On 12 September 2023, the Arnhem-Leeuwarden Court of Appeal handed down a judgment in a dispute concerning compensation to be paid by the client to a yard for the cancellation of the purchase of a yacht to be built (ECLI:NL:GHARL:2023:7675).
The client ordered a yacht from shipyard Wajer Yachts in 2017 for €1,800,000. At the time the agreement was concluded, the yacht had yet to be built. The parties included in the agreement that the client would temporarily rent another yacht, on the basis of which the parties would later fine-tune the upper deck layout of the yacht to be built. As the client was dissatisfied with the design of the yacht and the modifications proposed by the yard, the client cancelled the purchase in 2018.
The yard qualified the cancellation as a termination of a contract of work under Article 7:764 of the Civil Code, as a result of which, pursuant to paragraph 2 thereof, the client owes a termination fee that exceeds the amount of €100,000 paid by the client in advance . The client believes it was right to rescind or annul the contract and is entitled to a full refund of the down payment.
The court grants the shipyard’s claim for payment of around €179,000 for the temporary rent of another yacht, but rejects the claim for payment of a termination fee as insufficiently substantiated. On appeal, the parties agree that the aforementioned rent is due from the client.
The court of appeal considered that the contract between the parties qualifies as a mixed contract, which means that the statutory provisions on contracting work and on consumer purchase apply side by side, albeit that in case of conflict, the provisions on consumer purchase take precedence. The right of a principal in Article 7:764 of the Civil Code to terminate a contract of contracting work without cause has no counterpart in the regulation on consumer sale. However, the court of appeal believes that there is no conflict because this power of termination creates an additional consumer right.
The court considered that the client’s cancellation qualifies as a termination. It dismissed the client’s reliance on rescission and annulment because the yard had not defaulted in its obligations and any misrepresentation was not attributable to the yard. In both cases, the court of appeal attached importance to the fact that the client’s allegations went beyond the contractually limited options for it to request adjustments to the yacht.
Pursuant to Article 7:764(2) of the Civil Code, compensation for termination is calculated on the basis of the price for the entire work less savings for the yard resulting from the termination, against delivery by the yard of the work already completed. As for the savings, the court follows the calculation of the expert appointed by the yard, which is based on average cost price specifications of three similar yachts delivered in 2019. The court does honour the client’s request that an additional after-sales saving equal to 5% of the purchase price should be included. In doing so, the court arrived at a termination fee still to be paid by the client of over €360,000, plus the aforementioned rent and interest.
Perhaps the client had not realised that his options to change the design of the yacht during the contract phase as well as to refund the down payment were limited. This could have been different if, for example, the parties had first signed a letter of intent before the design could be fine-tuned. Such a letter usually includes provisions on (re)payments to be made by a party if no yacht construction contract is ultimately concluded. Incidentally, article 7:764 of the Civil Code is a provision of non-mandatory law. The parties could therefore also have included a different compensation scheme in the contract.
A similar situation arises in a dispute between a client and Contest Yachts (Conyplex), in which the District Court of Noord-Holland recently assumed jurisdiction (see ECLI:NL:RBNHO:2023:6013) and will now consider the question of whether the client is entitled to a refund of the down payment.
We have extensive experience in drafting and reviewing letters of intent and contracts for the construction of yachts, and litigating such contracts on behalf of yards and clients. If you have questions about the content of such contracts or options for terminating them, please feel free to contact us.
