Under French law, the shipyard remains owner of the yacht until acceptance, unless otherwise agreed. An advance payment made without published transfer of title or an independent bank guarantee is a mere claim, lost if the yard goes bankrupt. Three clauses protect the buyer: registered progressive ownership, an on-demand refund guarantee, and a claim for recovery within three months.
In March 2024, a Lyon businessman orders from a yard in Friesland a 38-metre motor yacht, 19.4 million euros excluding tax payable in seven instalments. He pays 20% on signature, 15% at keel laying and 15% at launching of the bare hull, 9.7 million euros in all. In January 2026, the yard is declared bankrupt. The contract contains no clause transferring title during construction; the refund guarantee promised in the letter of intent was issued by the yard’s parent company, which is also bankrupt; the hull was never registered in the buyer’s name. The receiver sells the hull to another yard. The buyer files a claim in the insolvency.
Nothing in this story had to do with naval engineering. Everything turned on three clauses that the contract proposed by the yard did not contain and that the buyer had not asked for. This page deals with the heart of the yacht construction contract: who owns the hull during the works, how that right is made enforceable against third parties, what the refund guarantee for advance payments should look like, and what becomes of the contract and the instalments paid if the yard files for insolvency. It reasons first under French law, with pointers to Dutch, German and Italian yards, dealt with in detail on a companion page.
1. A written contract, a sale for future delivery, a special text
The Transport Code devotes five articles to the shipbuilding contract, and they are enough to take it out of the general law. Construction of a ship for a client must be the subject of a written contract, and amendments to that contract must, on pain of nullity, be made in writing (Transport Code, article L. 5113-2). Unless otherwise agreed, title passes only on acceptance of the ship after trials (article L. 5113-3). The builder is liable for hidden defects even if acceptance is given without reservation (article L. 5113-4), and the warranty claim is time-barred one year after discovery of the defect (article L. 5113-5). These rules apply to any floating craft built and equipped for commercial, fishing or pleasure navigation at sea (article L. 5000-2): a twelve-metre yacht and a sixty-metre yacht fall under the same chapter.
On the nature of the contract, the Cour de cassation ruled in a case involving an order for two submarines placed by a foreign State with a consortium: the shipbuilding contract “is to be analysed as a contract of sale for future delivery” (Cass. com., 26 June 2019, no. 17-30.970, published in the Bulletin). The formula has two consequences for a yacht buyer. The yard sells a future thing that it owns until delivery, which explains the rule of article L. 5113-3. And the contract for works of the Civil Code only applies by default: where the contractor supplies the material and the thing perishes before delivery, the loss falls on the contractor, unless the client was in default in taking delivery (Civil Code, article 1788). Until the yacht is accepted, a fire in the shed is the problem of the yard and its insurer. This allocation stops being coherent as soon as the contract transfers title during construction, which is why any early transfer clause comes with a clause on custody, risk and insurance.
A final point of characterisation, often ignored in contracts drafted in English: the Vienna Convention on the International Sale of Goods does not apply to sales of ships, vessels, hovercraft and aircraft (CISG, article 2(e)), even though it treats contracts for the supply of goods to be manufactured as sales (article 3(1)). A complete yacht is outside its scope. The national law designated by the contract therefore applies in full, with its time limits, formalities and insolvency rules.
2. The yard is the owner until acceptance, unless otherwise agreed
The default rule is unfavourable to the buyer, and it is clear. For eighteen to thirty-six months, the buyer pays instalments that represent, by launching, more than half of the price, and owns nothing. He is a creditor of an obligation to deliver. If the yard is solvent and honest, this does not matter. If the yard files for insolvency, it is the only thing that matters.
The text itself allows the parties to agree otherwise. Three models coexist. The first transfers title to the hull, marked materials and paid equipment to the buyer as payments are made, the yard keeping custody and risk until delivery. The second transfers title at a set milestone, most often launching. The third, used in contracts proposed by yards, transfers nothing before delivery but promises a bank refund guarantee. The first two require the transferred ownership to be enforceable against third parties, and above all against the yard’s court-appointed administrator. That is where publicity comes in.
All ships under construction on the territory of the French Republic must be entered in a register kept by the administrative authority designated by order of the minister responsible for the sea (Transport Code, article L. 5114-2). For each ship a record is drawn up with the particulars needed to identify the vessel, the name of the owner and the rights over the ship (article L. 5114-3), and this register is public (article L. 5114-4). A buyer who has obtained an early transfer clause must insist that his right is entered there. The register does not create ownership; it makes it visible, and that is what counts against an administrator or an attaching creditor. It must be said plainly: the evidential weight of this register has never been tested before the Cour de cassation in a shipyard insolvency dispute, and French law remains, on this point, the least tested of the four major shipbuilding countries. The ownership clause must therefore be drafted with a precision that does not need case law: identification of the hull by its yard number, physical marking of materials and equipment in the buyer’s name, a joint inventory at each milestone, and entry in the register within fifteen days of each payment.
3. Since 1 May 2026, the mortgage on a ship under construction changes the negotiation
Ordinance no. 2026-265 of 8 April 2026 completed the codification of ship mortgages in the Transport Code, with effect from 1 May 2026. French-flagged ships can be subject to contractual mortgages, created in writing on pain of nullity (Transport Code, article L. 5114-6-1) and granted by the owner of the ship or an agent holding a special power (article L. 5114-6-2). The decisive text is one sentence long: a mortgage may be granted on a ship under construction (article L. 5114-6-5). Priority is determined by the order of the dates, hours and minutes of registration (article L. 5114-6-7).
This security changes the structure of financing, and in turn the negotiation with the yard. A bank financing the instalments can now take a mortgage over the hull from construction; but the mortgage can only be granted by the owner, which means the buyer must already be the owner. The early transfer of title clause is no longer only protection against the yard’s insolvency, it is the condition for bank financing. A yard that refuses early transfer refuses, in practice, its client’s financing. Put this way, the argument overcomes most resistance. The publication rules for this mortgage are left to a decree (article L. 5114-6-6), and the practice of the registration services for a hull still on the slipway is not yet known; the mechanism is dealt with in detail on the page on financing.
4. The refund guarantee for advance payments: independent, bank-issued, matched to the instalments
A yard does not finance a twenty-million-euro yacht from its own funds; the instalments pay for steel, engines, subcontractors and wages as work proceeds. The problem is not the advance payment. It is the unsecured advance payment. Between signature and delivery, the buyer advances 70 to 90% of the price against a thing he does not possess and, usually, does not own. The refund guarantee restores the balance: if the yard does not complete the ship, a solvent guarantor repays.
French law distinguishes two personal securities that contracts readily confuse. A suretyship (cautionnement) is accessory: the surety can raise against the creditor the defences of the principal debtor, and a yard in difficulty always disputes the default alleged against it. An independent guarantee is of a different nature: the guarantor undertakes, in consideration of an obligation entered into by a third party, to pay a sum either on first demand or on agreed terms, cannot raise any defence relating to the guaranteed obligation, and is released only in case of manifest abuse or fraud by the beneficiary (Civil Code, article 2321). It is the only form that fulfils the expected function: the buyer calls the guarantee on a simple statement of default, collects the money, and the dispute over whether the call was justified takes place afterwards, with the money in his account.
An “on-demand” guarantee issued by the yard’s parent company is not security; it is one more commitment from the same group. The guarantee must come from a first-class credit institution or insurer outside the yard’s group, whose solvency is checked like that of a financial counterparty. Four parameters make the instrument effective. The amount covers at all times the total of sums paid, either through a single guarantee whose amount increases at each instalment, or through one guarantee per instalment issued before the corresponding payment, the rule to write being that an instalment is only payable after receipt of the guarantee covering it. The term runs beyond the contractual delivery date by a sufficient margin and is automatically extended in case of delay, otherwise the yard that is late is also the one whose guarantee expires. The triggers are objective, termination of the contract for delay exceeding a number of days, opening of insolvency proceedings, cessation of business, refusal to deliver, and the guarantee can be called on the buyer’s statement, without a judgment or award. Finally, the law and forum of the guarantee are known before signature: a guarantee issued by a Dutch bank under Dutch law is called in Amsterdam, which is not unusual, but needs preparing.
5. When a French yard files for insolvency: the contract continues, ownership decides
Opening safeguard, reorganisation or liquidation proceedings does not end the construction contract. Notwithstanding any legal provision or contractual clause, no indivisibility, termination or rescission of a contract in progress can result solely from the opening of proceedings, and the administrator alone may require performance of contracts in progress by providing the promised performance (Commercial Code, article L. 622-13). The automatic termination clause on insolvency, present in almost all English-language forms, therefore has no effect before a French court; it remains useful as a trigger for the bank guarantee. The buyer does, however, have a procedural weapon: a formal notice to the administrator to decide on continuation of the contract, left unanswered for more than a month, results in automatic termination (article L. 622-13, III). Non-performance then gives rise to damages, but claimed in the insolvency, that is, in liquidation, usually lost.
What saves the buyer is ownership. A claim to recover movables can only be brought within three months of publication of the judgment opening the proceedings (Commercial Code, article L. 624-9). Goods sold with a retention of title clause agreed in writing no later than delivery may be claimed if they are found in kind when the proceedings open, as may movables incorporated into another asset where they can be separated without damage (article L. 624-16). A buyer who became owner of the hull through an early transfer clause claims the hull. One who bought the engines himself and had them delivered to the yard under retention of title claims them if they can still be separated. One who has none of these files a claim. The three-month period is a strict time bar, and it runs while the buyer is often still negotiating with the administrator. The claim is made without waiting, the administrator being able to accept it with the debtor’s consent, and the supervising judge deciding in case of dispute (article L. 624-17).
6. The subcontracted hull yard: the risk nobody deals with
A growing share of yachts is built in two stages: hull and superstructure at a yard in Eastern Europe or Turkey, fit-out and finishing at the Dutch, German or Italian yard that contracts with the buyer. The buyer has a contract only with the second. If the first goes bankrupt while the hull is there, the buyer has no direct right over it, unless the main contract has organised a transfer of title to the hull to the buyer, published in the country where it lies, or a refund guarantee expressly covering that risk. This configuration combines all the risks described here: a hull belonging to a yard with which the buyer has no contract, in a country whose law and register he does not know, financed by advance payments passed on with no guarantee of return, and covered at best by a guarantee whose triggers target the default of the contracting yard, not that of its subcontractor. Nobody thinks about it. Everybody pays for it.
The contractual answer lies in three stipulations: identification of the hull yard in the main contract, with a prohibition on changing it without consent; a clause by which the contracting yard undertakes to acquire title to the hull from its subcontractor at each milestone and to transfer it immediately to the buyer, with registration in the local register; and express extension of the bank guarantee’s triggers to the insolvency of the hull subcontractor. A serious yard accepts these three clauses, because it has its own interest in securing its hull.
7. Changes, delays, cost increases: what is settled in writing
Amendments to the construction contract must, on pain of nullity, be made in writing (Transport Code, article L. 5113-2). The rule protects both parties against requests made orally during yard visits, which end up adding ten to twenty per cent to the initial price and several months of delay. The contract organises a change order procedure: each request is priced and timed in a written quotation, accepted in writing before execution, and the buyer’s project manager has no power to order anything without that formality.
Delay is sanctioned by a capped daily penalty, then, beyond the cap, by a right to terminate. Where the contract provides that the party failing to perform shall pay a certain sum as damages, the other party may be awarded neither more nor less, but the court may, even of its own motion, reduce or increase the penalty if it is manifestly excessive or derisory (Civil Code, article 1231-5). A penalty capped at two per cent of the price for eighteen months’ delay is derisory; it is better to negotiate the cap than to argue disproportion. The yard, for its part, relies on force majeure, an event beyond its control, unforeseeable when the contract was concluded and whose effects cannot be avoided by appropriate measures (article 1218), which the forms extend to strikes, supplier delays and epidemics; the buyer should require that such events extend the deadline only for their actual duration, on proof, and that a force majeure delay exceeding a few months gives him a right to terminate with refund of advance payments, callable under the guarantee.
The price is in principle fixed. Absent a clause, a French yard can invoke hardship: if an unforeseeable change of circumstances makes performance excessively onerous for a party that had not accepted that risk, it may ask for renegotiation, and failing agreement the court may revise or end the contract (Civil Code, article 1195). The text is a default rule: a clause by which the yard accepts the risk of changes in costs excludes it, and that is the clause the buyer must obtain, even at the price of conceding a revision indexed to a public steel or aluminium price index, working both ways. Finally, the naval architect’s plans are protected by copyright; a buyer who wants to be able to have the yacht completed elsewhere if the yard fails obtains from the outset a licence over the plans and technical file, and an undertaking to hand them over on demand in case of termination. A hull recovered from the receiver without its plans is one that few yards will agree to complete.
8. The buyer’s roadmap, from quotation to delivery
Before the letter of intent, the buyer has the yard’s financial position checked, as well as the existence of a guarantor bank and any past or pending insolvency proceedings, and chooses the acquisition structure knowing its effects on warranties and flag. Before signature, he obtains the early transfer of title clause with public registration in the yard’s country, the independent bank guarantee matched to the instalments, the governing law and jurisdiction or arbitration clause, the international sanctions compliance clause, the written change orders clause, the definition of trials and acceptance criteria, and the licence over the plans. During construction, he has each transfer registered, checks each guarantee before each payment, keeps the change order log and has the works monitored by a surveyor independent of the yard and the broker. At acceptance, he takes his surveyor on board, records the reservations, retains the holdback and checks the class and flag certificates. After delivery, he notes the date of discovery of each defect and, in France, issues proceedings before the year expires.
The rule to remember is simple: an ownership clause that is not published is a clause that does not exist on the day it is needed, and an advance payment that is not guaranteed by a bank is an unsecured loan to the yard.
The firm advises on yacht construction and refit contracts and can review your draft contract before the first payment: contact us.
For a complete picture, our practical guide Building your yacht: a French or a foreign shipyard, which law are you choosing? compares the four national regimes, France, the Netherlands, Germany and Italy, and ends with a comparison table and model clauses; it can be downloaded free of charge. To have your own situation reviewed, contact the firm.
Frequently asked questions
Can the yard refuse a clause transferring title during construction?
It can, since article L. 5113-3 of the Transport Code makes transfer on acceptance only a default rule and the contrary clause is negotiated. But refusal has a commercial price: since 1 May 2026, the mortgage on a ship under construction under article L. 5114-6-5 can only be granted by the owner, so a buyer who does not own the hull cannot give it as security to his bank. A yard that refuses early transfer in practice refuses its client’s bank financing, and most give way when the argument is put like that.
Is retention of title over engines I bought myself useful?
Yes, on two conditions. The clause must have been agreed in writing no later than delivery of the engines to the yard, and the engines must be found in kind when the proceedings open, recovery remaining possible for incorporated goods that can be separated without damage (Commercial Code, article L. 624-16). An engine sitting on its bearers but not yet connected can be separated without damage; a shaft line embedded in the structure cannot. The claim must be made within three months of publication of the opening judgment (article L. 624-9), and that period cannot be made up.
What is the clause terminating the contract on the yard’s insolvency worth?
Before a French court, nothing: no termination or rescission of a contract in progress can result solely from the opening of proceedings, notwithstanding any contractual clause, and the administrator alone decides whether the contract continues (Commercial Code, article L. 622-13). The clause is nonetheless useful, provided it is linked to the bank guarantee: the opening of insolvency proceedings must be among the events allowing the buyer to call the refund guarantee on a simple statement. That, and not termination of the contract, is where protection of the advance payments is decided.
The yard is asking me for a guarantee of payment of the instalments: is that normal?
It is common, especially when the buyer is a foreign company set up for the transaction. The statutory mechanism guaranteeing payment of contractors does not apply to a client contracting for its own account outside any professional activity (Civil Code, article 1799-1), and its application to shipbuilding, which is not a building works contract within the meaning of article 1779, is doubtful. The payment guarantee is therefore freely negotiated: a standby letter of credit, an independent guarantee from the buyer, or escrow of the next instalment. A buyer who offers it strengthens his position to obtain, in return, the refund guarantee and the ownership clause.
Is an independent surveyor needed during construction?
Yes, and distinct from the broker who brought the deal, whose remuneration depends on the yard. The buyer’s surveyor follows the milestones, certifies that they have been reached before each payment, draws up the joint inventory of materials and equipment marked in the buyer’s name, keeps the change order log and goes on the trials. His report is attached to the acceptance protocol. His cost, around one per cent of the price over the whole build, bears no comparison with that of an instalment paid against a stage not reached or a reservation forgotten at acceptance.
On the same subject: building a yacht in the Netherlands, Germany or Italy, on what the yard’s law changes for the buyer; mortgage on a ship under construction, on financing a new yacht since the reform of 1 May 2026; acceptance, sea trials and hidden defects in a new yacht, on the one-year period after delivery; dispute with a foreign shipyard, on governing law, the competent court and arbitration.