The Yacht Law Podcast
The Yacht Law Podcast answers your legal questions about buying, selling, and owning superyachts; working aboard them; and more. Hosted by maritime attorney Michael Moore and yachting journalist Diane Byrne, each episode provides insight into how to better navigate the luxury yachting lifestyle. While we discuss common legal issues, the information shared is not intended as legal advice or as a substitute for the personalized advice of your own attorney. Consider The Yacht Law Podcast as a starting point to better educate yourself about the superyacht world.
The Yacht Law Podcast
Who Keeps Your Money? Understanding MYBA vs. IYBA Yacht Contracts
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Yacht deposit disputes are heating up in an industry already feeling the pressure of tariff uncertainties. Michael Moore and Diane Byrne dive into the complex world of deposit recovery, exploring why more buyers are suddenly concerned about getting their money back when yacht deals fall through.
The conversation reveals a stark contrast between two industry-standard contracts: the Mediterranean Yacht Brokers Association (MYBA) and International Yacht Brokers Association (IYBA). While IYBA offers what Moore calls an "easy in, easy out" approach, allowing buyers to reclaim deposits relatively painlessly, the MYBA contract creates significant hurdles through ambiguous terminology like "operational integrity" – a phrase that has launched expensive legal battles, with no clear definition in maritime law.
Perhaps most eyebrow-raising is the standard practice of having selling brokers hold substantial deposits while maintaining a direct financial interest in the transaction's outcome. Unlike other industries that employ neutral third-party escrow agents, yacht brokers face inherent conflicts when disputes arise. As Moore warns: "You're sending a million dollars to someone that you've never met, that are in another country... and you're playing with fire if you don't really have an understanding of who's going to be holding these soft and substantial funds."
For anyone considering a yacht purchase, especially during uncertain economic times, understanding these contract nuances becomes essential protection. Whether dealing with a $200,000 boat or a $20-million superyacht, the fundamental principles remain the same: The devil truly is in the details, and those details can either safeguard or jeopardize your deposit when yacht dreams hit rough waters.
Have a yacht law question? Email it to info@megayachtnews.com or michael@moore-and-co.com for your chance to have it answered on our podcast. All requests for confidentiality and/or anonymity are respected.
Hiring a lawyer is a big decision. Visit Moore & Company for the legal team's qualifications and experience. And, to learn the latest about superyacht launches, shipyards, designs, and destinations, visit Megayacht News.
Welcome everyone. Michael, when we were talking the other day, you mentioned that discussions about getting a yacht deposit back have been coming up a lot lately. Now it's obviously a perennial subject to a certain degree, because we are always seeing new people coming into the yachting industry first-time buyers, for example. They don't always read the contracts, they're not familiar with the contracts, so clearly there are going to be some questions. But I'm wondering if there's something else going on right now. I've heard a couple of stories about some yacht buyers being a bit, shall we say, nervous, maybe even very worried because of the on-again, off-again tariffs. Perhaps it's coincidence that some of the chatter is coming up about that. Are you hearing anything along those lines?
Michael Moore:Definitely hearing quite a bit about tariffs and concerns from buyers who are worried that the tariff situation may sink the foreign yard or may cause disruption of some sort in the foreign yard, getting more inquiries where people are looking at the specific terms of what the manufacturer and seller are responsible for and what is the scope of the clause that effectively has to do with the importation of the yacht. But, yeah, it's totally related to the tariffs because, as you I'm sure know, tariffs are added to duty. They're kind of discussed interchangeably, but they aren't really interchangeable. They're really two different concepts and so, yeah, it's a big deal in the yacht world right now as to what's going on. Coincidentally, I'm not sure if you're aware, but I was interviewed only last week about tariffs by the New York Post.
Diane M. Byrne:I did see that. Yes, that was a good article actually.
Michael Moore:Caught me a little bit off guard and a little bit unprepared, but I did my best and it was amazing we posted that and got 3,000 impressions, which is interesting that 3,000 people would have a look, right, definitely.
Diane M. Byrne:Well, you know, the tariffs are obviously a pretty hot topic. I think, if the industry is honest, people thought that this would be a pretty smooth couple of months and maybe even a smooth year for yacht sales, and you know, tariffs have a way of throwing monkey wrenches into things.
Michael Moore:Yep, it's a cost, it's a tax, it is a tax for sure. Yeah, it's the cost, it's the tax, it is the 5% for sure.
Diane M. Byrne:And I think there's a misimpression too that among some people not in yachting, but among some people who are not familiar with yachting that say, a 10% tariff on a $20 million yacht, okay, that's $2 million. If somebody can afford a $20 million yacht, then they can afford the extra two million. Well, certainly you can argue that they could, but can and want to are two completely different things.
Michael Moore:Yeah, it doesn't work that way, not horrible no, I mean exactly people.
Michael Moore:That are they. They they are wealthy, that's for sure. We depend on them in the yacht world, but they still live a life of fairness and they want to get what they pay for. People tend to make purchases like these luxury items at the sort of pressure of their net worth. In other words, if they're worth $20 million, maybe they're buying a $200,000 boat, but if they're worth $200 million, maybe it's a $20 million boat. There is a relationship, but it's all linked up to the same kind of balances checks and balances, if you will, regarding their life and their net worth. There's a little bit of concern in terms of am I spending too much?
Michael Moore:One of my all-time favorite stories was this guy that had the largest apartment in Manhattan and a beautiful yacht and beautiful house on Fisher Island. By all accounts, he had just a memorabilia collection that was probably the excess of most people's net worth. But when he saw the art collection of a client who I brought him to a cocktail party and he saw the art collection on the wall, he said now, this is real money. I thought it was. I told him. I said that's the funniest thing I've ever heard. And he said why. It's true. I said well, you know, you're just doing what everyone does. You're comparing yourself to, you know, the other guy. It just makes me laugh because you are inherently funny like that.
Diane M. Byrne:Right right.
Michael Moore:Yeah, this is real money. I'm thinking yeah, your house in New York is $75 million, the highest unit in New York. Yeah, and that's not real money, not exactly real money, yeah.
Diane M. Byrne:Well, whether somebody is talking about a $75 million, as the French like to say, or a $75 million yacht. Definitely, money is money. At the end of the day, you don't want to have to spend more than what you anticipate.
Diane M. Byrne:So, when it comes to these deposits, why don't we dive into some of the details with how the industry operates? Is that there are industry standard contracts? As usual, of course, the devil is in the details. It's which contract you're using. What's the differences, what are the nuances of those contracts? So why don't we jump into?
Michael Moore:those.
Diane M. Byrne:We've got MYBA and IYBA. And in an industry that is full of acronyms, we've got two more. So MYBA being the Mediterranean Yacht Brokers Association, IYBA being the International Yacht Brokers Association. They sound very similar. They certainly represent similar groups, but there are absolutely differences on the regions that they focus on. So why don't you kind of give us the overview?
Michael Moore:So I think that the 30,000 foot vantage point would be that, yeah, we have industry standard contracts. We may be entering the advent of a new era of non-standard contracts. Overall, what you have are, principally, the brokers drive the train to some extent at the very beginning, between the sellers and the buyers. The brokers are in the middle, of course, and of course their mission is to, in the case of the seller, to sell a boat, and the mission for the buyer is, course, to buy a boat. But I think that what is happening with respect to these two forms that we're going to touch on is, I've never seen quite as much related problems, things that are related to these two forms, um, where, just almost overnight it seems, people are questioning and asking more and more, raising more and more issues. But let's just start with the basics. These are forms that are very life-easy. They have specific requirements, but fundamentally, the IYBA form is what I call an easy in easy out form, whereas the MYBA is anything but that. IYBA is a kind of a classically American approach to things, like if you don't want this boat, we have another one we'll sell you, and they kind of want the experience of the buyer to be pleasant.
Michael Moore:Now the Mediterranean Yacht Brokers form. It reflects in my mind a little bit more of a European idea. The Europeans generally like to see contracts before the contracts before the contracts. What I mean by that is they love letters of intent. Well, letters of intent are generally not enforceable. They're just what they say, they're letters of intent. But the other thing is the orientation from the Mediterranean point of view.
Michael Moore:As generally as I understand it, or as I see it and I've experienced it, is that if you put us through the trouble of going through the process of signing even the form, we are going to make it difficult for you to walk away. Okay, now the one thing that I would say under the IYBA form that I think I've seen that's a little bit upsetting is if you sign the agreement, these are all illusory contracts. These are contracts where you say if X, y and Z, or usually just X and Y, occurs, you will still have this option of making this document enforceable, and that is usually very succinctly stated C, trial and survey. If you go through C, trial and survey, you then have a time in which to accept the vessel. And if you don't accept the vessel under the IYBA form generally speaking, not always. All these forms can be a little bit dangerous so you have to read them. But generally speaking, the form is written initially anyway that if you don't accept by the time of the acceptance of vessel date, you are deemed to have rejected the vessel and you walk away. You get your deposit back If you accept the vessel. The deposit then is said to be hard or said to have gone hard and you will not get your deposit back. Your deposit is at risk and you're going to go through closing. The deposit becomes part of the purchase price and but but once the buyer accepts the vessel, at that point the contract is hard and enforceable. And I and I will say this, I think that generally speaking and I can't I've been practicing too long to say 100 of the time time, but the vast number of times under the IYBA contract, if the buyer rejects the vessel, either by the operation of the contract automatically or by literally saying I reject, he gets his deposit back. Now, on the MYBA side of things and I'm going to go back and forth on other examples, but the MYBA contract basically says that if you place your deposit, now you're into the survey, let's just go right to the survey. Forget about the differentiation between sea trial and survey, because you're still going to end up with the same problem and that is there are actually two standards, that if someone wants to hold your deposit, they have a much better chance of doing that under the MYBA contract.
Michael Moore:The first question is so you go through your survey and then you reject the vessel. Well, now you're into contract interpretation. The first question is did you reject it based on the opinion of qualified marine surveyors? Well, notwithstanding one's argument that it might be argued and it should be argued that the marine surveyor defined in that contract as someone who makes their living surveying vessels, you would assume that if that party rejected the vessel it would be over. But that's not the case. I have actually seen and I actually have a case in the office that has to do with the idea that the marine surveyors were not qualified marine surveyors. And so that's your first point of contention Is it sufficient for the buyer to say they are appointing qualified marine surveyors, or is the interpretation of whether the parties the surveyors appointed were in fact qualified marine surveyors. So that is the point of conflict. When the seller's attorney in this case predictably European, representing a predictable German seller says we don't accept that. They're true marine surveyors, now that's a lawsuit. That's an arbitration under the MYBA contract. You're going to be in London arbitrating. That's an arbitration under the MYBA contract. You're going to be in London arbitrating.
Michael Moore:Usually that fight comes up under two words that appear in the MYBA contract that I would just simply summarize as operational integrity. I don't believe there's anybody on this earth that knows what quote operational integrity means. So I think there are probably a lot of people who believe they know and they have different views as to what that means. But as far as a well-developed definition of operational integrity, you're not going to find that anywhere. Okay, you're not going to find that in the case law and you're not going to find that in the London Maritime Arbitration Association Rules or rulings. You will just simply have to figure it out and you're going to have a very expensive lesson for finding out what those words mean.
Michael Moore:For example, do you believe that operational integrity only has to do with the forward movement of the yacht and is it sea-worthy? Is it synonymous with sea-worthiness that in itself. There have been volumes written in cases tried over the word sea-worthiness. Is it sea-worthy? Is it not sea-worthy?
Michael Moore:But operational integrity if you have a vessel that does not have an adequate pumping out system and therefore is in violation of the law in terms of the handling of waste on board the boat, is that a? Do they fail the operational integrity test? What if the engines are not compliant with the EPA laws of the United States of America and your buyer's, an American, presumed to be using the boat in America. Would that be a failure of operational integrity? So going into the issue counts as a quote-unquote defect. In other words, is it a defect that your pumping out stations are not adequate, or your battery holding power systems are not adequate, or the fact that your engines will never be allowed in the United States? Is that a defect? So it's really the MYBA contract. I would maintain this as a lawyer's friend only in the sense that if you're a litigator, a lawyer as a litigator.
Diane M. Byrne:That sounds pretty challenging, to say the least. I think most people, if they heard the term operational integrity, they would take it to mean something pretty straightforward, pretty obvious like the yacht isn't operating properly.
Michael Moore:It's unsafe, it's unseaworthy. It's kind of a common sense Operating means operating, it is not operating. The engines die off, for example. Right yeah.
Diane M. Byrne:And then on the IYBA side, I like the phrase you use, actually the easy in, easy out, because in looking at some of the details of what IYBA has in their contracts I thought, well, that sounds pretty straightforward. Yeah, like giving a buyer the ability to reject, whether it's pre-survey, post-survey, as long as it's by the accept or reject date spelled out in the contract.
Michael Moore:Exactly. That makes perfect sense because the contract talks about it. Do I actually have to go through a sea trial and go through a survey before the clause that says accept or reject by this date? Or can you just reject? Because what happens in people's lives is, you know, basically stuff happens A spouse dies or people have an unexpected health crisis At some point.
Michael Moore:In all of these scenarios, somebody is holding a ton of money. That's something that I think a lot of lawyers are now querying with the seller and the seller's side of the table to say, look, if we reject the vessel now, will that be an issue for you? Or do we? Do you want us to go through the formality of a sea trial and survey?
Michael Moore:One of the real things that I'm sensing, diane, is and this is kind of a you know more in company type snapshot but at the end of the day, whether it was under the IYBA contract or the MYBA contract, somebody is holding your money, the buyer's money, and now you get into the question of how is it that it's become standard in the industry, both IYBA and MYBA, that the selling broker most of the time is the party holding the money, and is that an inherent conflict of interest that you kind of experience? And every brokerage house in the world is now implicated and do they understand the true implications of one side or the other saying I get the deposit and for the first time it's become very evident to anyone that the broker is financially involved. They have a financial interest in the outcome. They either have a financial interest in closing, going forward and closing at all costs, in which case they make their full commission, or do we have a situation where the deposit is forfeit and they make half their commission?
Diane M. Byrne:generally speaking, so it's not an escrow situation the way that you would see, say with real estate and other purchases.
Michael Moore:Correct. I think that all over the world the aviation industry is a classic example that all around Oak City, which is where the Federal Aviation Administration is based Oklahoma City, oklahoma there is an entire industry of people that hold deposits. They are escrow agents. They are paid fees for holding deposits, but they have no financial interest in the outcome. They have a fee structure and they tell you right up front what it's going to be, and so buyer and seller have to decide who pays for it.
Michael Moore:However, in the yacht world, I would say that the vast majority of times the money is held by the selling broker, the broker that's next to the buyer.
Michael Moore:The buyer puts down his deposit, but he puts it in the account of the so-called selling broker, and I think a lot of times there is this idea that the selling broker actually is working for the buyer, when in reality all brokers work for the seller. That's how they get paid. The gross monies are paid to the seller, and then the seller then pays the agreed upon commission with the listing broker, and then the listing broker then has a subcontract that determines how does the listing broker split his commission with the selling broker. But I think the law is fairly well established that all brokers act for the seller, because the seller is the one that pays the commissions. But at the end of the day, the fundamental principle is that the stakeholder has a financial interest in whether the deal goes forward or not, and that I think that is the problem and what we're seeing with the advent of more and more. I don't know. The industry has grown larger, the brokerage community has grown larger, but in reality I think there has been a trend toward more disputes over deposits.
Diane M. Byrne:Contracts at the end of the day are negotiations. Clearly, the one initiating the contract has it written to favor them.
Diane M. Byrne:But there's always room for the other party to make notations on what they would like to see changed. Does that happen with the IYBA and MYBA contracts, in terms of you've got a listing broker on one side and then the buyer may come in with their own broker and want certain things to be changed, or does everybody essentially say 'no, this is the way IYBA always does it, this is the way MYBA always does it, and we're going to just keep it as is'?
Michael Moore:You get a lot of, I mean, I think, again, not to broker friends, and I do believe that the industry moves because of brokers. In fact, I'll tell any seller that you're going to waste a lot of time and energy if you think you're going to get a boat sold by kind of just listing it on yachtworld. com. But I think that most deals of any consequence there's a broker involved, and usually more than one broker involved. Now what is the response, at least in a large number of instances, to the fact that the industry moved many years ago toward the form work, what I call form work. It was never adequate, so you got into each of these forms where the e, ebit form or MYBA form has a clause that basically calls out for additional terms.
Michael Moore:Now this actually is the document that changes everything. This is actually the document that is the deal, and it would be that document that you would then change. It's both on MYBA side and IYBA side. You could say this supersedes other things that are not inconsistent. I mean, everything stays the same unless it's modified by these additional terms, which would be inherently inconsistent with what was written before or, in many cases, just sets out more specifically what you're going to be in the case of a buyer getting with your deal and with a seller what you're tendering with the deal, or the asking price or the accepted or profit price. Now, for example, you take a typical IYBA form.
Michael Moore:Although it is easy in, easy out, there's basically in most of those forms there's a clause that says additional registered vessels and it says included, not included. Well, I mean, sometimes these additional vessels are multimillion-dollar boats, so it's a little bit inadequate just to check a box and say this is included. The reality is those boats need to be checked out too. But I think that the additional terms and also this is not to get it too far afield, but it does involve deposits and these are the battlegrounds, these are the things that where the unhappiness comes, it often is over the deposit. The reality is the person holding that deposit may get conflicting instructions from the seller and the buyer, and the wise person in the middle and in conflict will do what is called an interpleader action and that is, put the money in the court registry and let a judge sort it out. You can always get it back readily by simply advising that the conflict has been resolved. But the interpleader is just a way of the person in the middle, the stakeholder, saying I don't know who gets this money. It's got to go one way or the other. It's either got to go back to the buyer or it's going to go up to the seller and be split with the brokers. But I'm just not in position to take a side here.
Michael Moore:You will often see that the stakeholders are also not totally happy with transferring that deposit to the seller. They're not happy. They may get an instruction send me the deposit. They're not happy with that. They don't necessarily totally trust the seller. They may not totally trust the manufacturer, or at the very least they worry that if they send that deposit to that manufacturer, to that seller, that's just the beginning of a negotiation for what the seller or the manufacturer will actually pay in the way of a commission. And so the brokers are not very happy with instructions that say well, just send me the deposit, we'll talk about this later. That's not the way it works.
Diane M. Byrne:Well, like I said in the beginning, the devil is in the details, right, the devil is in every little last detail on how it's interpreted and how the court would interpret it as it turns into a lawsuit. This is certainly a lot to unpack, and I'm sure we can revisit this subject at another time too, with a little more nuance based on some questions we may have, but this has been really eye-opening and very educational.
Michael Moore:You know my pleasure. I try to spot these things with you and with your guidance and cooperation, and help the things that I think are real, the things that are happening. And suddenly you get three cases in one law firm, and three are all about deposit fights. It's a red flag. It's like, okay, let's have a podcast on that, let's talk about that, because it does. The industry does need to understand who are you sending this money off to? You're sending a million dollars to someone that you've never met, that are in another country, and the most you can hope for is they have a house flag like a Fraser's or Camper and Nicholson's or Burgess, but you're playing with fire if you don't really have an understanding of who's going to be holding these soft and substantial funds.
Diane M. Byrne:Absolutely, absolutely. Well, thanks everybody, as always, for listening. If you have a yacht law question that you would like us to address on an upcoming episode of the Yacht Law Podcast, you can reach out to Michael or me. Our contact information is in the show notes for this episode and our goal, as always, is to help you make better, educated decisions, whether you are an owner, a crew member, a representative in the industry or somebody who is simply seeking to understand more about the world of yachting. Until next time, I'm Diane.
Michael Moore:Burke and Michael Moore. Michael, why don't you sign off, michael Moore, saying goodbye? Thank you, diane.
