Using a California broker

A: The short answer to our reader’s question is a resounding “NO.” If the current owner of the boat sells the boat to someone else under circumstances described by our reader, he will have no grounds for legal action against the broker.

 

First, regardless of the regulations that govern a yacht broker’s professional behavior, a legal claim against the broker in this case would require our reader to prove that he was damaged in some way. He will be hard pressed to prove any amount of damages in a transaction where he did not buy anything.  But he has raised a few regulatory issues that don’t necessarily relate to a lawsuit, so let’s take a look at the duties that a broker will generally owe to the parties in a yacht purchase transaction.

Part of the regulatory analysis presented by our reader is correct. California law requires a yacht broker to present to the owner of a vessel any offer to purchase received prior to the completion of a sale, unless expressly instructed by the owner not to present such an offer  (California Code of Regulations, Title 14 §7623). 

I will first note that this regulation refers to the broker’s duty to present offers to the seller of a yacht. It does not concern the buyer, and as such the buyer would have no standing to enforce this particular regulation. But let’s look beyond this one regulation.

A yacht broker is an agent of the buyer or seller of a yacht, and he or she is authorized to represent both parties in a transaction if the relationship is adequately disclosed. As an agent for the parties, a broker owes a duty to the parties to use all information reasonably available, and to use his or her expertise and experience, to look out for their clients’ interests.  This may get a little complicated in cases where a broker represents both parties, but that duty would exist even if it were not spelled out in a regulation.

A broker’s duty in a purchase and sale transaction extends to a wide range of tasks, but our reader is specifically concerned with the purchase contract.  This is a complicated issue for brokers.  They are not licensed attorneys, but they are expected to understand the various contracts that they ask their clients to sign and to explain the provisions of those contracts.  The solution to this dilemma is to use a form contract.

Form contracts have been developed over many years by the attorneys who work in a particular industry, and the forms have been tested many times in court. A transaction that is not covered by a form contract may use a contract that was pieced together from various other agreements or haphazardly modified to fit a transaction that it was not intended for. The language of these modified contracts is often so ambiguous that litigation is almost certain to follow if there are any problems at all with the transaction. And a broker who increases the likelihood that his clients will end up in litigation is obviously failing in his duty to look out for his clients’ interests.

The California Yacht Brokers Association (the CYBA) has a very good set of forms available for use by their member brokers and their clients. And, while there is no specific legal form that must be used to submit a purchase offer for a yacht in California, the CYBA form contracts have been extensively vetted by attorneys and used by California brokers for many years. This in turn allows California brokers to explain the forms to their clients without retaining an attorney for every transaction.

Our reader’s broker mistakenly advised him that the offer must be submitted on a CYBA form, but the broker was otherwise justified in declining the form submitted by our reader.

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