US Practice of Deposit with Boat Purchase

[savoir]

Originally Posted by Curmudgeon

No, if you promise to paint my house and I promise to pay you when the work is done, we have formed a legally binding contract, even though no cash consideration will change hands until the end. Mutual promises are perfectly sufficient as consideration.

The reason that contracts are in writing is something called the statute of frauds. This statute was passed by parliament in the 17th century and was imported to the U.S. (and to Canada and every other common law jurisdiction) as part of English common law. The rules vary from state to state, but in a nutshell, certain types of contracts must be in writing, including contracts above a certain dollar amount.

The standard U.S. yacht broker's purchase and sale agreement calls for a deposit, but it doesn't say how much. Once both parties have executed the agreement, the buyer is required to deposit whatever amount has been agreed.

You have decided to bat in a different ball game.

You describe in the first paragraph a contract that does not envisage a deposit and use it to support what you say about a contract that always envisages a deposit. That is neither possible nor relevant. Deposits are not compulsory. Should the world of boat buying ever adjust itself to accept no deposit, pay after delivery contracts then you would be absolutely correct.

'Tis hard to see that happening. Too many crooks out there.

How many real estate contracts call for payment of a 10% deposit after submission of an offer ? NONE

[Curmudgeon]

Originally Posted by GordMay

Generally, the owner has a right to ask for a cash deposit at the time you sign a formal purchase agreement.
10% is customary from dealers and brokers (escrowed), but direct sellers usually ask for less. Include the deposit amount in the sales agreement, and the fact that it will be refunded should serious problems crop up from the survey.

See ➥ http://www.cramermarine.com/images/f...rch_n_sale.pdf

The good faith deposit should be fully refundable until the buyer accepts the boat. Until the acceptance date, the buyer is free to walk away for any reason. The refund is not contingent on the surveyor finding anything wrong.

As a buyer, you NEVER want to burden of proving that the problems disclosed by the survey are serious enough to justify return of your deposit, and the standard U.S. yachtbroker's form wisely stays away from that morass. Section 3 provides that the buyer must accept the yacht by a certain date. If he does not, the deal is off.

A buyer wants to make sure to have the survey done well before the acceptance date so that he can accept the yacht subject to certain conditions, e.g. the seller's obligation to fix certain issues disclosed by the survey.

[savoir]

Before I go further Curmudgeon, are you quite sure that the Statute of Frauds applies to boats ? Maybe you were thinking of real estate ?

[Curmudgeon]

Originally Posted by savoir

Before I go further Curmudgeon, are you quite sure that the Statute of Frauds applies to boats ? Maybe you were thinking of real estate ?

In most states, the statute of frauds applies to any contract for the sale of goods involving consideration of more than $500.The majority of states treat boats as "goods." A custom built yacht probably isn't "goods" but a production boat sold (or resold) by a dealer or broker probably is.

The most recent version of the UCC raises that number to $5,000, but I don't think too many states have adopted the newest version.

In any event, I would not relish trying to persuade a judge that an oral contract involving consideration of many thousands of dollars was enforceable.

[savoir]

OK then. Remember, you chose to refer to the Statute of Frauds not me. Here is the relevant bit from the California Civil code which picks up the Statute of Frauds.

1. Where is the $500 section ?

2. Where is the section that says a yacht cannot be sold by oral contract ?


1624. (a) The following contracts are invalid, unless they, or some
note or memorandum thereof, are in writing and subscribed by the
party to be charged or by the party's agent:
(1) An agreement that by its terms is not to be performed within a
year from the making thereof.
(2) A special promise to answer for the debt, default, or
miscarriage of another, except in the cases provided for in Section
2794.
(3) An agreement for the leasing for a longer period than one
year, or for the sale of real property, or of an interest therein;
such an agreement, if made by an agent of the party sought to be
charged, is invalid, unless the authority of the agent is in writing,
subscribed by the party sought to be charged.
(4) An agreement authorizing or employing an agent, broker, or any
other person to purchase or sell real estate, or to lease real
estate for a longer period than one year, or to procure, introduce,
or find a purchaser or seller of real estate or a lessee or lessor of
real estate where the lease is for a longer period than one year,
for compensation or a commission.
(5) An agreement that by its terms is not to be performed during
the lifetime of the promisor.
(6) An agreement by a purchaser of real property to pay an
indebtedness secured by a mortgage or deed of trust upon the property
purchased, unless assumption of the indebtedness by the purchaser is
specifically provided for in the conveyance of the property.
(7) A contract, promise, undertaking, or commitment to loan money
or to grant or extend credit, in an amount greater than one hundred
thousand dollars ($100,000), not primarily for personal, family, or
household purposes, made by a person engaged in the business of
lending or arranging for the lending of money or extending credit.
For purposes of this section, a contract, promise, undertaking or
commitment to loan money secured solely by residential property
consisting of one to four dwelling units shall be deemed to be for
personal, family, or household purposes.
(b) Notwithstanding paragraph (1) of subdivision (a):
(1) An agreement or contract that is valid in other respects and
is otherwise enforceable is not invalid for lack of a note,
memorandum, or other writing and is enforceable by way of action or
defense, provided that the agreement or contract is a qualified
financial contract as defined in paragraph (2) and (A) there is, as
provided in paragraph (3), sufficient evidence to indicate that a
contract has been made or (B) the parties thereto by means of a prior
or subsequent written contract, have agreed to be bound by the terms
of the qualified financial contract from the time they reached
agreement (by telephone, by exchange of electronic messages, or
otherwise) on those terms.
(2) For purposes of this subdivision, a "qualified financial
contract" means an agreement as to which each party thereto is other
than a natural person and that is any of the following:
(A) For the purchase and sale of foreign exchange, foreign
currency, bullion, coin or precious metals on a forward, spot,
next-day value or other basis.
(B) A contract (other than a contract for the purchase of a
commodity for future delivery on, or subject to the rules of, a
contract market or board of trade) for the purchase, sale, or
transfer of any commodity or any similar good, article, service,
right, or interest that is presently or in the future becomes the
subject of a dealing in the forward contract trade, or any product or
byproduct thereof, with a maturity date more than two days after the
date the contract is entered into.
(C) For the purchase and sale of currency, or interbank deposits
denominated in United States dollars.
(D) For a currency option, currency swap, or cross-currency rate
swap.
(E) For a commodity swap or a commodity option (other than an
option contract traded on, or subject to the rules of a contract
market or board of trade).
(F) For a rate swap, basis swap, forward rate transaction, or an
interest rate option.
(G) For a security-index swap or option, or a security or
securities price swap or option.
(H) An agreement that involves any other similar transaction
relating to a price or index (including, without limitation, any
transaction or agreement involving any combination of the foregoing,
any cap, floor, collar, or similar transaction with respect to a
rate, commodity price, commodity index, security or securities price,
security index, other price index, or loan price).
(I) An option with respect to any of the foregoing.
(3) There is sufficient evidence that a contract has been made in
any of the following circumstances:
(A) There is evidence of an electronic communication (including,
without limitation, the recording of a telephone call or the tangible
written text produced by computer retrieval), admissible in evidence
under the laws of this state, sufficient to indicate that in the
communication a contract was made between the parties.
(B) A confirmation in writing sufficient to indicate that a
contract has been made between the parties and sufficient against the
sender is received by the party against whom enforcement is sought
no later than the fifth business day after the contract is made (or
any other period of time that the parties may agree in writing) and
the sender does not receive, on or before the third business day
after receipt (or the other period of time that the parties may agree
in writing), written objection to a material term of the
confirmation. For purposes of this subparagraph, a confirmation or an
objection thereto is received at the time there has been an actual
receipt by an individual responsible for the transaction or, if
earlier, at the time there has been constructive receipt, which is
the time actual receipt by that individual would have occurred if the
receiving party, as an organization, had exercised reasonable
diligence. For the purposes of this subparagraph, a "business day" is
a day on which both parties are open and transacting business of the
kind involved in that qualified financial contract that is the
subject of confirmation.
(C) The party against whom enforcement is sought admits in its
pleading, testimony, or otherwise in court that a contract was made.
(D) There is a note, memorandum, or other writing sufficient to
indicate that a contract has been made, signed by the party against
whom enforcement is sought or by its authorized agent or broker.


Take your time.

I reckon you are thinking of real estate.

The Uniform Commercial code only requires " some writing " and "some writing " does not a contract make.

[Doodles]

Could I get the Cliff Notes on this?

[Curmudgeon]

Savoir, it's not the California civil code that is relevant, but the California commercial code. See Section 2201:

California Commercial Code 2201-2210

Section 2201 refers back to the civil code but only to exempt "financial transactions" (e.g. currency swaps, commodities futures contracts, etc.). The other major exception is "specially manufactured goods," i.e. the custom built yacht. So yes, in California, if you contracted with a builder to build you a custom yacht, that contract could be oral and still be enforceable. (Of course no yard would ever build a yacht on a verbal contract so the issue is moot.)

[David_Old_Jersey]

Originally Posted by savoir

Take your time.

Of course I read it all - Although this thread has started to drift away from the original point, IMO your post does illustrate exactly why it is important to keep one eye on the practice as well as the (legal) theory........if your deposit does not come back in full or only in part (even though it should) it don't hurt so much if it is $1000, rather than $25k - as at that point (most) will need to be waiving lawyers (or an axe ) at the other party (with the bills to match and no guarantee of success - although the axe thing is satisfying).....rather than having the option to just suck it up and move on.

I appreciate that some here have a problem with no 10% deposit as suggesting a buyer is not serious - but for me if someone is willing to front up any cash (merely as a sign of good faith - not as a commitment), plus is spending cash out of own pocket for travel / lift out / surveyor (which can together be in the $1000+ range)......then I would be very happy to start dealing with them. Of course over here "Tyre kickers" maybe not so rich as elsewhere so can't afford the grand or 2 for every boat they have a looksee at .

[savoir]

Originally Posted by Curmudgeon

Savoir, it's not the California civil code that is relevant, but the California commercial code. See Section 2201:

California Commercial Code 2201-2210

Section 2201 refers back to the civil code but only to exempt "financial transactions" (e.g. currency swaps, commodities futures contracts, etc.). The other major exception is "specially manufactured goods," i.e. the custom built yacht. So yes, in California, if you contracted with a builder to build you a custom yacht, that contract could be oral and still be enforceable. (Of course no yard would ever build a yacht on a verbal contract so the issue is moot.)

That is no more and no less than an adoption of the UCC by the California legislature. Both contain the phrase and requirement for " some writing ". " Some writing " and a contract are not the same thing.

I'm off to watch the Tour de France. Much more interesting. Keep digging, the hole is getting deeper. Abyssinnia

[savoir]

Originally Posted by David_Old_Jersey

Of course I read it all - Although this thread has started to drift away from the original point, IMO your post does illustrate exactly why it is important to keep one eye on the practice as well as the (legal) theory........if your deposit does not come back in full or only in part (even though it should) it don't hurt so much if it is $1000, rather than $25k - as at that point (most) will need to be waiving lawyers (or an axe ) at the other party (with the bills to match and no guarantee of success - although the axe thing is satisfying).....rather than having the option to just suck it up and move on.

I appreciate that some here have a problem with no 10% deposit as suggesting a buyer is not serious - but for me if someone is willing to front up any cash (merely as a sign of good faith - not as a commitment), plus is spending cash out of own pocket for travel / lift out / surveyor (which can together be in the $1000+ range)......then I would be very happy to start dealing with them. Of course over here "Tyre kickers" maybe not so rich as elsewhere so can't afford the grand or 2 for every boat they have a looksee at .

Do you understand that I was being required to pay the 10% BEFORE agreement on price and haulout and survey ?

I would never dispute having to pay for those on any boat. Three of the four times that I did it the owner said NO to my offer and I lost hundreds each time in bank charges, all for nothing but a few phone calls. I bought the fourth so it didn't matter with that one.

[MarkJ]

Originally Posted by savoir

Do you understand that I was being required to pay the 10% BEFORE agreement on price and haulout and survey ?

.

Yes. Thats why its ridiculous. As the OP says this thread is about foreigners trying to buy in the USA so no USA broker will accept the photocopy of a personal check. For a start most countries DO NOT use checks (or cheques) I haven't had one for 20 years or more.

So a 10% deposit was going to cost me US$215 for each offer made. Escrow company fees for holding $10,000

Thats a frigging JOKE and puts the broker in a far stronger position than he should be in.

No wonder other countries have laws against this blatent rip-off.

[Capt Phil]

Now I know why I will never buy another boat in CA... Capt Phil

[Curmudgeon]

Originally Posted by savoir

Do you understand that I was being required to pay the 10% BEFORE agreement on price and haulout and survey ?

I would never dispute having to pay for those on any boat. Three of the four times that I did it the owner said NO to my offer and I lost hundreds each time in bank charges, all for nothing but a few phone calls. I bought the fourth so it didn't matter with that one.

Maybe your offers were too low. That's a separate issue from the good faith deposit.

[Curmudgeon]

Originally Posted by MarkJ

Yes. Thats why its ridiculous. As the OP says this thread is about foreigners trying to buy in the USA so no USA broker will accept the photocopy of a personal check. For a start most countries DO NOT use checks (or cheques) I haven't had one for 20 years or more.

Excuse me? You can walk into almost any reputable bank in the world and get a cashier's check denominated in dollars.

Are you telling me that the broker won't even convey your offer to the seller unless the broker has the actual check in hand? I don't believe that for a moment, unless you've made a lowball offer that the broker knows will not be accepted.

The broker wants to earn a commission. It's not in the broker's best interest to make life difficult for a prospective buyer.

[hellosailor]

"Excuse me? You can walk into almost any reputable bank in the world and get a cashier's check denominated in dollars."
You certainly can. After you've paid the currency conversion fee, to convert from the local currency to US dollars.
Don't want to lose the conversion fee more than once? No problem, open an account with a bank that deals natively in U$D, and keep using those same dollars to make your offers.

I think this is hilarious, people trying to buy cheap from all over the world, and then complaining, all over the world there are different customs and laws and monies. Gee, isn't THAT all a surprise? If it is such a burden, shop in your home market!

Wait till you try to find out whether you've gotten a valid title or there are any liens on a boat that comes from a foreign legal system that you've never met before either.

ROFL!