I am interested in purchasing a yacht through a California broker. This is my first California purchase but I have bought several boats over the years through brokers in Florida, using the form contracts provided by the Florida Yacht Brokers Association. I am comfortable with that purchase contract, so I would like to use it again for this purchase by changing the various references to Florida law and otherwise replacing Florida with California throughout the contract. I made those changes and presented my offer to the broker, but he claims that I must use a form contract created by the California Yacht Brokers Association, and he refused to present my offer to the owner of the boat. I was under the impression that a broker must submit all offers to the owner, so it appears to me that the broker is breaking the law. Can I take legal action against the broker if the boat is sold to someone else?
The short answer to our reader’s question is a resounding “NO.” If the current owner of the boat sells the boat to someone else under circumstances described by our reader, he will have no grounds for legal action against the broker.
First, regardless of the regulations that govern a yacht broker’s professional behavior, a legal claim against the broker in this case would require our reader to prove that he was damaged in some way. He will be hard pressed to prove any amount of damages in a transaction where he did not buy anything. But he has raised a few regulatory issues that don’t necessarily relate to a lawsuit, so let’s take a look at the duties that a broker will generally owe to the parties in a yacht purchase transaction.
Part of the regulatory analysis presented by our reader is correct. California law requires a yacht broker to present to the owner of a vessel any offer to purchase received prior to the completion of a sale, unless expressly instructed by the owner not to present such an offer (California Code of Regulations, Title 14 §7623).
I will first note that this regulation refers to the broker’s duty to present offers to the seller of a yacht. It does not concern the buyer, and as such the buyer would have no standing to enforce this particular regulation. But let’s look beyond this one regulation.
A yacht broker is an agent of the buyer or seller of a yacht, and he or she is authorized to represent both parties in a transaction if the relationship is adequately disclosed. As an agent for the parties, a broker owes a duty to the parties to use all information reasonably available, and to use his or her expertise and experience, to look out for their clients’ interests. This may get a little complicated in cases where a broker represents both parties, but that duty would exist even if it were not spelled out in a regulation.
A broker’s duty in a purchase and sale transaction extends to a wide range of tasks, but our reader is specifically concerned with the purchase contract. This is a complicated issue for brokers. They are not licensed attorneys, but they are expected to understand the various contracts that they ask their clients to sign and to explain the provisions of those contracts. The solution to this dilemma is to use a form contract.
Form contracts have been developed over many years by the attorneys who work in a particular industry, and the forms have been tested many times in court. A transaction that is not covered by a form contract may use a contract that was pieced together from various other agreements or haphazardly modified to fit a transaction that it was not intended for. The language of these modified contracts is often so ambiguous that litigation is almost certain to follow if there are any problems at all with the transaction. And a broker who increases the likelihood that his clients will end up in litigation is obviously failing in his duty to look out for his clients’ interests.
The California Yacht Brokers Association (the CYBA) has a very good set of forms available for use by their member brokers and their clients. And, while there is no specific legal form that must be used to submit a purchase offer for a yacht in California, the CYBA form contracts have been extensively vetted by attorneys and used by California brokers for many years. This in turn allows California brokers to explain the forms to their clients without retaining an attorney for every transaction.
Our reader’s broker mistakenly advised him that the offer must be submitted on a CYBA form, but the broker was otherwise justified in declining the form submitted by our reader.
David Weil is licensed to practice law in the state of California and, as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, is a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. He is also one of a small group of attorneys to be certified as an Admiralty and Maritime Law Specialist by the State Bar of California. If you have a maritime law question for Weil, he can be contacted at (562) 438-8149 or at firstname.lastname@example.org