THE FINE PRINT

There are times when a boat owner owes a bro­ker a com­mis­sion af­ter a list­ing agree­ment has ex­pired

Marlin - - CONTENTS | DEPARTMENTS - BY R ALEIGH P. WAT­SON, ESQ.

Un­for­tu­nately, many sell­ers do not closely read their bro­ker­age list­ing agree­ments. How­ever, there are hid­den terms in all agree­ments that ves­sel own­ers should un­der­stand. One such term in­volves the le­gal obli­ga­tion to pay a com­mis­sion af­ter a list­ing agree­ment has ex­pired or been ter­mi­nated.

PROCUR­ING CAUSE DOC­TRINE

The procur­ing cause doc­trine is a le­gal the­ory based on the prin­ci­ple of good faith and spec­i­fies that a bro­ker de­serves a com­mis­sion if he ini­ti­ates ne­go­ti­a­tions be­tween a buyer and seller through some af­fir­ma­tive act, even if the sale oc­curs af­ter a list­ing agree­ment is ter­mi­nated. Most list­ing con­tracts used to­day are “ex­clu­sive right to sell agree­ments.” In other words, the owner gives the ex­clu­sive right and au­thor­ity to one bro­ker­age to man­age the sale of their ves­sel. Un­der such an agree­ment, the procur­ing cause doc­trine is typ­i­cally in­ap­pli­ca­ble and nor­mal rules of con­tract in­ter­pre­ta­tion ap­ply. Hence, the terms of the list­ing agree­ment gov­ern, in­clud­ing when a com­mis­sion is owed.

LOOK FOR THE LAN­GUAGE

Through most list­ing agree­ments, a com­mis­sion must be paid to the bro­ker even af­ter the con­tract is ter­mi­nated if the ves­sel is sub­se­quently sold to an in­di­vid­ual to whom the ves­sel was pre­vi­ously shown dur­ing the term of the con­tract. Nor­mally, the para­graph is not clearly la­beled. Some­times it will be ti­tled “Other Sit­u­a­tions,” and other times it may not be iden­ti­fied at all. To be fair, this type of lan­guage is not re­stricted to yacht bro­ker­age, and the pub­lic pol­icy be­hind it makes sense. Own­ers should not be able to ter­mi­nate a list­ing agree­ment and im­me­di­ately sell a ves­sel to some­one a bro­ker brought to them with­out pay­ing a com­mis­sion.

THE TERMS SHOULD BE CLEAR

Un­for­tu­nately, the lan­guage in most list­ing agree­ments lacks speci­ficity and of­ten­times fa­vors the bro­ker­age. The rel­a­tive time frames should be clear, what af­fir­ma­tive ac­tion the bro­ker must take to trig­ger that par­tic­u­lar clause should be un­am­bigu­ous, and the bur­den to share rel­e­vant in­for­ma­tion should be log­i­cal and fair. For ex­am­ple, should a bro­ker be owed a com­mis­sion if he spoke to a po­ten­tial buyer one time when the boat was listed but the owner sold it to that same per­son six months af­ter the list­ing ex­pired with­out ever know­ing the bro­ker showed it to that in­di­vid­ual in the first

place? It prob­a­bly de­pends on who you ask. That can be a tricky sit­u­a­tion if the lan­guage is vague.

A FEW POINT­ERS

Some small ad­just­ments in the lan­guage can make a big dif­fer­ence. To be­gin with, a seller should en­sure the bro­ker is re­quired to “phys­i­cally show” and/or “sub­stan­tially present” the ves­sel dur­ing the term of the list­ing. Many agree­ments sim­ply re­quire a boat to be “sub­mit­ted” or “in­tro­duced” by the bro­ker­age. Those words are too am­bigu­ous in this con­text. Se­condly, the time frame should be clear and rea­son­able. Most list­ing agree­ments al­low for six to 12 months af­ter the list­ing has ex­pired or been ter­mi­nated, but any­thing longer is prob­a­bly un­fair to the owner.

Thirdly, and per­haps most im­por­tant, the bur­den should be on the bro­ker to pro­vide a list of names to the owner af­ter the con­tract has ex­pired. Most list­ing agree­ments will either fail to re­quire a list of per­sons to whom the ves­sel was phys­i­cally shown or put the bur­den on the owner to re­quest such a list. Ide­ally, the bro­ker is re­quired to pro­vide the owner a list within 10 to 15 days af­ter ter­mi­na­tion of the list­ing agree­ment. Hence, the owner should not be ob­li­gated to pay a com­mis­sion to that bro­ker on a sub­se­quent sale if such a list is not pro­vided. In my opin­ion, this is a more log­i­cal way to han­dle the process, and fairer to the owner and any sub­se­quent bro­kers.

WHAT CAN HAP­PEN

I have per­son­ally seen sit­u­a­tions where an owner has been caught ow­ing a com­mis­sion to two dif­fer­ent list­ing bro­ker­ages. The first bro­ker ini­tially showed the buyer the ves­sel, but the list­ing agree­ment was ter­mi­nated shortly there­after. The owner listed the boat with an­other bro­ker­age, which be­gan ne­go­ti­a­tions with the same buyer a few months later and even­tu­ally sold the boat. The se­cond bro­ker as­sumed it was fine to pro­ceed as nor­mal be­cause the owner never re­quested or pro­vided a list of per­sons from the pre­vi­ous bro­ker in ac­cor­dance with the ini­tial list­ing agree­ment. Of course, there is cer­tainly blame to go around in that sce­nario, but the owner signed the con­tract and the terms were not in his fa­vor.

To be clear, bro­kers are ex­tremely im­por­tant tools for sell­ers. Re­gard­less, I strongly rec­om­mend ev­ery owner to read their list­ing agree­ment and hire a mar­itime trans­ac­tion at­tor­ney to re­view the terms if it makes them feel more com­fort­able. It is cru­cial the owner and bro­kers un­der­stand the rel­e­vant terms so all par­ties are pro­tected.

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