[Reno9108]

Hypothetical situation

I place an offer on a boat dependent on survey outcome. The offer is accepted and I pay for and proceed with the survey. The survey turns up some issues, I say the issues are significant but the seller says they are not.

When is that 'accepted' offer binding, when is it not binding?

Who gets to say the issues are significant and thus warrant nullifying the previously agreed upon offer? Though at this point the seller would probably tell you to take a leap...

What about a nuanced misrepresentation of the boat "...the sails are as new..." when it is clear they are not?


P.S. I posted the initial "Proper purchasing etiquette" as well. I would like to thank the community here for your responses, it was a great source of information to me and I hope to others as well. Let the learning begin.

 

[Minnewaska]

The answer depends on what your Purchase and Sale contract says. The standard YBAA contract makes it fully binding on the seller to deliver the vessel, as described in an attached detailed listing, for the agreed upon price. It gives the buyer the right to survey the vessel and defines an Acceptance Date, by which the buyer must decide if they'll go ahead. Silence usually means rejection and all deposit money is returned. Once the buyers accepts the boat, they are fully bound. Prior to acceptance, the buyer can ask to renegotiate the original price, or walk away, based upon absolutely anything, but typically due to the survey. The moment they do, the original deal is off, as you've essentially rejected the boat at the original agreed upon price.

Those are the basics, but any buyer and seller can agree to further matters, such as a guarantee that the sails are new. The detailed listing I referred to above, typically states the buyer must confirm inventory and assess condition. Sometimes it's hard enough just to find everything on the listing. I once surveyed a boat that was missing both it's dinghy and scuba compressor. The broker called the seller, who confirmed he removed them both and they were no longer going to be included, so make an adjusted offer. I shut down the survey and walked. Bad vibe.

 

[CrispyCringle]

Its pretty much like buying a house. You agree on a price and the sale is contingent on agreed on inspections and their results. The buyer can insist on repairs after the inspections, or a reduction in price. But the seller can agree to the new requests or not. If the two parties cant reach an agreement, the deal is off. And like buying a house, the buyer pays for these inspections, as its in his interest to do so.

 

[MikeOReilly]

Practically speaking, it is the potential buyer who gets to decide if the survey results are acceptable. The buyer doesn't even have to give reasons, or share the results of the survey if they don't want. But that would be odd.

If the survey turns up surprising results (ones unknown to everyone, or undisclosed by the seller) that are significant in the buyer's mind, the original deal is essentially null and void. Essentially, this means the boat is not in the state that the original offer was made on (at least, in the buyer's mind). So at this point the buyer either walks away, or attempts to renegotiate the contract.

Of course, since this a whole new negotiation, the seller is under no obligation to agree to the buyer's terms.

Now, I suppose either side could attempt to sue for breach of contract. This would force the court to decide if the survey results really did turn up unexpected results that significantly impact the sale. But I've never heard this done before. I doubt if any court remedy would be cheaper than simply walking away from the deal.

 

[sailingfool]

...

Now, I suppose either side could attempt to sue for breach of contract. This would force the court to decide if the survey results really did turn up unexpected results that significantly impact the sale. But I've never heard this done before. I doubt if any court remedy would be cheaper than simply walking away from the deal.

Any option for either party to sue would depend on what the contract says. If you use a version of the YBAA sale agreement, if the buyer choses not to accept the boat, then the contract is void, and there would be no legal basis for either party to sue, that's how the contract is written.

Now if the buyer accepts the boat in writing, then refuses to close, the contract provides the loss of the deposit as the only damages payable to the seller.

The contract stipulates arbitration in the case of a dispute, which I assume eliminates the option to sue.

http://www.catamaransite.com/files/Yacht_Purchase_Agreement.pdf

 

[MikeOReilly]

Any option for either party to sue would depend on what the contract says. If you use a version of the YBAA sale agreement, if the buyer choses not to accept the boat, then the contract is void, and there would be no legal basis for either party to sue, that's how the contract is written.

Now if the buyer accepts the boat in writing, then refuses to close, the contract provides the loss of the deposit as the only damages payable to the seller.

The contract stipulates arbitration in the case of a dispute, which I assume eliminates the option to sue.

http://www.catamaransite.com/files/Yacht_Purchase_Agreement.pdf

You can always sue. Whether the suit would be sucessful is dependent on the terms of the contract, and the determinations.

 

[sailingfool]

You can always sue. Whether the suit would be sucessful is dependent on the terms of the contract, and the determinations.

It would be interesting to have a legal mind comment as to the risks of bringing a law suit regarding an agreement which has these terms:
"The BUYER and SELLER further understand and agree that arbitration shall be the sole and exclusive forum for resolving any dispute, controversy or claim relating to this Agreement and that neither party shall resort to any court except to compel arbitration, refer questions of law or to confirm, vacate or modify any such award. .."

Perhaps any attempt at a suit, would be well, legally sticking your neck out

 

[danvon]

Arbitration clauses are put there to prevent you from suing and are generally enforceable. Generally arbitrators are thought to be more defense-friendly than juries, which is why your cell phone company etc. insist on them.

 

[MikeOReilly]

I suspect if it was challenged that it would be tossed out by the courts. These kinds of indemnity clauses are often inserted into contracts. When challenged, some are tossed out.

As I say, I wouldn't stress about this. I know of no situation, anywhere, where a failed recreational boating sales agreement has resulted in court action. It's simply not worth it for either party.

The sales agreement gives the potential buyer control over acceptance or rejecting the boat based on the survey. But this doesn't mean the seller must agree to any new terms. It's a whole new negotiation at that point. A seller may not agree that a finding is substantial enough, or indeed that it is any surprise. Any boat is going to have expected issues, and this applies in spades for older boats. It could be that a buyer has simply not educated themselves sufficiently, and is now surprised an older boat has water in the deck, or some blistering, or fibreglass crazing, or leaky tanks, or...

The key as the buyer is to be as fully informed as you possibly can be before you make an offer.

 

[sailingfool]

...
The key as the buyer is to be as fully informed as you possibly can be before you make an offer.

Of course the buyer usually is not so informed when making an offer. Which is why the YBAA and similar sale agreements provide an acceptance period which permits the buyer to complete his/her due diligence regarding the boat, to become so informed.

So the desirable condition is: "the buyer is to be as fully informed as you possibly can be, before you ACCEPT the boat.." Unfortunately becoming so well informed can cost a bundle of spent money.

 

[MikeOReilly]

Of course the buyer usually is not so informed when making an offer. Which is why the YBAA and similar sale agreements provide an acceptance period which permits the buyer to complete his/her due diligence regarding the boat, to become so informed.

So the desirable condition is: "the buyer is to be as fully informed as you possibly can be, before you ACCEPT the boat.." Unfortunately becoming so well informed can cost a bundle of spent money.

Agreed, it can cost a lot of money. Doesn't change the need for the buyer to be as informed as they possibly can be.

 

[danvon]

I suspect if it was challenged that it would be tossed out by the courts. These kinds of indemnity clauses are often inserted into contracts. When challenged, some are tossed out.

As I say, I wouldn't stress about this. I know of no situation, anywhere, where a failed recreational boating sales agreement has resulted in court action. It's simply not worth it for either party.

The sales agreement gives the potential buyer control over acceptance or rejecting the boat based on the survey. But this doesn't mean the seller must agree to any new terms. It's a whole new negotiation at that point. A seller may not agree that a finding is substantial enough, or indeed that it is any surprise. Any boat is going to have expected issues, and this applies in spades for older boats. It could be that a buyer has simply not educated themselves sufficiently, and is now surprised an older boat has water in the deck, or some blistering, or fibreglass crazing, or leaky tanks, or...

The key as the buyer is to be as fully informed as you possibly can be before you make an offer.

I would agree not to be too stressed about the arbitation clause, but realize that it likely IS enforceable. The law in many jurisdictions favors arbitration as it is a mch simpler way to resolve things than litigation (having done some civil litigation, I can wholeheartedly say that there is no other way imaginable to waste more money resolving a dispute. Pistols at dawn would generally be less costly to society). In a dispute over something like a deposit on a purchase, the arbitrator can look to the contract and I would expect a reasonable outcome.

 

[Reno9108]

Any option for either party to sue would depend on what the contract says. If you use a version of the YBAA sale agreement, if the buyer choses not to accept the boat, then the contract is void, and there would be no legal basis for either party to sue, that's how the contract is written.

Now if the buyer accepts the boat in writing, then refuses to close, the contract provides the loss of the deposit as the only damages payable to the seller.

The contract stipulates arbitration in the case of a dispute, which I assume eliminates the option to sue.

http://www.catamaransite.com/files/Yacht_Purchase_Agreement.pdf

A good read.
1. How much is a standard deposit?
2. Is this contract close to standard across different countries?

 

[Minnewaska]

A good read.
1. How much is a standard deposit?
2. Is this contract close to standard across different countries?

1. 10%
2. I'm sure it is not.

 

[Reno9108]

1. 10%
2. I'm sure it is not.

Thanks, and I should apologize, after a quick search on this site I came up with the same answer.

search is your friend

 

[Minnewaska]

Thanks, and I should apologize, after a quick search on this site I came up with the same answer.

search is your friend

Most appreciate just having boating discussions. No apology needed here.

 

[MikeOReilly]

A good read.
1. How much is a standard deposit?
2. Is this contract close to standard across different countries?

As others said, 10% is standard, but you can try and negotiate this as well.

I haven't gone through the contract in detail, but it looks like a good template. There's nothing stopping you from presenting this as the contract. The seller will usually have one in mind, but you are equally able to use yours. You just have to both agree.

 

[sailingfool]

A good read.
1. How much is a standard deposit?
2. Is this contract close to standard across different countries?

This the current version of the sale contract used by the several hundred yacht brokers in the US who are members of the YBAA.

10% is a common deposit but the deposit amount really has little significance in a contract that allows the buyer to walk away from the purchase unless he accepts the boat in writing prior to the acceptance date. My last boat sale I accepted a $1 bill as a deposit. Because the acceptance period was only one week, the deposit had no real signifigznce.

Sent from my SM-G965U using Tapatalk

 

[Minnewaska]

My last boat sale I accepted a $1 bill as a deposit. Because the acceptance period was only one week, the deposit had no real signifigznce.

As long as you prevent any buyer's expenses involved with the survey from attaching to the boat, their is little recourse against the deposit. While I've never heard of it happening, damage due to negligence, done to the boat during a survey, might be a good reason to want a standard deposit.

The party that most wants to see the deposit is the broker, who also signs the contract. They get paid out of the deposit money in certain defaults.

Your post was written as if you actually posted the contract, but I didn't see it. Wondering if my popup/ad blocker is preventing it. I was curious, because I just signed one last Fall and it clearly states a copyright violation for use my a non-YBAA member. They are updated routinely too. The one I signed in 2018 was materially different.

 

[SteveKras]

At what point do you provide that deposit? If my initial offer is below asking price, there is no guarantee that the seller would accept my offer. Is the deposit only sent after both parties agree to a contract?