Disclosure (used boats)

[Observer]

On a recent thread, which has now been pulled, it was suggested that a seller has a moral and legal duty to disclose to potential purchasers any "serious" damage which has occurred to the boat offered for sale (e.g. previously sank on its moorings and refitted; involved in a serious collision and repaired).

I don't necessarily disagree with the 'moral duty' argument (although there seems to be the practical problem of where to draw the line between incidents which are serious enough to require disclosure and those which are not). However, so far as I am aware, there is no legal duty on a seller to disclose adverse information in the boat's history - so 'caveat emptor' applies. That applies in the case of a private sale and a sale by a business - although in the latter case the buyer does have the benefit of the implied conditions given by the Sale of Goods Act.

Clearly, a potential buyer would wish to know if the boat he's thinking of buying has been involved in a major incident of this nature. Perhaps a survey may reveal such a history - but perhaps not.

Pondering on this, it occurred to me that a buyer could produce a list of "disclosure questions" which he could ask the seller to complete prior to completion of purchase (or even before survey). Then, if the seller fails to disclose anything covered on the list, the buyer would have recourse against the seller (including, possibly, right of rescission) for misrepresentation.

Do you think this is a good idea? Is is feasible? Is it likely to be acceptable to sellers? If so, what questions would you suggest should be included? Questions should, I think, be reasonably specific and not so as to require disclosure of trivial incidents.

Any other comments?



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[Talbot]

I think this is a good idea, and should be taken up by RYA, with a team of experts to make sure the questions are correct and in english (i.e. clear and precise in their meaning not typical lawyer speak).

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[andy_wilson]

Do people really buy yachts without asking the vendor if they have ever been run aground, stranded, flooded, sunk or suffered any major incident?

Also if there is any secured loans, liens for unpaid work or supplies, or ships arrest warrants issued?

Oh yes, and is it theirs to sell!

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[Deleted User YDKXO]

Thats a very good point. What you say or write during purchase negotiations may be construed as being part of a contract so it would be a good idea to formalize such discussions. Maybe a few simple questions like

1. Has the boat ever been the subject of an insurance claim? If so, please give details
2. Has the boat been subject to any repairs or renewals other than routine maintenance? If so, please give details
3. Are there any mortgages, loans or other liens secured against the boat? If so please give details

I'm assuming that the broker has already checked title

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[tcm]

Morals

I agree.

Whatever the circumstances it is too vague to base a contracts on morals, as these will vary from one person to another. One person will feel they have a moral duty to their family to achieve the maximum resale value, another will feel a different moral duty, perhaps expecting a vendor to detail every single little thing that has ever gone wrong with a boat.

The general list offered by Deleted User seems a good start. If they don't list a serious crunch, and truthfully, as a result, they would be lying, and there would be recourse.

The actual issue i believe queried some work done, and a "nicer" version of the truth was invented. The vendor simply lied AFAIK.

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[Dave_Snelson]

Tim, I agree with every word, however....

Contracts for private sale are difficult, if not impossible to enforce. Even contracts for surveys are full of loopholes. The stuff that was wrong with my Windy 8800 is the subject of many previous posts and discussions - not to mention the £5,500 it cost me to put them right!

Maybe some basic major components contract could cover this, but in reality a "Hull & Major Machinery" survey *should* cover this. I say should....

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[Observer]

Useful input Mike.

Question 1 is excellent as it does not require subjective judgement and should catch the vast majority of 'incidents' which a purchaser would be concerned to know about. I suppose there's possibility of repairs having been undertaken which were not subject to insurance claim and that should be covered by question 2. If there has been more than one previous owner, it may be necessary to qualify the questions by adding "To the seller's knowledge".

Question 3 is good intent but suggest separating into two parts:

3a Has the boat or any right in the boat been offered or given in security for payment of any loans or other debts which are partly or wholly outstanding or unpaid? If so please give details.
3b Is any amount due to any third party in respect of any work carried out on the boat or in respect of mooring fees or similar? If so please give details.

This should flush out any impediments to the seller's ability to transfer clear title. Independently, a purchaser of a used boat should ensure that the following sentence (or similar language) appears in the purchase contract - "The seller agrees to sell with FULL TITLE GUARANTEE". These words have a specific statutory meaning which includes a promise on the part of the seller:

that the person making the disposition is disposing of the property free—
(a) from all charges and incumbrances (whether monetary or not), and
(b) from all other rights exercisable by third parties,
other than any charges, incumbrances or rights which that person does not and could not reasonably be expected to know about.

Unencumbered title is not guaranteed by the above so usual checks are still necessary but existence of this language in the contract ensures that there is a clear right of recourse to the seller if there are any encumbrances or defects in title.


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[tcm]

Note for people who don\'t know Observer

I've met him and he is actually jolly sound and fun chap! And not at all how some of his postings sound - as though he might be a flippin retired deep-shit High Court Judge...

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[Observer]

Dave,

A private contract should not be so difficult to enforce if it is clear where liability lies. The problem is establishing that. I don't know enough about the circumstances of your case to say whether the type of 'questionnaire' I'm suggesting would have helped but say you had asked the seller, in writing, the following question: "Are you aware of any defects in the boat or its machinery and equipment? If so, please give details." If the seller had been unaware of the problem you later found, it would not help. However, if he was aware and had answered negatively and you could produce evidence to show he was aware (admittedly could be difficult) then you would have clear cause of action for breach of contract and you could have brought a claim under the small claims procedure (uo to £5,000?) which is not too difficult on a DIY basis.

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[Observer]

Re: Note for people who don\'t know Observer

Thanks for the vote of confidence tcm. I've no axe to grind here as you know. Just making suggestions which may help others to avoid problems.

Legal stuff can be intimidating to people not used to it. I am - so able to offer practical advice in the same way you and others offer practical advice on other boating matters.

I suppose I should add disclaimer to everything I suggest - but that is a bit lawyerish and I am not a lawyer even if I do sound like one.


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[Observer]

Just want to add one more question which I mentioned in another post.

4. Are you aware of any defects in the boat or its machinery or equipment? If so, please give details.

It may be optimistic to expect seller to be willing to list minor defects but worth a try? Perhaps dilute the question by adding "material" or "serious" if seller objects?



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[Deleted User YDKXO]

Yes, thats a good one. That brings up one point that I'd like clarification on. A broker once told me that if you list equipment on sales particulars for a boat you are warranting that the equipment is in working order. So, for example, if you buy a boat which the sales particulars state has a radar and the radar is not working, you have a redress against the vendor. In other words caveat emptor does'nt strictly apply
Can anyone clarify this?

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[Observer]

Depends whether the seller is a person who is "selling in the course of a business" (i.e. a dealer in boats). If he is, then the terms implied by the Sale of Goods Act will apply (goods to be of satisfactory quality). The implied term will not apply if a defect was pointed out to the purchaser before the contract was made or the purchaser examines the goods before the contract was made and that examination ought to have reveled the defect.

In the case of a private sale, there is no implied term that the goods will be of "satisfactory quality" so it's purchaser's risk. This would apply to the boat and any equipment.

If you buy from a private seller through a broker, it's still a private sale and the implied terms of Sale of Goods Act don't apply. So the broker you mentioned could be right or wrong depending on the circumstances (probably more likely to be wrong than right because broker acting for a trade seller is not common?).




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[Kevin]

Not sure if it applies to boats but I was under the impression that in some areas the law had altered slightly in cases for example in house sales, if the seller doesnt tell that the house is next to unsocial/ problematic neighbours or flight path etc then the buyer has recourse. There was one story where an elderly lady sold a house for a set sum but didnt let the buyers know that the neighbours had been causing trouble and the buyers went to court and got compensation back on the buying price. I didnt think it was enough now for sellers to simply say that the question wasnt asked and thus have no obligation.

Buying from a trader under sales of goods isnt always smooth going I bought a car which had major defects and took two and a half years to get to court and sort out so I wouldnt rely on that being a safety net!

Like most things its as important the person your buying off as much as what they are selling. another option is the less subtle way of getting satisfaction which involves a group of south american associates with questionable morals to demand satisfaction on your behalf

 

[jfm]

Observer I might be wrong/rusty legalwise but I thought that there was caselaw saying that a material omission is a deemed misrepresentation. In other words, saying nothing when there is a material defect is treated legally same way as if lied. But to be honest I can't remeber the basis for this.

Material is subjective but probably means having a material effect on value.

In my case I asked the seller (himsef, not his agent) if the boat had had any major repairs and why the port hour clock was 7 hours less than starboard on a 100hour boat. Answers were "no" and some story about catching a fishing net and limping home on one engine. Turns out, the boat was driven into a large stationary object called Herm.

So I had an actual misrepresentation. Now, if I had bort the boat would I have a claim? Damn right I would. Even though it was properly fixed the very fact of this incident depresses the value. Proof of that is eg that BB decided to walk away from the Fairey mentioned in his other post, and in my case we walked away despite being offered a £15 ish price reduction. The reasons why the value had fallen? Risk of premature gearbox failure in future due to clanking a rock, risk of GRP stress cracks round rudder stock, P bracket, where all had been smashed off, risk that when we come to sellit a buyer would walk away when they found out, etc.

Broker tells me someone else is buying the boat. Dunno who, I wish him well........

I thort there was an implied duty of dealing in good faith and failure to disclose something that makes the boat worth £20k++ less is actionable, I think.

Disclosure isn't a bad idea using a list like yours. But I guess many brokers would resist and insist on their (badly worded) contracts only, and blather on about buyer can rely on his survey bla bla


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[mtb]

Re:In the real world

You or any one can spout off like this until it's your turn to sell, would you then adopt and adhere to these contracts.
I mean no disrespect but
This turns the idea of selling into a nightmare for the average seller
I would be very surprised if the majority would even if they knew cough up info which would lose a sale.
Possible litigation at some distant future point !!!!!!!!
Who as a normal bod would or could guarantee a vessel which could possibly add up to more than the boats worth if some thing goes wrong. Any seller could have a field day and there are plenty who'd like to take advantage of a seller in this way.
I'd like to see the views of the legal types on here come up with the sellers bill of sale.
Should one imply or guarantee some thing, after it's sold ? how some thing is treated can make all the difference and then what. Where's the protection for the seller.
It is so so easy to say work or maintenance was carried improperly after some thing has failed.
It's not feasible in my view, if I buy a boat then I make sure I've checked it through and my personal view is you should pay a price which reflects the cost of unseen defects.

Cheers
Mick

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[Observer]

Hi jfm,

You were smart enough to spot a discrepancy and follow it up. Suppose no difference in engine hours? Would you have been alerted?

I haven't heard of the "material omission" case law. Is it possible that a representation was implied because of some other conduct by seller? Difficult to see how a representation implied in sale of goods generally can fit with SoGA.

There is some logic for implied representation that there is no "material defect" but would this cover "material damage" which has been (apparently) adequately repaired?

I suspect you're right in saying brokers would resist (won't want to have their lives made any harder) but worth a try. After all, a reasonably sized boat costs the same or more than an average house and we have disclosure on real estate sales.


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[jfm]

it\'s about value effect, not repair quality

Observer, re your 3rd para, I see it differently. If there has been big damage and it has been totally properly repaired by good boatyard, it is still disclosable imho, and if misrepresented then it's actionable. This is about diminution in value, not the actual defect and whether repaired well. The fact is, even if there is a fully kosher repair, the value is still less. Witness BB walking away from the fairey, me walking away from this boat. I just didn't want it because it had crashed, I want a perfect boat and peace of mind

Imagine you are buying a million Euro fairline, 12mths old. Two identical ones are for sale. One has clanged a rock, bent p brackets, bent rudders, tillers, fibreglass repaired, new prop shafts and props fitted. Fully documented repair by a great boatyard. The two boats are identical otherwise, down to the scatter cushions colour. Which do you buy?

Or if buying a 1 year old 60k porsche, from dealer, and it turns out it has had a big crash, rolled, resparayed, new body panels welded in, all by Porsche dealer. Would you pay same price as an identical one in the next town from a porsche dealer with clean history? Of course not, you certainly wouldn't be getting peace of mind and you'd only feel happy if you got a price haircut

Fact is, it is worth less. Perhaps not on a 10year old boat, but on a nearly new boat at this price, it affects value

By same token if you owned the porsche that crashed, you should claim insurance not just for the cost of repair, but on the diminution too. Many people dont, but if you argue it right you get a few thousand quid extra

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[tcm]

Re: it\'s about value effect, not repair quality

I agree. But you must ask. I disagree that that they are duty bound to raise this - and from your initial response you almost intimated that they should advertise as "only crashed once on CI rocks but fully sorted since!".

Christ, it is indeed a massive price dump that a buyer would want..

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[BrendanS]

Re: it\'s about value effect, not repair quality

I'm going to stop posting re the fun I've had in my boat, on the basis it's going to incriminate me for future sales?

B

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