Sequence of events during purchase?

[Paul L]

Originally Posted by OrangeCrush

I went to see the boat a few days before leaving on vacation. Couldn't get my questions answered before I left but once I did via email I made the offer from afar. I agree that the broker mainly wants to see the deal go through and so far I think if there were other buyers in the mix I'd already have caught wind of that. But you're right, TN, that I put myself in a weak position since I can't be around for 3 weeks unless I fly home early.

Even so, I should have a signed agreement soon. I will make sure it has all the necessary contingencies in it (it already has almost all that have been mentioned, just needs more specifics on acceptance of survey I think).

The part I'm still not clear on is how (as you say Paul) that the seller will be locked into the agreement. The draft contract says if seller is unable to fulfill the terms, that I get my deposit back plus any expenses including survey. So a signed contract seems like it would only ensure that they owe me nothing if they backed out. Is that wrong?








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Unable does not mean unwilling. For example, if the boat sinks in its slip, the seller is unable to deliver the boat and finalize the transaction.

[OrangeCrush]

Good to hear that but I'm afraid I didn't quote it right... Here is the actual text:

DEFAULT BY SELLER: The SELLER’S failure to deliver the VESSEL to the BUYER or otherwise to perform the terms of the AGREEMENT, due to any reason (including loss of or substantial damage to the VESSEL caused by the SELLER’S negligence which prevents completion of the sale), shall obligate the SELLER to pay all costs and charges incurred in connection with any survey undertaken on behalf of the BUYER, and to pay the BROKERS the full brokerage commission which would have otherwise been due pursuant to Paragraph 9 f. The SELLER’S obligation is without prejudice to any other rights the BUYER might also have as a result of the SELLER’S default. However, if the sale cannot be completed by the closing date due to substantial damage to the VESSEL not caused by the SELLER’S negligence, the SELLING BROKER is authorized to deduct from the deposit any fees or charges incurred against the VESSEL by the BUYER, including the cost of the survey and related expenses, and return the balance to the BUYER.


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[jrbogie]

were i selling my boat i wouldn't even consider an offer without 10% as earnest money.

[jrbogie]

Originally Posted by OrangeCrush

Paul, thanks a lot for the help so far.

Would it be too much to ask for me to send you the preliminary draft of the contract for you to take a quick look at? I could send you a PM or email.

Either way it seems there is no way for me to prevent them from allowing someone else to buy the boat before the survey is done, because only at that point would they have up reimburse my expenses beyond the deposit, assuming there even was one.


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as far as the seller is concerned you have not yet made an offer without earnest money in escrow. yes, the boat is on the market until you put some skin in the game.

[redhead]

Orange, I feel as if I know you since you once owned a boat I know! Here's my take:

* We all agree if there's no deposit there is no binding agreement (each party must have something to lose). If this were a real estate deal I would say the broker is using your offer to get a higher offer elsewhere without financial harm to you. RE brokers do this. Yacht brokers probably do too.

* Since your gut and previous contacts with this broker are telling you she is on the up and up why don't you simply ask her why no deposit? She will either waffle about it and you will know she is full of hooey, or will have a plausible explanation.

Wishing you the best of luck and hope you get your dream boat!

[Terra Nova]

Originally Posted by redhead

...why don't you simply ask her why no deposit?...

What kind of low-baller would keep pestering the broker while impatiently waiting for an expected counter-offer to his non-offer?

[Paul L]

Originally Posted by OrangeCrush

Good to hear that but I'm afraid I didn't quote it right... Here is the actual text:

DEFAULT BY SELLER: The SELLER’S failure to deliver the VESSEL to the BUYER or otherwise to perform the terms of the AGREEMENT, due to any reason (including loss of or substantial damage to the VESSEL caused by the SELLER’S negligence which prevents completion of the sale), shall obligate the SELLER to pay all costs and charges incurred in connection with any survey undertaken on behalf of the BUYER, and to pay the BROKERS the full brokerage commission which would have otherwise been due pursuant to Paragraph 9 f. The SELLER’S obligation is without prejudice to any other rights the BUYER might also have as a result of the SELLER’S default. However, if the sale cannot be completed by the closing date due to substantial damage to the VESSEL not caused by the SELLER’S negligence, the SELLING BROKER is authorized to deduct from the deposit any fees or charges incurred against the VESSEL by the BUYER, including the cost of the survey and related expenses, and return the balance to the BUYER.


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This clause is designed to protect the broker and clearly written by the brokers legal team.

[yachtcowboy]

I was a broker for 40 years and you are correct "the seller owes you nothing except your expenses until the boat is paid in full." Sellers and buyer's can back out of any deal for any reason until "final acceptance" is signed and money changes hands I have seen deals fall apart until all the money changes hands. I don't understand "no deposit until survey" if I were the seller I would not hold my boat off the market for three weeks in prime selling season without a signed contract, a survey schedule and closing date, a 10% deposit in the broker's trust account. If I were the seller's broker I would advise my seller to accept back-up offers during this time and inform you of back-up offers, no detail just that there is a back-up offer. If you want this boat maybe moving more quickly is worthwhile. IMHO any time a deal are out of the ordinary there is no deal. Ordinary means; signed accepted offer by both parties, 10% deposit in brokers trust account, demo and survey dates, final acceptance date, closing date. All this should never exceed 21-28 days. Good luck and have fun this part of "ownership" is supposed to be fun.

[Moontide]

Sounds like you have not really made an offer, you have asked the seller what they think about a price. An offer should be in writing and accompanied with a deposit. It also needs to be signed by the seller. At that point it is binding on the seller. It is not binding on you if you have contingencies for survey, sea trial, financing and whatever else you want. If you do not make a deposit then in most states there is no consideration by you and the seller could unilaterally void it at anytime.

If you have a written offer with the seller's signature accepting it then you are the buyer unless you exercise one of your escape contingencies. I also have never heard of a broker who is saying they don't want mioney on deposit before the costs of a survey are incurred.

Regarding your wanting to let the seller know you will not nickel and dime them based on the survey, you could modify the survey contingency clause stating that you will not not have the right to exercise the survey escape clause if the cost to correct the items is less than X dollars.

[Inhancer]

Perhaps you can get seller to agree (in writing) to giving you right of first refusal. This would prevent seller from selling to a higher bidder without giving you a chance to counter offer. Giving such a right does not hurt the seller and could cause a bidding war and subsequent higher selling price.

[OrangeCrush]

Thanks all. I decided to have a friend go to observe the survey instead of waiting to be there myself. Everything still seems good but fingers crossed that it all works out! As usual, your advice is a big help.


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[Cottontop]

Originally Posted by Moontide

If you do not make a deposit then in most states there is no consideration by you and the seller could unilaterally void it at anytime.

Your written offer says, "I offer you $100,000 for your boat."
Seller writes, "I accept."

You have a contract.

[jmschmidt]

No contract is enforceable without valuable consideration (Statute of Frauds). This usually means a money deposit. It can be as little as one dollar, but without it you have no recourse if another buyer comes in with a more attractive offer. Every broker and seller of anything should know this. In some types of consumer sales you have a certain number of days to retract your offer without penalty and receive your deposit back. After that the nature and outcome of the due diligence items (survey, sea-trial, etc.) stated in the contract will determine if you can get out with your deposit back.

[SV DestinyAscen]

Originally Posted by jmschmidt

No contract is enforceable without valuable consideration (Statute of Frauds). This usually means a money deposit. It can be as little as one dollar, but without it you have no recourse if another buyer comes in with a more attractive offer. Every broker and seller of anything should know this. In some types of consumer sales you have a certain number of days to retract your offer without penalty and receive your deposit back. After that the nature and outcome of the due diligence items (survey, sea-trial, etc.) stated in the contract will determine if you can get out with your deposit back.

Statute of frauds deals with whether a contract has to be memorialized in a writing - when I was still actively working, my counsel basically advised me that every state and jurisdiction has different cause law on it, esp with varying interpretation/adoption of the uniform commercial code.

If you to get into an analysis for whether consideration is sufficient or illusory - that's really way way way beyond the scope of sellers/buyers. The only circumstance when it comes up in real life is when someone sues another for breach - and the attorneys battle it out re whether the contract was even formed.

[Cottontop]

Originally Posted by jmschmidt

No contract is enforceable without valuable consideration (Statute of Frauds). This usually means a money deposit. It can be as little as one dollar, but without it you have no recourse if another buyer comes in with a more attractive offer. Every broker and seller of anything should know this. In some types of consumer sales you have a certain number of days to retract your offer without penalty and receive your deposit back. After that the nature and outcome of the due diligence items (survey, sea-trial, etc.) stated in the contract will determine if you can get out with your deposit back.

The Statute of Frauds is about the types of contracts that must be in writing to be enforceable. Nothing to do with consideration.

A contract is simply an exchange of promises that society will enforce. But the promises cannot be illusory, there has to be something real on offer from both sides (referred to as "consideration"). In my example, the $100,000 and the boat are "consideration." Nothing else is needed and my example is absolutely an enforceable contract.

Certain classes of agreement, called unilateral contracts, may require a "payment," for instance, to establish consideration. An option contract is a classic example. In an option contract, only one party is promising anything, so the other party may have to "pay" for that promise to be enforceable (so that there is consideration on both sides).