I recently made an offer to purchase a boat through a yacht broker and the offer was accepted. Unfortunately, I lost my job due to the pandemic and I simply cannot afford to buy the boat now. The offer was made contingent upon sea trial and survey, but there was no contingency in the contract regarding my financial ability to buy the boat. Is my deposit at risk if I withdraw the offer?
You are probably OK, but the answer will depend on the language of your purchase agreement. The language of a yacht purchase agreement may vary quite a bit depending on the preferences of individual yacht brokers, but in California, the most common purchase agreement is the document published by the California Yacht Brokers Association.
The philosophy used by the CYBA in drafting their standard purchase agreement was that they did not want to force anyone to buy a boat. Under the CYBA purchase agreement, the vessel is “deemed rejected” unless the buyer signs a final acceptance prior to a certain date. And, when a vessel is rejected, the contract requires the return of the buyer’s deposit, net of any unpaid costs relating to the transaction (such as the cost of a haulout and survey). In the scenario described by our reader, he would simply decline to execute the final acceptance and he would be entitled to a return of his deposit.
The outcome may be different if your broker does not use the CYBA contract or a contract drafted by an experienced attorney. A broker may use a purchase contracts that he found on the internet or pieced together from several different documents. These documents may be created without the benefit of any legal advice, and they tend to be very ambiguous. For example, many of the non-CYBA forms make no provision for the “signing off,” or acceptance of the survey or other contingency, or they fail to describe the circumstances in which the buyer’s deposit may be at risk. Ambiguity often leads to litigation.
Regardless of the language of the contract, a buyer’s deposit will not be at risk unless the buyer breaches the purchase contract. Problems arise when the ambiguity of a contract makes it very difficult to determine whether the contract has been breached. Even in the event of a breach, the contract must include some language which ties the deposit into the seller’s remedy for a buyer’s breach of the contract (typically, a “liquidated damages” clause). If the language of the contract is so ambiguous that it is impossible for the parties to determine whether a breach has occurred or whether the deposit should be returned, the entire mess will end up in court.
The best advice that I can offer a buyer regarding the purchase deposit is to read the contract carefully, and be sure that all of the buyer’s obligations in the contract are clearly spelled out. Don’t be afraid of “legalese.” If the language of a contract is so convoluted that it is impossible to understand, a jury won’t understand it either. Ask the broker to explain your rights and obligations in plain English, or – better yet – talk to an attorney.
David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com, or via email at firstname.lastname@example.org.