Ship sale and purchase (S&P) is the secondhand transaction by which ownership of a vessel passes from seller to buyer against payment of an agreed price. A handysize bulk carrier in 2024 changed hands for between USD 18 million and USD 32 million; a modern VLCC traded at USD 80 million to USD 120 million; a newbuilding LNG carrier exceeded USD 260 million. The transaction is documented by a Memorandum of Agreement (MOA), a contract that has evolved from short bespoke documents into standardised forms, of which the Norwegian Saleform is the most widely used in the international market. The brokerage commission on a typical S&P transaction runs at 1% of the purchase price, split between the seller’s and buyer’s brokers: at USD 30 million, that is USD 300,000 per side, computed easily with the brokerage commission calculator.
The S&P market and its participants
The secondhand market is the principal mechanism by which shipping capacity rebalances between segments and between geographic markets. Vessels move from owners who want to exit a trade to owners who want to enter it, from older-fleet operators willing to take on maintenance risk to younger-fleet operators who need tonnage fast.
The principal participants are the shipowner-seller, the shipowner-buyer, and the sale-and-purchase brokers acting for each. S&P brokers are distinct from chartering brokers: S&P brokerage is transactional, focused on the sale, rather than the ongoing relationship of a chartering broker. The leading S&P broking houses include Clarksons, Braemar, BRS, BIMCO-affiliated firms, and a large number of regional firms in Greece, Japan, Korea, Norway, and Singapore.
The brokers negotiate the commercial terms: price, deposit percentage, delivery range, inspection rights, and any special conditions. Once the parties agree, the broker issues a recap, a one-page summary of the agreed terms. The recap is the commercial foundation; the MOA follows within a few days, incorporating the recap terms. In the London and Norwegian markets the recap is typically expressly stated to be subject to formal MOA, so the contract is formed only on execution of the MOA. In some Asian markets the recap may itself constitute a binding contract; parties should specify clearly.
The Memorandum of Agreement
The MOA is the transaction document. SALEFORM 2012 (published by the Norwegian Shipbrokers’ Association and adopted by BIMCO) is the market-standard form for secondhand sales. It runs to 19 clauses, with standard annexes for the bill of sale, the protocol of delivery and acceptance, and the deposit holder’s confirmation. BIMCO SHIPSALE 22, published in January 2022, is a newer all-BIMCO alternative that covers similar ground with updated provisions on electronic documents, sanctions compliance, and anti-corruption. Most transactions still use SALEFORM 2012 as the base, with rider clauses to address specific commercial points.
Both forms are governed by English law as the default, with London arbitration under LMAA terms as the default dispute-resolution mechanism. Parties regularly choose Singapore law and SCMA arbitration instead, particularly for transactions involving Asian sellers or buyers. New York law is occasionally chosen for transactions involving US-flag vessels or US financial institutions.
The purchase price and Clause 1
The purchase price is stated as a lump sum in US dollars, to be paid in full at delivery. Unlike most real-property transactions, a ship purchase does not have a tiered or deferred payment structure in SALEFORM 2012; the balance is due simultaneously with delivery of the documents. The price is “clean” in the sense that it excludes bunkers, lubricants, and spare parts, which are priced separately at delivery.
The deposit and Clause 2
Clause 2 sets the deposit at 10% of the purchase price, payable within three banking days of the date of the MOA into a joint account or to an agreed deposit holder. The joint account is typically held at a major bank on terms agreed by both parties. Neither party can withdraw the deposit without the other’s consent, except as provided in the MOA: the seller receives it on buyer’s default, the buyer receives it (with interest) on seller’s default.
The deposit is genuinely a security mechanism, not a down payment. Title does not pass on payment of the deposit; it passes only on delivery. The deposit holder’s role is quasi-fiduciary: the deposit holder cannot take instructions from one party alone to release the funds. In practice, the deposit holder is often the seller’s shipbroker, a P&I club, or a major bank, and the holder’s confirmation confirms the terms on which it will release the deposit.
For context, on a USD 50 million transaction a 10% deposit is USD 5 million. The balance of USD 45 million is due at closing, typically funded from a ship-finance facility. Lenders providing acquisition finance will require a mortgage over the vessel as security, to be registered under the flag immediately at delivery. The interface between the MOA closing and the mortgage registration is managed through a closing memorandum agreed between the buyer’s lawyers and the lending bank’s lawyers. The asset depreciation schedule calculator is relevant where lenders require a depreciation analysis to underpin the collateral value over the loan tenor.
Inspection rights and Clause 4
SALEFORM 2012 Clause 4 gives the buyer a right to inspect the vessel and the vessel’s records. The inspection covers: the classification records held at the class society (survey reports, recommendations, conditions of class, port state control detention history), the statutory certificates, the oil record book, the garbage management record book, the ballast water record book, and any relevant hull and machinery survey reports.
The physical inspection is typically conducted with the vessel alongside or at anchor, and with the main engine running (or after a hot test). The buyer’s superintendents, surveyors, and (where a lender is involved) the bank’s approved surveyors all attend. The buyer must either accept or reject the vessel following inspection. SALEFORM 2012 Clause 4 provides that if the buyer fails to exercise its inspection right within the agreed period, the vessel is deemed accepted.
Notice of readiness and Clause 5
Clause 5 is the operational core of the delivery mechanism. The seller must give rolling notices of expected readiness: typically 30, 14, 10, 7, 5, 3, and 2 days in advance of the anticipated delivery date, followed by a definite Notice of Readiness (NOR) once the vessel is at the named delivery place and ready for delivery in all respects.
The NOR triggers the closing process. On receipt of a valid NOR, the buyer has a defined window (typically 72 hours, negotiable) to complete its documentary and financial checks and release the balance price. If the buyer fails to pay within that window, the seller can treat it as a buyer’s default. If the vessel is not ready to deliver as warranted when the NOR is tendered, the NOR is invalid, and the seller cannot start the closing clock.
The place of delivery is either a named port or anchorage, or a named DLOSP (Dropping Last Outward Sea Pilot) from a defined area or voyage. DLOSP delivery is common where the vessel is in active trading and the seller does not want to risk port costs or delays. The delivery place has consequences for documentation, VAT exposure (particularly in EU waters), and logistics.
Drydocking and underwater inspection under Clause 6
Clause 6 is one of the most negotiated provisions. It provides two alternatives: a drydocking with class attendance (Alternative A) and a divers’ or underwater inspection while afloat (Alternative B). Alternative B (underwater inspection) is the current market norm for vessels under 15 to 20 years of age; Alternative A (drydock) is more common for older tonnage, vessels in poor condition, or where the buyer’s lender requires it.
Under Alternative A (drydock), the vessel is drydocked at a yard agreed between the parties, and the buyer’s surveyors and the class surveyor inspect the underwater body. Defects are categorised: class-affecting defects (bottom damage, rudder wear beyond class limits, propeller damage, sea-chest fouling that requires renewal) are the seller’s responsibility to rectify. Non-class defects may be treated as buyer’s risk or as grounds for a price adjustment, depending on the MOA terms. After rectification and class sign-off, the vessel is delivered from the drydock.
Under Alternative B (divers), an approved firm of divers inspects the hull and running gear afloat. If the dive shows a class-affecting defect, the parties typically agree either to proceed to a drydock (and the cost and time allocation follows Clause 6(b) Alternative A principles) or to a price reduction. If no class-affecting defects are found, the vessel proceeds to delivery without drydocking.
Bunkers, lubricants, and Clause 7
At delivery the buyer takes over the bunkers remaining in all tanks and the unbroached lubricating oils, paying the seller at the price the seller actually paid for them, supported by invoices. In a high-fuel-price environment the seller holds a valuable asset in the tanks; in a low-price environment the buyer is buying bunkers at a historical cost premium. Parties in volatile markets negotiate either a market-price benchmark (referenced to Platts or Ship & Bunker at the delivery port on the delivery date) or a blended formula.
Spare parts on board and the vessel’s inventory of stores are typically included in the MOA price, but this must be specified. Loose gear, portable equipment, and personal effects of the crew are excluded.
Delivery documents and Clause 8
Clause 8 of SALEFORM 2012 specifies the documentary package the seller must deliver at closing. The core documents are:
The bill of sale, executed by the seller, notarised, and apostilled in the jurisdiction of the selling entity. The bill of sale is the document of title; it identifies the vessel by name, IMO number, GT, NT, and flag, and states that the seller is transferring all its right, title, and interest free from encumbrances.
The protocol of delivery and acceptance, executed by both parties at the time of physical handover of the vessel. This document confirms the time, place, and condition of delivery and is the contemporaneous record of the closing.
The deletion certificate from the existing flag registry (or, where deletion cannot occur immediately, a power of attorney and undertaking to procure deletion). Most flags require the vessel to be physically present or for an agent with a power of attorney to attend the registry. Panama, Marshall Islands, and Liberia (the three largest open registries by fleet) have electronic deletion procedures.
Current class and statutory certificates, the survey reports and class records, the planned maintenance records, the vessel’s drawings and manuals (or a master list confirming their location on board), the certificate of registry, and all required port state documentation.
The bill of sale and protocol must be carefully handled. Under the Merchant Shipping Act 1995 (UK), a transfer of ownership of a UK-registered ship requires registration of the transfer, and the bill of sale is the prescribed form. Under Panamanian law, a bill of sale executed before a Panamanian consul or apostilled by the relevant foreign authority triggers the transfer of Panamanian registration on presentation at the Registro Publico.
Encumbrances, maritime liens, and Clause 9
Clause 9 is the seller’s warranty that the vessel will be delivered free from all charters, encumbrances, mortgages, and maritime liens. This warranty is one of the most commercially significant in the MOA. A maritime lien attaches to the vessel itself and is enforceable against a subsequent bona fide purchaser in most common-law jurisdictions. Lien-bearing claims include: seafarers’ wages, salvage, collision damage, and (in some jurisdictions) damage to cargo. Port charges and necessaries (bunkers, repairs, towage) give rise to statutory liens in many flag states, which also survive sale.
The seller’s obligation under Clause 9 is to deliver the vessel with all mortgages discharged and all liens extinguished. In practice, the seller’s bank’s mortgage is discharged simultaneously at closing from the sale proceeds; the closing mechanics include a payoff letter from the mortgagee bank, a deed of release of mortgage, and (where the mortgage is registered) a filing of the discharge at the flag registry.
Maritime liens for crew wages and salvage are more difficult: they arise by operation of law and cannot always be discharged in advance of closing. The buyer’s protection is the MOA warranty, backed by an indemnity and, in some cases, a portion of the purchase price held in escrow pending confirmation that no lien claims are outstanding. See the maritime lien and ship arrest article for the jurisdictional rules on lien priority and enforcement.
Condition at delivery and Clause 11
Clause 11 requires the vessel to be delivered in the same condition as it was when inspected by the buyer, fair wear and tear excepted, with class maintained and with all statutory and class certificates valid and unencumbered. The “same condition” warranty has generated extensive English and Norwegian arbitration case law.
The phrase “fair wear and tear” is not defined in SALEFORM 2012. English courts and arbitrators have held that fair wear and tear is the gradual deterioration caused by ordinary use over time, as distinct from damage caused by casualty, neglect, or deferred maintenance. A buyer who discovers corroded deck plating, a seized windlass, or a cracked exhaust manifold post-delivery will argue that those defects were not fair wear and tear; the seller will argue that they were ordinary age-related deterioration not visible or discernible at inspection. The burden of proof lies on the buyer to establish that a defect existed at delivery and was not within fair wear and tear.
The requirement to deliver free of recommendations is separate from the condition warranty. A recommendation is a defect formally noted by the class society at survey, requiring rectification within a specified period. A recommendation “affecting class” is one that, if unremedied, will result in suspension or withdrawal of class. SALEFORM 2012 requires the vessel to be free of all recommendations (including those not yet due for rectification) at delivery, unless the parties agree otherwise.
Default clauses: Clauses 13 and 14
Clause 13 (buyer’s default) provides that if the buyer fails to pay the balance purchase price within the NOR window, the seller is entitled to forfeit the deposit and to sell the vessel to a third party, recovering any shortfall (the difference between the MOA price and the lower resale price) from the defaulting buyer as damages. The deposit forfeiture is a remedy, not a limitation on damages; if the loss exceeds the deposit, the seller can claim the excess.
Clause 14 (seller’s default) provides that if the seller fails to deliver in accordance with the MOA (including failure to tender a valid NOR, failure to deliver the agreed documentation, or delivery in a condition that does not meet the warranties), the buyer is entitled to a refund of the deposit plus interest plus proven damages. In practice, seller’s default claims most commonly arise where the vessel is arrested before delivery (for a pre-existing maritime lien), where the seller cannot procure a clean deletion, or where the vessel sustains a casualty between signature and delivery.
The SALEFORM 2012 vs SHIPSALE 22 comparison
BIMCO published SHIPSALE 22 in January 2022 as a full redesign of the sale form for the digital era. The table below summarises the principal differences.
| Topic | SALEFORM 2012 | SHIPSALE 22 |
|---|---|---|
| Electronic signatures | Silent (assumed physical) | Expressly permitted; parties can agree e-signature platform |
| Document delivery | Physical or courier | Electronic delivery of all closing documents expressly permitted |
| Sanctions | No express provision | Dedicated clause: either party may terminate if the transaction would expose it to sanctions liability |
| Anti-corruption | No express provision | Dedicated clause: seller and buyer warrant compliance with applicable anti-corruption law |
| Condition on delivery | Clause 11, “same condition” formulation | Equivalent provision with clearer drafting on the fair-wear-and-tear carve-out |
| Underwater inspection / drydock | Clause 6, two alternatives | Similar structure; updated to reference current class procedures |
| Joint account / deposit | Clause 2 (10% default) | Clause 2 (10% default); deposit holder provisions updated |
| Governing law | English law (default) | English law (default), with express alternatives for Singapore and New York |
| Entire agreement | Clause 18 | Retained, strengthened |
| Confidentiality | Clause 19 | Retained, strengthened; added data-protection acknowledgment |
The practical effect of SHIPSALE 22 is that fully electronic closings are now expressly provided for in the form. Under SALEFORM 2012, parties who want to close electronically must add rider clauses to address execution and authentication. Under SHIPSALE 22, the form builds in the mechanics. The sanctions and anti-corruption provisions in SHIPSALE 22 are a direct response to the post-2014 sanctions environment and to the US FCPA / UK Bribery Act compliance requirements now imposed on many shipping groups.
Despite SHIPSALE 22, market adoption has been slow: SALEFORM 2012 with rider clauses remains the dominant instrument as of 2024 to 2025, reflecting the industry’s preference for known quantities. SHIPSALE 22 is more frequently seen in transactions involving major listed shipping groups with internal compliance requirements, and in transactions where the closing is genuinely electronic.
The S&P process: milestones from enquiry to delivery
A typical secondhand S&P transaction passes through the following milestones:
Indication and negotiation. The broker circulates the vessel’s particulars to prospective buyers. Counter-offers iterate on price and conditions. The parties may initially agree “subject” (subject to inspection, subject to financing, subject to satisfactory survey), meaning no binding contract yet exists.
Subjects and recap. Once the commercial terms are agreed in outline, the broker issues a recap. Subjects (conditions precedent) are lifted as each condition is satisfied. When all subjects are lifted, the commercial agreement is firm, though the MOA has not yet been executed.
MOA execution. The MOA (SALEFORM 2012 or SHIPSALE 22, as agreed) is exchanged and signed, typically by email exchange of PDF or DocuSign. The signed MOA supersedes the recap.
Deposit payment. Within three banking days of MOA execution, the buyer remits 10% of the purchase price to the joint account. The deposit must be in cleared funds. Failure to pay the deposit on time is itself a buyer’s default under Clause 13.
Records inspection. The buyer inspects the class records, survey reports, and statutory certificates, either at the class society’s offices or through a data room. The buyer’s surveyor confirms that the class certificates are valid, that no unacceptable recommendations are outstanding, and that the port state control history is clean.
Physical inspection. The buyer’s superintendent and surveyor inspect the vessel afloat or alongside. The seller’s crew cooperates by running the main engine, the generators, and the cargo equipment to demonstrate their condition. The buyer may bring its lender’s approved surveyor.
Delivery notice sequence. The seller’s broker issues the rolling delivery notices to the buyer, counting down toward the anticipated delivery date. The final notice is the definite NOR, tendered when the vessel is at the delivery place and physically ready for delivery.
Underwater inspection or drydocking. At or around the time of the NOR, the drydock or dive takes place. Class attendants and buyer’s surveyors identify any underwater defects. Defects are categorised and resolved before closing.
Closing. The buyer’s lawyers and the seller’s lawyers (and the financing bank’s lawyers) exchange the closing documents by email or in person. The buyer’s bank releases the balance price by SWIFT wire. On confirmation that funds have been received, the seller and buyer sign the protocol of delivery and acceptance. Physical handover of the vessel (keys, radios, computers, bunker samples) follows immediately.
Post-delivery registrations. The seller procures deletion from the existing flag. The buyer registers the vessel under its chosen flag and registers the lender’s mortgage. Provisional certificates are issued to cover the gap.
Title transfer and the bill of sale under English law
Under English law, which governs most international ship S&P transactions, a ship is treated as goods for the purposes of the Sale of Goods Act 1979, but also as a registered asset under the Merchant Shipping Act 1995. The interaction of the two regimes determines how title passes.
The Sale of Goods Act 1979, section 17, provides that title passes when the parties intend it to pass. In a ship sale under SALEFORM 2012, title passes at the moment of delivery: the bill of sale is executed, the balance purchase price is received, and the protocol is signed. The deposit does not transfer title; it secures the transaction.
The Merchant Shipping Act 1995 regulates the form of the bill of sale for UK-registered ships (Schedule 1). For ships registered under foreign flags, the bill of sale must comply with the flag state’s requirements. Marshall Islands, Panama, and Liberia all have prescribed forms, and their registries verify the bill of sale before accepting a transfer of registration.
The implied term as to title in section 12 of the Sale of Goods Act 1979 applies to ship sales: the seller warrants that it has the right to sell the vessel and that the buyer will enjoy quiet possession. This warranty is reinforced by Clause 9 of SALEFORM 2012 (the encumbrances warranty). Where the vessel carries an undisclosed maritime lien, the buyer’s remedy lies in breach of warranty: it can claim indemnification from the seller for the cost of discharging the lien or defending the arrest.
The case of The Union Power [2012] EWHC 3537 (Comm) confirmed that a vessel sold “as is, where is” for recycling still carries the seller’s implied warranty of title under section 12 of the 1979 Act; an “as is” clause goes to condition and quality, not to title. The decision is consistent with the general principle that a seller cannot exclude the section 12 warranty by general exclusion language; only a clause that specifically addresses the title warranty and the parties’ intentions will suffice.
The demolition and recycling sale
When a vessel reaches the end of its commercial life, the sale is typically to a cash buyer acting as intermediary between the shipowner and the recycling yard, or directly to the recycling yard. The price is expressed in USD per light displacement tonne (LDT): in 2024, Bangladeshi yards were paying USD 480 to USD 530/LDT; Indian and Pakistani yards USD 440 to USD 510/LDT; Turkish yards USD 320 to USD 360/LDT (suitable for OECD-standard recycling for EU-flag vessels). The vessel scrap price calculator converts LDT and prevailing $/LDT to an indicative demolition value.
The legal framework for the recycling sale changed when the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 2009 entered into force on 26 June 2025. The Hong Kong Convention requires: an approved Inventory of Hazardous Materials (IHM), a Ship Recycling Plan, a Statement of Completion from an authorised ship recycling facility, and notification to the flag state. Flag states that have ratified include Bangladesh, India, Norway, Denmark, Belgium, Turkey, and others.
BIMCO’s RECYCLECON form is the standard contract for the sale to a recycler. RECYCLECON requires the seller to deliver the IHM, to warrant that the vessel is free of certain hazardous materials beyond the IHM entries, and to deliver the vessel for recycling at the agreed facility. The buyer (typically the cash buyer or the recycling yard) warrants that the facility is authorised under the Hong Kong Convention or (for EU-flag vessels) the EU Ship Recycling Regulation (EU) No 1257/2013.
The earlier BIMCO DEMOLISHCON form (pre-Hong Kong Convention) did not include the IHM warranty or the facility-authorisation requirement. Parties using DEMOLISHCON post-2025 face regulatory gaps; RECYCLECON is the compliant instrument.
The “as is, where is” delivery condition is common in demolition sales: the vessel sails under its own power to the beaching yard, or is towed if not self-propelled. The buyer (cash buyer) does its own condition assessment, and the price reflects the condition of the steel and the weight of recoverable metals. The buyer under RECYCLECON takes the vessel in its as-delivered condition, with the warranty on the IHM as the principal seller’s obligation.
Ship financing and the mortgage interface
Most shipowners acquiring secondhand tonnage finance part of the purchase with a ship mortgage loan. Typical loan-to-value ratios in 2024 ranged from 55% to 65% of the agreed market value, meaning the buyer funds 35% to 45% equity. On a USD 40 million vessel, that is USD 14 million to USD 18 million equity and USD 22 million to USD 26 million debt.
The mortgage is registered over the vessel immediately at delivery, as a condition of the lender’s drawdown. The lender controls the release of funds: the drawdown is made directly to the seller’s account as part of the closing mechanics, with the buyer providing the equity portion separately. The lender’s lawyers attend the closing to verify that the bill of sale, the deletion, and the mortgage registration are all executed in the correct order and that no prior encumbrance remains.
The mortgage registration regime is flag-specific. Marshall Islands, Panama, and Liberia all have efficient electronic mortgage registration procedures; a provisional mortgage certificate can be issued within hours of the closing. Flags with less efficient registries (India, Nigeria) introduce timing risk at closing. The closing memorandum between the buyer’s lawyers, the seller’s lawyers, and the lender’s lawyers allocates the risk of registration delays.
The ship mortgage under English law is governed by the Merchant Shipping Act 1995 and operates as a statutory charge, not as a common-law mortgage. The mortgagee can arrest the vessel on default and apply for a judicial sale. The priority of ship mortgages relative to maritime liens depends on the law of the flag and the lex fori of the arresting court: in most common-law jurisdictions, maritime liens for wages, salvage, collision, and bottomry rank ahead of registered mortgages.
Classification and the IACS Transfer of Class Agreement
The classification society is a central actor in every ship sale. It holds the vessel’s survey history, it attends the delivery drydock or underwater inspection, and it issues the clean class certificate that is a delivery condition under Clause 11.
When the buyer wants to change the vessel’s class society at delivery (for example, from DNV to Bureau Veritas, or from Lloyd’s Register to ABS), the parties use the IACS Transfer of Class Agreement. The transferring society provides a full survey status report to the receiving society; the receiving society conducts a transfer survey and accepts class conditional on completion of any outstanding items. The transfer survey is conducted either before delivery (while the vessel is still in the seller’s name) or at delivery.
The Transfer of Class Agreement does not affect the delivery conditions: the vessel must arrive free of recommendations in either case. If the transferring society has outstanding recommendations that the receiving society does not recognise as class-affecting, the parties must agree how to deal with them in the MOA or in a side letter.
Sanctions, anti-money-laundering, and due-diligence requirements
The post-2014 sanctions environment has added a compliance layer to every ship S&P transaction. OFAC (US Office of Foreign Assets Control), EU Council sanctions, and UK OFSI sanctions all restrict transactions involving designated persons or entities. A vessel with prior trading history in sanctioned trades (Russian crude under the G7 oil price cap, Iranian crude, Venezuelan crude) carries a “reputational” or “regulatory” risk that affects both saleability and price.
Standard due-diligence steps in a 2024 to 2025 transaction include: OFAC/EU/UK sanctions screening of the seller and the seller’s ultimate beneficial owner, port call history review for the preceding 12 to 24 months (using AIS data and Lloyd’s List intelligence), cargo history review where available, and verification that the vessel has not appeared on published “shadow fleet” or “dark fleet” lists. Lenders require all of these checks as a condition of financing.
SHIPSALE 22’s sanctions clause (absent from SALEFORM 2012) is a response to this environment: it gives each party the right to terminate the MOA without penalty if the transaction would expose it to sanctions liability, subject to prompt notification.
Anti-money-laundering (AML) requirements under the EU’s Fourth and Sixth AML Directives, and equivalent UK and US rules, require banks and certain brokers to conduct beneficial ownership verification and source-of-funds analysis. In practice, the buyer’s bank’s AML team is the principal check: the bank verifies the buyer’s corporate structure to the ultimate beneficial owner, confirms that the source of equity funds is legitimate, and screens against global sanctions and PEP (politically exposed persons) databases.
EU Emissions Trading System and CII implications for secondhand sales
Since 1 January 2024, shipping has been included in the EU Emissions Trading System (EU ETS) under Directive 2023/959/EU. Ships above 5,000 GT operating on EU routes must surrender EU allowances (EUAs) for their CO2 (and from 2026, CH4 and N2O) emissions. A vessel being sold mid-year carries an accrued ETS liability that the seller has not yet surrendered.
SALEFORM 2012 contains no express provision for EU ETS liability allocation. Parties typically add rider clauses: the seller is responsible for EUA obligations accruing up to (and not including) the delivery date; the buyer is responsible from delivery. The mechanics require the seller to quantify and surrender the accrued EUAs before the annual compliance deadline (30 April for the prior year), or to provide the buyer with an indemnity covering the accrued position.
The EU ETS for shipping article covers the surrender mechanics and the per-incident administrative consequences of non-compliance. For secondhand sales, the practical implication is that a vessel with a poor Carbon Intensity Indicator (CII) rating (D or E under MARPOL Annex VI Reg.28 and the IMO’s CII guidelines) trades at a discount relative to A, B, or C-rated vessels of equivalent specification. The CII rating is now a standard due-diligence item reviewed during the records inspection. See the CII explanation article for the rating methodology.
Common post-delivery disputes and their resolution
The most frequent dispute pattern is a post-delivery condition claim. The buyer takes delivery, then finds a defect: corroded frames behind a cargo hold ceiling, a cracked engine bedplate, a contaminated cargo tank, a seized bow thruster. The buyer claims damages under Clause 11 (condition warranty). The seller points to the inspection (the buyer inspected and accepted), to the fair-wear-and-tear carve-out, and to the absence of any complaint at delivery.
English arbitration tribunals (LMAA) and the English Commercial Court have developed a settled approach: the buyer must prove that the defect existed at delivery (not that it developed after delivery), that it was not within fair wear and tear, and that it was not visible or disclosed at inspection. The burden of proof is on the buyer throughout. Minor defects that do not affect the vessel’s class, trading pattern, or earnings do not give rise to recoverable damages even if technically in breach.
A second common dispute is on bunker valuation. The seller claims reimbursement at actual cost (USD 800/MT for HFO bought six months before delivery); the buyer in a falling market argues for spot market price (USD 550/MT on delivery date). SALEFORM 2012 says “the last price paid” supported by invoices, which typically favours the seller; parties in volatile markets should address the benchmark explicitly in the MOA.
A third dispute pattern is on the NOR. The buyer receives a NOR, inspects, finds defects, refuses to close, and argues the NOR was invalid because the vessel was not in the warranted condition. The seller argues the vessel was in condition, the NOR was valid, and the buyer’s failure to close is a default. These disputes turn on: what the surveyor found, what was disclosed at earlier inspection, and whether the alleged defects are within fair wear and tear or actually class-affecting.
LMAA arbitration is the default dispute-resolution forum for SALEFORM 2012 disputes. The LMAA Small Claims Procedure applies to disputes under USD 100,000; the Intermediate Claims Procedure for disputes up to USD 400,000. Larger disputes go to the LMAA full procedure with a three-member tribunal. English Commercial Court litigation is an alternative but is generally more expensive; parties with very large claims (over USD 10 million) sometimes prefer the court given the supervisory role of the Commercial Court over arbitration awards.
The role of S&P brokers and brokerage
The S&P broker acts as agent for the instructing principal (seller or buyer) and earns a commission on the successful conclusion of a sale. The standard S&P brokerage commission is 1% of the gross purchase price, divided between the seller’s broker and the buyer’s broker (0.5% each where one broker acts for each side, or 1% to a single broker who acts for both). On a USD 30 million transaction, 1% is USD 300,000 total brokerage. The brokerage commission calculator handles split-commission scenarios and the VAT treatment where the broker is EU-resident.
The broker’s role extends beyond price negotiation. An experienced S&P broker will: advise on realistic market price, identify the appropriate buyer pool, draft and negotiate the recap, advise on standard and non-standard MOA clauses, manage the closing logistics, and support communication between the parties at critical junctures. The broker is not a legal adviser and does not draft the MOA (that is the role of the parties’ maritime lawyers); but the broker’s familiarity with market practice is a practical check on non-standard or commercially unusual clauses.
Limitations
The coverage in this article reflects the position under SALEFORM 2012 and SHIPSALE 22 as of mid-2026. Several qualifications apply:
The article covers secondhand sales of ocean-going commercial vessels. Sales of fishing vessels, inland waterway craft, workboats, yachts, and offshore units often use different forms (the SSF, BIMCO HEAVYLIFTCON, various specialist forms) with different clause structures. The principles on deposit, delivery, and condition are broadly similar but the details differ.
The demolition sale section reflects the position after the entry into force of the Hong Kong Convention on 26 June 2025. The practical implementation of the Convention’s IHM and facility-authorisation requirements is still evolving at many recycling yards, particularly in Bangladesh and Pakistan.
The EU ETS and CII sections reflect the regulatory position as of 2024 to 2025. The EU ETS is extending its scope in phases (full 50% obligation in 2024, 70% in 2025, 100% from 2026); the CII regime under MARPOL Annex VI is subject to ongoing IMO review. Both regimes affect secondhand valuations but the quantitative discount associated with a D or E CII rating has not yet been systematically documented in publicly available market data.
This article does not constitute legal advice. S&P transactions are high-value and legally complex; parties should instruct qualified maritime lawyers for their specific transactions.