Maritime/Non-Maritime Law on Boat Sales, Warranties & Disclaimer Requirements
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1 Julius H. Hines Maritime/Non-Maritime Law on Boat Sales, Warranties & Disclaimer Requirements K&L Gates LLP, Charleston SC Copyright 2013 by K&L Gates LLP. All rights reserved.
2 klgates.com 2
3 TYPES OF LAW State Common Law State statutory law Federal common law (maritime law) Federal statutory law klgates.com 3
4 MARITIME LAW VS. STATE LAW Maritime law governs maritime contracts Dockage, salvage, crew wages, boat fuel Not sale of vessel! Sales of vessels governed by state law UCC Article 2 sale of goods Warranties also governed by state law Federal Magnuson Moss act also applies Vessel repairs Maritime law unless per warranty klgates.com 4
5 BOAT SALE CONTRACT Buyer Seller (often dealer) Manufacturer (?) klgates.com 5
6 SELLER S WARRANTIES Non-merchant no warranty Merchant seller: Merchantability--automatic Fitness for a particular purpose E.g. I need a boat that accommodates eight people Seller must have reason to know of intended purpose Use of broker can create merchant status klgates.com 6
7 DISCLAIMER OF WARRANTIES Dealer usually wants to disclaim warranties Disclaimer must be in contract of sale Merchantability; disclaimer must Mention merchantability; and Be conspicuous Make no other written warranties klgates.com 7
8 MANUFACTURER Privity of Contract issue Privity required: North Carolina Florida Privity not required South Carolina and many other states Manufacturer liable as seller Governing law important klgates.com 8
9 COMMUNICATING MANUFACTURER S WARRANTY DISCLAIMERS Dealer should be sure to disclose manufacturer s warranty pre-contract Magnuson-Moss Act regulations Manufacturer may provide copy of the written warranty with every warranted consumer product Can t disclaim implied warranties (merchantability) But can take advantage of other limitations and disclaimers klgates.com 9
10 CONTRACT TAKEAWAY Sale contract should Disclaim all warranties on behalf of seller (dealer or broker s customer) Incorporate manufacturer s limited warranty klgates.com 10
11 ACCEPTANCE AND REJECTION Rejection goods rejected based on a nonconformity Must be done in reasonable time Seller has right to cure (within delivery time) Right to cure also in MMA Acceptance goods accepted as conforming or despite nonconformity Buyer gets reasonable opportunity to inspect Some amount of test use typically allowed for boats klgates.com 11
12 WHAT IS REJECTION? I hereby reject this boat I don t want the boat I m not happy with the boat klgates.com 12
13 REVOCATION OF ACCEPTANCE Can still occur despite valid acceptance Non-conformity must substantially impair value of boat to buyer (not just any non-conformity) Types of non-conformities: Known as of acceptance, but Buyer reasonably assumed it would be fixed ( we ll take care of that ); Unknown as of acceptance, and difficult to discover; Unknown as of acceptance, and Seller said it wasn t there. klgates.com 13
14 NOTICE OF REVOCATION No formal notice; money back request will do Must be made within reasonable time after buyer knows grounds for revocation Must be made before substantial change in condition of boat Right to cure? None in UCC but some courts have added Required for MMA lawsuit (attorney s fees) klgates.com 14
15 BUYER S REMEDIES FOR REJECTION/REVOCATION Purchase money back! But only from seller (i.e. dealer) Difference in cost of replacement boat Benefit of Bargain (MktV promised) - (MktV delivered) MktV promised is usually sale price but not every time! klgates.com 15
16 BREACH OF WARRANTY Applies to accepted goods Important notice requirement; Strict view: claim of breach Lenient view: any complaint will do Notice to who? Dealer if manufacturer says so Otherwise best to notify seller and manufacturer Component manufacturers? klgates.com 16
17 REMEDIES FOR BREACH UCC remedy: (MktV as warranted)-(mktv as accepted)=damages Exclusive remedy repair or replacement Optional unless exclusive May not fail of its own purpose No unlimited tinkering Unsuccessful tinkering may give Buyer right to revoke acceptance Buyers often seek revocation of acceptance and damages for breach klgates.com 17
18 TYPICAL WARRANTY LIMITATIONS Duration (e.g. one year) Per MMA, only allowed in a limited warranty Consequential Damages Exclusion Allowed by UCC and MMA Covers things like loss of use, storage and other out of pocket expenses Component parts (separately warranted) klgates.com 18
19
KEY WEST BOATS INC. WARRANT POLICY FOR 2010 MODEL BOATS WHAT IS COVERED: KEY WEST BOATS, INC. MANUFACTURER warrants to the retail purchase of its 2010 and later model year products, which are purchased
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