Boat Sale Agreement 101
The fundamental components of any boat sale agreement include a description of the boat, the price and the parties involved. Addressing the price is important because the parties must agree and confirm how much the purchase price is going to be, and how this price will be paid (i.e., cash, installment payment, financing). In regard to the parties involved, I recommend identifying who is selling the boat, as well as who is buying the boat, including their social security numbers, as you will need these as part of the federal government best practice process under the Coast Guard’s new requirements. The agreement also typically includes a statement that the seller is transferring the boat to the buyer, and then the rest of the agreement addresses in detail what specifically is being sold.
Although a written agreement may seem unnecessary for small transactions, it is always better to have a written agreement, especially if a third party wants to get involved. My clients are sometimes forced into agreements they did not create because a bank or other financing company requires one . Generally, banks and financing companies will not require a boat sale agreement for a transaction involving a boat relative to its value. However, some banks do require a written agreement to confirm the ownership and details of the transaction such as if the buyer needs to buy insurance. Additionally, some finance companies that provide a loan for the boat purchase force a written agreement into the transaction as part of the approval process.
Many states provide a form boat sale agreement. However, in my experience, it is always better to consult with an attorney to draft your agreement. Many people do not recognize in the smaller transaction that a boat sale agreement will also include a bill of sale and title transfer to ensure that the current owner does not have claims to the vessel after the sale. A purchase boat sale agreement should also include provisions that address whether there is a warranty on the boat, or what is known as an "as is" sale of the boat.
What Should be Included in a Boat Sale Agreement Template?
When crafting a boat sale agreement template, ensure that it encompasses the following aspects:
Buyer and Seller Details: Including full legal names and addresses for the buyer and seller establishes clear identification of the parties involved in the sales transaction.
Boat Description: Provide a detailed account of the boat, including specifics such as the year of manufacture, make, model, hull identification number (if applicable), and any major accessories or upgrades. Any defects with the boat should also be noted in this portion.
Sale Price: The total sale price of the boat must be accurately recorded in the agreement and should include any amounts payable for taxes, registration, fees, etc.
Payment Terms: Stipulate how and when payments should be made. Outline whether the buyer will pay a deposit when signing, the balance prior to taking possession, and how payment for tax, registration, and other fees will be handled.
Warranties: Disclaimers of warranties pertaining to the boat should be explicitly included. It is also a good idea to specifically disclaim any express or implied warranties regarding the merchantability, fitness for a particular purpose, and other such warranties.
Transfer of Title: The agreement should include a provision that the seller will transfer title of the boat to the buyer in exchange for payment of the agreed sale price. If applicable, the seller should also agree to assist the buyer in completing all registration paperwork to ensure all title forms are properly filed with the appropriate local governmental office.
Legal Aspects of Boat Sale Agreements
The transfer of ownership of a boat does not occur until the buyer has paid the seller the purchase price, and the seller has delivered possession of the vessel to the buyer. However, the seller’s rights do not terminate instantly upon payment by the buyer because unless there has been delivery of the vessel to the buyer, actual title does not pass from seller to buyer until delivery has occurred. The issue of delivery of the vessel or possession thereof presents a problem that can lead to litigation if a conflict later arises with respect to whether or not a binding contract of sale was created. The simplest way to solve the problem of creating evidence of both parties intent to perform may be to simply make contemporaneous with the agreement a full and complete delivery of possession or title. In this manner, neither party can claim the contract is not binding upon it. With respect to a written contract of sale, it is recommended that the agreement contain the name of the seller of the vessel, the consideration (i.e., the purchase price), the date of contract, a full description of the vessel, including the manufacturer’s hull number, whether or not the vessel was delivered, where or to whom it was delivered, the date of delivery, the number of copies of the vessel that were signed, whether or not any bill of sale was exchanged at the time of execution of the contract, the names and addresses of all indicia of ownership holders (e.g., lien holders), whether or not there is any security agreement between the seller and the vessel purchaser, scrivener’s names.
In the State of Florida, the statute relating to MARINE DEALER’S LIENS provides: To secure the payment of the portion of that price remaining unpaid at the time title passes to an owner or person who leases a MOTORIZED VESSEL, the person who sells or leases that MOTORIZED VESSEL has a first priority lien on it to the extent of the unpaid balance. This lien created under this section is in addition to any common law or statutory liens. This section does not apply to sales of vessels other than MOTORIZED VESSELS and does not apply to vessels, other than MOTORIZED VESSELS, titled and registered under the laws of another state or of a territory or possession of the United States. No lien created under this section is enforceable unless the seller or lessor notifies the purchaser or lessee in writing, at the time of sale or lease, of the lien and the securement of a still existing obligation on the part of the purchaser or lessee.
Pitfalls of Boat Sale Agreements to Watch For
One of the most common mistakes made by boaters who try to sell their own vessels is sitting down and just typing up some sort of agreement without doing any background research first. Because this is one of the largest investments that most people will ever make, both in terms of time and money, it’s important to make sure you’re getting all the facts in order before you get your boat sale agreement template together. Otherwise, you might end up creating problems for yourself that could be avoided with just a little bit of homework.
A few examples of issues that are often omitted or misrepresented in boat sale agreements are:
Missing Detail Failure to test all systems and create an inventory of the equipment and condition is another common mistake. You need to include accurate information with your boat sale agreement template about motor hours, maintenance and condition of the vessel. It’s helpful in creating the right price as well, so don’t skip out on the details in the draft just because it takes a little extra work—this will save you, and your buyer, time later on.
Omission of Contingencies If you are financing the purchase with a loan, details about that need to be included in the boat sale agreement template. Along with that, make sure to require a survey and sea trial as contingencies of sale. Be sure to exchange funds and documents as specified in the agreement, and keep a close eye on your finances to ensure they’re exactly where they should be at closing.
Do-It-Yourself Boat Sale Agreement Templates
There are numerous places that a boat seller may find various template sales agreements. Perhaps the most common is an online search result. There are literally hundreds of websites and blogs that publish sample templates. The best place to find one of these sample templates is to search for "boat sale agreement template" or "boat bill of sale template".
Many times these sample templates come with step by step instructions on how to fill them out so they can be very helpful. One website that provides a number of sample templates is FindLegalForms.com. This website sells a number of different templates and also holds a free sample template for download, though the free sample has a watermark on it. Many websites will provide a simple bill of sale template that is easy to fill out. The State of Florida Division of Motor Vehicles also has a template boat bill of sale that is worth reviewing. In my opinion, however, the best example of a boat bill of sale that I have seen is the one provided by the Florida Yacht Brokers Association. Florida is known for having one of the most complex approaches towards pleasure boat sales so to have a document that is broadly acceptable in that state is worth reviewing . Sample templates are also widely available on the Internet, including in sites such as eBay. As a practice pointer, you should never take a template from eBay or a private individual unless you verify its acceptance by lenders and agencies in your area. Trust but verify!
Finally, there are also a number of websites where you can purchase professionally drafted agreements. Some of those websites provide sample templates, while others require a payment for each template. Some websites will even allow you to customize their sample templates. No matter how you receive your template, customizing it will often require you to make basic changes in the template language. In many cases there may be more significant additions needed based on certain scenarios. For example, in some transactions a broker will be involved selling the boat which can create commission obligations. In those circumstances, you will want to add in those provisions. You should also remove any language in a sample template that you do not think you need. Never leave provisions in place that you don’t want because you do not plan to follow them. Any language that you leave in a template will be interpreted against you if a dispute arises regarding those provisions.
When Do You Need a Lawyer for a Boat Sale Agreement?
Whether "just" a family member or a stranger, the person buying or selling a boat is generally better served by having a lawyer draft or at least review a Boat Sale Agreement or Bill of Sale. Among other issues addressed by an attorney, there are legal requirements for the Bill of Sale itself. The last thing a seller or buyer wants is an unenforceable agreement. Additionally, while it may seem self serving for a lawyer to advise on the merits of hiring a lawyer to draft or at least review a proposed agreement, a novice party to a sales agreement may unintentionally fall into a trap for the unwary. Perhaps the most enticing trap is failing to understand the extent of a seller’s warranties regarding the boat and its equipment.
A lawyer may also be able to assist with drafting additional documents such as a Power of Attorney (possibly required by a bank believing the sale requires bank approval or to comply with state vehicle registration). Similarly, the lawyer may be asked to assist with any Financing or Purchase Agreement.
Boat Sale Agreement Checklist
It is vital that both the buyer and seller review the entire agreement thoroughly prior to signing it. Some of the important considerations and checks should include, but not be limited to:
• Confirm that your boat is free and clear of any mortgages or liens.
• Verify the seller actually owns the boat.
• Check that you have received evidence of ownership (title or bill of sale) in the correct name.
• Make sure that the boat number on the contract and your evidence of ownership are the same.
• Note there are time limits specified for payment of the deposit and then the balance.
• Who is entitled to the interest earned on the escrow account? Is the interest paid to the buyer or seller after closing?
• Is the closing to occur on or after a certain date?
• Give attention to how the boat is described in the contract as well as the conditions of sale for additional items being sold with the boat .
• If the boat is under construction, be certain you understand exactly what is being sold.
• In the case of a trailer or cradle being sold with the boat, check the description and if there is a limit on the trailer price.
• Confirm that damages to be paid are limited to deposits and earnest money only.
• To the extent permitted by the governing statute, indemnification provisions should provide that the obligation of the parties is not contingent upon an insurance recovery.
• Review the right to inspect clause carefully in terms of the type of testing permitted and whether the buyer is responsible for costs associated with the right to inspect.