Lay-up contracts

ITIC has seen a sharp increase in the number of lay-up contracts that we have been asked to review. Some of these lay-up agreements are based on an amended ship management contract where the manager acts as agent for and on behalf of the owner. Other agreements have the manager offering lay-up services to the owner as a principal rather than as agent.

Where the manager offers these services as an agent of the owner, he will arrange for the appropriate anchorage to be sourced and also arrange for the maintenance and repair of the vessel. However, if the manager contracts to undertake the maintenance and repair of the vessel rather than arrange for those services, the contractual relationship between the owner and the manager changes completely. In those circumstances, the manager is taking on the role of a contractor and therefore may require ship repairers’ liability insurance in the event that anybody, who is actively engaged in the maintenance and repair of the ship on behalf of the ship manager, causes damage to the ship. Such maintenance and repair insurance is available but it may be substantially more expensive than your existing professional indemnity insurance. As such, ITIC recommends that any lay-up contract is reviewed by your solicitors before sending it to us for further review.