Short answer. Late delivery of a new yacht is dealt with first through the building contract, which must be in writing and almost always provides a delivery date, a grace period, capped daily liquidated damages and a right to terminate beyond a maximum delay. Contractual penalties fall due once the yard is put on notice, and a French court may reduce a manifestly excessive penalty or increase a derisory one. Where the delay exceeds the contractual threshold, or the yard plainly will not deliver, the buyer can terminate by notice after putting the yard on notice and recover his instalments, which presupposes that a refund guarantee was secured at the outset. Title passes only on acceptance after trials.
A yacht ordered for the season is delivered in October. A yard announces, three months before the date, that another quarter or two will be needed. A builder in difficulty stops work having banked sixty per cent of the price. These situations are common, because building a yacht draws on subcontractors, engine and equipment suppliers and long validation cycles, and because yard contracts are written by the yard.
The building contract: what it says, and what it leaves out
A contract for the construction of a vessel for a client must be in writing, and its amendments must be in writing on pain of nullity (article L. 5113-2 of the Transport Code). That has an immediate practical consequence: changes requested during the build, whether options, layout or equipment, must be recorded in written variation orders stating their effect on price and on time. Without them the yard will rely on the changes to justify the delay and the buyer will be unable to show that the date was maintained. Keeping a log of change requests, with the yard’s acknowledgment and the stated effect on the programme, is the buyer’s first tool.
Contracts from the larger yards, often in English on international models, structure delivery in three tiers: a contractual delivery date, a grace period of thirty to ninety days without penalty, then capped daily liquidated damages, generally between five and ten per cent of the price, and finally a buyer’s right to terminate where the delay exceeds a threshold, often one hundred and eighty to two hundred and seventy days. They also list permissible delays which suspend the programme: force majeure, engine supplier delays, buyer-requested changes, and the buyer’s own delays in approvals or payments. Negotiation therefore bears as much on the list of permissible delays and their cumulative cap as on the level of the penalties. A contract with no cap on permissible delays is a contract with no delivery date.
Liquidated damages: automatic, capped, and adjustable by the court
Where a contract provides that a party failing to perform will pay a stated sum by way of damages, no greater or lesser sum may be awarded (article 1231-5 of the Civil Code). The penalty clause therefore relieves the buyer of proving his loss, but it also caps him: where penalties are limited to five per cent of the price, he cannot claim more for the delay itself, unless he shows gross or wilful misconduct by the yard, or a loss distinct from the one the clause was meant to cover. The court may, even of its own motion, reduce a manifestly excessive penalty or increase a derisory one, and that power is a matter of public policy. Save where non-performance is final, the penalty is incurred only once the debtor is put on notice: the recorded letter sent as soon as the grace period expires is the act that starts the clock, and a buyer who waits in silence for delivery loses part of his rights.
An order of magnitude: on a four million euro yacht, a penalty of 0.05 per cent a day beyond sixty days of grace, capped at five per cent, is two thousand euros a day and two hundred thousand euros at most, reached after a hundred penalised days. These sums are normally set off against the final instalment, which the contract must say expressly, failing which the yard will make delivery conditional on payment in full. Contracts sometimes include the mirror clause, a bonus for early delivery, which is not adjustable by the court.
Permissible delay or culpable delay: the fight over causes
A yard facing delay almost always invokes an excuse: force majeure, a supplier’s failure, buyer changes, late approval of drawings, weather for the trials. Force majeure supposes an event beyond the debtor’s control, not reasonably foreseeable at the time of contracting, and whose effects cannot be avoided by appropriate measures (article 1218 of the Civil Code); a late supplier is not force majeure, absent a contrary clause, and most yard contracts contain precisely that contrary clause. The question then becomes evidential: the yard must show that the supplier’s delay actually moved the critical path, and for the period claimed, which means access to the programme and to the purchase orders.
The buyer should therefore require, in the contract itself, written notification of any permissible delay within a short period, say ten to fifteen days, on pain of forfeiture, together with a monthly progress report. The buyer’s representative at the yard, whether engineer or surveyor, is decisive here. His dated reports, photographs and exchanges with the project manager establish the true state of progress at each stage and allow causes invoked after the event to be contested. The firm works with these experts to build the chronology of the build and to allocate delay, item by item, to the builder or to the buyer.
Terminating the contract: when, how, and with what consequences
Where the delay exceeds the contractual threshold, the termination clause applies: it must specify the undertakings whose breach will bring termination, and termination is subject to an unsuccessful notice expressly referring to the clause, unless the parties agreed it would follow from the breach alone (article 1225 of the Civil Code). Absent such a clause, or where the buyer prefers not to rely on it, he may terminate by notice at his own risk, after a notice fixing a reasonable period and announcing termination (article 1226); the yard may go to court to contest it, and the buyer must then prove the gravity of the breach. Termination may also be immediate where it is plain the yard will not deliver, for instance where work has stopped or insolvency proceedings have opened.
Termination brings restitution of the instalments paid, and that is where the real financial risk lies: a yard that has spent the instalments on the build, or is in difficulty, does not repay spontaneously. Serious contracts provide a refund guarantee issued by a bank or an insurer, callable on first demand against the notice of termination. Without it, the buyer of a yacht under construction is an unsecured creditor of the yard, and title passes to him only on acceptance after trials (article L. 5113-3), absent contrary agreement. Two contractual protections partly compensate: a clause transferring title to the hull and equipment progressively as payments are made, enforceable against other creditors if published, and a mortgage over the vessel under construction, available after temporary registration.
The consumer buyer: a more favourable regime
Where the buyer is a private individual and the yard a professional, the Consumer Code applies on top of the contract. The professional must deliver on the date or within the period stated and, absent any statement, without undue delay and at the latest thirty days after the contract is made (article L. 216-1). On breach, the consumer may withhold payment, then terminate if the professional has not performed after being given a reasonable additional period; he may terminate immediately where the professional refuses to deliver, where it is plain he will not deliver, or where the delivery date was an essential condition of the contract (article L. 216-6).
The professional must then refund all sums paid within fourteen days (article L. 216-7). These provisions are mandatory and neutralise clauses making termination subject to heavier conditions. They do not, however, solve the question of the yard’s solvency, which is why the refund guarantee matters as much for a consumer as for a company.
After delivery: acceptance, reservations and latent defects
Delivery of a new yacht is not a simple handover of keys. It follows sea trials and a joint acceptance at which the buyer records his reservations; title passes, absent contrary agreement, on the date of that acceptance (article L. 5113-3). Reservations must be precise, dated and coupled with a period for rectification, and the contract should provide for a retention on the final payment until they are lifted. A yacht delivered late and with substantial reservations raises the question of overlap: do liquidated damages continue to run until the reservations are cleared? The answer turns on the drafting, and it is a point to negotiate before signature.
The builder remains liable for latent defects even where acceptance was given without reservation (article L. 5113-4), and the action is time-barred one year from discovery of the defect (article L. 5113-5), a shorter period than under the ordinary law of sale. The yard’s contractual warranty, commonly twelve to twenty-four months, and the equipment suppliers’ warranties come on top.
How the firm works
Before signature, the firm reviews and negotiates the building contract: the list and cap of permissible delays, the grace period, the level and cap of liquidated damages, the termination threshold, the refund guarantee, progressive transfer of title, governing law and forum. During the build it organises the evidence with the buyer’s representative, drafts variation orders and notices, and sends the notice that starts the penalties running.
Where the programme slips, it negotiates a revised schedule with consideration in return, whether reinforced penalties, equipment included or a discount on the balance, or it terminates and calls the refund guarantee. Where the yard enters insolvency proceedings it files the claim, asserts title to whatever has been transferred and defends the buyer in any sale of the yard. The firm appears before the commercial courts, in arbitration and before the Chambre arbitrale maritime de Paris, and works in English with Italian, Dutch, German and Turkish yards and their counsel.
Is your yacht late, is the yard invoking force majeure or has it suspended work? A consultation measures your rights and sets the strategy before the delay gets worse.
Frequently asked questions
When do liquidated damages start to run?
After the contractual grace period expires and, save where non-performance is final, from the moment the yard is put on notice (article 1231-5 of the Civil Code). A written notice as soon as the grace period ends is essential.
Can a court change the penalties set out in the contract?
Yes. It may, even of its own motion, reduce a manifestly excessive penalty or increase a derisory one, and any clause to the contrary is deemed unwritten (article 1231-5 of the Civil Code).
Can an order for a late yacht be cancelled and the instalments recovered?
Yes, through the termination clause (article 1225) or by termination on notice after a formal demand (article 1226), and immediately where the yard plainly will not deliver. Recovery of the instalments depends on the yard’s solvency or on a bank refund guarantee.
Is the yard still liable for defects after delivery?
Yes. The builder is liable for latent defects even where acceptance was given without reservation (article L. 5113-4 of the Transport Code); the action is time-barred one year from discovery of the defect (article L. 5113-5).
Does a private buyer have extra rights against the yard?
Yes. The Consumer Code allows him to withhold payment, to terminate after a formal demand or immediately where the date was essential, and to obtain a full refund within fourteen days (articles L. 216-1, L. 216-6 and L. 216-7).
Further reading: latent defects on a second-hand yacht, buying a yacht abroad, ship mortgages, including over a vessel under construction.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and is no substitute for advice on your own matter.