Mr. Grossmann did not know that in the Netherlands a broker is not “above the parties” but acts purely on behalf of the seller. He waived a pre-inspection – and it cost him dearly.
Many sales contracts through a broker state that the buyer only has the right to have the vessel inspected by an expert after the sale is completed. After that, there must be “material defects” where the cost of repair exceeds 10 percent of the purchase price to give the buyer the right to cancel the agreement. This case once again demonstrates the importance of having a vessel inspected prior to purchase.
Mr. Grossmann saw a brokerage ad for a polyester motor vessel built in 2005, first owner, asking price around 180,000 euros. The vessel had been ashore every season, had already received preventive osmosis treatment during construction, and was (according to the seller) in tip-top condition. Grossmann told the broker that he wanted an expert opinion before buying. To determine his negotiating position, he also asked how much the seller had originally paid for the vessel. The broker reported that the ship had cost 253,000 euros at the time and even provided an invoice. The original invoice would be part of the purchase contract, which Grossmann would receive on the day of signing. In the end, the purchase price came to 155,000 euros, with the agreement that the seller would still do some work on the ship.
In the confirmation email, Grossmann asked how things were going with the inspection he had requested. According to the broker, however, Grossmann had waived an inspection and bought the ship “as seen without an inspection.” He referred to the draft of the purchase agreement sent to Grossmann. Grossmann was surprised; he had clearly indicated in advance that he wanted an appraisal before the purchase was finalized.
The broker, however, insisted that Grossmann had forfeited this right. Grossmann is a German citizen and thought he could trust that if a broker was brokering and indicating membership in various trade associations, he had the integrity to inform both parties of their rights in a balanced manner. And based on the earlier announcement that the vessel had been ashore every season, had always been meticulously maintained and was in tip-top condition, Grossmann left this matter as it was. Naively, it seems.
It was only during the sea trial, two weeks after the day the contract was signed, that Grossmann received the original invoices. To his surprise, it turned out that the seller had not paid 253,000 euros in 2005, but only 200,000 euros!
To make matters worse, when the ship was taken out of the water, it turned out that the hull was badly damaged. An expert called in determined that the ship had been seriously affected by osmosis. This had to be caused during construction, given the condition the ship was in. A rather unique situation. However, according to the seller, the ship had undergone preventive osmosis treatment. How then could the ship have osmosis?
As Mr. Grossmann’s lawyer, I wrote to the other party. The latter explained that the osmosis could have occurred a year and a half ago and that he could not have known about it because the ship had not been out of the water during the 2009/2010 season. According to the ad, the ship had really been out of the water every year! There, too, the seller had not told the truth. Through the seller’s lawyer, the broker then claimed that Grossmann had expressly agreed with him that he had waived the appraisal! When asked, Grossmann could not answer otherwise, that he had never intended to waive the appraisal, but that he assumed that he was no longer entitled to it because the broker had told him so.
He could have initiated a lawsuit because it turned out that the seller had not been very truthful and that the broker was not clean either.
However, under Dutch law, the broker is only a messenger and does not become a party to an agreement. He can therefore not be held liable for the information he provides.
For cost-benefit considerations, Grossmann refrained from taking legal action. The parties agreed on a settlement, in which Grossmann had to state in retrospect that he had to consider his damage as “apprenticeship money”!
TIP: Note that when selling through the middleman, contracts are almost always used that exclude a right to a retroactive audit. However, this is not a legal right of a seller or broker. Only an inspection up front will give you peace of mind about what you are buying! Insist on the right to have an inspection done before you buy! Don’t be lulled and always check what a broker says when selling a vessel. Only the seller himself can make binding statements to you.
Specialized in legal issues around water sports: Frits Hommersom
You can reach Frits Hommersom, who is fluent in English and German, at www.hommersomadvocatuur.nl.