Can arbitration on P&S correct a hidden boat problem?

[Rob R]

Has anyone collected $ damages by working through the binding arbitration clause in their Purchase&S agreement on their boat? I'd love to get some advice before I head down that road.
I discovered a very hidden problem (rust under epoxy and paint) after my boat purchase. The temporary tank repair was done by the seller who then stated the tanks were in good condition.
The P&S agreement is under FL law and lists Arbitration as the method for dispute resolution.
Now lets assume I have clear evidence of the “negligent misrepresentation”. My question on arbitration in FL is IF I get a favorable judgement through arbitration, do I have any hope of collecting? Complicating collection might be the transaction happened in FL, the seller resides in MI and the boat is in WA.
Thoughts....

 

[DavidM]

I am not sure that arbitration clause is valid given the geography of the parties. And if the seller doesn’t want to pay an arbitration judgement then I think your only recourse is litigation with all of the expense that entails.

I wouldn’t pursue it unless the damages are more than $10,000.

David

 

[mvweebles]

Not a lawyer, but spent much of my career negotiating contracts. If your agreement states that Florida is the venue to resolve disputes, that's where you must file.

You are correct that collecting may be difficult even if you can prove deception (which is difficult unless you happen to find a can of the paint used and a receipt showing purchase about the same time as the boat was listed for sale).

But the burden of proof is fairly low - preponderance of the evidence, essentially 51% more likely than not. Although the seller may bear little chance of immediate consequence of a judgement, possible he won't want to have an open debt hanging out there. But that's only a hunch. If he did what you suspect - actively deceive you about a material condition, chances are he may not care much.

I feel your pain. Some people are pond scum.

Peter

 

[sunchaser]

So somebody painted over the rust, is the tank leaking in that area? If not what’s the problem? If the tank has been leaking since before purchase, did your surveyor notice the issue?

 

[Kaniksu]

Was your offer contingent upon your acceptance of a survey? If so and you accepted the survey and waived the contingency, it becomes difficult for you. Do you know for a fact that it was the seller who did the repair? Do you know for a fact that it was the seller who did the repair? I only practice in Washington, but sometimes these issues are simply not worth pursuing.

 

[twistedtree]

Welcome to the wild world of boat buying.

Would you be claiming a violation of the P&S agreement, and if so, what clause? Most such agreements absolve the seller of any misrepresentation. That pushes you back to finding some State law that was violated. And if it was a state law that was violated then the arbitration requirement in the contract my not apply.

Florida has never struck me as a consumer protective State, but I could be wrong. If the violation is outside the contract, you might also look to more consumer friendly venues and whether you could get standing in that state vs Florida. But I suspect that if a transaction took place in FL is will be hard to move the venue elsewhere.

Unfortunately things like this usually come down to doing what’s best for you vs holding people responsible. Pursuing any action whether arbitration or courts will cost money, and unless you can also go after you legal costs, you won’t get anything in the end, and will suffer a lot of aggravation along the way. Think about how you want to spend your time.

Also, what did the seller actually represent, and was it untrue? Is he say the tank had never been repaired, or did he say they were fine or something more vague that he could claim was true. Is the repair actually leaking?

 

[mvweebles]

My read of the OP's post is he believes the seller made a fradulent representation - that the tanks were in good condition when he knew they were not, and in fact made efforts to conceal the condition. If proven, this would effectively be a breach of the contract and re-open the agreement despite signatures and waivers.

But it's a high bar. OP would need to prove ALL of the following:
1. Seller made a representation of the soundness of the tanks
2. Representation was false
3. Seller knew it was false
4. Seller intended the buyer to rely on the false representation
5. Buyer did indeed rely on the representation
6. Buyer sustained damages as a result of relying on the false representation

This is why I said he'd almost have to find a can of the paint and a receipt dated around the time the seller listed the boat for sale. While proof is difficult, remedies are expansive and include specific performance (i.e. fixing the tanks to the represented conditon); or voiding the contract altogether whereby the buyer could seek compensation for all costs incurred in the transaction including survey, travel, etc.

But....running the proof gauntlet is tought duty. This is a boat - a liesure activity. Best to lick the wounds and hope there is a Cosmic Karma account whereby the seller's testicles are slowly roasted with hot embers.

Peter

 

[ksanders]

You also run into the idea that if a tank is not leaking, painting over a rusty area, after first removing visible oxidation, and using a rust resistant paint is a reasonable course of action.

Define "good condition"

That by its very nature is a subjective term.

Add to that the reality of a several decade old boat and the definition gets even more subjective.

 

[twistedtree]

My read of the OP's post is he believes the seller made a fradulent representation - that the tanks were in good condition when he knew they were not, and in fact made efforts to conceal the condition. If proven, this would effectively be a breach of the contract and re-open the agreement despite signatures and waivers.

This assumes that the representation was made as part of the contract. The few boat purchase contracts that I've been involved with say the seller makes no representation other than they own the boat, are allowed to sell it, and that it's free and clear of liens. So they can tell you anything they want and it's not enforceable via the contract. That's why I said it would then fall to state consumer laws which might provide some recourse over misrepresentation. Now if the contract DOES cover any verbal representations made by the seller, that's a different story. Gotta read the contract and see what it provides, but my guess it that it won't be much. Boat buying is almost 100% buyer beware.


I feel for the buyer here, but he's probably been screwed fair and square.

 

[sunchaser]

You also run into the idea that if a tank is not leaking, painting over a rusty area, after first removing visible oxidation, and using a rust resistant paint is a reasonable course of action.

Define "good condition"

That by its very nature is a subjective term.

Add to that the reality of a several decade old boat and the definition gets even more subjective.

Yes, properly cleaning up rust and painting over it whether on tanks or other metal is quite common and probably a good thing to do. In this case we lack insight as to whether the tank is rotted out and leaking or merely cleaned up to prevent further oxidation or for visual purposes.

More importantly why was the rust there and has that “leak” been addressed. More details from the. OP would be helpful.

 

[mvweebles]

This assumes that the representation was made as part of the contract. The few boat purchase contracts that I've been involved with say the seller makes no representation other than they own the boat, are allowed to sell it, and that it's free and clear of liens. So they can tell you anything they want and it's not enforceable via the contract. That's why I said it would then fall to state consumer laws which might provide some recourse over misrepresentation. Now if the contract DOES cover any verbal representations made by the seller, that's a different story. Gotta read the contract and see what it provides, but my guess it that it won't be much. Boat buying is almost 100% buyer beware.


I feel for the buyer here, but he's probably been screwed fair and square.

I hope a skilled attorney chimes in. I believe the theory behind the OPs question is fraudulent misrepresentation. That's different than poor due diligence, the standard issue with post-sale complaints. The OP would have to prove that the seller took steps to prevent him from conducting standard due diligence and sustained harm as a result and therefore the signed contract is not valid.

It's a high bar to clear for the OP because you have to show intent to hide a material defect.

Peter

 

[guy with a boat]

Impressive legal analysis by TT and Weebles. You guys both know quite a bit about a lot of things. I’m saying this as a guy who is zero percent lawyer, but has worked with contracts throughout my career and stayed out of trouble.

If I ever need a legal opinion from someone that’s not (to my knowledge) an actual lawyer, I’m calling you guys.

 

[SteveK]

IMHO if you can find 3 lawyers and ask them the same question, and if two of them give you the same answer, follow it. Otherwise all you got was legal opinions.

 

[twistedtree]

Impressive legal analysis by TT and Weebles. You guys both know quite a bit about a lot of things. I’m saying this as a guy who is zero percent lawyer, but has worked with contracts throughout my career and stayed out of trouble.

If I ever need a legal opinion from someone that’s not (to my knowledge) an actual lawyer, I’m calling you guys.

The unfortunate thing is that 90% of the time, nobody wins except the lawyers. They can spend your money even faster than a boat :-(

 

[rkymtnsailor]

I think the OP needs to tell us 1. Was there a survey and 2. Is the tank leaking?

If it isn't leaking (yet) it was probably in "good" condition at the time of sale.

Older GB's have a known problem with their mild steel tanks.

 

[Rob R]

No shortages of opinions on this thread but it doesn't sound like anyone has gone down the arbitration route as prescribed in my P&S (from my contract "pursuant to the rules of the International Yacht Arbitration Council")
My idea that I have a "case" stems from my reading of an article in Marlin Marine.
https://www.marlinmag.com/story/boats/the-fine-print-on-seller-broker-misrepresentation/
The consensus does seem to be that winning an arbitration judgement would just be the start of more legal bills for collection of any judgement. That about sinks this plan.

A few more answers to some of the queries before I put a nail in this:
I did indeed find a can of diesel tank sealant deep in the aft cabin...but no receipt so I cant say when the tanks had been repaired. No leaks yet but I would consider that inevitable.

Prior to me seeing the boat for the first time I stated that I did not want to see the boat unless the tanks were rust free. That is when I was assured the tanks were great.
More recently the seller stated the tanks had rust on them from a deck leak and that there was goo dripping from the tank but "it didn't smell like diesel" "not sure what it was" "but I decided to coat the tank with epoxy just in case".
I should have recorded that wonderful admission.

Other than that the leaking deck has been replaced and all is dry below.

Thanks for all your input.

 

[twistedtree]

More recently the seller stated the tanks had rust on them from a deck leak and that there was goo dripping from the tank but "it didn't smell like diesel" "not sure what it was" "but I decided to coat the tank with epoxy just in case".
I should have recorded that wonderful admission.

Other than that the leaking deck has been replaced and all is dry below.

Thanks for all your input.

Was that before or after you completed your inspections and accepted the boat? If before, it sounds like a complete disclosure of the issue. If after, then it seems boarder line give there isn't an active failure of the tank.


Regardless, crappy position to be in and I hope it doesn't spoil your enjoyment of the boat.

 

[Comodave]

I would put it behind you and use the money to replace the tank if or when it starts to leak. What you have here is a he said she said. Not a winner and even it it was you may not be able to collect anything. Forget it and enjoy your new boat. Don’t let this sour new boat experience.

 

[Portage_Bay]

I would put it behind you and use the money to replace the tank if or when it starts to leak. What you have here is a he said she said. Not a winner and even it it was you may not be able to collect anything. Forget it and enjoy your new boat. Don’t let this sour new boat experience.

I suggest you pay attention to twistedtree's comment that the only winners are the attorneys and Comodave's advice. I once went after the surveyor after discovering all of the expensive issues he missed, he was incompetent and dishonest. His undoing in court was his lack of honesty, not his incompetence or the undisclosed condition of the boat.

I got a fair judgment, the attorney's collected their full fee, I got some of my share of the settlement before the surveyor disappeared.

I am aware that you may be seeking resolution through arbritration vs going to court. If you've not taken a case to arbritration be aware that it get's very expensive very quickly. The hours grinding away as you pay your lawyer and if a 3rd is required to act as go-between with your attonrney and the other side's attorney you'll be paying half of that hourly fee as well.

With your case spread across 3 states I don't think you have a good chance of favorable outcome, either judgment or collection.

From my experience going after the surveyor I learned to be certain I will never again through my own actions allow myself to be in a position that requires legal help. I now conduct my own pre-survey inspection.

From subsequent boat purchases I learned that surveyors miss things. Sometimes very expensive things. That sellers can be less than honest. That some brokers are in in just for the comissions. I've learned to put major issues found after purchase behind me, as painfully expensive as it can be, and move on.

 

[mvweebles]

I suggest you pay attention to twistedtree's comment that the only winners are the attorneys and Comodave's advice. I once went after the surveyor after discovering all of the expensive issues he missed, he was incompetent and dishonest. His undoing in court was his lack of honesty, not his incompetence or the undisclosed condition of the boat.

I got a fair judgment, the attorney's collected their full fee, I got some of my share of the settlement before the surveyor disappeared.

I am aware that you may be seeking resolution through arbritration vs going to court. If you've not taken a case to arbritration be aware that it get's very expensive very quickly. The hours grinding away as you pay your lawyer and if a 3rd is required to act as go-between with your attonrney and the other side's attorney you'll be paying half of that hourly fee as well.

With your case spread across 3 states I don't think you have a good chance of favorable outcome, either judgment or collection.

From my experience going after the surveyor I learned to be certain I will never again through my own actions allow myself to be in a position that requires legal help. I now conduct my own pre-survey inspection.

From subsequent boat purchases I learned that surveyors miss things. Sometimes very expensive things. That sellers can be less than honest. That some brokers are in in just for the comissions. I've learned to put major issues found after purchase behind me, as painfully expensive as it can be, and move on.

How did you get past the sweeping indemnity clause at the heading of all survey documents, the one that says they will do their best but no guarantees?

Peter

 

[Portage_Bay]

That was 45 yrs ago. I don't remember the details of the purchase contract. I don't recall signing anything with the surveyor who was the one I sued (sp?).

I think the process of purchasing a boat in those days was a lot less formal. I was much younger, more ignorant and put too much trust in the broker and surveyor.

Contracts seem to get longer with more clauses holding everyone harmless each year. I doubt I would be successful today.

 

[SteveK]

Surveyors are following the suggestions of ABYC. Is there a suggestion on how to find a painted over rust spot on a fuel tank. If you go ahead make sure ABYC is also a named participant.

 

[guy with a boat]

How did you get past the sweeping indemnity clause at the heading of all survey documents, the one that says they will do their best but no guarantees?

Peter

“His undoing in court was his lack of honesty, not his incompetence or the undisclosed condition of the boat.”

A clause that says “no guarantees” doesn’t excuse intentional misrepresentation of his work or findings, which sounds like it might have been the issue.

 

[Portage_Bay]

“His undoing in court was his lack of honesty, not his incompetence or the undisclosed condition of the boat.”



A clause that says “no guarantees” doesn’t excuse intentional misrepresentation of his work or findings, which sounds like it might have been the issue.

That is what happened and he lied about it in court. I'm reasonably sure the broker was part of the problem but no way to prove that. As I said earlier I was much younger and far too trusting.

 

[sunchaser]

Over the years TF has provided a valuable to service for those who ask "I'm thinking of buying an XX boat. What are the issues to look out for?"

It is a given that on older boats there are brand specific issues that become common watch points. Count the fuel tanks on a GB as one of these areas to spend some time on and bring to the surveyor's attention.

Better yet, do as Portage suggests and do you own serious due diligence and if in doubt as to your skills bring a smart friend along. I've helped friends and relatives on vessels up to 125' in size on pre-survey guidance basis. And I've had others help me as I became too emotionally attached to a prospective purchase.

As noted by others, "where is as is" and "seller makes no representations" language is common place in the used boat market. Has anyone ever seen "full disclosure" language in a boat sale contract?

 

[Bmarler]

Post #5 was made by an actual lawyer. Makes sense to me. If the buyer accepted the survey it doesn’t seem like there’s much that can be done. Legal fees can easily eclipse the cost of a proper tank repair or replacement.
Disappointing? Sure.
Really though, if I developed a leak in the top of a tank I’d try a patch and see if I could eke some more time out of it. A well done patch could last for many years.

It is too bad the seller went this way though, seems unnecessary really. Especially if the tank wasn’t leaking. Then it becomes a good faith effort to prevent a leak from starting.

 

[omoore]

I can tell you from experience that collecting is difficult. Litigation is a very slow and expensive process. Een if you win a judgement you still have to collect. My advice is fix the problem and enjoy the boat!

 

[Circumnavigator]

Several problems here. First, the P&S almost certainly says that the Buyer may not reply on anything the Seller says and the Buyer represents that he has not done so. That's hard to overcome.


Second, the Seller can easily claim that he thought he fixed the problem. That may or may not be true. In order to pursue a claim for fraud, the Buyer will have to prove that the Seller knew that the tank was bad. The Buyer has no way to prove what the Seller thought.


Although the deal has a Florida arbitration clause, in order to actually get the Seller, the Buyer will have to bring suit in Michigan. It might be worth going there and using the Small Claims Court if the claim is under the Michigan SCC limit which Google says is $6,500.


Jim

 

[PNK]

Arbitration on P&S....

I have been involved in several arbitration cases, although not with a boat, and my experience is that it can be expensive, and risky, because even if you “win” you may not be happy with the result, or the arbitrator may decide on a compromise that neither side is happy with.
If i were the OP it might make sense to get a written opinion from a qualified surveyor as to the tanks conditions, and an estimate for the cost of repair, or replacement.
You could try sending those to the seller with a request that he split the cost with you. He is not likely to agree, but it would be pretty simple and quick to do, as opposed to arbitration.
As several others have already posted, this may be a case of moving on, and not letting it sour you on enjoying your new boat. Best of luck,
Peter