Newbuilding Contracts in Indonesia: Title Transfer, Refund Guarantees, Delivery, and Defects

Originally published in Lexology Panoramic: Shipping 2027.

By Setyawati Fitrianggraeni, S.H., LL.M., FCIArb., FAIADR, Reynalda Basya Ilyas, and Tiyana Sigi Pertiwi, S.H., LL.M.

In brief

Indonesian law gives the parties to a shipbuilding contract wide freedom to decide when title in a newbuild vessel passes, what form a refund guarantee takes, and how defect claims are framed, because there is no dedicated statute or standard form for newbuilding contracts. The gaps are filled by general contract principles in the Indonesian Civil Code and by the vessel registration regime. This part explains when title passes, what makes a refund guarantee valid, what remedies exist when a yard refuses delivery, and who can claim for defects. The law is stated as at 22 May 2026.

Transfer of title

In principle, the parties are free to decide and agree when the ownership title of a newly built ship passes from the shipbuilder to the buyer. There is neither statutory guidance nor a standard form on the timing of the transfer. Parties may agree in the shipbuilding contract that title passes to the buyer upon delivery and full payment, or during construction.

In Indonesia, a deed of registration acts as proof of the ownership title of the ship. The Shipping Law and Minister of Transportation Regulation No. 39/2017 on Registration and Nationality of Vessels (MoTR No. 39/2017) provide guidance on the requirements for registration. The ship must have obtained a measurement certification, and the purchase from the shipbuilder must be accompanied by documents evidencing title.

For a newbuild ship built by a shipyard, title is evidenced by a construction or shipbuilding agreement with the shipyard, the protocol of delivery and acceptance, a builder certificate, and evidence of completion of payment for the construction of the ship. If the new ship was built traditionally by a craftsman, title ownership can be evidenced by a craftsman’s certificate, which should either be issued under the knowledge of the head of district or accompanied by a certificate of ownership.

Refund guarantees

Indonesian law does not contain specific statutory provisions governing refund guarantees in the shipbuilding context, nor does it prescribe any particular form. The validity of the terms of the guarantee between shipbuilder and shipowner is subject to the general contract principles of the Indonesian Civil Code regarding the validity of contracts, specifically article 1320, which requires: (1) consent of the parties; (2) legal capacity; (3) a specific subject matter; and (4) a lawful cause.

The parties are free to determine the form and terms of the guarantee, provided that such terms do not contravene applicable laws and regulations. This includes, for example, a refund guarantee that takes the form of a financial instrument or that involves a third-party guarantor assuming the shipbuilder’s repayment obligation. Generally, a refund guarantee made in the form of a written agreement that clearly specifies the guaranteed amount, the conditions triggering payment, and the validity period should constitute a valid refund guarantee. Indonesian courts have not specifically addressed the enforcement or validity of refund guarantees in the shipbuilding context.

Court-ordered delivery

There is no specific statutory procedure governing court-ordered delivery of a vessel in the shipbuilding context. General civil law remedies are available to a shipowner seeking to compel delivery. The shipowner may bring a general civil claim against the yard before the relevant court on the grounds of breach of contract or unlawful act (tort). As part of such a claim, the shipowner may request the court with jurisdiction to compel delivery in the interim or following the final decision of a substantiated claim.

Defects

Where the vessel is defective and damage results, claims for defects and damage should be based on the agreed terms under the shipbuilding or sale and purchase contract. Contractual claims for damage and defects can be filed based on breach of contract by the shipowner against the shipbuilder.

A purchaser from the original shipowner who has no direct contractual relationship with the shipbuilder may seek recourse against the seller under the relevant sale and purchase agreement. Where a third party sustains damage due to defects of a vessel and is not bound to contracts with the shipbuilder or shipowner, the aggrieved third party may make a claim against the party that caused the harm based on an unlawful act (tort) claim.

For advice on shipbuilding contracts, vessel registration, and shipping disputes in Indonesia, contact Anggraeni and Partners at connect@ap-lawsolution.net.