Agency Agreement: what are the keystones?

• Yachting

The main prerequisite for occurrence and performance of yacht sale & purchase agreements is to find the buyer or the yacht with desired specifications. It is a competence of yacht brokers, whose professional activity involves mediation in yacht sale & purchase.

It should be noted that most of the agreements between yacht buyers and sellers in the Mediterranean region take place with yacht brokers involved.

In order to regulate legal relations between the Broker and the Customer, there is a separate form of contract – Agency/Brokerage Agreement. In vast majority of such agreements, the Customer acts as the Seller, i.e. the yacht owner. Brokerage Agreements are usually templated and based on a proforma developed by MYBA (Mediterranean Yacht Broker’s Association).

Brokers often use their own templates adapted to them and their vision of the procedure for rendering services. Therefore, Brokerage Agreements are not always balanced in view of scope of the Seller’s rights and the Broker’s liabilities. It is important to secure that essential terms of the Agreement should conform with interests of the Customer, i.e. the yacht owner.

Based on our experience, before signing Agency Agreement, special attention should be drawn to the following:

1. Validity term and procedure for premature cancellation

Clients quite often applied to us for termination of Agency Agreements that had neither validity term nor even termination procedure. In such case, we chose the option to sign supplementary agreement on termination of the principal one. Since it was only possible by mutual agreement with the yacht broker, we achieved the result through negotiations and new agreements.

2. Commission fee payment terms

Brokerage Agreements may contain terms upon brokerage fee payment in favor the broker even if the yacht buyer is engaged in transaction without the broker involved. Therefore, if you want to contribute to the search for buyers on your own, you should agree on your vision with the broker.

3. Settlements

For avoidance of potential disputes, we recommend you to agree in advance and to fix the following aspects:

- broker’s fee amount;

- payment procedure;

- procedure for arranging yacht advertising and marketing.

A separate vital issue is the need to change the yacht price offered to potential buyers. The agreement should stipulate procedure for approval of such amendment, being understandable to the owner.

4. The Buyer’s consent

Although the objective result of yacht broker’s work is to find a potential buyer, the yacht owner shall make a final decision upon the sale. One shall bear in mind that it is the owner’s right, not an obligation.

5. Access to the yacht

For avoidance of inconvenience when using the yacht for sale by the owner and his/her guests, we recommend you fix in the agreement procedure for arranging the date and procedure for visiting the yacht by potential buyers.

One more crucial aspect is due diligence of the yacht broker itself, in particular, if you are not familiar with the broker’s company and if the broker itself takes the initiative to render services upon your yacht sale and offers you to enter into Brokerage Agreement.

While preparing for the yacht sale, it is important to protect your own interests at each stage of the sale. One should not neglect preparatory stages, including in the process of arranging terms of yacht broker’s engagement.

If you are planning to enter into Agency Agreement, please do not hesitate Interlegal yachting lawyers for professional advice, examination of the agreement and support of negotiations with yacht broker.

Valeriia Fetysenko

fetysenko@interlegal.com.ua