Post-delivery guarantees under the MYBA MOA: the one area where the Seller remains on the hook

In a previous edition of this newsletter, we examined the extent of a seller’s obligations after delivery of a yacht under the standard MYBA Memorandum of Agreement (MOA). The conclusion was, perhaps surprisingly to some, that the seller’s exposure to claims for technical defects largely falls away once delivery is accepted. This raises an obvious follow-up question: is there anything the seller remains on the hook for after closing?

The answer is yes and it is worth examining closely, because the seller’s post-delivery warranty and the guarantee that supports it represent the one area of the MOA where the parties genuinely negotiate substantive protections rather than accepting the standard form as drafted.

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The scope of the standard warranty

Under the standard MYBA MOA, the seller gives limited warranties that survive delivery. The principal warranty is that the yacht is sold with good and marketable title, free of mortgages, liens, and encumbrances. Those warranties are usually backed by a guarantee, in a form MYBA itself provides, which may be given personally by the seller’s beneficial owner or by a corporate entity on the seller’s behalf.

The warranty is deliberately narrow. It is not a general promise that the yacht is in good condition; it is a promise about ownership and encumbrance and this is a fundamentally different category of risk from the technical defect scenario examined in our previous edition.
 

The Guarantee: where the real negotiation takes place

Because the underlying warranty is narrow by design, the meaningful negotiation typically shifts to the guarantee that supports it. In our experience, four elements tend to dominate that negotiation:

• Scope of coverage. The MYBA form provides a starting point, not a finished product. Whether the guarantee extends only to the base title warranty or is drafted to capture a broader set of seller warranties — for example, around tax status, regulatory compliance, or outstanding crew claims — is a genuine point of negotiation between the parties.

• Identity of the guarantor. A guarantee from a creditworthy individual or a well-capitalised entity is a fundamentally different instrument from one given by a single-purpose vehicle with no assets beyond the yacht itself. The identity and financial substance of the guarantor can matter as much as the terms of the guarantee and, in some cases, more.

• The cap. A guarantee with no ceiling is a very different instrument from one capped at a fraction of the purchase price. Where the cap lands determines how much real protection the buyer is receiving, as opposed to how much of the comfort is more symbolic than substantive.

• The expiry date. A guarantee that survives for several years looks meaningful on paper. One that expires shortly after delivery may already have lapsed by the time a title issue realistically surfaces, particularly given that certain maritime liens and encumbrance claims, depending on the flag state, can take considerable time to come to light.

It is beyond the scope of this article to prescribe what constitutes a reasonable cap or an appropriate expiry window; both are genuinely deal and party specific. It is, however, worth noting that this is an area where practice diverges significantly. What one seller’s counsel treats as standard, another treats as an opening bid and the buyer’s advisers should approach it accordingly.
   

Practical significance

The guarantee is often the most meaningful security a buyer has once the transaction has closed. The buyer retains contractual claims under the MOA’s warranties, but the guarantee is what gives those claims real commercial pressure particularly where the seller is a corporate vehicle that may be dissolved or stripped of assets after completion. Everything examined in our previous edition — condition, defects, the limits of the survey window — falls largely outside the seller's post-delivery exposure. The guarantee is the exception, which makes it worth negotiating carefully and worth not treating as boilerplate simply because MYBA provides a standard template.