Commonly Overlooked Contract Provisions: Think Twice Before You Sign

Being a yacht captain is not for the faint of heart. It takes a strong and confident leader to be able to effectively supervise a crew and ensure the safety of all guests on board.  A good captain will tell you – it’s a team effort.  However, a great captain realises the team extends beyond the crew on board. 

As the global marine industry rolls into another year of projected growth, captains more than ever are entering into contracts on behalf of vessel owners for the purchase of marine goods and services. As delighted as manufacturers, retailers and service providers may be, they are still looking for an edge should their relationship with the customer turn sour. In an effort to protect their own interests, these corporations usually retain sophisticated legal counsel whose sole objective is to protect the corporation.  

The question becomes: what can captains do to protect vessel owners from these corporate juggernauts?

The first step is to make sure you understand what you are signing. Many vessel owners have a legal team on standby to help assist with reviewing contracts, and if necessary, suggesting changes to even the playing field. Unfortunately, many times the legal team is underutilised, which in return heightens the risk for potential future legal action. For the sake of being brief, let’s examine three commonly overlooked contractual provisions: (1) the forum selection clause, (2) the choice-of-law provision, and (3) the attorneys’ fee provision. 

Here? There? Where? 

Imagine you live in Florida, and you enter into a contract to purchase a good or service from a seller who also resides in Florida. Not long after entering into the agreement, the seller fails to uphold their end of the bargain and you want recourse. You contact your vessel owner’s legal counsel and tell him/her you want to file a lawsuit at your local courthouse. Sounds simple, right? Unfortunately, it doesn’t always work out that way. 

Many contracts often include what’s called a forum selection clause. The purpose of this clause is to memorialise the parties’ agreement on where a dispute will be litigated. Being that sellers and service providers are usually the ones who draft the contract, the forum or venue listed is typically one that works to their advantage.  

Under Florida law, forum selection clauses are deemed presumptively valid and the party seeking to avoid enforcement of a forum selection clause must establish that enforcement would be unjust or unreasonable. In a sports context, captains who fail to negotiate a fair forum to resolve disputes are likely agreeing for the vessel owner to play an away game.    

What law applies? 

Let’s revisit the example above – both you and the seller reside in Florida. Conventional thinking would lead you to believe that Florida law would apply in resolving a potential dispute, right? Again, that’s not always the case. Included with a forum selection clause is usually what’s called a governing law or choice of law provision.   

While the forum selection clause determines which court or arbitration council will resolve potential disputes, the choice-of-law provision selects which country or state’s law will be applied by the court or arbitration council. Much like the forum selection clause, choice-of-law provisions are deemed presumptively valid in Florida and will only be deemed unenforceable if the law of the chosen forum contravenes the strong public policy of the forum state. 

As you could imagine, corporate legal counsel strategically selects which choice-of-law governs potential disputes as a way to minimise and manage risks to their clients. Overlooking this crucial provision can come with severe consequences. 

What about attorneys’ fees? 

One of the most common questions I get from clients is: am I entitled to be reimbursed for my attorneys’ fees? The answer is: it depends. In Florida, attorneys’ fees will generally not be awarded to a prevailing party unless the recovery of the fee is authorised by statute or is grounded in a contract. 

For example, only some causes of action, such as a claim under Florida’s Deceptive and Unfair Trade Practices Act (“FDUPTA”), allows for the recovery of attorneys’ fees without a written contractual provision. A general breach of contract claim does not allow for the recovery of attorneys’ fees unless the contract says so. It’s important captains consult with the vessel owner’s legal team to ensure an attorneys’ fees provision is included in the contract or the vessel owner may be left with few options to recover these costs should they be deemed the prevailing party in a lawsuit. 

It may sound cliché, but it’s better to be safe than sorry. As the marine industry continues its growth, transactions are becoming more and more complicated, and time is still of the essence. A captain who consults with the vessel owner’s legal team regarding the meaning and potential ramifications of the contractual provisions like those mentioned herein can gain valuable insight to the vessel owner’s rights and recourse should a breach occur.  

Robert E. Machate is an attorney at Robert Allen Law whose practice includes maritime and commercial litigation, superyacht transactions, and immigration issues. For further information related to this article, please contact rmachate@robertallenlaw.com or +1 (305) 372 3300.  The information offered in this column is summary in nature and should not be considered a legal opinion.