Yacht Disputes: Latent Defects, Charter, Refit and Arrest

A yacht is often sold within a few weeks, between a seller holding through a Maltese company, a buyer resident in Monaco, a broker based in Antibes and an Italian yard that delivered the vessel three years earlier. When the dispute arises, each of those locations becomes a question of law before it is a question of fact. That is what sets yachting litigation apart from ordinary commercial disputes: the disagreement rarely concerns what happened, almost always the applicable law and the court competent to hear it.

Latent defects: two years from discovery, not from sale

The most frequent dispute after an acquisition concerns the defect discovered once the vessel is in service: hull osmosis, shaft line corrosion, a reconditioned engine presented as overhauled, understated running hours. Where the sale is governed by French law, the buyer has the benefit of the latent defect warranty under article 1641 of the Civil Code, and the action must be brought within two years of discovery of the defect (article 1648), the whole being subject to the twenty year long-stop period running from the sale under article 2232. Time therefore runs from discovery, not from signature: a decisive nuance in a sector where defects typically surface during the first season afloat, sometimes two or three summers after the transaction.

The seller must still have failed to exclude liability. Second-hand yacht sale contracts, frequently built on the MYBA form, almost invariably contain a warranty exclusion coupled with an “as is” sale. Such clauses operate between informed professionals; they give way, however, before the bad faith of a seller who knew of the defect, and the pre-purchase survey then becomes the central piece of evidence, one way or the other.

Formal requirements, an overlooked ground of nullity

Article L. 5114-1 of the Transport Code, as amended by Order no. 2021-1843 of 22 December 2021 with effect from 1 January 2022, requires that any instrument creating, transferring or extinguishing ownership or any other right in rem over a registered vessel be recorded in writing, on pain of nullity, with the particulars identifying the parties and the vessel. A sale concluded by exchange of emails, a verbal agreement confirmed by a deposit transfer, an unformalised assignment of co-ownership shares: in each case the buyer believes he holds title and holds none. The defect of form is generally discovered at the worst possible moment, on resale or on registration of a mortgage.

Charter, refit and construction: three distinct regimes

Chartering a crewed yacht falls under the law of affreightment and engages the owner’s liability as to seaworthiness and crew competence: cancellation for technical breakdown, an accident on board, late delivery of the vessel, each is resolved on the terms of the MYBA Charter Agreement and the law it designates. Refit and construction follow a different logic, closer to construction law than to maritime law: late delivery, cost overrun, non-conformity with specification, acceptance with or without reservations. Confusing these three regimes is the costliest analytical error in this field, because it leads to the wrong court on the wrong basis, and to discovering that time has run once the right basis is finally identified.

Which court, which law, and what security for payment

Jurisdiction is determined first by the contract, and yachting is among the fields where jurisdiction and arbitration clauses are most frequently stipulated, sometimes in favour of London arbitration although no party has any connection with the United Kingdom. Failing a valid clause, Regulation (EU) No 1215/2012, known as Brussels I bis, designates as between Member States the court of the defendant’s domicile or that of the place of performance of the obligation in question. Verifying the validity of the clause before issuing proceedings costs a few hours; discovering it unenforceable after eighteen months costs the case.

There remains the question every creditor eventually asks: how to secure payment of a judgment against a foreign owner whose only traceable asset is the vessel herself. The answer lies in one measure, ship arrest, which detains the yacht in port until sufficient security is provided. In yachting more than anywhere else it is often the only genuinely effective lever, because a yacht detained in high season costs her owner considerably more than the sum claimed.

Based in Paris, the firm acts in all French ports, from Le Havre to Marseille and from Nantes-Saint-Nazaire to Antibes, as well as before the Chambre arbitrale maritime de Paris, and works in English with shipowners, P&I clubs and foreign counsel.

Typical cases handled

The situations below are illustrative, anonymised scenarios. They show when the firm steps in and what the work consists of.

Galvanic corrosion discovered three months after purchase

The new owner discovers major corrosion of the exhaust system. The firm has the defect recorded, assesses the effect of the MYBA “as is” clause and acts within the two-year period.

Refit delivered eight months late

The yard claims the balance while the works are non-compliant. The work bears on penalties, acceptance with reservations and the retention.

Charter cancelled and deposit withheld

A charterer demands the return of the deposit after cancelling a cruise. The firm applies the MYBA charter agreement and negotiates the allocation of the deposit.

Engine failure one month after delivery

One month after handover, an engine fails at sea. The seller relies on the “as is” clause, the hour meter shown at the viewing and the sea trial completed without incident. The buyer relies on latent defect. Between the two lies a question of fact: is the failure a defect that predates the sale, or normal wear poorly maintained since. We obtained a court-ordered survey with dismantling under the expert’s supervision, secured the maintenance history from the yard, and compared the hours recorded by the engine control unit with the hours declared. The gap between the two turned the case: a meter that does not tell the truth is no longer a warranty question, it is a question of the seller’s good faith. The settlement that followed covered the replacement of the engine.

Build and refit disputes have their own page: refit and newbuild disputes, covering delay, defective work and the final invoice.

Frequently Asked Questions

What is the time limit for a latent defect claim after buying a yacht?

Two years from the discovery of the defect, under article 1648 of the French Civil Code, and not two years from the sale. That distinction saves a good many files, because corrosion, osmosis or an engine fault often appears long after delivery. The difficulty is evidential rather than procedural: the buyer must show that the defect existed at the time of sale, that it was hidden, and that it makes the yacht unfit for its intended use or so reduces that use that the buyer would not have paid the same price. A survey obtained early, before repairs are carried out, is usually what decides the case.

Does an as is clause bar any claim?

Not automatically. A clause excluding the warranty against latent defects is valid between professionals of the same speciality, but it is deprived of effect where the seller knew of the defect, and a seller acting in the course of business is presumed to know. Many yacht sales involve a professional seller or a broker acting for one, which is precisely the situation in which the clause fails. The wording matters too: an as is, where is formula borrowed from an English law form does not necessarily produce the same effect once French law governs the sale. The clause is a starting point for analysis, never the end of it.

Is a yacht sale concluded by email valid?

For most pleasure vessels the sale is consensual, so an exchange of emails showing agreement on the vessel and the price can bind the parties. For registered vessels, however, the transfer must be recorded in writing and entered in the register to be effective against third parties, and a sale that is never registered leaves the buyer exposed on title. The risk therefore runs both ways: sellers discover they are bound by a broker’s email, and buyers discover they own nothing the register recognises. Before any exchange that looks like acceptance, it is worth deciding whether a binding contract is intended.

Which court has jurisdiction where the parties are in different countries?

Within the European Union, Regulation 1215/2012 gives effect to a jurisdiction clause and, failing one, points to the defendant’s domicile or to the place of performance. Outside the Union the answer depends on the contract and on the flag. A yacht held through a foreign company and flying a third flag can produce three plausible fora, which is why the clause deserves attention when the contract is drafted rather than when the dispute arises. Where payment is at stake, the vessel’s physical location often settles the question in practice, since a conservatory arrest in a French port secures the claim wherever the merits are heard.

Should proceedings be brought in summary form or on the merits?

Both routes are used and the choice is tactical. Summary proceedings, référé, obtain the appointment of a surveyor, an interim payment or a protective measure within weeks, and the surveyor’s report frequently becomes the decisive document in the case. Proceedings on the merits settle liability and quantify loss, but take considerably longer. In yacht disputes the usual sequence is to secure the evidence and the money first, then litigate or settle on the strength of the report. Waiting for the season to end before acting is the most common and the most costly mistake, because the yacht is repaired, sold or moved and the evidence goes with it.

The yacht is foreign flagged and owned by a company: does that change anything?

It changes the procedure more than the rights. Ownership by a company means the claim lies against that company, and the person who negotiated may carry no personal liability, so the identity of the contracting party is established from the register and the corporate documents before anything is sent. The flag determines the registration formalities, the mortgage regime and part of the crew regime, and it may bring a second body of law into a case otherwise governed by French law. None of this prevents a French court from hearing the dispute or a French port from being the place of arrest.