In California, the most common purchase agreement used in yachting transactions is the contract published by the California Yacht Brokers Association (CYBA). The philosophy used by the CYBA in drafting the latest version of the document was that it did not want to force anyone to buy a boat. There-fore, under the 2005 CYBA purchase agreement, a vessel is ’deemed rejected’ unless her buyer signs a final acceptance prior to a certain date.
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 you described, you would simply decline to execute the final acceptance and you would be entitled to a return of the deposit.
The outcome may be different if your broker did not use the current CYBA contract or a contract drafted by an experienced attorney. Many yacht purchase contracts are drafted by brokers who piece together various provisions from several different documents. These documents may be created without the benefit of 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 the acceptance of the survey or other contingency, or they fail to describe the circumstances in which the buyer’s deposit may be at risk.
Regardless of the language of the contract, when a buyer fails to complete the purchase of a vessel, his or her deposit must be refunded unless the buyer breached the purchase contract. Problems arise when the ambiguity of the contract makes it difficult to determine whether it has been breached.
Even in the event of a breach, the contract must include some language that ties the deposit to 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 dep-osit should be returned, the entire situation will probably end up in court.
The best advice I can offer you regarding the purchase deposit is to read the contract carefully and be sure that all of your obligations are clearly spelled out in the contract. Don’t be afraid of ’legalese.’ If the language of a contract is so convoluted that it is impossible to understand, a judge and 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.