Dispute on "as is, where is" sale and purchase

By Ngo Khac Le|23/05/2023 09:42

Selling and purchasing shipwrecks can also cause disputes on seemingly simple issues through the lawsuit below for your reference.

Summary of facts

On 28/11/2019, the motor vessel “NS” (the “Vessel”) sank in the water area of Ha Tinh Province because of an incident on the way to Son Duong port. On 16/01/2020, the Claimant (Ship owner/Seller) and the First Respondent (Buyer) entered into the Agreement on wreck purchase and wreck removal and salvage (the “Wreck Sale Agreement”). Accordingly, the Claimant and the First Respondent agreed to the sale and purchase of the shipwreck with the condition of “as is, where is” with any spares, equipment, bunker, etc. remaining on board of the Vessel. Under this Agreement, the amount of VND 6,274,800,000 equivalent to approximately USD 270,000 (“Contract Price Amount”) should be transferred to the Claimant’s account from the Second Respondent (Agent)’s account at the time of signing the Wreck Sale Agreement. Transfer of the Contract Price Amount from the First Respondent’s account to the Second Respondent’s account shall be made in accordance with the Tri-Party Agreement signed on the same date onsecurity for purchase of shipwreck of M/V “NS” (the “Wreck”).


As per Tri-Party Agreement the First Respondent was obligated to transfer the Contract Price Amount to the Second Respondent’s account as the security for the performance of the Wreck Sale Agreement (the “Security”). The Second Respondent kept the Security and transferred this amount to the Claimant’s account after deducting the agency fee of USD 3,000 when the payment request was made between the Seller and the Buyer (the “Payment Request”). On the same date, the Second Respondent received the Payment Request confirmed by the Claimant and the First Respondent. However, until now, the First Respondent did not provide documents as required by the Bank of evidence to perform the Wreckage Purchase Agreement. Therefore, the Bank could not transfer the Security to the Claimant’s account.

On 27/02/2020 and 19/03/2020, the First Respondent sent several documents to the Second Respondent requesting to hold the Security because the wreck removal under the Wreck Sale Agreement had not been settled due to sale by Claimant of 14 hatch covers of the Vessel to TT Company on 18/12/2019.

On 01/07/2020, the Claimant submitted the Request for Arbitration to an arbitration center to settle the disputes over the Wreck Sale Agreement and the Tri-Party Agreement.

The claimant's point of view

The Claimant held that (i) the Parties entered into the Wreck Sale Agreement and the Tri- Party Agreement. Therefrom, the Claimant had performed all of its obligation but the Respondents still did not perform their duties under these Agreements; (ii) it had no contractual obligation to remove the bunkers from the Wreck; (iii) after the Wreck Sale Agreement was signed, the Claimant only played a supportive role to absorb the bunker under the permission of the First Respondent; (iv) the obligation of removing the bunker belonged to the First Respondent as per Article 2 and Article 7.1 of the Wreck Sale Agreement, and (v) it had the right to sell 14 hatch covers to TT Company; and (vi) from the date of 18/12/2019 on which the Purchasing Agreement of 14 hatch covers was signed between the Claimant and TT Company, 14 hatch covers had not been a part of the Wreck any longer. Rather, the Claimant also claimed that these hatch covers were no longer a part of the Wreck before the point of time when selling to TT Company, in particular since the moment that they were washed ashore.

In the Final Hearing, in response to the First Respondent’s statement that 14 hatch covers, which had left the Wreck, belonged to the First Respondent in accordance with the Vietnamese version in Article 12.2 of the Wreck Sale Agreement that “Party B will be directly responsible for removal and salvage of the Wreck of the Vessel and all bunkers and anything onboard of the Vessel or

having fallen out of the Vessel as the owner of the Vessel”, the Claimant argued that the parts which had been “fallen out of the Vessel” could only be counted from the time of delivery, i.e. from 16 January 2020.

The Claimant requested the Arbitral Tribunal to decide: (i) the First Respondent was responsible to pay VND 6,274,800,000 to the Claimant under the Wreck Sale Agreement and the Tri-Party Agreement both dated 16/01/2020; and (ii) the Second Respondent was responsible to convert VND 6,274,800,000 to USD and to transfer it to the Claimant’s account.


The first respondent's point of view

The Claimant (i) did not remove all bunkers as agreed; (ii) sold part of the Wreck to TT Company. With regard to 14 hatch covers, the First Respondent held that as per Article 12.2 of the Wreck Sale Agreement (Vietnamese version) 14 hatch covers which were apart from the Wreck also belonged to its ownership. About the payment obligation of the Respondents, the First Respondent alleged that there had been some problems in relation to the Wreck delivery between the Claimant and the First Respondent, thus it made a request demanding the Second Respondent to block the Security temporarily. The First Respondent simultaneously had not provided the necessary documents as required by the Bank to perform the payment obligation.

The second respondent's point of view

The Second Respondent emphasized to follow the final decision of the Tribunal on the transfer of VND 6,724,800,000 to the Claimant’s account.

(To be continued )

(*) VIAC Arbitrator

Bài liên quan
  • Dispute on inspection of goods
    (VLR) It is normal to inspect the goods that have been lost or damaged during the performance of the sales contract and in the contract of carriage. However, improper inspection can lead to significant disputes and damages that you can refer to below.

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Dispute on "as is, where is" sale and purchase