Damages ///21 Any Damages to the vessel (especially those affecting the ligthship) ///

22 Welded / Riveted ///23 Vessel is Single / Double Skinned24 Single Bottom / Double Bottom Tanks DOUBLE BOTTOM25 Any Side Tanks NO26 Vessel been laid up in last three (3) years? (When/Where/How Long)

27 Present Class of the vessel UNIVERSAL SHIPPING BUREAL28 Bunkers ROB upon delivery TO ADVISE29 Other Special Items (Aluminum / Stainless Steel onboard the vessel) MAY BE

30 Permanent Ballast - Material, Weight and Location NOGeneral Arrangement Plan TO FOLLOW ADDITIONAL INFORMATION

Flag / Port of Registry Panama / PanamaDeadweight SDWT 20, 712 TS --- DRAFT 9.764Holds / Hatches 5 / 5Derricks / Crane D= 2 X 5 TS / CRANES 4 X 12.5 TSDraft S:- 9.764 / T:- 9.983 M / W :- 9.556 MClass UNIVERSAL . SHIPPING BUREAU / PANAMATRADING HISTORY MED. SEA ARABIN SEA W.COST. INDIABUNKERS ROB AT PRESENT TO ADVISE

VESSEL DETAILS FORM

MEMORANDUM OF AGREEMENT Dated: June 2012 This agreement is made between: (hereinafter called the “Sellers”)

and, Dubai Trading Agency Ltd. Or their nominee

(hereinafter called the “Buyers”) That the Sellers agree to sell and Buyers agree to buy on the following terms and conditions the (Hereinafter called the “Vessel”). Classification : Built : Port of Registry : Flag : GRT / NRT : IMO NO : 1. PRICE The purchase price on a delivered at a safe outer anchorage at Alang, West Coast India is USD .00 less Buyers 3 per cent address commission per long ton of Light Displacement tonnage. The Light Displacement tonnage, strictly excluding any permanent ballast, constants & circulating liquids is net Metric Tons Long tons. The total gross purchase price hence being USD (United States Dollars Hundred and Thousand Hundred and and cents only) delivered at official Outer Anchorage Alang, West Coast. 2. BASIS OF PAYMENT The Buyers are to pay 30% 20% cash deposit to be lodged into the following account within 3 (three) Singapore/London/ New York banking days after both parties signing of this agreement by fax/email: Interest if any, to be for the Buyers account. ***************** The balance (70%) 80% of the said purchase price, (less Buyers address commission which shall be deducted at source) shall be paid by Swift and / or telegraphic transfer to Sellers account together with the release of the aforesaid deposit. Such payment is to be effected within maximum 3 (three) Singapore/London/ New York banking days after the time the Sellers (or their local agents) have tendered the final Notice of Readiness for delivery at delivery port as per the MOA and in exchange of the documents enumerated in Clause 3, herein.

3. PAYMENT PROTOCOL At the time of closing the balance 70%, less Buyers address commission which shall be deducted at source, shall be paid to Sellers account as per clause 2 herein within 3 (three) Singapore/London/ New York banking days after Sellers tendering the final Notice of Readiness at the port / place of delivery as per Clause 5 and in exchange of the following original documents in favour of Buyers which shall be in English or accompanied with a certified English translation (if in any language other than English). A) Signed Commercial Invoice in triplicate giving full description of the Vessel as per clause no. 13 of the

MOA and certifying the purchase price as USD (United States Dollars Hundred and Thousand Hundred and and cents only).

B) Legal Bill of Sale transferring title of the Vessel to the Buyers and specifying that the Vessel is free from

all encumbrances, maritime liens, debts taxes and mortgages or any other claims of whatsoever nature the said Bill of Sale to be notarially attested by the appropriate authorities.

C) Certificate from the Sellers guaranteeing that the Vessel at the time of delivery to the Buyers is free from all encumbrances, loans & debts, bank mortgages, insurance / charter claims, port/ court dues, crew wages maritime and other liens, claims or liability of any nature and that Sellers indemnify the Buyers of the consequences of any such claims arising prior to the time of delivery of the Vessel to the Buyers.

D) A written undertaking from the sellers to apply and provide a certificate of Deletion of the Vessel at their

expenses from the Vessel’s Present Registry, promptly after delivery of the Vessel but not later than 4(four) weeks, to the Buyers.

E) Original transcript of registry from Vessels present port of registry certifying the Sellers to be the present

owners of this Vessel and further stating that the Vessel is free from registered mortgages, liens or other encumbrances and same to be dated not earlier than 10 (ten) 5 (five) banking days prior to the estimated date of physical delivery of the Vessel tendering NOR to the Buyers. A copy of this certificate should be provided to the Buyers at the time of tendering NOR.

F) Copy of Vessel’s Port of Registry certificate.

G) A protocol of delivery and acceptance, stating the exact time and date of delivery, to be signed by the Buyers and the Sellers representatives at the place of closing and respectively, in exchange of the documents.

H) Sellers’ board resolution in which they authorize the sale of the Vessel to the Buyers and a Power of

Attorney both duly notarized, and signed by the Sellers, authorizing person to sign the required documents on behalf of the Sellers.

Draft copies of the all the above mentioned documents (A-H) to be faxed/emailed to the Buyers for their acceptance along with 1(one) 5 (five) day’s notice of expected time of arrival of the Vessel (as mentioned in Clause 5). 4. DELIVERY OF THE VESSEL The Sellers shall deliver and the Buyers shall take delivery of the Vessel on an “as is” basis safely afloat, free of cargo and charter free, at official Outer Anchorage Alang, West Coast under her own power, in the Sellers’ option not before 10th July 2012 and not later than 25th July 2012 in Sellers’ option, with 25th July 2012

canceling date in the Buyers’ option but in any event, within 3 (three) Singapore/London/ New York banking days of the Sellers tendering the final notice of readiness, which to be tendered prior to above canceling date. In the event the Vessel is not ready for delivery within 25th July 2012 (canceling date in Buyers’ option) then the Buyers shall have the option to either maintain or cancel this contract, which option shall be declared by the Buyers within 2 (two) working days of Sellers such notification in writing to Buyers. In case the Buyers fail to declare their option within 2 (two) working days then the canceling date shall be automatically extended to the date so proposed by the Sellers which to be mutually agreed by Buyers and Sellers and the same notification shall apply as with the original canceling date. In the event the Buyers opt to cancel the agreement then the deposit to be immediately returned back to the Buyers along with the interest accrued. The Vessel is to be delivered during business hours of a local (India) working day. The Sellers warrant that at the time of delivery all main machinery including main engine, and all generators, auxiliaries, navaids, windlasses, anchors on board the Vessel to be intact and in working condition (but not necessarily to the maximum output/capacity). The Vessel will be delivered with everything on board including remainder of bunkers, lube oil, fuel oil, together with all outfit, equipment and unbroached machinery (if any), tools and instruments and unused stores on board belonging to the Vessel at the time of delivery but excluding the following only:

- Any proprietary items belonging to the Seller - Any rental items belonging to the Seller (Please list)

Otherwise without removals. Owners warrant that the vessel has not undergone any conversions or modifications. 5. NOTICE The Sellers shall give Buyers 10 (Ten), 7 (Seven), 5 (Five), 3 (Three), 2 (Two) day’s notices of the expected time of arrival of the Vessel and one (1) day’s definite time of arrival. The Sellers shall issue the Notice of Readiness for delivery only after the Vessel has arrived at a safe anchorage, official Outer Anchorage Alang, West Coast India and she is in all respects ready for physical and documentary delivery as per this M.O.A. The vessel shall be deemed ready for delivery at place of delivery upon arrival of the vessel, and after the vessel is ready in all respects for physical and documentary delivery as per this agreement when sellers’ agents tenders the Notice of Readiness to the Buyers / Buyers agent / Nominated representative at the port of delivery by written notice, e-mail, or telefax. Notice of Readiness to be tendered during normal business hours of a working day (excluding Saturdays, Sundays, local, National and bank holidays). The Notice of Readiness should be served on the Buyers during local business hours of a working day at the port of delivery. The Notice of Readiness shall be accompanied by the following certificates, Items I and VI being provided By a reputed, licensed, and independent surveyor as appointed by sellers. I. Port worthy Certificate Certificate issued at the port of delivery confirming the net LDT of the vessel is Metric tons, equivalent to Long tons, as per original lightweight evidence mentioned here below. a. Original Trim and Stability Booklet and or Original Capacity plan there will be no deduction for any circulating liquids (constants) if found in the system, unless same are mentioned in the trim and stability booklet. Permanent ballast is not to be included in the LDT. In the event that there are conflicting proofs of ldt, the lower ldt to prevail. If there is ldt proof showing breakdown with

gross and net, net to prevail. Permanent ballast, the weight of removals, insulation, constants, fluids and or liquids in system shall not be included in the ldt amount. II. Letter signed by the sellers or their agents stating the master and the crew have no further claims against the vessel or her owners, at the time of delivery. III. A letter from the sellers that Seller’s Agents at the port of delivery have no further claims against the vessel or her owners, at the time of delivery. IV. Desk Review. V. Permission or approval to beach from the GPCB/GMB to be obtained by the Buyers and Sellers agents together. The Sellers undertake that they will provide information for the “Desk Review” and the “Inventory of potentially Hazardous Materials on board” as soon as practically possible prior to the anticipated date of arrival of the vessel at the place of delivery. Buyers and Sellers shall use their best endeavors to cooperate with the GPCB and/or other authorities (that may vary from time to time) to obtain such GPCB approvals or other approvals as may be imposed by Indian authorities prior to beaching. VI Gasfree for hotwork certificate issued by a local authorized chemist/authorities It is understood and agree by both parties that the documents specified in I to V above are all the Sellers Need to provide. Any additional local certificates or requirement by the port authorities shall be the Buyers’ responsibility and shall not delay the delivery of the vessel. 6. PHYSICAL DELIVERY The Sellers shall deliver physical possession of the Vessel to the Buyers as specified in Clause 4 hereof. At the time and place of such delivery, Sellers shall execute and furnish to the Buyers a delivery certificate specifying the date, time and place of physical delivery of the Vessel and the Buyers shall execute and furnish to the Sellers a receipt acknowledging such delivery. 7. ENCUMBRANCES The Sellers warrant that the Vessel at the time of delivery is free of all encumbrances, debts, taxes, maritime liens, mortgages / bank mortgages, insurance / charter claims, port/ court dues, arrests, crew wages and any other claims of whatsoever nature. Should any claims, which have been incurred prior to the time of delivery be made against the Vessel, Sellers hereby undertake to indemnify the Buyers against all consequences of such claims. 8. LOSS OR C.T.L. Should the Vessel become a total or constructive total loss prior to delivery, the deposit referred to in Clause 2 herein, shall be immediately be returned to the Buyers together with accrued interest and this agreement shall be considered null and void. 9. BEACHING ASSISTANCE Following payment and physical delivery of the Vessel, Sellers shall assist the Buyers in beaching the Vessel by providing the help of their Master, 7 (Seven) crew mainly belonging to the engine room including chief engineer, and two oilers for up to the next beaching tide after physical delivery but at all times not to exceed 7 days after physical delivery.

Beaching is to be carried out at the Buyers risk and expense, and all inward clearance costs up to the time of delivery are for the Sellers account. Should the Sellers crew members be required in excess of the above period, then the Buyers to have the right to maintain them for further maximum 7 (Seven) days at the rate of USD 4000/- (Four Thousand Only) per day. The Sellers shall pay the wages, and keep these crew members insured, for the whole period. The Vessel is to be delivered with sufficient useable/pumpable bunkers, lube oil, fresh water and provisions for minimum 6 (six) days lay-up and 1 (one) day steaming. 10. GENERAL TERMS A) The Sellers shall furnish the Buyers with a copy of the Light Displacement tonnage proof i.e.builder's

yard capacity plan with deadweight scale showing the vessel's lightweight in addition to present and ex names and trim and stability booklet and loading manual showing the vessel's lightweight in addition to present and ex names stamped by the register of shipping, which to be proven by the original document stamped by class on board the Vessel. This copy documentation is to be provided to the Buyers, by courier, within 10 days from the signing of this contract, but in any event no later than seven days prior to tendering NOR.

B) The Sellers at time of delivery are to hand over all the certificates and plans whether valid or invalid on board to the Buyers and Sellers are to allowed to keep the original registration certificates and original radio license and log book and any other certificates as may be required to obtain the Deletion Certificate but copies of the same to be given to Buyers.

C) All cost relating to the Sellers’ flag at the port of delivery such as pilotage, crew repatriation and Sellers’ agent fees are to the account of the Sellers.

D) Any taxes, charges or expenses, whatsoever, connected with the purchase of the Vessel in Alang, shall be for the Buyers’ account.

E) The Buyers have waived their right to inspect the Vessel and her records, therefore this sale is outright and definite subject only to terms and conditions and exceptions herein.

11. DEFAULTS A) Should the deposit not be paid as aforesaid the Sellers have the right to cancel this contract in which case

the Sellers shall be entitled to claim compensation for any proven loss and for expenses together with interest at the rate of 10 percent per annum.

B) Should the balance purchase price not paid as aforesaid, the Sellers have the right to cancel this contract

in which case the amount deposited together with interest earned, if any, shall be forfeited to the Sellers. If the deposit does not cover Sellers losses they shall be entitled to claim further compensation for any proven loss and for proven expenses together with interest at the rate of 10 percent per annum.

C) If the Sellers fail to execute the legal transfer or to deliver the Vessel with everything belonging to her

in the manner and within the time specified herein this agreement, the Buyers shall have the right to cancel this contract, In such event, the deposit in full shall be returned to the Buyers together with the interest accrued thereon.

D) If the Sellers should not be able to deliver the Vessel to the Buyers or complete the sale to the Buyers or

if the Buyers are unable to receive and accept delivery of the Vessel due to outbreak of war, restraint of governments, princes or people of any nation or the United Nations, or act of God, either party may terminate pursuant to this Clause and there shall be no liability attaching to any party or either part. And in such case the 30% cash deposit paid by the Buyers as mentioned in Clause 2 to be duly returned back to the Buyers in full along with the interest accrued thereupon.

A) This sale is not subject to the issue of any Import or Export License to either party. 12. ARBITRATION This agreement shall be governed by and construed in accordance with English law. All disputes or differences arising out of or under this agreement shall be referred to arbitration in London in English under the terms of the London Maritime Arbitrators' Association then current (the "LMAA Terms") or (in the event that the parties agree in writing that the value of any such dispute or difference is less than US $50,000 (United States Dollars Fifty Thousand)) the terms of the London Maritime Arbitrators' Association Small Claims Procedure then current (the "LMAA Small Claims Procedure"). In the absence of written agreement as to the value of any such dispute or difference as envisaged hereunder, the parties shall apply the LMAA Terms. Any decision or award of the appointed arbitrators under the LMAA Terms or the LMAA Small Claims Procedure shall be final and binding upon the parties. The following provisions shall apply in relation to any arbitration proceedings under this Agreement to which the LMAA Terms (rather than the LMAA Small Claims Procedure) shall be applied:

(a) Unless the parties agree upon a sole arbitrator, one (1) arbitrator shall be appointed by each party. The arbitrators so appointed shall appoint a third arbitrator and the reference shall be to a three (3) man tribunal thus constituted.

(b) If either of the appointed arbitrators refuses to act or is incapable of acting, the party who appointed him shall appoint a new arbitrator in his place. If one party fails to appoint an arbitrator, whether originally or by way of substitution, within two weeks of the other party (it having made its appointment) requiring such party to do so (by fax or letter), the President for the time being of the London Maritime Arbitrators' Association shall, upon application of the other party, appoint an arbitrator on behalf of the defaulting party and that arbitrator shall have the like powers to act in the reference and make an award (and the like duty in relation to the appointment of a third arbitrator) as if he had been appointed in accordance with the terms of this agreement.

(c) If, for any reason, any two arbitrators appointed by the parties in accordance with Section

13(a) (or appointed by the President for the item being of the London Maritime Arbitrators' Association as contemplated in Section 1(b)) fail to appoint a third arbitrator as contemplated in Section 1(a) within fifteen (15) banking days of the appointment of the second one of them then, on the application of either party, the President for the time being of the London Maritime Arbitrators' Association shall appoint a third arbitrator on behalf of the arbitrators and the parties and the arbitrator so appointed shall have the like powers to act in the reference and make an award as if he had been appointed as the third arbitrator in accordance with the terms of this agreement.

13. VESSEL DESCRIPTION The Vessel is described as follows :

Vessel Name IMO Number Type of Vessel Deadweight Exact GRT / NRT Year of Construction

Yard and Country of Construction Flag and Port of Registry Whether mainly welded construction Does the vessel have any permanent ballast Lightweight of vessel and how same to be proven Reefer space (Please clarify volume and insulation material What is the exact material of working propeller Is vessel equipped with spare propeller Is the vessel equipped with a spare tailshaft What is detail/type of main engine Number/Type/Size Generators Length /Breadth Extreme/Depth Moulded Light Draft Fore/Aft Class Material Deck and Cargo Lines Trading History Bunkers likely to be ROB at time of delivery Position of Ballast Tanks Whether single or double skinned in all holds Whether vessel has suffered any damage Have any conversion to the vessel taken place Whether ballast tanks originally coated to the best of sellers' knowledge, the ballast tank were originally coated. However, the sellers have evidence of same and can give no guarantee as to whether there are any traces or visible signs of coating left If any heating coils - type of material If cargo tank coated - type of material To the best of sellers' knowledge, the cargo tanks were originally coated. However, the sellers have evidence of same and can give no guarantee as to whether there are any traces or visible signs of coating left Gas free condition on delivery Is there any mortgage attached

Any derricks All the above details are given without any guarantee, including the information appearing beside the headings “Lightweight”, “Material of Working Propellers” and “Capacity of Generators”, the Sellers make no representation or warranty and offer no assurances as to the accuracy, currency or completeness of the information given as this is based on information provided from the plans/manuals of the Vessel as drawn up by the ship yard at time of construction. Copy of the relevant information on board the Vessel has been provided to the Buyers from the trim and stability booklet and or capacity plan and or loading manual and same has been accepted by Buyers, furthermore Sellers have also provided information to hand relating to any stainless steel on board and same also been accepted by Buyers. These details are accepted by the Buyers on without recourse basis. 14. The sale is to be kept strictly private and confidential and the Sellers to guarantee that under no circumstances would they disclose the financial details of this deal to any Agent/Surveyor/End-buyer at delivery port. Even if they are required to fax the copy of this M.O.A. to their local Agents at delivery port for local formalities then the same to be faxed with all financial details (price, commission, deposit, balance purchase price, etc.) duly erased. 15. All notices, written or telegraphed, shall be addressed to the following : The Sellers : The Buyers : Alliance sale and purchase. Alliance sale and purchase Email: sandp@alliancetanker.com Email: sandp@alliancetanker.com 16. In witness thereof the parties have executed this contract, in 2 (two) originals, in their names and by their respective officers, agents or representatives, duly authorized. 17. Upon Vessel’s arrival at the place of delivery the Buyers shall be allowed to place up to 8 (Eight) watchmen on board the Vessel at the Buyers sole risk and expense and without any interference to the Vessel’s normal operation and the Buyers watchmen shall sign Sellers standard P & I Indemnity form, if so required. 18. Sellers are not obliged to meet new local formalities that have been enforced after the time of signing the Memorandum of Agreement or any new documents required. Such new formalities/documents required will therefore not affect the delivery of the Vessel regardless if provided by Sellers or not.

THE SELLERS : THE BUYERS :

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ESSAY QUESTION LESSON 6What type of arrangement is made with a first class bank in order to

facilitate the purchase of a vessel for scrap?

Assume you are the broker for a ship breaker for whom you have received an indication of a ship which owners wishes to sell for scrap. The ship in question is a motor tanker of 7500 tons light displacement which has a bronze working propeller and a spare cast iron propeller.

The ship may proceed to breakers yard under her own power.

Compose a firm offer, with very brief explanation for each of the terms of the offer.