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Old 09-04-2010, 03:39   #1
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Boat Sale Disaster....

Morning all,

Can't sleep so thought I'd post this out to the masses.....

We've had our boat sat in a hurricane hole for sale for the past year and finally snagged a buyer - or so I thought. After going through weeks & weeks of paperwork, back & forth emails, etc, the deal was finally "closed in Escrow" April 1st but then this issue came up yesterday.

The buyer had engaged a documentation company to handle the transaction (sale documents and Escrow). Following the "completed in Escrow" of the sale last week and subsequent handing of ownership to the buyer (and subsequent moving aboard this past weekend), the funds were to be transferred to myself as soon as the documentation company had received a hard copy of the sale documents (an email copy had previously been sent to them, with the hard copy enroute via Express Post).

Within the sale documents was a clause, stating the vessel was "being sold as is. If the inboard diesel engine expires due to oil leak within 6 months of signature of this document, seller to be liable for repair costs".

Having had ownership of the vessel for almost a week, the buyer contacted the documentation company this afternoon, requesting they stop the sale as an issue had occured with the engine (it apparently "clunked, smoked and spat out an oily discharge").

The documentation company is now stating they cannot release the funds as the buyer is no longer giving the go-ahead on the sale, even though the sale has "completed in Escrow". They're also claiming that even though they have a signed, notarized and emailed copy of all the sale documents, and were happy to use these to "complete in Escrow", the buyer is now within his right to stop the sale as they've not yet received the hard copy/originals of the documents.......

Thoughts? I found this out last night so am engaging the services of a Maritime Attorney this morning, but man oh man, do we get the guy off the boat? Or now that he has signed for ownership, is it his problemo and we just pay for repair costs?

thanks,
n
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Old 09-04-2010, 04:21   #2
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Worrying for both you and the buyer! My suggestion is the first thing to do is to get the engine fixed. Got to be cheaper than any legal bills.
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Old 09-04-2010, 05:03   #3
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Worrying for both you and the buyer! My suggestion is the first thing to do is to get the engine fixed. Got to be cheaper than any legal bills.
Absolutely! The engine's run trouble free for 14 years and whilst in storage for the past year, has been run regularly by the hurricane hole owner.

I've no idea what the buyer's done to cause this problem but as pointed out to him in an email - I warrantied the engine so am more than happy to have it diagnosed and if due to an oil leak, repaired at my expense.

My biggest frustration is that we "closed in Escrow" - signed by both buyer and seller, and countersigned by documentation company CEO - and now I'm being told as the original documents are not with doc co, the buyer can still cancel the sale. To me that doesn't make sense - ownership has been transferred and the deal I have to wait for funds until the paperwork arrives is between the documentation company and I.

Just waiting to hear back from the attorney now - man oh man - what a drama.
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Old 09-04-2010, 05:32   #4
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Worrying for both you and the buyer! My suggestion is the first thing to do is to get the engine fixed. Got to be cheaper than any legal bills.
I am a lawyer, which is the last thing you need right now. Who is right or wrong in the purely legal sense will depend on when the moment of delivery of the boat (handing it over to him) is considered to have taken place. If the boat is in worse condition on delivery, than it was when the contract was signed, then usually the buyer has the right to refuse it, unless something different is written in the contract. The fact that the vessel is sold "as is" doesn't change that. "As is" just means that the seller is not responsible for future problems. If the keel falls off after the contract is signed but before delivery of the boat to him, the buyer would ordinarily not be required to accept the boat.

Unless you want to wait another year for another buyer (just to go through this same thing again), I suggest you should negotiate with the buyer in a friendly way. I would either repair the engine myself, and quickly, or if it needs a major overhaul which means that the buyer will get something much better than what he bargained for, then split the cost with him.

If he has just gotten cold feet, then don't fight it, certainly not legally. It's a no-win situation.
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Old 09-04-2010, 05:43   #5
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I am a lawyer, which is the last thing you need right now. Who is right or wrong in the purely legal sense will depend on when the moment of delivery of the boat (handing it over to him) is considered to have taken place. If the boat is in worse condition on delivery, than it was when the contract was signed, then usually the buyer has the right to refuse it, unless something different is written in the contract. The fact that the vessel is sold "as is" doesn't change that. "As is" just means that the seller is not responsible for future problems. If the keel falls off after the contract is signed but before delivery of the boat to him, the buyer would ordinarily not be required to accept the boat.

Unless you want to wait another year for another buyer (just to go through this same thing again), I suggest you should negotiate with the buyer in a friendly way. I would either repair the engine myself, and quickly, or if it needs a major overhaul which means that the buyer will get something much better than what he bargained for, then split the cost with him.

If he has just gotten cold feet, then don't fight it, certainly not legally. It's a no-win situation.
Thanks mate - appreciate the info.

To pick your brain:

"Closing in Escrow" occured on 31st March, 2010. Buyer took ownership that day as part of "closing in Escrow" agreement. Buyer, Seller & Documentation Company CEO all signed "Closing in Escrow" paperwork that day also.

Buyer moved aboard boat on 4th April, 2010. Funds for boat remained in Escrow with Documentation Company whilst hard copies of paperwork were in transit to them. This was a seperate agreement I achieved with them.

Problem with engine was reported 08th April, 2010. Buyer at that time advised he wished to cancel sale, Documentation Company advised they could not release funds as buyer & seller were now in disagreement (even though the transaction was "closed in Escrow").

So.... ownership was handed over one week prior to problem occuring. I'm liable to engine repairs, as set out in Bill of Sale agreement.

How does that all sound?
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Old 09-04-2010, 05:50   #6
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Horrible situation. You need to be talking personally with the buyer, I think.

Worse, case, you get your boat back. Not the end of the world, but I get sleepless nights over less than this, so I understand your grief.

Bill
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Old 09-04-2010, 06:14   #7
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Originally Posted by ausnp84 View Post
Thanks mate - appreciate the info.

To pick your brain:

"Closing in Escrow" occured on 31st March, 2010. Buyer took ownership that day as part of "closing in Escrow" agreement. Buyer, Seller & Documentation Company CEO all signed "Closing in Escrow" paperwork that day also.

Buyer moved aboard boat on 4th April, 2010. Funds for boat remained in Escrow with Documentation Company whilst hard copies of paperwork were in transit to them. This was a seperate agreement I achieved with them.

Problem with engine was reported 08th April, 2010. Buyer at that time advised he wished to cancel sale, Documentation Company advised they could not release funds as buyer & seller were now in disagreement (even though the transaction was "closed in Escrow").

So.... ownership was handed over one week prior to problem occuring. I'm liable to engine repairs, as set out in Bill of Sale agreement.

How does that all sound?
OK, look. "Closing in escrow" is not completion of the transaction. It means that buyer and seller have given money and title (respectively) into neutral hands (the escrow agent) to complete the transaction later when certain conditions have been fulfilled. The phrase "closing in escrow", by the way, is nonsense, technically speaking -- "closing" is short for "closing escrow" -- that is the end of the transaction, not the beginning. It's when escrow is closed out and the seller gets his money. This has not happened yet and ownership has not been transferred.

Delivery, which is transfer of possession as opposed to ownership (completely different things legally), would normally be when you gave him the keys and let him move aboard (although maybe not if he had no documents and couldn't use the boat, and was only sleeping on it). For a larger and more complicated deal, you would have made him inspect the boat again before getting the keys, and you would have made him sign a document saying that he accepted its condition. And you would probably not have let him move aboard before you got your money. That would also be important from the point of view of liability, because you could be liable for something he did on the boat after it's been handed over but before he is the owner.

As is normal for a smaller deal, you didn't do any of that, but that does leave open some ambiguities. I guess that delivery took place on April 4, and without any formal act of acceptance signed by the buyer, in most states the buyer would have a "reasonable time" after delivery to discover any problems which did not exist when the contract was signed (unless the contract said something different about it). Four days to April 8 would probably be considered a reasonable period of time, so at first glance I would say that the buyer is not completely crazy to think that he can cancel the sale.

I don't know what the contract says and I don't know the laws of your state. If the contract contains a phrase like "accepting handover of the vessel shall mean that the purchaser accepts its condition in all respects and waives any rights etc.", then the whole situation may be different. I have lived in Europe for the past couple of decades and am not licensed to practice law in any state in the U.S. This is not legal advice, ok?

But from what I can see, unless there is something different in the contract, you don't really have a basis for insisting and getting into a conflict with the buyer. Even if you had a clear-cut legal position, which I think probably you do not, it is usually not worthwhile to get into a fight because, as someone said, the legal fees would be more than the cost of the repairs. In such a situation, I think you should not think in legal terms, but just try to work it out with the buyer and try to save the deal. A friendly, understanding, flexible, and constructive approach is usually best in such situations, in my experience.

Sorry if that is not what you wanted to hear. If you want to know for sure your legal position you will have to get legal advice from a lawyer licensed in your state, and make sure he reads your contract.
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Old 09-04-2010, 06:19   #8
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Thanks Dockhead - this is all very new to me and I really appreciate the advice you've offered.
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Old 09-04-2010, 06:23   #9
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Thanks Dockhead - this is all very new to me and I really appreciate the advice you've offered.
NOT legal advice, remember. I'm just a former lawyer, shooting the breeze. Free advice is worth exactly what you pay for it.
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Old 09-04-2010, 06:29   #10
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NOT legal advice, remember. I'm just a former lawyer, shooting the breeze. Free advice is worth exactly what you pay for it.
No worries - free advice from fellow boaters is better than me sitting here, mulling it over & over in my head.

I've sent the buyer a "let's get this sorted" email so we'll see what he comes back with; I swear I should've just brought the boat back to the UK, rather than selling it.....
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Old 09-04-2010, 09:54   #11
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Take your boat back....period....this guy is just another example of somebody trying to get something for nothing.....This will be the first of many excuses for not releasing the funds.....meanwhile he's on your boat tearing things up.

I have seen this happen to many people......they take advantage of the fact that you are not in close proximity to the vessel and WILL screw you.
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Old 09-04-2010, 11:14   #12
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Sounds to me the buyer is out on a free cruise. I never would accepted a deal where I was on the hook for an engine rebuild after the new owner did whatever to it for 6 months. Get these people off YOUR boat!
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Old 09-04-2010, 11:37   #13
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"Within the sale documents was a clause, stating the vessel was "being sold as is. If the inboard diesel engine expires due to oil leak within 6 months of signature of this document, seller to be liable for repair costs"."

I assume the buyer added this clause. I think this is a very unusual clause and certainly one that I as a seller would never have accepted in selling a used boat.

I'm not a lawyer and don't have any other details on this at my disposal. But I think the advice you're getting about getting the buyer off your boat ASAP is on target. Then you need to get the engine checked out and repaired if necessary. If this particular buyer really wants the boat, make another deal with them, but get that horrible clause out of the documents and think about engaging a lawyer to help with the sale.
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Old 09-04-2010, 11:53   #14
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My thoughts:

I can't imagine selling something and agreeing to have any financial responsibility for it after it left my hands, but you did and you must now deal with that.

Find out if that is legally binding in your state. Just because someone puts something in writing does not mean it is legally enforceable.

I 'd try to work something out with the buyer before trying to start all over again (If that's even an option) which would include an re negotiated contract stating you have no further financial responsibility.

It sounds like a lawyer who is truly knowledgable to represent you in this is a good idea.
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Old 09-04-2010, 12:07   #15
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If one can see it from the buyer's perspective, assuming that he or she didn't do anything stupid, they bought the boat with some assurance that the engine was sound, and within a week the engine took a crap. It may very well be that they did something stupid and if that's the case their stupidity should be explained to them very gently by an outside expert. It's also possible that the engine problem developed coincidentally and that the seller has had some bad luck. I would strive, as either the buyer or the seller, to definitively find the failure and solve the problem by speaking kindly to one another rather than trying to lay as much blame as possible. It may be that they'll be too afraid after this to continue.
I once sold a Volvo sedan to a young woman who was just starting her family. In California once the vehicle is sold, it's sold. No going back. The first morning that she had the car she couldn't get it to start for awhile and when it did it ran like crap. I suspected a clogged fuel filter. She wanted a refund. I asked her if I could have one chance to fix it and she explained that she had bought the car to drive her new family with her brand new baby girl in the car across the country and that she now had no confidence in the car and was afraid. I understood her position. She didn't want me to fix the car and give it back to her at all. I gave her the money back. I didn't have to but I did anyway.
I'm still glad I did.
The big difference is that it was a $1000.00 car, not a $50,000.00 or $100,000.00 or $500,000.00 boat.
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