Key takeaways
SALEFORM 2025
This new standard form contract for vessel sale and purchase follows the structure of the widely used SALEFORM 2012
Changes to SALEFORM 2012
SALEFORM 2025 reflects changes in vessel sale and purchase practice and developments in regulatory and compliance requirements.
Adoption of SALEFORM 2025
The new standard form is likely to be rapidly and widely adopted as the basis for vessel sale and purchase transactions.
Over the years, the SALEFORM standard form contracts have become a mainstay of ship sale and purchase transactions. Now, in the first major update to the widely used SALEFORM 2012, the Norwegian Shipbrokers’ Association and BIMCO have adopted SALEFORM 2025.
The updated edition reflects a number of significant developments in industry practices and also heightened regulatory and compliance requirements applicable to vessel sale and purchase transactions since SALEFORM 2012 was launched more than decade ago.
This article provides a brief overview of revisions that have been made in SALEFORM 2025.
Escrow arrangements for the deposit and a new termination right
The deposit mechanism has been revised to move away from a traditional (and increasingly infrequently used) joint account structure to an escrow agent/escrow agreement arrangement.
In line with this, the deposit lodging timings are now expressly linked to: (i) both the SALEFORM 2025 and the escrow agreement being entered into and exchanged; and (ii) the escrow agent confirming in writing that it is ready to receive the deposit from the buyers.
Consistent with the revised escrow agent/escrow agreement arrangement, the deposit provisions now incorporate the requirement for buyers and sellers to provide the escrow agent with all 'know-your-customer' and anti-money laundering documentation required by the escrow agent.
Furthermore (as a significant new option) the parties are given the means of incorporating a new (without liability) termination right linked to the escrow agent not (within a set period) confirming that it is ready in all respects to receive the deposit.
Alternative payment mechanisms
In addition to retaining (as the default position) the payment mechanism that will be familiar to those that have used previous iterations of the SALEFORM, the SALEFORM 2025 now incorporates two new optional alternatives.
These new alternatives provide for pre-positioning of funds by the buyers by, prior to the day of delivery, either:
remitting funds to the escrow agent (to be held by escrow agent to buyers’ order), or
remitting funds to the sellers’ bank (to be held by sellers’ bank to buyers’ order) using conditional SWIFT payment instructions.
Revisions to the Inspection and Notice of Readiness provisions
The SALEFORM 2025 retains the SALEFORM 2012 drafting in relation to transactions where the vessel is inspected and accepted by the buyers prior to entry into the SALEFORM. In relation to transactions where the buyers will not inspect the vessel or the buyers’ inspection of the vessel is to occur only after entry into the SALEFORM, the revisions in the SALEFORM 2025 have sought to clarify arrangements.
The provisions governing the Notice of Readiness (NOR) now provide that NOR may only be issued when the vessel is at the place of delivery location and physically ready for delivery. They further provide that failure to tender a valid NOR by the Cancelling Date constitutes a breach of the agreement by the sellers.
Dive inspection/drydocking and spare, bunkers and other items
The revisions made to the dive inspection/drydocking provisions and the spares, bunkers and other items provisions, have sought to address several (though not all) of the issues that parties frequently seek to resolve when negotiating a SALEFORM 2012.
Delivery documents and closing
Reflecting the changes in industry practice since SALEFORM 2012 was adopted, the SALEFORM 2025 provides for documentary closing meetings to be virtual and for the electronic transfer of delivery documents with certain originals to follow.
The list of delivery documents has also been updated, including to reflect that certain documents are not applicable when there is no change in flag state. Whilst the revisions to the closing process and delivery documents lists offer a more contemporary framework, the provisions will still need to be carefully considered for each sale and purchase transaction.
Regulatory and compliance requirements
In recognition of the increase in regulatory and compliance requirements since SALEFORM 2012 was adopted, SALEFORM 2025 incorporates several new clauses addressing anti-bribery and corruption, sanctions, emissions trading schemes and FuelEU Maritime (the latter two adopting recently published standalone BIMCO clauses and as such will be familiar to those with recent vessel sale and purchase experience).
Ready for widespread adoption
Whilst extensively updated to reflect developments in the shipping industry and increased regulatory and compliance requirements, the SALEFORM 2025 is a contract that has been drafted with a clear recognition of the value of maintaining a familiar form.
It is expected that this familiarity of form (unlike, for example, the approach taken in BIMCO’s other relatively recent vessel sale and purchase contract, SHIPSALE 22) will contribute to the rapid and widespread adoption of the SALEFORM 2025. That said, as with its predecessors in the SALEFORM series, the SALEFORM 2025 will require careful review and should be appropriately amended (including in relation to some of its new provisions) by parties to fit the requirements of specific vessel sale and purchase transactions.
