Conditional Wording -Boat Contracts

D

Diversion

New Member
Apr 1, 2008
58
Hilton Head SC
Boat Info
2007 44 Sedan Bridge, 11' Novurania console tender.
Engines
480 hp
Hello,
I'm new in the used boat arena but have read much in the past several months. I'm looking to buy a used yacht in the $400k range and i've seen many comments on ensuring the purchase is conditional on surveys, which makes sense. I do have a lot of contract experience in general and there has to be more. Just inserting survey conditional legalese still obligates the buyer when survey is done. Where's the wording relating to if the buyer doesn't like the results of the survey, they can get their deposit back and walk? Does anyone have some sample wording?
Much appreciated,
 
Have not looked at a contract in three years, but conditions include satisfactory survey, sea trial, financing, etc., giving the prospective buyer "sole discretion" to determine what these conditions mean. If you walk, you get your deposit back unless the contract stipulates otherwise. At $400K you will have good leverage to write a contract offer that protects you. You should involve a lawyer who has experience with boat sales.
 
Boat/US used to have model contracts that you could use. If you are a member, contact them.

Whether the boat is new or used, contracts may contain contingencies for satisfactory hull and egine survey, sea trial, ability to obtain financing and insurance. That last one could be a biggie if you have never owned a boat before and are buying a large vessel.
 
a LARGER vessel even...........in Florida where storms have the insurance underwriters gun shy, I've seen moves to a 10' longer boat or to one with significantly more complicated onboard operating systems slowed down by refusals to write or by requirements that the owner have a licensed captain onboatd for the first 60-90 days of ownership and operation.

But, you didn't give us a location so I have no clue whether this will apply to you or not......just don't overlook the insurance contingency or you may be forced to close on a $400K boat that you cannot insure.
 
I tried to put that insurance clause in a boat purchase from MM and they laughed at me.
 
Definitely call your insurance early on and see what they will cover you for, otherwise you will be shopping for a disappointment.

Oh, you really don't need to spend 400 k on a yacht. I will sell you mine for 200k.
 
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Thanks for the feedback. Florida or Texas or is the location. Evenually Florida only. The sample contracts were great. I see 2 of the documents had "...the purchase and sale of the Boat shall be conditional on the Buyer being satisfied with the condition of the Boat as described by a Surveyor on or before a specified date". That's what I'm looking for. Hopefully MM will allow such a clause because w/o it one is obligated regardless if the price is lowered to resolve "issues". I would rather not have something major fixed as part of a contract. I would just as soon locate another boat.
Thanks Dancin Dave for the alternate solution. I'll keep in back pocket.
Cheers,
 
I suppose if you have 400k to spend on a boat, there is always the option to self insure! :grin:

Doug
 
Contracts are a part of the negotiation.

What MM "allows" doesn't make a happy damn to me. Put in the contract the wording you want then hope the MM salesman says "We don't allow that or for you to change the wording on the contract" so you can say...."thank you very much - go sell the boat to someone else" and head for the door. My guess is that you won't make it much past the office threshold before someone stops you and offers to negotiate the contract terms.

Brokers and dealerships tend to try to strong arm buyers into using their standard contract forms, and I don't have a problem with that, as long as you understand that the contract is written to protect the broker/dealer's interest first, the seller second and guess who they care the least about. A contract is an agreement between parties and if the terms don't suit you, then change them. Just because it is printed on white paper doesn't make it non-negotiable. By all means be reasonable, but don't sign a contract that does not adequately protect your interests.

Understand, however, who is on first in the negotiation. If the boat is a brokered boat, the broker is only in the deal for 10% and some of your contingencies must be accepted by the seller, not the broker. Larger brokerage firms may in fact own the boat you are trying to buy so in that case, the manager of the brokerage/dealer, not the salesman, must sign off on contract terms.

One of the things I've seen this year is what I call a "rush to close" where you are asked to fill in a blank for a closing date on the contract when you execute it. Buyers are being pushed to close deals in a matter of a few days. Do not sign a contract with a specified closing date if you have contingencies for surveys, sea trial, financing or insurance. When you sign the contract you probably don't even know who is going to do the surveys, much less their schedule or when they are available, so how can you contract a firm closing date?

The rush to close is a matter of cash flow for the broker/dealer, and commission for the salesman. I put this whole thing in the "counting your chickens before they hatch" department. The broker wants you "hooked up" and his financial folks want to know when they can spend your $400K.......the salesman just want to know if he will have your commission in time to make the payment on his big screen or his kids braces.

As far as insurability is concerned, this is just a matter of good business. First, you cannot buy insurance on a boat until you have an insurable interest.....i.e. pay for it (or in some instances sign over your trade to the dealer). In Florida in particular because the storm risk is quite high, you do not want to pay for a boat unless you have an insurance binder in your pocket. I know of several cases.....some CSR members probably found this as well.....that buying an agreed value policy on a boat that is moored in Florida can be difficult and the pickin's can be slim as far a carriers who will a.)write a policy period, b.) cover the agreed value and c.)write you as an operator if you do not have adequate experience. d.)do not have a hurricane plan and a contract with a boat yard to remove your boat from the water in advance of a named storm. One case in particular, a fisherman traded a 26 ft. center console for a Viking 50' convertible....huge step up!.....and the only company that would write him for a Florida location was Lloyd's of London on a single risk underwriting. The guy would never admit what he had to pay for his first year's coverage. Another case was that there was a named storm on the East coast but no carrier would bind coverage until the storm was no longer a threat to any US location. By the way......in both cases, closing was delayed until the insurance problem was solved and the buyers had binders on the boats they were purchasing.

Remember, you have the strong hand in the negotiations on contract terms as long as you have your check book open. A big deposit makes problems with contract terms go away because they see you are a serious buyer but when you write the last big check, your leverage is gone.
 
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fwebster said:
Contracts are a part of the negotiation.

What MM "allows" doesn't make a happy damn to me. Put in the contract the wording you want then hope the MM salesman says "We don't allow that or for you to change the wording on the contract" so you can say...."thank you very much - go sell the boat to someone else" and head for the door. My guess is that you won't make it much past the office threshold before someone stops you and offers to negotiate the contract terms.

Brokers and dealerships tend to try to strong arm buyers into using their standard contract forms, and I don't have a problem with that, as long as you understand that the contract is written to protect the broker/dealer's interest first, the seller second and guess who they care the least about. A contract is an agreement between parties and if the terms don't suit you, then change them. Just because it is printed on white paper doesn't make it non-negotiable. By all means be reasonable, but don't sign a contract that does not adequately protect your interests.

Understand, however, who is on first in the negotiation. If the boat is a brokered boat, the broker is only in the deal for 10% and some of your contingencies must be accepted by the seller, not the broker. Larger brokerage firms may in fact own the boat you are trying to buy so in that case, the manager of the brokerage/dealer, not the salesman, must sign off on contract terms.

One of the tings I've seen this year is what I call a "rush to close" where you are asked to fill in a blank for a closing date on the contract when you execute it. Buyers are being pushed to close deals in a matter of a few days. Do not sign a contract with a specified closing date if you have contingencies for surveys, sea trial, financing or insurance. When you sign the contract you probably don't even know who is going to do the surveys, much less their schedule or when they are available, so how can you contract a firm closing date?

The rush to close is a matter of cash flow for the broker/dealer, and commission for the salesman. I put this whoe thing in the "counting yor chickens before they hatch" department. The broker wants you "hooked up" and his financial folks want to know when they can spend your $400K.......the salesman just want to know if he will have your commission in time to make the payment on his big screen or his kids braces.

As far as insurability is concerned, this is just a matter of good business. First, you cannot buy insurance on a boat until you have an insurable interest.....i.e. pay for it (or in some instances sign over your trade to the dealer). In Florida in particular because the storm risk is quite high, you do not want to pay for a boat unless you have an insurance binder in your pocket. I know of several cases.....some CSR members probably found this as well.....that buying an agreed value policy on a boat that is moored in Florida can be difficult and the pickin's can be slim as far a carriers who will a.)write a policy period, b.) cover the agreed value and c.)write you as an operator if you do not have adequate experience. d.)do not have a hurricane plan and a contract with a boat yard to remove your boat from the water in advance of a named storm. One case in particular, a fisherman traded a 26 ft. center console for a Viking 50' convertible....huge step up!.....and the only company that would write him for a Florida location was Lloyd's of London on a single risk underwriting. The guy wouldnever admit what he had to pay for his first year's coverage. Another case was that there was a named storm on the East coast but no carrier would bind coverage until the strom was no longer a threat to any US location. By the way......in both cases, closing was delayed until the insurance problem was solved and the buyers had binders on the boats they were purchasing.

Remember, you have the strong hand in the negotiations on contract terms as long as you have your check book open. A big deposit makes problems with contract terms go away because they see you are a serious buyer but when you write the last big check, your leverege is gone.
Click to expand...

Good post Frank.

Doug
 
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