You agree to buy a luxury yacht, complete the survey and prepare for closing. Then a storm, collision or other event damages the vessel before ownership changes hands. Responsibility for the loss can depend on the purchase agreement, when the damage occurs and the law governing the sale.
Understanding how the contract handles this possibility can reduce uncertainty when a high-value purchase is underway.
When does the risk of loss pass to you?
A yacht purchase agreement can specify when the risk of loss shifts from the seller to you. The contract may keep the risk with the seller until closing or another stated event. Common industry forms from organizations such as the Yacht Brokers Association of America (YBAA) and MYBA – The Worldwide Yachting Association also address who bears the risk before closing.
If damage occurs before then, the contract may address repairs, a delayed closing or other remedies. If the contract does not address the issue, the law governing the agreement may provide default rules for determining when the risk shifts to you.
What happens if the yacht is damaged?
The effect can depend on the severity of the damage and the terms of your agreement. A contract may distinguish between repairable damage and a casualty that prevents the transaction from moving forward.
Relevant provisions may address:
- Repair obligations and deadlines
- A purchase price adjustment
- An extension of the closing date
- Termination rights after substantial damage
- Insurance coverage and proceeds
The parties may also document the yacht’s condition before closing to help identify changes after acceptance.
Clear damage terms can reduce closing uncertainty
Preclosing damage does not automatically mean your yacht purchase must end. The purchase agreement may explain who bears the loss, whether repairs can proceed and whether the closing date or purchase price can change.
Because yacht sales can involve industry forms, insurance and state-law rules, an attorney experienced in yacht transactions can help you identify which contract terms apply and what options they provide before you complete the purchase.
