A workable Indonesian shipbuilding contract does five things: it annexes the specification, ties payments to verifiable physical events, reserves inspection and rejection rights, defines how changes are priced, and sets numerical acceptance criteria for sea trial. Contracts missing any one of those five generate the disputes that the other four were meant to prevent.
The specification is the contract
Everything else is administration around a technical document. The specification should be annexed and signed, and it should state the general arrangement, structural basis or rule reference, machinery and systems schedules, an equipment maker’s list, the coating and finish schedule, and — critically — the division between yard supply and owner supply. Where the contract text and the specification conflict, the contract should say which prevails.
A specification written after the price has been agreed is not a specification; it is a record of an argument that has already been lost.
Milestones tied to physical events
| Tranche | Trigger | Verification |
|---|---|---|
| 1 | Contract signature | Execution; security or guarantee arrangements in place |
| 2 | First steel cut / keel laying | Material certificates checked; setting-out witnessed |
| 3 | Hull framing or closure | Structural stage inspected; tank testing complete |
| 4 | Launch | Vessel afloat; machinery installed |
| 5 | Delivery | Sea trial passed; certificates issued; protocol signed |
The principle is that money follows verified physical progress. A milestone defined by a date rather than an event pays for the calendar, not for the vessel. Where a yard requests an intermediate payment for equipment procurement, that is reasonable — but it should be tied to the equipment being on site and identifiable, and where possible to title in that equipment passing to the owner.
Inspection and rejection rights
The contract must give the owner’s representative access to the vessel, to the workshops, and to the quality records, and it must state what happens when work does not conform. A right of inspection without a right of rejection is decorative. The rejection clause should distinguish between work that must be redone and work that can be accepted against a reduction, and it should require the yard to notify hold points in advance so attendance is possible.
This is the clause that makes owner-side supervision effective. Without it, the supervisor can observe defects but cannot compel their correction until delivery, at which point the leverage has largely gone.
Variations
Every build changes. The question is whether changes are priced before or after they are executed. A workable variation procedure requires that any work outside the signed specification be described, priced and its schedule impact stated in writing, and approved by the owner, before it starts. Two refinements are worth adding in Indonesia: a stated basis for pricing variation labour and materials, so that each change is not a fresh negotiation; and a rule that verbal instructions on the shop floor carry no contractual weight.
Sea trial acceptance in numbers
“Satisfactory sea trial” is not an acceptance criterion. The contract should state the trial conditions — loading, draught, sea state, water depth — and numerical acceptance figures for speed, fuel consumption at stated power, manoeuvring performance, noise and vibration limits where relevant, and machinery parameters under load. It should also state the consequence of falling short: remedy, retrial, price adjustment, or in defined circumstances rejection.
Trials run without agreed conditions produce results nobody can interpret, and an owner who accepts a trial in flat water at light displacement has accepted a number that will never be repeated in service.
Delivery, guarantee and documentation
Delivery is complete when the protocol of delivery and acceptance is signed. That document should attach the punch list, with each open item allocated a responsibility and a date, and it should record the handover of certificates, as-built drawings, manuals, spares and inventory. The guarantee period runs from that point, and the contract should state its length, what it covers, how defects are notified, and where remedial work will be performed — a guarantee that requires the vessel to return to a yard two thousand kilometres away is worth less than it appears.
The certificate chain itself is set out on our delivery and export page.
Security and remedies
Owners should understand what secures their pre-delivery payments and what happens if the yard cannot complete. Refund guarantees, title passing progressively as work is paid for, and clear provisions on ownership of owner-supplied equipment on site are the usual mechanisms. The right structure depends on the parties and the jurisdiction, and it is a matter for qualified legal advice rather than for a template.
How this desk contracts
Construction, repair, refit and vessel-sale contracts arranged through this desk are issued by PT Komodo Galangan Nusantara, denominated in USD, with the specification annexed, milestones tied to physical events, and a written variation procedure. Supervision is contracted and invoiced separately from yard work so that the owner-side role stays owner-side. Contact sales@komodoluxury.com or +62 811-3823-875.
Frequently asked questions
What should never be left out of a build contract?
The specification as a signed annex, milestone definitions tied to verifiable physical events, the owner’s inspection and rejection rights, a written variation procedure, sea trial acceptance criteria expressed numerically, and the guarantee period with its scope.
Are advance payments normal?
A payment at contract signature is standard practice. What matters is the proportion and what secures it — the balance of payments should sit against physical progress that has been verified, so that the owner’s exposure at any moment is proportionate to the value actually created.
What is a protocol of delivery and acceptance?
The document signed at handover recording that the vessel has been delivered and accepted, with the inventory, documentation and any outstanding items listed. It ends the yard’s possession and starts the guarantee period, and it should never be signed against an unrecorded punch list.