For a variety of reasons, beneficial owners often trade “up” or trade “down” their vessels.
It’s the nature of the industry, whether the vessel is for personal use or for charter hire. Once survey and sea trial have been completed and acceptance of the vessel has been tendered by the Seller to the Buyer, it is standard industry practice that a closing date is scheduled.
Beneficial owners of vessels are usually not available to attend a formal closing. A common practice is for the beneficial owner to sign and date a Bill of Sale in advance of closing and—PERHAPS—an Acceptance of Vessel is signed by a Buyer’s representative at the closing table.
But here is the question; when was the exact time and date of delivery of the vessel?
Surely the Buyer does not own the vessel until the Seller has confirmed in writing receipt of funds in full. It is imperative to document the EXACT time and date delivery of your vessel occurred.
The document that should be agreed in advance and signed by both parties at the closing table is called a Protocol of Delivery and Acceptance. This document is a protection for both parties.
Case in Point: The Buyer and the Seller’s representatives are sitting at the closing table exchanging documents. Buyer’s representative confirms he is happy with his documents and instructs a wire to be sent to the Seller. As the Buyer and Seller’s representatives are sitting at the closing table, the vessel (which is docked at the Seller’s marina) is struck by another vessel. There is extensive damage to the vessel, causing the vessel to sink. Buyer and Seller’s representatives are sitting at a closing table miles away from the vessel. The sinking is not reported to the parties until hours after the closing has concluded.
Exactly who owned the vessel when the accident occurred? Whose insurance company should the accident be reported to? If you don’t have a signed, sealed and delivered Protocol of Delivery and Acceptance, it’s anyone’s guess.
Guessing is not part of a proper closing.
ALWAYS ensure a Protocol of Delivery and Acceptance is executed at closing with the exact date and time. Accidents do happen. Protect yourself. Hire a competent closing representative.
Gail Wasserman is Senior Director of Ashmead & White Consulting, Inc., a maritime and aviation solutions company based in the Virgin Islands. Previously, Gail was Director of Paralegal Services in a law firm based in South Florida which served these industries.