Release money against physical facts a third party can verify, never against calendar dates or self-reported percentages. The payment schedule is the only real leverage an owner has once construction starts, and owners who front-load payments hand that leverage to the yard in the first month. Everything else in the contract is downstream of this.
Why this is the clause that matters
An owner’s power in a build is the money not yet paid. A schedule weighted toward the start — a large deposit, then payments on dates — means that by the time problems surface, most of the budget has moved and the yard’s incentive to fix things at its own cost has evaporated. A schedule weighted toward verifiable progress keeps the incentives aligned all the way to handover.
Milestones that work
Each should be a physical event an independent inspector can confirm happened and was done properly:
- Contract signature — a deposit sized to secure the slot and start procurement, not to fund a large share of the build.
- Materials procured and on site — verifiable by inspection, not by invoice copies.
- Keel laid or equivalent structural start.
- Frames erected and faired — faired matters, because fairing before planking or plating is a hold point where quality is still correctable.
- Hull plating or planking complete and watertight.
- Main engines installed and aligned, alignment recorded.
- Systems installed and commissioned — tested, not merely present.
- Interior fit-out complete.
- Sea trial completed and passed against the agreed protocol.
- Delivery, acceptance and documentation handover.
The proportions matter as much as the list. Keep meaningful value in the last two milestones, because those are the ones that need leverage.
Retention
Hold a retention beyond delivery, released at the end of the warranty period or on closure of the punch list, whichever is later. Without retention, warranty enforcement depends entirely on the yard’s goodwill and its interest in your future business, which may be limited. With retention, the defects that emerge in the first months of operation get fixed.
Documentation as a payment condition
Make final payment conditional on the handover pack: as-built drawings, equipment manuals, certificates, spares lists, warranty documentation and test records. Owners who do not do this frequently never receive complete documentation, and discover the gap years later when they try to sell or when a surveyor asks for records. Documentation has a way of becoming unavailable the moment the last payment clears.
Title, risk and insurance during construction
Establish who owns the vessel and the materials at each stage, who bears the risk of loss or damage during construction, and who insures it for what value. If the yard becomes insolvent mid-build, the answer to “who owns the partially built hull and the equipment in the store” determines whether you lose your money. This is not a theoretical concern in any shipbuilding market.
Variation orders
Define the procedure precisely: who may authorise a variation on the owner’s side, that it must be priced and its programme impact stated before work proceeds, and that no variation is payable without that written authorisation. Uncontrolled variations are the most common route from an agreed price to a much larger final number, and they are usually a series of small, individually reasonable changes that nobody totalled.
Keep a variation register from day one. Owner-side supervision exists partly to maintain it — see new-build project management.
The acceptance protocol
Agree the sea trial and acceptance criteria at contract signature, not on the day. Specify what will be measured, under what load condition, and what result constitutes a pass. Ambiguity here is the single most common cause of a stand-off at handover, with the yard asserting completion and the owner asserting deficiency, and no agreed standard to resolve it.
For a Komodo vessel, include the conditions the boat will actually work in — station-keeping and manoeuvring in a real tidal stream, not only a flat-water speed run. See survey and sea trial.
Specification precedence
State that the technical specification annex takes precedence over general contract wording where they conflict. Then make sure the specification is precise enough to be worth that precedence — vague scope is quoted at the leanest interpretation and defended on the same basis. The specification guide covers how to make it precise, and the cost guide covers what the resulting numbers usually look like.
Delay and liquidated damages
Include a delay remedy with defined exceptions, and be realistic: exceptions swallow the clause if drafted loosely, and owner-caused delay through late decisions or late variations is a genuine category. The best protection against delay is not the damages clause, it is a stable specification and prompt owner decisions.
Frequently asked questions
How should payments be staged in a boat building contract?
Against physical, independently verifiable milestones — materials on site, keel laid, frames erected and faired, hull watertight, engines installed and aligned, systems commissioned, sea trial passed, delivery accepted — with meaningful value kept in the final milestones rather than front-loaded into the deposit.
Should I hold a retention on a shipbuilding contract?
Yes, released at the end of the warranty period or on punch list closure, whichever is later. Without retention, warranty enforcement depends on the yard’s goodwill, and defects emerging in the first months of operation often go unfixed.
What is the most common cause of a dispute at handover?
An acceptance protocol that was never agreed in writing. The yard asserts completion, the owner asserts deficiency, and there is no agreed standard to resolve it. Specify what will be measured, under what load condition, and what constitutes a pass — at contract signature.
Talk to the build desk
Send the vessel details or the operating profile you want to run and we will tell you what has to be established before a number means anything. Quotations in USD. Construction, repair, refit and vessel-sale contracts are issued by PT Komodo Galangan Nusantara.