Stumbling blocks in the (international) purchase of ships

Under the law of obligations, the purchase of a ship is a contract for the sale of goods pursuant to Art. 184 in conjunction with Art. 187 in conjunction with Art. 1 para. 1 CO. Although the legislator has not envisaged any special provision for the sale of ships, there are nevertheless some legal principles that must be observed for a flawless conclusion of the contract.

Drafting of the contract of sale

As with other contracts for the sale of goods, the conclusion of a written contract of sale is recommended for the purpose of securing evidence. But what should it contain in order to guarantee both the buyer and the seller the smoothest possible transfer of ownership?

On the one hand, the purchase contract should certainly contain the subject matter of the contract as well as the terms of payment, whereby the latter are usually divided into a down payment and a residual purchase price in the case of ship purchases or sales.

Furthermore, the time of handover and transfer of ownership, the sea trials and the inspection of the ship’s condition should be stipulated in the contract. It is essential that the sea trials are carried out in the presence of an expert appointed by the buyer or by the expert himself.

In addition, both parties should regulate the assurances and obligations of each other by means of a contract. The buyer, for example, must guarantee that the necessary financial resources are available and that they will be paid as agreed. The seller, on the other hand, must guarantee that he will keep the ship exclusively for the buyer, that the latter will become the sole owner after the conclusion of the contract of sale and that he can freely dispose of the ship and its inventory.

Not to be forgotten is the contractual provision concerning material defects. If a contract has been concluded without a corresponding exclusion of liability, defects can still be claimed within two years of the purchase of the vessel. Should the seller not agree to this, liability for certain points can be expected. As a compromise, for example, a capped cost sharing up to a certain amount or an adjustment of the purchase price can be agreed.

Even if a disclaimer has been effectively agreed between the seller and you as the buyer, there are exceptions to this principle. For example, if the seller fraudulently conceals a defect in the boat from the buyer. In this case, the seller is liable even though an exclusion of warranty was agreed in the purchase contract. However, the buyer must prove this “fraudulent intent”.

Other key documents

In addition to the conclusion of the actual purchase contract, a number of other documents facilitate the smooth transfer of ownership. From a legal point of view, the following documents are particularly important:

• a builder’s certificate;
• a certificate of no objection;
• a certificate of incumbency;
• a radio licence;
• an antifouling declaration;
• a proof of payment of VAT;
• a declaration by the seller that the vessel is free from encumbrances;

If the vessel is being sold from one land territory to another, an international ship’s mass certificate, an international load line certificate, an international air pollution prevention certificate (EIAPP), a declaration of cancellation in the country of sale and proof that the boat has not been outside EU waters for more than three years continuously after payment of VAT are also recommended.

If you have received all these documents, you are legally well protected. 

Conclusion

In summary, buying a boat is an expensive leisure activity that needs to be properly regulated. If you keep a cool head when it comes to the decisive points, proceed step by step and consult an expert lawyer in case of uncertainty, you will know from the start what you are getting into.

We will be happy to advise you.