Superyacht Sales: Procuring Cause and Protection From Intentional Exclusion

Yachts are getting bigger and bigger, and with the increase in size, an increase in price follows, as do the sales commissions. As any seasoned yacht broker knows, the longer a buyer spends looking for a yacht, the more people he or she talks to, often resulting in more brokers believing they are entitled to a portion of the commission. While being a broker on these extremely sophisticated deals can be quite rewarding, yacht brokers need to know how to protect themselves and understand what is required from them to be legally entitled to commission from a sale.

The global yachting industry is reaching new heights and consumers are turning to yacht brokers more than ever to educate them on the latest and greatest yachts, marine products and technology.  While remaining apprised of the constant changes in the yachting industry is nothing short of a herculean task, yacht brokers must also remain vigilant to the challenge of ensuring their clients are being properly served.  

The world would be a simpler place if buyers relied solely on the knowledge and expertise provided by one broker, however this is not always the case. There are often times when multiple brokers are involved in a singular transaction which inevitably leads to the question of who is legally entitled to be paid commission? As with most legal issues, the answer is it depends, but one thing is certain, the broker must be the ‘procuring cause’ of the transaction.

Although most jurisdictions share a similar premise as to what constitutes procuring cause, exact definitions and requirements vary. For example, in Florida, to be considered the procuring cause of a sale, the broker must have brought the purchaser and seller together and effectuated a sale and participated in continuous negotiations unless the seller and buyer intentionally excluded the broker. Proving that a broker was intentionally excluded is highly reliant on document proof.

A few common factors considered when determining the procuring cause of a sale include:

1. Who introduced the buyer to the yacht?

2. Was the broker instrumental in creating the buyer’s interest to purchase the yacht?

3. What steps the broker took to direct the buyer’s interest to purchase the yacht.

4. Did the broker fail to do something that caused the buyer to utilise the services of another broker?

5. Did the buyer or seller act in bad faith to deprive the broker of the commission?

Basically the broker, through his or her actions, is the reason the buyer purchased the yacht.

So, what can yacht brokers do to protect themselves from buyers that may be playing the field, and if needed, help prove they were the procuring cause of the sale? Communicate as much as possible in writing with the client. Shooting a quick text after a call capturing the gist of the call is a start.  As the great Bob Allen always says: “If it’s not in writing, it didn’t happen.” When trying to prove something transpired without documentation, proof ends up being a he said she said situation which quite the hurdle to overcome in court. 

While the industry practice for yacht brokers to communicate with clients is normally through phone calls, a simple follow up email or text message memorialising each conversation will provide the broker and client with a mutual understanding of the relationship and will certainty aid in a procuring cause dispute should one arise.

If the buyer appears to be playing the field, the yacht broker should also address any concerns he or she has so the broker’s role is clear. No broker wants to find out the buyer was working with another broker, especially after a significant amount of time has been spent fostering that client relationship. Hopefully that does not happen, but if so, understanding the client’s intentions will allow the yacht broker to decide whether or not he or she wants to continue working on behalf of that client, or if his or her efforts would be better focused someplace else.

If a situation arises where a broker feels they were the procuring cause of a transaction and is being cut out, the yacht broker should immediately inform the brokerage house because ultimately, the right to a commission belongs to the brokerage and the decision to pursue legal action is normally left solely with the brokerage itself.

Consulting with an attorney regarding the facts of the yacht broker’s situation and applying the law to determine whether or not the yacht broker may have a potential legal claim against a seller can help bring insight to the brokerage’s rights. It is imperative that the yacht broker provide the attorney with all information and documents relating to the situation, including information and documents the yacht broker may considerable unfavorable. The more information, the better.

As the desire to have the latest and greatest yacht on the market continues to drive this industry, one thing is for certain – the knowledge and expertise of a qualified yacht broker is in demand. By following the simple steps above, a yacht broker may be able to avoid a legal battle for commission and develop a long lasting relationship with a client.

Nicholas J. Zeher is an attorney at Robert Allen Law whose practice includes maritime and commercial litigation, superyacht transactions, corporate law matters, and immigration issues. For further information related to this article, please contact rmachate@robertallenlaw.com, nzeher@robertallenlaw.com or (305) 372-3300.  The information offered in this article is summary in nature and should not be considered a legal opinion or legal advice in any manner.