A yacht is paid for long before it exists. Two to three years often pass between signature of the construction contract and handover of the keys, during which the buyer pays staged instalments on a hull that is still only a set of plates in a shed. The whole legal difficulty lies in that interval. Who owns the hull being assembled? Who bears the loss if the shed burns down? On what asset does the bank take its security? And which policy covers the vessel on the day ownership shifts? These four questions are not settled by commercial common sense but by a precise combination of the Civil Code and the Transport Code, which most of the industry’s standard contracts deal with too quickly.
1. Sale of a yacht to be built or contract for work: the characterisation drives the risk
The first step is to characterise the transaction, because two very different regimes compete. If the yard supplies the materials and delivers work designed to the buyer’s specifications, this is a contract for work, and Article 1788 of the Civil Code settles the incidence of loss: where the contractor supplies the materials, the loss of the thing before delivery falls on him, whatever the cause, unless the customer has been put on notice to take delivery. In other words, until delivery has taken place, a fire or a sinking during sea trials remains economically the yard’s loss.
If the transaction is instead characterised as a sale of a future thing, the rules of sale apply and the risk marker moves with ownership. The characterisation is not an academic debate: it determines who loses the vessel if the vessel disappears. It is settled by the actual balance of the contract, by the degree to which the buyer specifies the work and by who supplies what, rather than by the label the parties put at the top of the first page.
2. Writing on pain of nullity: the rule that overrides a verbal agreement
French maritime law imposes here a formality the ordinary law does not know. Under Article L. 5114-1 of the Transport Code, any instrument creating, transferring or extinguishing ownership or any other real right in a francisé vessel must, on pain of nullity, be made in writing. That requirement is far from theoretical in a construction file, where a change to the ownership transfer schedule is regularly recorded by a simple exchange of emails between the yard and the broker, with no signed amendment.
Such an arrangement is fragile: the sanction is not unenforceability, it is nullity. And since Article L. 5114-2 requires entry in the register of vessels, including for vessels under construction, the writing is not merely evidence, it conditions the enforceability of the chain of title which the second-hand buyer will examine two years later. A file whose paper trail has holes in it loses value at resale even where nobody ever disputed anything.
3. Progressive transfer of ownership: what the parties can actually organise
Construction contracts often provide that ownership of the hull and of the equipment incorporated in it passes to the buyer as payments are made. That clause is lawful, because Article 1196 of the Civil Code leaves the parties free to defer or to split the transfer of ownership, but it carries a consequence buyers rarely measure: the same article provides that the transfer of ownership carries the transfer of risk. Each instalment paid therefore shifts a fraction of the risk to the buyer, even though the asset remains physically in the yard’s custody and outside the buyer’s control.
The clause is useful only if it is completed by three specifications: what exactly is transferred, on what certain date, and who remains custodian of the thing for the purposes of liability for things in one’s keeping. Failing that, the buyer acquires the risk without acquiring control, which is the worst of both positions and the one most construction contracts leave him in.
4. Financing a vessel that does not yet exist: the mortgage on a vessel under construction
A bank financing a unit worth several tens of millions of euros wants real security from the first payment, which means encumbering an asset that is still unfinished. French law expressly allows it since the reform made by Ordinance No 2026-265 of 8 April 2026, in force on 1 May 2026: Article L. 5114-6-5 of the Transport Code provides that a mortgage may be granted over a vessel under construction.
That possibility has practical effect only if the vessel has first been entered in the register provided for by Article L. 5114-2, and if the security is described precisely enough to cover equipment intended for the vessel but still stored ashore. That is the usual point of friction with the yard, which intends to keep retention of title over the same equipment until payment in full. The two securities must be articulated in the contract, failing which they will neutralise each other on the day they are needed.
5. The insurance gap: the day nobody is really covered
During construction the vessel is covered by the yard’s policy, which insures the builder’s interest. After delivery it is covered by the hull policy taken out by the owner. Between the two there is almost always a grey zone, and that is where the expensive losses happen: sea trials, delivery voyage to the port of delivery, and the period of immobilisation between technical acceptance and signature of the delivery protocol.
The reasoning is the same as on the previous point, since Article 1196 of the Civil Code makes risk follow ownership: as soon as a tranche of ownership is transferred, the buyer has an insurable interest and the yard loses part of its own. A yard policy which does not name the buyer as an additional insured therefore leaves his interest uncovered. The check to be made is simple to state and rarely carried out: at each transfer date provided by the contract, which policy is in force, and for whose benefit?
6. Delivery and after: what the protocol must lock down
The delivery protocol is the real legal instrument of the transaction, far more than the initial contract. It fixes the date on which risk finishes shifting, it settles the list of reservations, and it determines the place of delivery, on which the tax treatment of the transaction and often the law applicable to the transfer depend.
It also governs what comes next: defects appearing after entry into service will fall under the yard’s contractual warranty or under the statutory warranty against latent defects, whose scope is fixed by Article 1641 of the Civil Code and whose two-year period from discovery of the defect is fixed by Article 1648, the whole being enclosed within the twenty-year long-stop of Article 2232. A protocol which merely records the handover of the keys, without annexing the schedule of reservations or defining the starting point of the warranties, deprives the buyer of the only useful evidence on the day a structural defect appears.
These six points form the framework of every construction and yacht sale file. They are decided at the drafting stage, in the specifications, the payment schedule, the ownership transfer clause, the security package, the insurance certificates and the delivery protocol, and they are practically impossible to correct once the vessel is in the water.
Commissioning or delivering a yacht? The firm reviews the construction contract, the transfer schedule, the securities and the delivery protocol together, before the first instalment is paid.
Further reading: ten checks before buying a yacht abroad, checking that a vessel is unencumbered, francisation and registration of a vessel, pleasure craft insurance.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and is no substitute for advice on your own matter.