Navigating the Legal Waters of Yacht Transactions: Essential Tips to Avoid Costly Mistakes by Interlegal

14/ 03/ 2025

Acquiring or selling a yacht is a significant endeavor that requires careful legal planning, particularly in the context of English maritime law. Our expertise in yacht deals enables clients to avoid pitfalls and make informed decisions, ensuring smoother ownership transfers and safeguarding investments. Here’s a guide to help navigate this complex process effectively. 1) Ensure that the yacht is in proper technical condition before buying. Carry out an inspection with an independent professional – engineer or a surveyor. If it is not possible to hire an independent technician, you should inspect the yacht yourself. 2) Get written confirmation from the seller of the yacht’s seaworthiness and condition. In the case of DAWSON v. YEOWARD [1961]the judge noted the words spoken by the seller about the state of the yacht were considered «mere representations» and were not provisions of the concluded sales agreement. Consequently, the seller’s statement does not constitute a guarantee. Include the written guarantees in the contract so that they can be called upon if defects are found after a certain period of time after purchase. 3) Fix the moment of transfer of rights and obligations and all risks associated with the yacht. You should clearly state the moment you take ownership and all risks associated with a yacht – such as damage, breakage or destruction. In the case of PIERCE v. WOOD [1934] the buyer did not receive compensation for damage caused to the yacht during delivery by the seller as judge concluded that the ownership had passed at the time of the conclusion of the agreement and before transportation and delivery. 4) If a new yacht is damaged during operation, check whether she fullymeets the specifications of the builder. The new yacht is usually covered by a 1–2-year warranty. If the yacht is damaged during this period, check whether she meets the declared specifications. If the liability is breached, the builder will have to compensate for the cost of repair (as it was in theBrian Henry Austen and Michael Stephen Austen v. Pearl Motor Yachts Ltd [2014] case). 5) Pay special attention to the yacht survey conditions in the contract. Use the wording «subject to survey» in the contract if the purpose is to make the completion of the survey a mandatory condition for the transaction.It is often used in sales contracts when condition for the successful conclusion and continued performance of the agreement may or may not be the occurrence of any other fact. Accordingly, if this fact occurs (or does not occur), the agreement will not be considered concluded and binding on the parties. 6) Make sure that terminology of the contract is as clear and both parties interpret its terms same way. Keep in mind that construction «as is, where it is» in the contract of sale deprives the buyer of the right to make claims regarding the condition of the boat after the purchase. In the case of «as is, where is», most often the implied condition of satisfactory quality will not apply. 7) Split the payment for the cost of the yacht into multiple parts. Be cautious about paying deposit! There is an established practice of paying by dividing the sum of the yacht cost into an advance payment (deposit) and the main payment (balance). Balance payment is usually made on the day of actual delivery of the yacht and documents upon completion of the transaction. The deposit is paid by the buyer either immediately upon signing the sales contract or shortly afterwards. If the buyer fails to fulfil the contract, the seller has the right to retain the deposit as compensation for the losses incurred. If the buyer did not pay the deposit on time and thereby breaches the terms of the contract for the purchase of the yacht, the seller can get the full amount of the deposit reimbursed by the court, as it was in the case GRIFFON SHIPPING LLC v FIRODI SHIPPING LTD (the “GRIFFON”) [2013]. The court stated that the fact that the deposit itself was not paid could not deprive the seller of its right to reimburse it and ordered the buyer to compensate the whole of the 10% deposit. 8) Record the legal status of the paid funds correctly and make payment only within the signed framework of the agreements. Keep in mind that not every payment is a deposit in the context of the transaction of the sale of a yacht! In the SIMPSON MARINE (SEA) PTE LTD v. JIACIPTO JIARAVANON [2019] case the court distinguished between the concepts of payment for reservation and a contractual deposit. The dealer was ordered to refund to the buyer $500,000 that had been paid to hold the two yachts until a certain date (a kind of ” booking”). The dealer attempted to retain the sum as a deposit, but the court ruled that it was payment for the reservation. 9) Employing a good broker is essential! And the terms of his participation and especially broker’s commission must be distinctly documented through a written agreement. In practice, the broker will be entitled to a commission when: he had direct influence on the establishment of the contractual relationship between the seller and the buyer (and can prove that it was his actions that led to the transaction), he had direct instructions from the seller to the sale of the yacht, the transaction was successfully completed with the delivery of the vessel and payment of its value. In the case of MORAN YACHT & SHIP INC v. PISAREV & OTHERS [2014], the court dismissed a claim for commission from brokers who had shown the yacht to the future buyer, because at that time the seller hadn’t given any instructions for the sale. At Interlegal, we offer specialized expertise in English law, guiding clients through every stage of yacht deals. By partnering with experienced legal advisors, clients can confidently navigate the complexities of English maritime law, optimizing their investments and avoiding unnecessary risks.

1) Ensure that the yacht is in proper technical condition before buying. Carry out an inspection with an independent professional – engineer or a surveyor. If it is not possible to hire an independent technician, you should inspect the yacht yourself.

2) Get written confirmation from the seller of the yacht’s seaworthiness and condition. In the case of DAWSON v. YEOWARD [1961]the judge noted the words spoken by the seller about the state of the yacht were considered «mere representations» and were not provisions of the concluded sales agreement. Consequently, the seller’s statement does not constitute a guarantee. Include the written guarantees in the contract so that they can be called upon if defects are found after a certain period of time after purchase.

3) Fix the moment of transfer of rights and obligations and all risks associated with the yacht. You should clearly state the moment you take ownership and all risks associated with a yacht – such as damage, breakage or destruction.

In the case of PIERCE v. WOOD [1934] the buyer did not receive compensation for damage caused to the yacht during delivery by the seller as judge concluded that the ownership had passed at the time of the conclusion of the agreement and before transportation and delivery.

4) If a new yacht is damaged during operation, check whether she fullymeets the specifications of the builder. The new yacht is usually covered by a 1–2-year warranty. If the yacht is damaged during this period, check whether she meets the declared specifications. If the liability is breached, the builder will have to compensate for the cost of repair (as it was in theBrian Henry Austen and Michael Stephen Austen v. Pearl Motor Yachts Ltd [2014] case).

5) Pay special attention to the yacht survey conditions in the contract. Use the wording «subject to survey» in the contract if the purpose is to make the completion of the survey a mandatory condition for the transaction.It is often used in sales contracts when condition for the successful conclusion and continued performance of the agreement may or may not be the occurrence of any other fact. Accordingly, if this fact occurs (or does not occur), the agreement will not be considered concluded and binding on the parties.

6) Make sure that terminology of the contract is as clear and both parties interpret its terms same way. Keep in mind that construction «as is, where it is» in the contract of sale deprives the buyer of the right to make claims regarding the condition of the boat after the purchase. In the case of «as is, where is», most often the implied condition of satisfactory quality will not apply.

7) Split the payment for the cost of the yacht into multiple parts. Be cautious about paying deposit!

There is an established practice of paying by dividing the sum of the yacht cost into an advance payment (deposit) and the main payment (balance).

Balance payment is usually made on the day of actual delivery of the yacht and documents upon completion of the transaction. The deposit is paid by the buyer either immediately upon signing the sales contract or shortly afterwards.

If the buyer fails to fulfil the contract, the seller has the right to retain the deposit as compensation for the losses incurred. If the buyer did not pay the deposit on time and thereby breaches the terms of the contract for the purchase of the yacht, the seller can get the full amount of the deposit reimbursed by the court, as it was in the case GRIFFON SHIPPING LLC v FIRODI SHIPPING LTD (the “GRIFFON”) [2013]. The court stated that the fact that the deposit itself was not paid could not deprive the seller of its right to reimburse it and ordered the buyer to compensate the whole of the 10% deposit.

8) Record the legal status of the paid funds correctly and make payment only within the signed framework of the agreements. Keep in mind that not every payment is a deposit in the context of the transaction of the sale of a yacht!

In the SIMPSON MARINE (SEA) PTE LTD v. JIACIPTO JIARAVANON [2019] case the court distinguished between the concepts of payment for reservation and a contractual deposit. The dealer was ordered to refund to the buyer $500,000 that had been paid to hold the two yachts until a certain date (a kind of ” booking”). The dealer attempted to retain the sum as a deposit, but the court ruled that it was payment for the reservation.

9) Employing a good broker is essential! And the terms of his participation and especially broker’s commission must be distinctly documented through a written agreement.

In practice, the broker will be entitled to a commission when:

he had direct influence on the establishment of the contractual relationship between the seller and the buyer (and can prove that it was his actions that led to the transaction),

he had direct instructions from the seller to the sale of the yacht,

the transaction was successfully completed with the delivery of the vessel and payment of its value.

In the case of MORAN YACHT & SHIP INC v. PISAREV & OTHERS [2014], the court dismissed a claim for commission from brokers who had shown the yacht to the future buyer, because at that time the seller hadn’t given any instructions for the sale.

At Interlegal, we offer specialized expertise in English law, guiding clients through every stage of yacht deals. By partnering with experienced legal advisors, clients can confidently navigate the complexities of English maritime law, optimizing their investments and avoiding unnecessary risks.