There is a lot at stake
- Date: 24/05/2018
A yacht broker acted for potential buyers in negotiations for the purchase of a superyacht. An MOA was entered into, where the yacht broker agreed to act as stakeholders for the buyers’ deposit of US$1.25 million, which was 10% of the purchase price.
The MOA was subject to a successful completion of the sea trial and condition survey. The buyers had the opportunity to reject the vessel within 24 hours of the sea trial and 7 days of the condition survey. There was a further right to reject the yacht subject to the existence of defects which affected her operational integrity or rendered her unseaworthy.
Contrary to the sequence of the MOA, the condition survey was conducted before the sea trial. On the basis of this survey the buyers decided to reject the yacht, and the broker acting as buyers’ broker drew up a rejection message. This rejection did not specify the defects or comply with the time limits in the MOA. The broker also acting as stakeholder returned the entire deposit to the buyers.
The sellers subsequently alleged the rejection had been wrongful because proper notice had not been given in compliance with the MOA. Although expert advice was obtained which suggested the yacht was probably in a condition where she could have been rejected, the notices drafted and given by the broker did not comply with the MOA.
The buying company had been established solely for the purpose of buying the yacht and did not have easily traceable assets to pay any claim from the seller. The seller therefore sued the yacht broker for wrongfully paying away the funds from the stakeholder account. Advice from legal counsel suggested the broker would be found liable.
In addition to the uncertain prospects of recovering this from the buyer, the message of rejection had been negligently drafted by the broker. Consequently the buyer could potentially have a counter claim against their broker. The claim by the sellers was therefore settled in the sum of US$875,000.