A boat purchase — even of a relatively inexpensive boat — is a complex transaction that is more accurately compared to buying a home than to buying a car. People don’t question the dozens of printed pages that accompany a home purchase, but many complain that they should be able to buy a boat with a one-page agreement. Such an agreement is an invitation to a lawsuit.
For example, a yacht purchase will usually include an inspection period, during which a sea trial, marine survey and mechanical inspection may be completed. The buyer will usually submit a purchase deposit prior to conducting the inspections. The purchase agreement must set forth the rights of the parties in connection with the inspections and the deposit.
What if the boat is damaged during the sea trial? A marine insurance policy may not cover the claim if an inexperienced buyer was operating the boat at the time of the damage. A well-drafted purchase agreement will clear this up by requiring the seller to be in control of the boat at all times during the inspections. This is not an issue for a car purchase, since the seller and the potential buyer will probably both have insurance to cover the damage.
The vessel inspections won’t take place without a purchase deposit, and the purchase agreement must consider the handling and disposition of the deposit if the vessel is ultimately rejected. This, again, contrasts with a test drive for a car, which is arranged for simply by handing the buyer the keys.
A vessel may be encumbered by unrecorded maritime liens, or it may have title problems arising from transfers between state and federal registration systems. The purchase agreement must provide for the resolution of these problems if they are discovered during — or after — the purchase.
When and where will title transfer to the buyer? Will the parties allocate property tax for the year of the purchase? Will the buyer ask for a repair allowance after the survey? Is the slip transferable? These issues all add to the complexity of a vessel purchase and, consequently, to the complexity of a vessel purchase agreement.
A well-drafted purchase agreement can provide a road map for the parties to stay out of trouble and a clear discussion of their rights and remedies, if something goes wrong. Whether you are overwhelmed by the purchase agreement or simply annoyed by it, you’ll find that most of the provisions of a well-drafted agreement are designed to eliminate ambiguity and avoid possible disputes.
Take some time and read the document. Ask your broker to explain any provisions that aren’t clear to you, and contact an experienced maritime attorney if you have legal questions about the rights and obligations of the parties.