Bedazzled by what are perceived as bargain basement prices, increasing numbers of private purchasers are turning online for new and second-hand vessels in the USA and other enticing countries as a result of a strong Aussie dollar. But along with this new found freedom of expanded marine markets has come a litany of consumer problems, as unsuspecting purchasers throw caution and “buyer beware” principles to the wind. The reality in respect to these international purchases is that greater care and prudence needs to be taken as highlighted in our two scenarios; the first based around issues in contract and second highlighting the limitations and benefits of Australian consumer protection laws.
Most contracts between parties in different countries or states include jurisdictional clauses that limit legal action to a single state or jurisdiction. These clauses, more often than not preference the vendor and make legal action by the purchaser in their preferred jurisdiction extremely difficult if not impossible.
The effect of the jurisdictional clause is highlighted even more when viewed against the background of a complex weave of shipping agreements, a storm our client found himself having to weather prior to getting legal advice. Naively, signing an agreement with the shipper which included the jurisdictional clause that all legal action was to be taken in the State of California, the agreement also included a term stating that the yacht would be delivered ex-Newcastle, Australia. Unfortunately, the reality was very different as the shipper had no intention of delivering the vessel to Newcastle as he had previously entered another agreement with the charter party of the ship to deliver the vessel to Sydney. And to make things worse, against the written instruction of our client, the mast was shipped separately to the yacht. The logistical nightmare that this scenario caused for our client became apparent as he realised he would have to; deal with two separate parties in Australia when discharging both the yacht and mast from the ships; need two separate trucks to transport both the yacht and mast to Newcastle as the ships would arrive at different times; and incur double the costs in this process.
When our client had contacted us to see what legal recourse he had against the shipper, it was precisely when final payment was due to the shipper as the yacht and mast were already in transit. The legal reality for our client was, while the shipper may have breached the agreement, this first agreement was completely separate to a second agreement between the shipper and charter party, who’s only concern, would be that the yacht and mast be discharged in a timely manner. The result was that our client was forced to pay the shipper the balance owing in order to gain access to the two Bills of Lading, being evidence of ownership. Armed with these Bills, the yacht and eventually mast were discharged at Sydney for trucking to Newcastle. After the storm clouds had cleared and our advice considered, on balance it was decided not to pursue the shipper due to the cost and impediments created by the jurisdictional clause that limited all legal actions to the State of California.
The buyer beware principle was no less evident in the purchase of a privately-owned and sold, second-hand 50-foot luxury cruiser from the US, advertised online at a bargain basement price. While the new owner walked away from the deal feeling pretty happy with his purchase, once the cruiser was down-under, his glee soon turned to gloom. The reality was that he had no legal recourse available due to the private nature of the sale highlighting the importance of understanding what consumer protection is and is not available.
While, the purchaser appeared to do everything humanly possible to ensure the purchase and delivery were successful by flying to the USA; speaking to the vessel’s owner; organising a survey and taking the cruiser for sea trials; the purchaser was not aware of his legal exposure due to the private nature of the deal. Several weeks later the vessel appeared to arrive intact and was craned into the water. Yet when the engines were started and the throttle set to full forward, the engine roar couldn’t hide the fact that the cruiser remained stubbornly stationary. The owner was understandably crushed by this turn of events and his bargain boat had to be towed to the slipway for inspection. An expert immediately identified the problem; sometime between the test drive in the States and the arrival of the cruiser in Sydney, both 5 bladed twin propellers had been switched with propellers that had fewer blades, were smaller and thus completely ineffectual. The owner, now unable to pursue the US seller was also not aware of any other persons who may have had access to the vessel and would have to fork out over $30,000 to get the vessel going again.
The main difficulty that confronted the cruiser owner in taking legal action was that he was the importer of the vessel limiting any potential recourse to the party who removed the propellers, a task almost impossible to prove, as the props could have been changed at any time between sea trials and Sydney. A further sting in the tail came when it was realised that the shipping insurance was limited to loss while the vessel was being shipped.
However, should the purchaser of the vessel have used an Australian broker, whether online or face-to-face, the transaction would have been governed by the Australian Consumer Law (ACL). This far-reaching legislation, which replaced the Trade Practices Act last year, contains a variety of consumer protections in the form of implied warranties of sale. The implied warranties are conditions that can be reasonably assumed, by the purchaser, to exist within the vessel being; fit for the purpose it was to be used. In our purchasers case it could be argued that the cruiser, to be fit for purpose, should have been able to, at the very least, move forward at a safe navigating speed and reach planning speeds for what it was designed. Further, it could also be argued that the cruiser was not delivered in a state of acceptable quality, as the vessel was unable to move forward and safely navigate a sea-way for which it was designed. Of particular importance, to a purchaser for online purchasing, is whether vessel matches the description provided. The problem for our purchaser was that his purchase was a private sale and the principle Caveat Emptor – “as is” would apply. However, a description describing the look and ability of a vessel to reach planning speeds would have in this case made legal recourse against a broker more probable than not.
While the lure of purchasing a vessel cheaply overseas may be tantalising the after taste left can be extremely sour when “cheapness” becomes the overriding principle. The point being that whether purchasing in the USA or any other country, a successful purchase should be fully considered and planned to include professional assistance. And while sum may say these costs make the purchase less attractive, the cost to rectify a failed transaction far outweighs any benefit that may have been gained. The reality is that when purchasing a vessel overseas a purchaser must be even more vigilant, while legally there may be a right of recourse, the practical realities of cost may be such an impediment to prohibit such action.