Comparing the YBAA and IYBA Purchase and Sale Agreements
YBAA Yacht Broker News E-Newsletter
By Christopher Anderson and Jane Schwed, Robert Allen Law
Most brokerage yachts on the East Coast and in the Caribbean are bought and sold using one of two agreements – either the International Yacht Broker’s Association Purchase and Sale Agreement for Brokerage Vessel (“IYBA PSA”) or the YBAA Vessel Purchase and Sale Agreement (“YBAA PSA”). While very similar in many respects, there are a few distinctions worth noting. This article will explore the main differences between these two agreements.
- Time is of the Essence
The YBAA PSA contains a “time is of the essence” clause. This clause holds the buyers and sellers strictly to all of the deadlines in the contract. This means that those clauses that call for termination of the contract if the deadline is missed are enforced. IYBA, on the other hand, does not have a time is of the essence clause. This means that the clauses requiring signatures by a certain deadline are not strictly enforced. For instance, there is a clause in the IYBA PSA that requires the buyer to deliver the deposit within three days of the seller executing the document. Under the IYBA PSA, if the buyer misses this deadline but delivers the deposit in a reasonable amount of time, the seller most likely will not be able to terminate the deal over a one or two-day delay. If your client absolutely must get their boat by exactly 12PM on a Saturday, then the YBAA PSA may be the better choice.
- Venue for Disputes
The IYBA PSA requires that any claim or proceeding relating to the agreement be brought in a court in the state of Florida, either in the county of the main office of the selling broker, or in Broward County if the selling broker has no office in Florida and no other jurisdiction is written into the blank in the contract. Disputes under the YBAA PSA go to arbitration under American Arbitration Association rules in the city and state of the selling broker’s office. Therefore, if you have a deal where the selling broker’s office is located in Maine, and the buyer, seller and boat are in North Carolina, then (i) under the YBAA PSA the parties would end up in arbitration in Maine, and (ii) under the IYBA PSA the parties would end up in the courts of Broward County, FL (assuming no other jurisdiction is written in).
- Choice of Law for Disputes
Florida law governs all disputes under the IYBA PSA. Choice of law under the YBAA PSA is in the state of the main office of the selling broker. The courts of different states interpret contracts differently. How one state looks at an agreement differs from how another state looks at an agreement. Florida, for instance, requires specific disclosures for a contractual provision for liquidated damages to be effective while other states don’t have similar requirements. Because the YBAA PSA can be governed by the laws of various states based on where the selling broker’s office is located, it may make sense to have a local lawyer take a quick look at the contract.
- Dual Brokers
Both YBAA and IYBA agreements include a clause that addresses the conflict of interest issues that arise when the buyer and the seller have the same broker. Both agreements allow for a dual broker relationship between the parties. The IYBA agreement also requires that a broker may not disclose to the seller that the buyer is willing to spend more than the asking price without the buyer’s consent, and that a broker may not disclose to the buyer that the seller is willing to sell the vessel for less than the asking price without the seller’s consent. This requirement is a solution to the problem dual brokers have when trying to abide by laws requiring the broker to represent their principal’s best interests. By receiving consent from both parties, a dual broker involved in a IYBA PSA is given stricter guidelines on how to avoid a conflict of interest.
Both IYBA and YBAA have a clause that establishes three requirements that must occur for an agreement to occur. Both require that necessary documents – such as necessary title, proof of removal of encumbrances, etc. – are delivered before the closing occurs. Both also require that the purchase price be paid. The difference in IYBA and YBAA’s closing clauses is that IYBA requires that for a closing to occur, the vessel must be delivered, while YBAA only requires that the buyer confirms they are prepared to close.
- Wire Transfer
IYBA specifies that the purchase price must be delivered by wire transfer. In contrast, YBAA requires that the purchase price has been collected by the seller or selling broker as of closing.
- Prevailing Party Legal Fees
In a dispute under the YBAA PSA, absent theft or fraud, the party who wins pays his own legal costs. In contrast, in any dispute under the IYBA PSA, the prevailing party party’s legal fees and costs are paid by the other party.
- Risks and Losses
Both agreements have a clause that holds the seller responsible for all damage done to the boat after acceptance but before closing. The IYBA PSA has different outcomes depending on the severity of the damage. Under the IYBA PSA, damages that cost 5% of the vessel purchase price or less and take less than 30 days to repair must be repaired by the seller, but the contract is adjusted and deadlines are extended by however many days it takes to repair the damages. If damage is more extensive, than either party may terminate the agreement. Under the YBAA PSA, the seller must repair any damage to the vessel, regardless of the size of the repair, subject to approval of the buyer who has the right to request a reasonable price adjustment or to cancel the sale if substantial damages cannot be repaired to his satisfaction.
These are some of the important differences between the YBAA PSA and The IYBA PSA to take into account when deciding which agreement to use for your next deal.
*This article is a general overview and should not be considered legal advice.