I recently made an offer on a 50-foot sailboat located in Florida. The boat was listed with a Canadian yacht broker and the seller lives in Michigan. The offer was submitted on a one-page purchase offer form supplied by the broker, and it called for a $50,000 deposit, which I paid. The contract was pretty vague, but everyone was very friendly, so I was not too concerned. That all changed after I received the survey report. The surveyor found a long list of problems with the boat and based on his report I decided to reject the boat. I contacted the broker to arrange for the return of my deposit, but he never responded to my emails or phone calls. I also had trouble reaching the seller. He finally responded to me but refused to return my deposit because he disagreed with my surveyor’s report. He claimed that my surveyor was incompetent and that the problems noted in the survey report were grossly over-stated. We ultimately reached a compromise which called for him to keep $5,000 of the deposit and return $45,000 of the deposit to me. He then contacted the broker to instruct that the deposit be distributed according to the terms of our compromise. Unlike me, the seller was able to reach the broker, but the broker refused to return the deposit! He claimed that the seller owed a commission for the transaction under the terms of the listing agreement. I am now in the middle of a three-way, transcontinental, international dispute. What can I do?
This case really points out the value of a well drafted contract. We are frequently amazed at the lack of attention paid to this issue, by everyone involved in the transaction. Brokers, buyers, and sellers often look at a vessel purchase contract as a formality and question the need for a complex document. This is even more surprising when compared to a real property transaction, where the parties will slog through stacks and stacks of paperwork without raising an eyebrow. Many yacht brokers in California use the form contracts produced by the California Yacht Brokers Association, which are very well drafted and considerably shorter than real estate contracts and printed in a large font. Nonetheless, the CYBA agreements are seven pages long and many yacht purchase transactions proceed under a “simple” form such as the agreement described in our reader’s case. Let’s take a look at this transaction and see where a well drafted agreement would have helped things along.
The first concern with our reader’s transaction is the basis and method for rejecting the boat. A well drafted purchase agreement will provide for an unambiguous procedure for inspecting and rejecting the vessel. The contract should provide that the sale is, for example, subject to various contingencies (sea trial, survey, etc.) that must be met to the “Buyer’s satisfaction.” This gives the buyer the discretion to choose his own surveyor and to base his or her decisions on the opinion of their surveyor. The inspection terms of the contract should also provide for an unambiguous communication procedure. Most often this will require the buyer to actually sign off when all contingencies are satisfied, which means that there is no contract unless the buyer signs off.
Next, let’s consider the disposition of the deposit. Our reader’s dilemma arose from an interesting series of events, some of which were out of his control. Many brokerage listing agreements call for the payment of a commission to be paid by the seller if the broker produces a buyer who is prepared (“ready, willing, and able”) to purchase the boat, but the seller decides not to sell the boat. In this case, the listing agreement was apparently silent on this issue, and the buyer certainly was not prepared to buy the boat. The broker nonetheless decided that he was owed the commission, and he further determined – on his own – that the commission would be paid from the buyer’s deposit. This is particularly troublesome since the buyer of a boat is never a party to a listing agreement. This stalemate was complicated by the far-flung geography, and by the fact that a lawsuit was filed against the Canadian broker could only be served on him through international treaty. Service of a lawsuit under an international treaty typically requires six months or more of bureaucratic waiting before the foreign defendant can be compelled to respond to the complaint What a mess.
Our reader is facing an expensive legal battle that could have been avoided with the use of an unambiguous, professionally drafted purchase agreement. In real estate transactions, a complex set of escrow instructions accompany every deal. This was a half-million-dollar yacht transaction, with no instructions whatsoever regarding the disposition of a $50,000 deposit. Ambiguity is bad. Unless of course you enjoy paying an attorney to resolve these issues as they arise.
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.