Lost deposit

[mirror image]

One of the first questions to be asked of the buyer is does he have the funds or does he have a boat to sell or raise finance.

If he needs to raise finance that would be mentioned in the contract and the seller would have to be in agreement.

Seems common sense for all parties to be in agreement about the terms a deposit can be repaid.

 

[enterprise]

The value of losses can be a bit hit and miss, take a boat removed from sale at the start of the season when prices are keen, only to be placed back on the market as soon as the season ends, what value?, storage, mooring and yard fee's are another example, who pays those?, advertising etc, depreciation to some degree.

And does it really take six weeks to find you cannot get finance?

 

[bedouin]

The value of losses can be a bit hit and miss, take a boat removed from sale at the start of the season when prices are keen, only to be placed back on the market as soon as the season ends, what value?, storage, mooring and yard fee's are another example, who pays those?, advertising etc, depreciation to some degree.

Sorry to say you can't claim for most of those. The purpose of damages is to restore the seller to the position as if the contract had not been made, rather than as if the contract had been fulfilled.

 

[Observer]

Sorry to say you can't claim for most of those. The purpose of damages is to restore the seller to the position as if the contract had not been made, rather than as if the contract had been fulfilled.

Sorry but I think that is exactly the wrong way round. Contractual damages will seek to place the wronged party in the position he would have been in if the contract had been performed.

Take the example of mooring fees. If a seller has contracted to sell and the buyer, in breach of contract, fails to complete the purchase, the seller's recoverable damages could include mooring fees incurred from the date of breach to the date of a subsequent sale. It would meet the tests required for losses to be recoverable. The amount recoverable may be uncertain because there is likely to be room to debate the date of breach, but the principle of recoverability is, in my view, not in question. Additional depreciation would also be a recoverable loss in the sense that it would reduce the sale price to an alternative buyer.

 

[PaulGooch]

Sorry to say you can't claim for most of those. The purpose of damages is to restore the seller to the position as if the contract had not been made, rather than as if the contract had been fulfilled.

That makes absolutely no sense at all. Had the contract not been made, there could never be any losses that the buyer could be responsible for.

 

[lovezoo]

That makes absolutely no sense at all. Had the contract not been made, there could never be any losses that the buyer could be responsible for.

You still don't get it do you? The deposit is there to cover the wasted costs incurred by the seller (such as a lift out). It is not intended to try and put the seller in the position as if the sale had gone through.

 

[tinkicker0]

You still don't get it do you? The deposit is there to cover the wasted costs incurred by the seller (such as a lift out). It is not intended to try and put the seller in the position as if the sale had gone through.

That's the way I viewed it. Two separate contracts, one to enter the purchase process and reserve the boat (deposit paid) and one to complete the sale and gain title when the balance is paid.

Never heard of a case where the judge ordered a private buyer to service the contract after pulling out (specific performance?), just reparations for out of pocket expenses etc.


It would be nice to have the definitive answer. Who is a contract lawyer?

All my legal stuff was from a 6 month law module as part of a management course 10 years ago, so i'm no expert and me brain's addled since then.

I'd like to know the answer though, cos the law interests me.

 

[Nick_H]

It is not intended to try and put the seller in the position as if the sale had gone through.

Yes it is, that's the very nature of damages, although it depends on the wording of the contract.

 

[bedouin]

Actually on reflection - I am not sure that any contract to buy the boat ever existed. The fact that the OP describes the boat as "Under Offer" rather than "Sold" implies that there was no contract.

 

[Observer]

That's the way I viewed it. Two separate contracts, one to enter the purchase process and reserve the boat (deposit paid) and one to complete the sale and gain title when the balance is paid.

Never heard of a case where the judge ordered a private buyer to service the contract after pulling out (specific performance?), just reparations for out of pocket expenses etc.


It would be nice to have the definitive answer. Who is a contract lawyer?

All my legal stuff was from a 6 month law module as part of a management course 10 years ago, so i'm no expert and me brain's addled since then.

I'd like to know the answer though, cos the law interests me.

Look - jfm is a lawyer and has explained this. I am a commercial contracts specialist (in asset finance). I deal with (negotiate, draft and manage) contracts for the purchase, sale and lease (or other finance) of high value assets (£10k up to £millions) on a daily basis.

A typical used boat sale, where a buyer pays a deposit, is NOT (unless specifically constructed that way, which is possible but not common) two separate contracts. The deposit is simply a part payment of the contract price but (subject to any specific contract terms) it provides unofficial security for the seller against the buyer's breach. The security is "unofficial" because, if the contract is ended because of the buyer's breach, the seller does not have an unequivocal legal right to the deposit but he does have a potential claim against the buyer for damages, which can be set off against the buyer's right to recovery of the deposit.

A seller could indeed seek to compel a defaulting buyer to complete a purchase in accordance with the agreed contract terms. However, in practical terms, that is unlikely to be a desirable course to pursue because the seller would remain bound by the contract pending completion of the legal action to force that outcome. In contract law terms, a defaulting buyer is said to have "repudiated" the contract (shown by express statement or by action or omission that he intends not be bound by the contract). The seller then has a choice: he can accept the repudiation, in which case the contract is at an end and he can sell the goods elsewhere (which will crystallise any loss) and pursue a claim for damages; or he can refuse to accept the repudiation and seek to compel the buyer to perform, in which case he will remain bound by the contract even though the buyer is de facto treating it as at an end. So, if he chooses to seek specific performance remedy, he cannot, at the same time, agree a sale to another buyer. This is for obvious reasons not very satisfactory for the seller, so unlikely to be a course he would follow.

If (as is overwhelmingly more likely to be the case) he accepts the repudiation and ends the contract, the damages (loss) he can claim are those that are reasonable foreseeable and that flow directly from the buyer's breach. So additional costs of storage etc. would be recoverable (subject to the comment I made in the earlier post) as would the difference (if any) between the original contract price and the price paid by an alternative buyer. In assessing damages, the court will seek to put the seller in the position that he would have been in if the contract had been performed.

 

[tinkicker0]

Thanks Observer. You have raised some interesting points. I suspected JFM to be a Barrister or somesuch.

It's nice to know a poster's qualified statements, it clears up so much later arguing.

I suspect this thread is now at an end.

 

[whisper]

Look - jfm is a lawyer and has explained this. I am a commercial contracts specialist (in asset finance). I deal with (negotiate, draft and manage) contracts for the purchase, sale and lease (or other finance) of high value assets (£10k up to £millions) on a daily basis. .............

In assessing damages, the court will seek to put the seller in the position that he would have been in if the contract had been performed.

Thanks very much for such a clear explanation - an unusual thing from "professionals".

 

[PaulGooch]

You still don't get it do you? The deposit is there to cover the wasted costs incurred by the seller (such as a lift out). It is not intended to try and put the seller in the position as if the sale had gone through.

I get it, seems you don't.

 

[sunnydays]

Thank you!

Would like to say a huge thank you to everyone who has posted advice regarding this. We weren't told at the time the deposit was taken that it was subject to finance, had we known this we'd definitely have taken a different course. The finance required was very small in relation to the value of the boat and after it was declined the buyer reduced his offer but to a level that was unacceptable to us. In any case we lost six weeks of the busy season - you live and learn!