Three Ways to Pay $50 Million for a Ship: Which Closing Method Is Safest?
SALEFORM 2025 puts three balance-payment routes directly into the standard ship sale contract. They all move the same money. They do not create the same fraud exposure, bank-delay risk, buyer control or closing certainty.
Buying a ship has a peculiar final moment. Weeks of inspections, negotiations, class searches, financing work and document drafting eventually reduce to one extraordinarily simple question: who releases the money first?
On a $50 million transaction, nobody wants the seller to transfer legal ownership while $45 million is still wandering through correspondent banks. The buyer is equally reluctant to put the entire purchase balance beyond its control before title, deletion documents, mortgage releases and delivery conditions are in place.
SALEFORM 2025 tackles that tension much more directly than its predecessor. Instead of forcing parties to build modern closing mechanics largely through rider clauses, Clause 3 now offers three alternative ways to handle the purchase-price balance.
A small technical clarification matters.
The three SALEFORM alternatives govern payment of the balance, not necessarily every dollar of the nominal purchase price. A deposit is normally dealt with separately under the escrow provisions. So on an illustrative $50 million purchase with a 10% deposit, the question at closing is really how to move or release the remaining $45 million.
What SALEFORM 2025 changed
Modern closing practice has finally moved into the printed form.
Under SALEFORM 2012, the familiar basic model was straightforward: on delivery, the deposit was released and the buyer paid the balance to the seller’s nominated account. In practice, sophisticated transactions frequently amended that structure to solve payment-risk and banking issues.
SALEFORM 2025 formalizes three mutually exclusive approaches.
Pay on Delivery
The traditional route. Deposit is released under the escrow agreement and the balance is paid to the seller’s nominated account in connection with delivery.
Pre-Fund Escrow
Buyer sends the balance to the escrow agent before delivery. The escrow agent holds the money to the buyer’s order and releases it to the seller when closing occurs.
Conditional SWIFT
Buyer sends the balance in advance through authenticated MT199 and MT103 messages to the seller’s bank. The bank holds the money to the buyer’s order without allocating it to the seller until authorized release.
These are not merely three ways to wire money. They place the transit risk, bank risk, fraud risk and control of the balance in different places at different times.
Our $50 million test transaction
One ship. Same seller. Same buyer. Three completely different settlement paths.
Illustrative purchase economics
The buyer has already committed $5 million. The vessel is approaching delivery. Documents are being checked. The seller wants proof that $45 million is available. The buyer wants proof that clean title and the agreed delivery package will be transferred.
That is where the three methods separate.
Method One: pay the seller on delivery
Maximum simplicity. Maximum dependence on the live payment working on time.
How it works
The buyer keeps the balance until the delivery process. Once the transaction reaches the contractual payment point, the buyer pays the balance to the seller’s nominated account and the deposit is released under the escrow agreement.
Conceptually, this is the easiest structure to understand. There is no second escrow arrangement for the $45 million balance and no conditional SWIFT mechanism requiring the seller’s bank to hold the money under special instructions.
Why buyers like it
- The balance remains in the buyer’s control until closing.
- No need to fund $45 million several days early.
- Usually easier to align with acquisition financing.
- No separate balance-holding fee or escrow mechanism.
- Operationally familiar to banks and treasury departments.
Where it can hurt
- The largest transfer occurs under maximum closing-day pressure.
- Correspondent-bank screening can delay the funds.
- A last-minute sanctions or AML review can stop settlement.
- Seller may not consider payment complete until cleared funds arrive.
- Fraudulent substitute wiring instructions can be catastrophic.
Direct payment gives the buyer the strongest practical control before the payment is sent. The weakness is what happens immediately afterward: once the $45 million is moving, the buyer may have performed every internal step correctly while the receiving or correspondent bank still prevents the seller from receiving cleared funds on schedule.
Method Two: pre-position the balance with escrow
Move the banking risk before closing day, while preserving buyer control over release.
How it works
Before delivery, the buyer remits the balance to the escrow agent’s designated account. The money is held to the buyer’s order. At delivery, the deposit and balance are released to the seller in accordance with the escrow agreement.
The critical distinction is that the buyer has moved the money out of the normal bank-transfer path before the closing clock is running, but has not simply handed the funds to the seller.
Why it can be the cleanest closing
- Funds can be fully received and cleared before delivery.
- Correspondent-bank delay is moved away from the critical closing moment.
- Seller gains comfort that the purchase balance is already present.
- Buyer retains contractual control because funds are held to its order.
- Release can be coordinated with delivery documents and protocol.
What buyers must solve first
- KYC and AML onboarding can itself take time.
- The escrow agreement must say precisely when funds can be released or returned.
- Buyer gives up possession of the cash before actual delivery.
- Escrow-agent and account details must be independently authenticated.
- Some acquisition lenders cannot fund before closing conditions are satisfied.
Financing can kill this option.
A buyer may love the escrow solution commercially but be unable to use it because its lender’s drawdown conditions require the vessel to be free of mortgages or other conditions precedent to be satisfied at closing. If the bank will not release acquisition funds beforehand, there is nothing to pre-position.
Method Three: conditional SWIFT
The $45 million reaches the seller’s bank early—but remains under buyer control.
How it works
The buyer remits the balance before delivery using authenticated conditional payment instructions through SWIFT, using MT199 and MT103 messages. The seller’s bank holds the balance to the buyer’s order without allocating it to the seller’s account.
On delivery, the seller’s bank releases the balance after receiving written instructions from the buyer’s authorized representative.
Why the structure is attractive
- Seller can see the balance has reached its banking environment.
- Buyer can maintain control over release until closing.
- It can avoid the cost and administration of holding the full balance in escrow.
- Closing can be rapid once release instructions are given.
- The structure is familiar in sophisticated international S&P transactions.
The catch
- The seller’s bank must actually accept the conditional structure.
- Message wording and bank procedures need to be agreed ahead of time.
- Operational unfamiliarity can create exactly the delay the structure was meant to prevent.
- Sanctions and AML screening still occur.
- Written release authority must be crystal clear.
Current practitioner commentary indicates conditional SWIFT structures are not accepted in every S&P transaction today. If this is the selected closing method, both banks should confirm the mechanism and exact instructions well before delivery.
The buyer’s comparison table
No single winner in every category.
| Issue | Pay on Delivery | Pre-Funded Escrow | Conditional SWIFT |
|---|---|---|---|
| Buyer control before closing | Very High | High | High |
| Seller visibility of funding | Lower | Very High | Very High |
| Live closing-day transfer risk | Highest | Low | Low |
| Pre-closing KYC / banking workload | Lower | High | High |
| Compatibility with financed purchase | Often Strong | Can Be Difficult | Deal Specific |
| Need for escrow agreement covering balance | No | Yes | No Full-Balance Escrow |
| Special bank acceptance required | Normally Minimal | Escrow Bank | Yes |
| Closing speed once all CPs satisfied | Transfer Dependent | Fast | Fast |
| Main operational weakness | Money may be delayed in transit | Funds must be moved early | Seller’s bank may not accept mechanics |
The biggest closing risk may be a bank neither party hired
International ship purchases are often denominated in U.S. dollars. That can put correspondent and intermediary banks into the payment chain. Those banks may conduct sanctions, anti-money-laundering and other compliance screening even though neither buyer nor seller chose them directly.
Current maritime-law commentary warns that payments expected to clear in one to three banking days can instead be delayed for several days—or even longer—during compliance review.
Under English-law analysis cited by current maritime practitioners, unless the parties agree otherwise, a buyer generally should not assume its payment obligation is satisfied merely because it instructed its bank. The relevant question can be whether the required account actually received cleared funds.
The $25 million warning: money in escrow can still produce a closing fight
The balance was already pre-positioned. Timing still mattered.
A $25 million vessel sale based on SALEFORM 2012 was structured so the 10% deposit and 90% balance were held in escrow at a Norwegian bank. The balance was intended to be in escrow one banking day before expected delivery and later released to the seller.
A dispute arose over the final contractual deadline for release. The Commercial Court concluded that the relevant deadline was determined by midnight local time in the place where the payment obligation was performed—in that case Norway.
The lesson is bigger than the individual case: pre-positioning solves transfer timing only if the contract, escrow instructions, banking-day definitions and release mechanics all point to the same answer.
The $50 million email you should never trust by itself
Payment fraud deserves its own place in the closing checklist because ship transactions have exactly the characteristics criminals like: large international wires, lawyers, banks, time pressure, multiple jurisdictions and long email chains.
“Please note our bank details have changed.”
That sentence should stop the closing process until the change has been independently verified.
Business-email-compromise criminals commonly enter legitimate email threads, impersonate trusted counterparties and substitute their own wiring instructions. Once a large wire reaches the wrong account, the recovery window can be extremely short.
Confirm payment instructions using a previously known telephone number—not contact details contained in the new email.
Require at least two authorized people to approve any material bank detail or release change.
Treat any last-minute change to beneficiary, bank or escrow details as a new closing-risk event requiring fresh verification.
What closing day actually looks like
Option A — Payment on delivery
Closing conditions confirmed
Documents, vessel readiness and financing conditions are checked.
Buyer instructs the balance wire
The $45 million enters the payment chain.
Banks process and screen
This is the period of greatest transfer uncertainty.
Seller receives payment
Closing protocol and delivery are completed in accordance with the MOA.
Option B — Pre-positioned escrow
KYC and escrow arrangements completed
The escrow account is ready before delivery approaches.
Buyer wires $45 million early
Bank transit occurs before closing day.
Escrow confirms cleared funds
The money remains held to the buyer’s order.
Release occurs at delivery
The closing becomes principally a release event rather than a live international transfer event.
Option C — Conditional SWIFT
Banks agree conditional mechanics
Exact MT199/MT103 wording and operational process should already be confirmed.
Buyer transmits balance early
Seller’s bank receives the money before closing.
Seller’s bank holds it to buyer’s order
The money is not allocated to the seller’s account.
Buyer authorizes release
Written release instruction triggers settlement at delivery.
Which structure fits which buyer?
Escrow deserves a hard look
If the cash is available and an established escrow agent can complete KYC early, pre-positioning removes much of the settlement pressure from delivery day.
Start with the lender
If loan proceeds cannot be drawn until mortgages, liens and other closing conditions are satisfied, full balance pre-funding may simply be unavailable.
Escrow or conditional SWIFT
Both can give the seller stronger comfort that the balance already exists without placing the funds unconditionally into the seller’s hands.
Move screening earlier
Transactions with complicated ownership, jurisdictions or sanctions sensitivity benefit from getting the money through the compliance chain before the delivery clock is running.
Conditional SWIFT can be elegant
Where both banking teams explicitly support it, the mechanism can combine pre-positioning with buyer release control without full-balance escrow.
Do not teach them on closing day
Operational novelty is itself a risk. Select a mechanism the actual banks—not merely the parties’ lawyers—confirm they can execute.
The 48-hour-before-closing buyer checklist
So which payment method is safest?
For a straightforward cash-funded transaction, with a reputable escrow agent, completed KYC and a tightly drafted escrow agreement, pre-positioning the balance in escrow can offer the cleanest operational risk profile. The funds are already cleared before closing while remaining held to the buyer’s order.
Conditional SWIFT can achieve a similar objective without placing the entire balance with an escrow agent, but its quality depends heavily on the seller’s bank accepting and correctly operating the structure. It should be confirmed—not assumed.
Traditional payment on delivery remains simple, familiar and often the easiest to reconcile with acquisition finance. Its weakness is that the largest and most important international transfer occurs at the exact moment everybody is under pressure to close.
The safest method is therefore not the cleverest clause. It is the method that the MOA, escrow agreement, financiers and actual banks are all prepared to execute the same way.
Research basis
[1] BIMCO — SALEFORM 2025: An updated framework for ship sale and purchase. Confirmation of three payment alternatives, escrow structure, KYC requirements and modern closing procedures.
[2] Schjødt — Navigating SALEFORM 2025. Detailed analysis of Clause 3(a)–(c), financing limitations and current bank acceptance of conditional SWIFT arrangements.
[3] Haynes Boone — SALEFORM 2025: A Modern Rewrite for Vessel Deals. Payment options, buyer-order mechanics and financing-condition considerations.
[4] Hill Dickinson — SALEFORM 2025 and 2026 payment-timing analysis. Escrow, KYC, payment mechanics and Banking Day/time-zone issues.
[5] Reed Smith — Frozen Funds, Sinking Deals. Current analysis of correspondent-bank, sanctions, KYC and cleared-funds delay risk in international vessel sales.
[6] Songa Product and Chemical Tankers IV AS v Gardsea Shipping Inc, [2026] EWHC 1559 (Comm). Current English Commercial Court authority concerning payment release timing in a $25 million vessel sale.
[7] FBI — Business Email Compromise guidance. Independent verification, call-back procedures and risks from altered wire instructions.
$50M Ship Closing Method Screener
Compare the three SALEFORM 2025 payment routes using your own transaction. This tool does not give legal advice—it highlights which method may deserve the closest look based on funding and bank constraints.
