Vessel Ownership: Calm Seas or Surprise Squalls
| Jurisdiction | United States,Federal |
| Citation | Vol. 01 No. 2001 Pg. 36 |
| Pages | 36 |
| Publication year | 2001 |
January 2001, pg. 36. Vessel Ownership: Calm Seas or Surprise Squalls
January 2001
Owning and operating a vessel on Maine coastal waters, whether for business or pleasure, requires an appreciation of maritime risks that have little to do with the weather and may not be obvious. "Vessel" is broadly defined at 1 U.S.C. §3 to include "every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water." Even the casual weekend sailor may be subject to liabilities that are unanticipated due to differences between state law and maritime law. For example, a vessel is considered "personal property" of an owner under state law, but is considered an entity in its own right, in rem, under maritime law. Moreover, general maritime law is applicable to maritime contracts and torts that come within admiralty jurisdiction. Thus, if a case could be brought in the federal court as an admiralty matter pursuant to 28 U.S.C. §1333, general maritime law is the controlling body of law whether the case (a) is filed in admiralty in the federal court or (b) is filed as a civil case pursuant to the "savings to suitors" clause of 28 U.S.C. Sec.1333 (1) in a state or federal court. Only the federal court sitting in admiralty, however, has jurisdiction over the in rem claims.
A prospective vessel owner and vessel lender, therefore, should be cognizant of the general maritime law principles that apply to vessels sailing in coastal waters and the high seas. Three important areas of inquiry for a prospective vessel owner or lender, to be referenced below as the "buyer", are:
1. What is the condition of the vessel as determined by survey ?
2. Who holds title and claims to the vessel ?
3. What marine insurance coverage is in place ?
These issues with comments on state law and general maritime law principles are presented below.
1. Vessel Condition
A marine survey is an inspection of the vessel and its equipment. There are several different types of surveys, e.g., a pre-purchase survey for a buyer or a condition and valuation survey for insurance purposes. The inspection report (called the "survey") will identify deficiencies in the vessel and may contain recommendations to bring the vessel into compliance with U.S. Coast Guard regulations or good marine practice standards. Because vessels are generally sold without any promise or warranty about condition, a survey by a competent marine surveyor is generally the only protection a vessel buyer has with respect to vessel condition. A buyer should require that the Purchase and Sale Agreement permit a marine survey or inspection of the vessel as a condition of buyer's obligation to perform. The Agreement should specify whether the survey is to be done while the vessel is hauled or while afloat and whether the expense of any operational sea trials will be an expense of buyer or seller. The language in the Purchase and Sale Agreement might be as simple as "subject to completion of survey satisfactory to buyer" or might be more involved such as "buyer may terminate the Purchase and Sale Agreement if the cost to repair deficiencies as noted by marine survey exceeds $500."
A contract to sell a vessel is not a "maritime contract" and is, therefore, governed by state law.(Fn1) Any warranty about vessel condition is governed by state law commercial code provisions. Warranties may be either express or implied. An express warranty is an oral or written representation that a particular capability or condition exists, e.g., that the vessel will go 40 knots or that the vessel has been wired to marine standards. An implied warranty is a warranty that the law creates in limited circumstances: (1) if the vessel is purchased from a seller who is a "merchant with respect to goods of that kind,"(Fn2) there is an implied warranty that the vessel is fit for ordinary use, and (2) if the seller knows that...
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