On 25 October 2023, the Rotterdam District Court rendered a judgment in a dispute concerning a rescission of a contract for the construction of a yacht invoked by the client because an agreed delivery date proved unfeasible (ECLI:NL:RBROT:2023:9850).
The client ordered a yacht from shipyard Vaan Yachts. The contract stipulated that delivery of the yacht should take place no later than 18 months after the conclusion of the contract, with an allowable extension of 15% of this period, i.e. no later than early January 2024. In case of late delivery, the client would receive a monthly increasing discount on the contract price. In March 2023, the client rescinded the contract because it was already clear by then that the yacht could not be delivered on time. The client claimed restitution of the payment already made including interest. The yard took the view that the client could not rescind the contract on this basis given the agreed discount mechanism in case of late delivery, and claims a contractual penalty for a termination of the contract that would be attributable to the client.
The court considered that, unless otherwise agreed, any failure to perform an obligation entitles the other party to rescind the contract unless the failure does not justify rescission in view of its special nature or minor importance, and that if performance is not permanently or temporarily impossible the right to rescind only arises if the debtor is in default.
The parties had agreed that default would commence upon expiry of the permitted 15% extension of the delivery period. Because the yard acknowledged in court that at the time of the rescission it was already clear that the yacht could not be delivered on time, a default situation occurred before the claim was due, the court said.
However, the contract was silent on any right of rescission in case of late delivery. The court held that the parties’ agreed discount mechanism did not intend to exclude the statutory right of rescission. Such an exclusion must in principle be explicit. The exclusion of a rescission right had not been discussed during the contract negotiations.
The court rejected the yard’s defence that the delay in construction was due to the client as insufficiently substantiated. The defence that there was a minor default that did not justify rescission of the contract also fails. The court concluded that the contract had been validly rescinded, as a result of which the yard was ordered to refund the payment already made including interest.
In this case, the court approved a contract rescission due to an anticipatory breach, as the deadline for delivery of the yacht had not yet passed. Nevertheless, under Dutch law rescission is an option in such a case. The outcome might have been different if other contractual arrangements had been made.
Yacht construction contracts usually contain an exhaustive list of grounds for termination as well as a clause waiving other (statutory) grounds for termination, including rescission. If an agreed ground for termination only applies in case the deadline for delivery has actually not been met, a claim for rescission because of an anticipatory breach seems less likely to succeed.
Yacht construction contracts also often contain a tiered arrangement in case of late delivery of the yacht for reasons attributable to the yard, pursuant to which a time-increasing but capped amount of liquidated damages becomes payable in case of limited overruns of the agreed delivery date and a right to terminate in case of extreme overruns. Since the delivery date is usually an essential part of the contract, the court’s consideration that the inclusion of a discount mechanism as such does not exclude the right to rescind is justifiable. Parties are however free to include a sole remedy clause excluding the right to rescind the contract in case of late delivery of the yacht. After all, the statutory rescission remedy is of non-mandatory law and can be waived in whole or in part by the parties.
We have extensive experience in drafting yacht construction contracts, and litigating or arbitrating such contracts on behalf of yards and clients. If you have any questions about the content of such contracts or options for terminating them or preventing their termination, please feel free to contact us.
