The Use and Enforceability of Exculpatory (Red Letter) Clauses in Ship Repair Contracts 6 University of San Francisco Maritime Law Journal 1993-1994

6 U. S. F. Mar. L. J. 473 (1993-1994)
The Use and Enforceability of Exculpatory (Red Letter) Clauses in Ship Repair Contracts

handle is hein.journals/usfm6 and id is 479 raw text is: The Use and Enforceability of
Exculpatory (Red Letter)
Clauses in Ship Repair Contracts
By DANIEL B. MACLEOD*
INTRODUCTION
B ECAUSE marine vessels are usually worth millions of dollars and the
consequential damages for loss of use easily runs in the thousands of
dollars per day, virtually all major ship repairers attempt to limit their
liability. Thus, most form contracts for the repair of marine vessels contain
a clause or two restricting or limiting the liability of the ship repair facility.
Courts have interpreted and construed these clauses with a wondrous mix
of contract and tort concepts such that there is little national uniformity of
interpretation and an inherent unpredictability of result.
This article explores the nature and scope of the contractual
limitation provisions ship repairers include in their contracts and the
reception these provisions have received in the courts. Substantially all of
the ship repair exculpatory clause cases are examined, and it is suggested
that the best approach is the explicit application of contract principles
applied in the light of commercial and industrial reality.
I. THE SHIPYARD INDUSTRY
The construction and repair of ocean going vessels as an industry'
comprises about 590 establishments on the Atlantic, Gulf, and Pacific
* Daniel MacLeod is a partner with the firm of Alford, MacLeod & Couto in San Diego,
California. He is a graduate of California State University at Sacramento (A.B. 1963) and
Hastings College of Law (J.D. 1966). He is a Proctor Member of the Maritime Law Association
of the United States.
The Article Editor is Joseph F. Keenan. The Substantive Editor is Aaron MacLeitch.
The Technical Editor is Mark Berry.
1. EXECUTIVE OFFICE OF THE PRESIDENT, OFF. OF MGMT. AND BUDGET, STANDARD
INDUSTRIAL CLASSIFICATION MANUAL 238-39 (1987). The Office of Management and Budget
classifies industries in Standard Industrial Classifications (SIC). The SIC for construction and
repair of marine vessels is 373. Within this classification are smaller SIC codes for shipbuilding
and repair (3731) and boat building and repair (3732).

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