August 22 2018 | Contributed by Dardani Studio Legale Shipping & Transport Italy
The Supreme Court recently issued a decision regarding the sale and purchase of a second-hand vessel – in particular, the construction of the words ‘as she lies’ and the exclusion of the sellers’ guarantee as to any ship defects.
According to the short summary of the facts contained in the Supreme Court’s decision, the buyers brought proceedings before the Tribunal of Genoa against the sellers of a second-hand ship alleging the discovery of hidden defects in the vessel‘s electrical system. According to the buyers, the sellers were aware of the
defects before the vessel was delivered, but failed to disclose this to the buyers. The sellers defended the claim by arguing – among other things – that the vessel:
- had no defects;
- was in class at the time of delivery, with no conditions or recommendations; and
- had been sold to the buyers on an ‘as she lies’ basis, meaning
that it was sold with no guarantee as to any defects which it
The first-instance tribunal held the sellers liable and awarded damages in the buyers’ favour. The Court of Appeal of Genoa upheld this decision. The sellers appealed the Court of Appeal’s decision before the Supreme Court, reiterating (among other things) the argument that the alleged defects were not covered by a guarantee by the sellers because the vessel had been sold on an ‘as she lies’ basis.
Supreme Court decision
The Supreme Court confirmed the Court of Appeal’s decision. As to the construction of the words ‘as she lies’, the Supreme Court recalled that the clause originated in English maritime law and that two different theories had been applied in Italy as to its construction. While Italian jurisprudence has historically considered the words a mere standard clause with no legal effects, Italian maritime scholars have confirmed the validity of the clause aimed at contracting out the sellers’ guarantee – imposed by the Civil Code – to remedy any hidden defects in the goods being sold. Although the Supreme Court did not take a clear position in connection with this debate (due to a procedural issue, the court did not have to address the appeal on the merits of this specific point), it affirmed that the clause may exclude the sellers’ guarantee to remedy latent defects, provided that the seller does not:
- intentionally misrepresent the defects’ existence to the buyers; or
- try to prevent the buyers from discovering said defects.
The court added that under Italian law, the mere silence of the sellers does not constitute unlawful behaviour; rather, the sellers’ conduct must be active.
In an era where English law is the dominant influence, it is rare to find an Italian decision concerning the sale and purchase of second-hand vessels, which – being covered by standard forms such as the Norwegian sale form – are now almost exclusively governed by English law. Although this decision can be classified as obiter on the construction of the words ‘as she lies’, the Supreme Court seems to be sympathetic to Italian scholars’ interpretation of the clause.
The construction of clauses originating in a different legal system can create difficulties, especially in this field of law, whereby the concept of the seller’s guarantee for defects is forged within civil law. Interestingly, the Supreme Court’s attempt to interpret ‘as she lies’ might seem evocative of a pure English caveat emptor approach to the construction of the sale of a second-hand vessel. This recently came under discussion in London following the
decision in Union Power, which is still causing fierce debate among practitioners.