Mr. De Vries buys a boat that is more than 10 years old. He omits an inspection and within a year it appears that the underwater hull has suffered severely from osmosis. It is unlikely to have occurred in the year he owned the boat. What are the rights of Mr. De Vries towards the seller?
Undoubtedly you all know the feeling: you see a boat in the harbour, it is for sale and you are instantly ‘sold’. This is really the boat you always wanted and meets all your dreams. You enter into negotiations with the seller who reports nothing negative about the ship and you pay a considerable price, but later it appears that the ship has serious defects. This is a problem that unfortunately occurs all too often in my practice: defects that were not known at the conclusion of the agreement, at least not to the buyer. We are talking about so-called ‘hidden defects’. The law says that in case of purchase the purchased must comply with the agreement. The boat must, as it is called, have the qualities that you as a buyer could expect on the basis of the agreement. The boat must also have the properties that enable normal use. The law does not say exactly what you may expect and what you may not expect, nor does it say what the normal use is or what the properties are that you as a buyer do not need to doubt.
It is important to note that both buyer and seller have obligations when entering into an agreement. The seller has a so-called duty to inform and the buyer in turn has a so-called duty to investigate. An interesting question is of course which duty weighs heavier. It is important to know that the extent of the buyer’s investigative obligation is limited by the information provided by the seller and on what accuracy the buyer may rely. Furthermore, if the seller should have provided certain information, he cannot rely afterwards on the fact that the buyer did not investigate the matter sufficiently. In short: the more extensively you as a buyer question the seller about the condition of the ship and the more extensively you have informed the seller about what you expect from the ship and what the arguments are for you to buy the ship, the harder it is for the seller to reproach you afterwards that you have done insufficient research. The judge will in such a case give a heavier role to the duty that the seller had to adequately inform you.
The law states that if the seller does not deliver what the buyer could expect under the contract, there is a shortcoming on the part of the seller. The law further states that any shortcoming justifies dissolution of the contract. However, the next paragraph of this Article immediately provides that if the shortcoming is too minor, dissolution is not justified. It will therefore always have to be determined on the basis of the circumstances whether the seller’s shortcoming or the defect is of such a serious nature that full dissolution of the contract is justified. In all this it is true that prior to dissolution of course first of all the buyer can claim adequate performance from the seller if the defect can still be repaired. This means that the buyer gives the seller the opportunity to repair the defect within a reasonable period of time. If the seller does not make use of this opportunity or if the defect or shortcoming can no longer be remedied, only then can dissolution be considered. In the case of complete termination of the contract, where the shortcoming can be attributed to the seller, you can also claim compensation, for example for all the costs you have already incurred. If the purchase price has already been paid, it must be repaid to the buyer, with or without interest and the buyer must deliver the vessel back to the seller. To what extent there is culpability of the shortcoming, it is then determined whether and what damages should be paid to the buyer. If total dissolution is not justified because the extent of the failure does not justify this, the buyer can also choose to partially dissolve the contract, which leads to a reduction of the purchase price. This can play a role, for example, if the defect can no longer be repaired, but the buyer is still happy to maintain the contract for whatever reason.
Wronged to the extreme…
In addition to rescission, the law has given another option to the buyer to get rid of the contract and that is annulment. One of the grounds for invoking the voidability of a contract is the concept of ‘error’: a misrepresentation of the facts. Here you, the buyer, will have to prove that you would not have entered into a contract (at least not under the same conditions) if you had known the correct state of affairs. This error may have been due to the other party’s information or precisely because the other party breached its duty to inform where it had a duty to speak. The annulment of the contract can also be pronounced if it appears that both parties started from the same incorrect assumption. In the case of a car this may be an incorrect odometer reading; in the case of a ship, for example, it may be that the ship has a much older engine than both parties thought. This incorrect assumption is pre-eminently what arises in the problem of hidden defects. Also in the case of error, the choice can be made not to have the contract annulled, but to ask the court to change the consequences in such a way that the disadvantage of the buyer is removed. In all this, it applies that you as a buyer should not wait too long to complain to the seller. The law uses the term ‘within a reasonable time’ for this. In contracts between a professional trader and a private individual, the so-called consumer purchase, you have two months after discovery to report the defect to the seller. After reporting your complaint to the seller, you must have started legal proceedings within two years, otherwise your rights are time-barred.
The conclusion is therefore that you as a buyer are not completely powerless when confronted with a defective vessel, but that your legal position can be greatly improved if, in the context of your duty of investigation, you have the vessel investigated by a recognised surveyor beforehand.
Beware of the broker
Incidentally, you should be aware that if you buy a ship through a broker, he or she will often already have you sign a purchase contract which includes the provision that the contract can possibly be dissolved on the basis of the results of an expert’s report afterwards. I strongly advise you against signing such contracts! It is much better to negotiate with the other party if you have the vessel surveyed beforehand. In particular, I sometimes come across clauses in contracts stating that the purchase can be dissolved if the survey shows that the repair costs, for example, are more than 10% of the purchase price. This kind of provision is asking for trouble: now one must always interpret what the defect actually is and especially what the repair costs will be. A contract in which liability for hidden defects is excluded is, of course, completely out of the question. In addition, it is also practically advisable to negotiate and consult directly with the seller. An intermediary knows nothing of the actual condition of the boat and can then usually not be held liable for the fact that he did not report certain circumstances. The seller will then be able to hide behind the broker and say that he did not create any expectation or did not conceal any communication. In this case, you run the risk of being “sent from pillar to post”. A practical solution is for example that you agree with the seller that you have the ship inspected at your own expense and if you decide not to buy the ship on the basis of this outcome, the costs are borne by the seller. This can in any case add the report to the administration of the ship. He may not want to know this but the result of such a report can in any case help to avoid that this seller later on gets a claim from another buyer who claims that the seller did not fully inform him.
Finally: How did it end with Mr. De Vries? He instituted proceedings and was able to prove that the osmosis already existed at the time he bought his ship. However, he could not prove that the seller must have known about the defect, so the court did not completely vindicate him. It was also held against him that he had not had the vessel inspected, although the age should have given him cause to do so. Both parties ultimately had to bear half of the damages and each pay the costs of the proceedings.
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