Admiralty contract jurisdiction does not depend on locality (“upon navigable water”), but rather “…extends over all contracts which relate to the navigation, business or commerce of the sea.” Admiralty jurisdiction encompasses contracts performed upon the sea or upon waters within the ebb and flow of the tide. The true criterion as to whether or not admiralty contract jurisdiction exists is whether the contract is a “maritime contract,” i.e. having reference to maritime service or maritime transactions. To determine whether a contract is maritime, the courts look at the subject matter of the contract as well as prior judicial precedent.
Factors a court will consider in determining whether or not admiralty contract jurisdiction exists are as follows:
1. The provisions of the specific work order or contract;
2. The work actually performed in fulfillment of the contract;
3. Whether the work performed in connection with the contract was performed aboard a vessel upon navigable waters;
4. The extent to which the contract relates to the overall mission of a vessel or vessels;
5. The principle work and roles of the parties.
Historically, ship construction is not regarded as a traditional maritime activity, and a ship under construction has not evolved into “vessel” status. Thus, contracts for the construction of vessels, or for labor performed or materials supplied for their construction, are not maritime contracts cognizable in admiralty, although contracts for supplies and repair are within admiralty jurisdiction. In Peoples Ferry Company v. Beers, the Supreme Court of the United States held that a contract to construct a ship is not within admiralty jurisdiction because it is a contract made on land to be performed on land and is preliminary for the ship’s navigation.
A vessel is deemed to be still in the process of construction if it is not yet completed for the intended purpose, though it may have been launched. However, contracts for repairs or extensive reconstruction of a vessel in navigation are within admiralty jurisdiction. Contracts for minor repairs on board a vessel are not necessarily considered within admiralty contract jurisdiction.
Therefore, the rule that admiralty has no jurisdiction over contractual claims related to the construction of a vessel does not apply to the reconstruction of a vessel, as distinguished from original construction, regardless of how extensive the reconstruction may be.