Upon signing of a construction agreement, we expect the buyer to open an irrevocable letter of credit for 20% of the contract sum in our favour, instead of an advance instalment payment. Such letter of credit shall serve as security for any costs incurred by us in case of breach and/or termination of the construction agreement by the buyer and the final instalment payment due upon delivery of the yacht.
We further expect the buyer to pay the remaining contract sum of 80% in as many as twenty instalments starting from the date of fabrication commencement (start of flame-cutting), i.e. about nine months after the construction agreement entered into force.
As soon as reasonably possible, we will register the yacht as “vessel under construction”, and we will secure the instalment payments by the buyer either by bank guarantees or by transfer of title to the “vessel under construction”.
Upon delivery of the yacht, we will provide the buyer with security for warranty claims in the amount equal to 2.5% of the contract sum, in the form of a warranty bond or a bank guarantee with a maximum term of 2 years.