Newbuild vessel delivered with defects by a Turkish shipyard? Learn how foreign buyers can pursue warranty repairs, price reduction, compensation, rejection, termination and damages for defective ship construction in Turkey.

A foreign buyer takes delivery of a newly built vessel from a Turkish shipyard after months or years of construction. Shortly afterward, serious problems begin to emerge. The main engine repeatedly fails, the vessel cannot achieve contractual speed, fuel consumption exceeds guaranteed levels, welding defects appear, electrical systems malfunction, coatings deteriorate prematurely or the vessel fails to satisfy agreed technical specifications.

For a shipowner that has invested millions of dollars in a newbuild, these are not ordinary warranty problems. A construction defect may keep the vessel off-hire, cause loss of charter income, require emergency repairs in another country and even create safety or classification problems.

The central questions are therefore:

Can the foreign buyer force the Turkish shipyard to repair the vessel? Can the buyer claim the cost of repairs performed elsewhere? Can the purchase or construction price be reduced? Can the vessel be rejected? Can the contract be terminated? Can loss of hire and other financial losses be recovered?

Where Turkish law governs the relationship, the Turkish Code of Obligations (“TCO”) provisions governing contracts for work are particularly important. After delivery, the owner must inspect the work as soon as reasonably possible and notify the contractor of defects within an appropriate period. TCO Article 475 then provides important remedies including withdrawal in sufficiently serious cases, reduction of the price, free repair where this would not involve excessive cost, and preservation of the right to claim damages under general rules.

However, international shipbuilding contracts frequently contain detailed warranty regimes that can modify the practical operation of these rights. The contract must therefore be examined alongside Turkish law.

What Is Defective Ship Construction?

A newbuild vessel may be defective even though it can technically sail.

A defect can exist where the delivered vessel fails to possess characteristics required by the shipbuilding contract, technical specification, approved drawings, classification requirements or applicable standards.

Defects may concern the hull, machinery, propulsion system, electrical installation, navigation equipment, piping, coatings, cargo systems, accommodation, safety equipment or vessel performance.

The problem does not need to involve complete vessel failure.

A substantial departure from agreed contractual characteristics may itself create a defect claim.

Shipbuilding Contracts and Turkish Law

Where Turkish law applies, shipbuilding relationships can fall within the legal framework governing contracts for work.

This matters because TCO Articles 474–478 contain a specific system governing defective work, inspection, notification, acceptance, remedies and limitation periods.

The shipbuilding contract remains extremely important because sophisticated contracts usually contain their own provisions concerning:

warranty periods, notification deadlines, repair procedures, builder access, replacement parts, exclusions of liability, loss of hire, consequential damages and dispute resolution.

A foreign buyer should therefore never evaluate a construction defect solely by reading the warranty certificate.

Common Defects in Newbuild Vessels

Newbuild disputes can arise from almost every major vessel system.

Typical examples include main engine defects, propulsion failures, defective welding, structural cracking, shaft alignment problems, excessive vibration, electrical failures, generator problems, defective piping, coating failure, ballast-system defects and steering problems.

Performance deficiencies can also create substantial disputes.

The vessel may fail to achieve its guaranteed speed, deadweight, fuel efficiency, cargo capacity or other contractual performance criteria.

Design Defects

One of the first questions is:

Who was contractually responsible for the design?

This can completely change the liability analysis.

Turkish shipbuilding commentary notes that where design responsibility belongs to the builder, the defective-work remedies under TCO Article 474 and following may become relevant. Where the buyer itself bears design responsibility, builder liability requires a different analysis, including whether the builder failed to comply properly with the supplied design or otherwise acted wrongfully. (Lexology)

The design responsibility clause should therefore be reviewed immediately.

Defective Materials

A vessel can also be defective because inappropriate or substandard materials were used.

Examples include steel that fails contractual specifications, defective valves, unsuitable coatings, low-quality piping or components inconsistent with approved specifications.

The buyer should preserve certificates, procurement records and samples wherever possible.

Replacing the defective component without preserving evidence can make a later claim substantially harder.

Defective Welding

Welding disputes can become particularly serious because structural integrity may be affected.

Problems may include cracking, porosity, incomplete penetration or welding that fails approved procedures.

Independent technical inspection may require ultrasonic testing, radiography or other non-destructive testing.

Where structural defects are suspected, evidence should be collected before extensive corrective work begins.

Main Engine Problems

Engine defects can immobilize an otherwise completed vessel.

A newbuild may suffer overheating, lubrication problems, vibration, repeated shutdowns or component failure shortly after delivery.

The dispute may involve several potentially responsible parties:

the shipyard,

engine manufacturer,

equipment supplier,

or subcontractor.

The shipbuilding contract should determine who assumed responsibility for equipment integration and warranty coordination.

Propulsion and Shaft Alignment Defects

Misalignment can create vibration, bearing damage and repeated machinery failure.

These cases are technically complex because the shipyard may blame the equipment manufacturer while the manufacturer argues that installation was defective.

Independent engineering analysis is essential.

Speed Deficiency

Suppose the shipbuilding contract guarantees 15 knots under defined trial conditions.

During trials, the vessel achieves only 13.8 knots.

The contract may contain a specific formula reducing the contract price according to the extent of speed deficiency.

If performance falls below an agreed minimum threshold, rejection rights may potentially arise depending on the contract.

The precise performance guarantee provisions must therefore be reviewed.

Excessive Fuel Consumption

Fuel efficiency has become commercially critical.

A vessel consuming substantially more fuel than contractually guaranteed can lose significant value over its operating life.

The shipyard may argue that weather, loading, hull condition or operating parameters explain the difference.

The buyer may need expert analysis comparing contractual trial conditions with actual performance.

Deadweight Deficiency

Newbuild contracts commonly guarantee minimum deadweight.

A deficiency can directly reduce the vessel’s earning capacity.

Contracts may specify financial compensation for each ton below the guaranteed figure and sometimes establish a rejection threshold.

The contractual formula should be applied carefully.

Classification Problems

Classification evidence can be highly important in defective-construction disputes.

If the vessel cannot obtain or maintain required class status because of construction defects, the buyer’s position may be considerably strengthened.

Preserve classification reports, conditions, recommendations and correspondence with the yard.

However, class approval does not necessarily mean the shipyard has complied with every contractual warranty.

Class requirements and contractual specifications are not identical.

Sea Trial Failure

Sea trials provide one of the most important opportunities to identify defects before final delivery.

The buyer should document:

engine performance,

speed,

fuel consumption,

vibration,

steering,

navigation systems,

emergency systems,

and other contractually required tests.

If the vessel fails a required trial, the buyer should avoid signing documents that could later be interpreted as unconditional acceptance.

Can the Buyer Refuse Delivery?

Potentially, depending on the severity of the defect and contractual terms.

Not every minor deficiency permits rejection of a multimillion-dollar vessel.

Contracts often distinguish between defects preventing delivery and minor outstanding items that can be included on a punch list.

Where Turkish law governs, TCO Article 475 permits withdrawal where the work is so defective or so seriously contrary to the contract that the owner cannot use it or cannot reasonably be expected to accept it.

The threshold is therefore significantly higher than the existence of a minor defect.

Punch List Items

Minor deficiencies are frequently recorded at delivery.

Examples might include minor finishing work, small equipment adjustments or non-critical cosmetic defects.

The delivery protocol should identify each outstanding item clearly and specify when the shipyard must correct it.

Do not rely on informal assurances that:

“We will fix everything later.”

Record the obligation in writing.

Warranty Period

International shipbuilding contracts commonly provide a contractual warranty period beginning at delivery.

Academic analysis of standard shipbuilding contracts notes that builders commonly undertake during such periods to rectify covered defects at their own cost. The same contracts may also restrict other remedies or exclude losses arising from loss of vessel use. (DergiPark)

The warranty clause should therefore be read carefully rather than assuming it provides unlimited protection.

Warranty Is Not Necessarily the Same as Statutory Defect Liability

This distinction is important.

The contract may establish a 12-month warranty procedure requiring the builder to repair covered defects.

Turkish law separately regulates contractor liability for defective work.

The relationship between contractual warranty rights and statutory remedies depends on the governing law and wording of the agreement.

The buyer should not automatically assume that expiration of a commercial warranty eliminates every possible legal claim.

Inspect the Vessel Promptly

TCO Article 474 imposes an important duty after delivery.

The owner must examine the completed work as soon as reasonably possible in the ordinary course and notify the contractor of identified defects within an appropriate period. Either party may also request expert examination at its own expense and obtain a report.

Foreign buyers should therefore organize technical inspection immediately around delivery.

Visible Defects

A visible or discoverable defect should not be ignored until the warranty period is nearly over.

If defective welding, coating failure or another problem is identifiable during inspection, notify the yard promptly in writing.

Failure to inspect and notify can have serious consequences.

Hidden Defects

Some construction defects cannot reasonably be discovered during delivery inspection.

They may appear after weeks or months of operation.

TCO Article 477 provides that where a defect emerges later, the owner must notify the contractor without delay after discovering it; otherwise the work may be treated as accepted. Liability can continue for defects intentionally concealed by the contractor and defects that could not be discovered through proper inspection.

This makes rapid notification essential.

Never Wait for the Full Investigation Before Giving Notice

A foreign buyer discovers abnormal engine vibration.

The precise engineering cause is not yet known.

Waiting three months for a final technical report before notifying the yard can be dangerous.

A preliminary notice can state that a defect has been discovered, reserve all rights and explain that technical investigation continues.

Detailed evidence can follow.

Warranty Notice

The shipbuilding contract may impose additional notice requirements.

It may specify:

who receives the notice,

how notice must be delivered,

what information must be included,

and how quickly the builder must respond.

Follow these requirements strictly.

Sending an informal message to a project engineer may not satisfy a formal contractual notice clause.

Right to Free Repair

Where the requirements of TCO Article 475 are satisfied, the owner may demand free correction of the defect at the contractor’s expense, provided correction would not require disproportionate cost.

This is often the commercially preferred solution where the vessel can be repaired quickly.

But the situation becomes more difficult when the ship is thousands of miles away.

Must the Vessel Return to Turkey for Warranty Repair?

This depends heavily on the contract.

A warranty clause may require the builder to perform repairs at its own yard or may regulate repairs performed elsewhere.

Returning a vessel to Turkey can itself cause enormous positioning and off-hire costs.

The buyer should therefore examine whether the yard must approve third-party repair and who bears travel, towage and related costs.

Emergency Repair Abroad

Suppose the vessel suffers serious machinery failure while trading overseas.

Waiting several weeks for the Turkish builder to send technicians may be commercially or operationally impossible.

The buyer may need emergency repairs at another shipyard.

Before authorizing them, where practicable:

notify the Turkish builder,

invite inspection,

obtain an independent survey,

photograph the defect,

preserve damaged components,

and obtain detailed repair quotations.

This can substantially strengthen a later reimbursement claim.

Shipyard Refuses to Repair

A builder may deny that the problem is covered by warranty.

It may blame crew operation, normal wear, the equipment manufacturer or the buyer.

The foreign buyer should request a written technical explanation for rejection.

Independent expert evidence should then address the builder’s stated defense.

Price Reduction

The buyer may prefer to keep the vessel rather than insist on repeated unsuccessful repairs.

TCO Article 475 permits an owner, where its conditions are met, to retain defective work and request a reduction in price proportionate to the defect.

In shipbuilding cases, valuation evidence may be necessary to determine the appropriate reduction.

Withdrawal From the Contract

For exceptionally serious defects, withdrawal may potentially become available.

The defect must reach the statutory or contractual threshold.

A vessel that is fundamentally unsafe, incapable of its intended contractual use or seriously inconsistent with essential agreed characteristics presents a very different case from one requiring minor corrective work.

Before attempting termination or rejection, obtain specialist legal and technical advice.

Wrongful rejection of a completed vessel can itself generate substantial liability.

Compensation in Addition to Defect Remedies

TCO Article 475 expressly preserves the owner’s right to claim damages under general principles.

Potential losses can include corrective repair expenses and other proven losses causally connected with the defective construction.

However, international shipbuilding contracts frequently contain significant exclusions and limitations.

Loss of Hire

One of the largest claims can be loss of vessel earnings.

Suppose a newly delivered tanker suffers a construction-related engine failure.

The vessel remains off-hire for 35 days.

At USD 45,000 per day, the commercial impact is substantial.

But many shipbuilding warranty clauses attempt to exclude indirect losses or loss of use. Academic analysis of standard shipbuilding warranty clauses specifically notes contractual structures under which owners bear losses including lost profit resulting from inability to use the vessel. (DergiPark)

The contract must therefore be checked before assuming the entire lost hire is recoverable.

Consequential Loss Exclusion

Typical shipbuilding contracts may exclude:

loss of profit,

loss of use,

loss of charter,

business interruption,

and consequential damages.

Whether a particular clause applies and is enforceable under the governing law requires individual analysis.

Do not simply accept the yard’s interpretation.

Repair Costs

Where third-party repairs are legally justified, reasonable corrective repair costs can form a major component of the claim.

Preserve:

repair quotations,

invoices,

payment records,

surveyor reports,

technical reports,

and damaged components.

The buyer should also demonstrate that the chosen repair method and cost were commercially reasonable.

Towage and Salvage Costs

A construction defect can create far greater losses than the cost of replacing a component.

An engine failure may require emergency towage.

A steering defect may place the vessel in danger and require salvage assistance.

If these expenses were caused by a construction defect, they may potentially form part of a damages claim, subject to the contract and applicable liability rules.

Damage to Other Parts of the Vessel

A defective component may cause consequential physical damage.

For example, improper engine installation may cause catastrophic machinery failure damaging surrounding equipment.

The claim should distinguish:

the defective component itself,

cost of correcting the defect,

and secondary physical damage caused by the defect.

Contractual liability exclusions may treat these categories differently.

Damage to Third Parties

A construction defect can also cause collision, pollution or cargo loss.

The owner may initially face claims from third parties and subsequently seek recovery against the builder.

These cases can involve shipbuilding law, maritime liability, insurance and subrogation simultaneously.

Builder Blames the Equipment Manufacturer

The shipyard may argue:

“We did not manufacture the engine.”

That does not necessarily resolve the owner’s contractual claim.

The shipbuilding contract must determine who promised delivery of the completed vessel and who bears responsibility for subcontractors and equipment suppliers.

The builder may have separate recourse against its supplier.

That does not automatically mean the buyer must pursue the supplier instead.

Buyer-Supplied Equipment

The position can differ where the buyer itself supplied the equipment.

If the owner selected and delivered a defective component despite proper warnings from the yard, builder liability may be restricted.

TCO Article 476 provides that the owner can lose defect remedies where the defect results from instructions given despite the contractor’s express warning or is otherwise attributable to the owner.

The source of the defect therefore matters.

Acceptance Protocol

The delivery and acceptance protocol is one of the most important documents in the transaction.

Do not sign language stating that the vessel is accepted “without reservation” if known defects remain unresolved.

Known deficiencies should be expressly reserved.

TCO Article 477 attaches significant consequences to acceptance and failure to perform the required inspection and notification.

Does Taking Delivery Eliminate All Claims?

No.

Delivery does not necessarily eliminate claims for hidden defects or properly reserved defects.

But acceptance without appropriate reservation can materially affect the buyer’s position regarding defects that should have been discovered.

The technical inspection and delivery process must therefore be coordinated with legal review.

Limitation Periods

Limitation periods should be checked immediately.

Under TCO Article 478, claims arising from defective work generally become time-barred two years after delivery for works other than immovable structures, while claims involving the contractor’s gross fault are subject to a twenty-year period under that provision.

However, international shipbuilding contracts may contain their own warranty and claim procedures.

Do not confuse the contractual warranty period with the statutory limitation period.

Maritime Claim Classification

Ship construction also has a maritime-law dimension.

TCC Article 1352 classifies claims concerning the construction, reconstruction, repair, alteration or equipping of a vessel as maritime claims. (2M Hukuk Avukatlık Bürosu)

This classification can become relevant when security or other maritime procedural remedies are being considered.

Builder’s Assets and Recovery Risk

A successful damages claim has limited value if the shipyard becomes insolvent.

Where a substantial dispute develops, the foreign buyer should consider the yard’s financial position.

Repeated construction problems, unpaid subcontractors, staff departures or unusual demands for accelerated payment may justify closer investigation.

Remaining Instalments

If part of the shipbuilding price remains unpaid, the buyer should obtain advice before simply withholding payment.

The owner may have substantial defect claims, but unilateral non-payment can trigger builder remedies.

The contract should be reviewed for set-off rights, retention mechanisms and milestone payment conditions.

Refund Guarantee

If defects are so severe that rejection or termination becomes realistic, any refund guarantee should be reviewed immediately.

Check:

guaranteed amount,

expiry date,

demand requirements,

issuing bank,

governing law,

and whether the circumstances trigger payment.

Do not wait until the dispute has escalated to discover that critical security is approaching expiry.

Classification Society Is Not Automatically Liable

Foreign buyers sometimes assume that if class approved the vessel, the classification society must compensate them for construction defects.

That is not automatic.

Classification obligations and shipyard contractual obligations are legally distinct.

Any claim against class requires separate analysis of its duties, contractual terms and applicable law.

Insurance

Hull and machinery insurers should be notified where construction defects cause physical damage after delivery.

The insurer may fund repairs and later pursue subrogated recovery against responsible parties.

The buyer should avoid settlements with the builder that prejudice insurer rights.

Expert Survey

High-value construction disputes are won or lost on technical evidence.

A survey should answer:

What is defective?

What should have been built?

What was actually built?

Why did the defect occur?

Who was responsible?

How can it be corrected?

How much will correction cost?

A legal claim unsupported by engineering evidence will often be inadequate.

Judicial Evidence Preservation

Where the vessel or defective component is located in Turkey, formal evidence-preservation measures may be considered before the condition changes.

This can be particularly valuable where the shipyard denies the defect and urgent repairs are necessary.

Once machinery is dismantled and replaced, reconstructing its previous condition becomes significantly harder.

Arbitration

Many international shipbuilding contracts contain arbitration agreements.

The dispute may therefore ultimately be decided by an arbitral tribunal rather than a Turkish court.

The buyer should review:

governing law,

seat of arbitration,

arbitration rules,

notice requirements,

and provisional-remedy provisions.

Evidence preservation in Turkey may still be important even where the merits will be arbitrated elsewhere.

Practical Example: Main Engine Failure

A foreign shipowner takes delivery of a newbuild vessel from a Turkish yard.

Six weeks later, the main engine repeatedly overheats.

An independent investigation identifies improper installation during construction.

The owner should immediately notify the yard, preserve engine data and components, invite the yard to inspect and determine whether warranty repair or emergency third-party repair is commercially necessary.

The claim may extend beyond repair cost depending on the contract.

Practical Example: Vessel Cannot Achieve Contractual Speed

The contract guarantees 16 knots.

Repeated properly conducted trials establish a maximum speed of 14.8 knots.

The buyer should first examine the contractual speed-deficiency formula and rejection threshold.

Expert evidence should confirm that the deficiency is attributable to vessel design or construction rather than external conditions.

Practical Example: Hidden Structural Defect

Eight months after delivery, cracking appears in structural areas that were not reasonably accessible during ordinary delivery inspection.

The buyer should notify the builder immediately.

TCO Article 477 makes prompt notice particularly important where a defect appears after acceptance.

The affected structure should be professionally documented before repairs begin.

Practical Example: Defect Causes 30 Days Off-Hire

A propulsion defect requires dry-docking at another shipyard.

Corrective repairs cost USD 900,000 and the vessel loses 30 operating days.

The owner should calculate both direct repair costs and commercial losses but review the warranty clause carefully because the contract may restrict loss-of-use or lost-profit recovery.

First 24 Hours After Discovering a Serious Newbuild Defect

The foreign buyer should immediately preserve the shipbuilding contract, technical specifications, approved drawings, delivery protocol, warranty terms, class records, sea-trial results and correspondence with the builder.

Written defect notification should be sent without unnecessary delay.

An independent marine engineer or surveyor should inspect the vessel.

Photographs, operational data, alarm histories and damaged components should be preserved.

If emergency repairs are required, the builder should be given an opportunity to inspect where reasonably possible without compromising vessel safety.

The buyer should also calculate off-hire and other losses from the first day and check contractual notice deadlines.

The goal is to preserve both the technical evidence and the legal claim.

Frequently Asked Questions

Can a foreign buyer sue a Turkish shipyard for a defective newbuild vessel?

Yes, potentially. The governing law, shipbuilding contract, warranty provisions, nature of the defect and dispute-resolution clause must be examined.

Can the buyer demand free repairs?

Under TCO Article 475, free repair is one of the statutory remedies where the applicable conditions are satisfied and repair would not impose excessive cost.

Can the contract price be reduced?

Potentially yes. TCO Article 475 recognizes proportionate price reduction as another remedy for defective work.

Can the buyer reject the vessel?

Potentially, but the defect must satisfy the applicable contractual or statutory threshold. Minor defects will not normally justify rejection of an entire vessel.

What happens if the defect appears after delivery?

The buyer should notify the builder without delay. TCO Article 477 specifically addresses defects discovered later.

Can lost charter income be claimed?

Potentially, depending on causation and the contract. Many shipbuilding warranty clauses restrict or exclude loss-of-use and lost-profit claims. (DergiPark)

What if the shipyard blames a subcontractor?

The buyer’s rights against the builder depend primarily on the shipbuilding contract and applicable law. The builder’s separate relationship with its subcontractor does not automatically eliminate contractual responsibility to the buyer.

What if the buyer supplied the defective equipment?

Builder liability may be limited where the defect is attributable to the buyer or to buyer instructions given despite an appropriate warning. TCO Article 476 is relevant where Turkish law applies.

How long does a buyer have to bring a defect claim?

TCO Article 478 provides a two-year limitation period after delivery for defective works other than immovable structures, with a twenty-year period where the contractor is grossly at fault. Contractual warranty deadlines and other applicable rules must also be reviewed.

What is the most important step after discovering a defect?

Give timely written notice and preserve technical evidence before the defective equipment is altered, repaired or discarded.

Shipbuilding Defect and Warranty Lawyer in Turkey

A defective newbuild dispute should never be treated as a simple warranty complaint.

For a foreign buyer, the correct strategy is to establish a technical and contractual chain:

What did the Turkish shipyard promise to build? What was actually delivered? What defect exists? Who caused it? What repair is necessary? What financial losses resulted?

Turkish law can provide significant remedies. TCO Article 475 recognizes withdrawal in sufficiently serious cases, proportionate price reduction and free repair, while preserving claims for damages under general principles.

But international shipbuilding contracts can materially reshape those remedies through warranty procedures, liability caps, exclusions of consequential damages and arbitration clauses. Warranty clauses in standard shipbuilding arrangements frequently focus on the builder’s obligation to repair while restricting claims for vessel downtime and lost profit. (DergiPark)

Foreign buyers should therefore act immediately when serious defects emerge. Written notice, independent technical investigation, preservation of defective components and careful review of the delivery protocol can determine whether a multimillion-dollar claim succeeds.

Fırat Fesih Kaya Law Office assists foreign shipowners, shipping companies, vessel investors and international buyers with defective ship construction claims in Turkey, newbuild vessel warranty disputes, Turkish shipyard liability, defective machinery and hull claims, performance deficiencies, warranty repairs, price reduction, contract termination, compensation claims, loss of hire, evidence preservation, maritime litigation and international shipbuilding arbitration.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yıldırım Tower, Balgat, Çankaya, Ankara, Turkey