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Deposits
Reimagined
THE DEFAULT POSITION
Where the contract doesn’t state why a deposit is paid and how it can be recovered, then the default position (under English law – which is commonly used in international agreements) is that it is more than a mere part-payment: it is a guarantee that the buyer will complete, which the seller gets to keep as ‘liquidated’ (i.e. pre-agreed) damages if the buyer defaults – regardless of whether the seller has suffered any actual loss.
And 10% has traditionally been the magic number. Anything more has been treated by the courts as punitive rather than compensatory – and so an unenforceable penalty clause. But this could be hard to justify in the context of the sale of an asset as expensive as one of our Members’ yachts.
MYBA'S APPROACH
MYBA’s Memorandum of Agreement is the dominant transactional framework for yacht sales in European waters.
Under the MYBA MOA, the deposit (usually 10%) is payable upon signing, with the balance paid on completion after a successful sea trial and survey. The deposit is typically held by the broker, as stakeholder for both parties, and cannot be released except in accordance with the agreement's terms. If the buyer fails to pay the balance in accordance with the MOA, the seller can cancel and the deposit is released on a 50:50 basis between seller and broker.
Various versions of this form are used, but the buyer typically has only four hours maximum for a sea trial. Even the prospective purchasers of cars can often spend a weekend test driving. And if the buyer walks away after the sea trial, the deposit must be repaid by the broker (less “all expenses … if any” although what this encompasses isn’t clear). And spare a thought for the broker(s) who will have put in an enormous amount of work into humouring a tyre-kicker - with no commission to show for it.
IYBA’S APPROACH
The International Yacht Brokers Association (which, despite the name, predominantly covers the US market) publishes its own Purchase and Sale Agreement (PSA). This differs in several material respects from its European cousin, the MYBA MOA. There’s no stipulation for a 10% deposit, although this is commonly the starting point. In practice, deposits can be as low as 5% for higher-value vessels.
There’s no set time for how long the “trial run” should take, just a provision that this should be completed “as soon as practicable”. Unlike the MYBA MOA, “all running expenses” being for the seller’s account – not the buyer’s. Moreover, whether or not the buyer has inspected the vessel, the buyer will be deemed to have rejected it unless a timely written notice of acceptance is submitted to the seller.
DUAL UPFRONT PAYMENTS
It’s time for traditional deposits to evolve. Here’s the idea. The buyer has the option of paying two separate amounts upfront:
Firstly, a payment reflecting the actual cost of a meaningfully-long sea trial (of, say, a week) using as a guide the equivalent amount paid to charter a similar-size vessel for the same period; and
Secondly, a payment paid to secure the right to purchase within the closure timeframe, just large enough to deter any daydreamers.
Both amounts are set-off against the final balance due on completion, but the buyer can walk away after the sea trial no questions asked, in which case only the second amount would be repaid.
This approach is surely better for the seller, who knows at the outset that an agreed fixed amount has already been paid as reasonable compensation for preparing the vessel and undertaking the sea trial. Crew can prepare the vessel to perfection.
The broker should also be delighted, as he or she can still continue marketing the vessel where the prospective buyer hasn’t made the second payment. That buyer can also trial a selection of vessels, so that the choice changes from whether to buy – to which to buy. The broker could even take this a step further and charge for vessel tours, further fending off timewasters. With the seller’s blessing, sea trial payments could be retained by the broker to reward ongoing efforts and a sometimes uncertain income stream.
The buyer might wish to try out several yachts – without the need to book a charter (keeping in mind that only a minority of yachts are registered for commercial use). And having had the opportunity to conduct a more thorough sea trial, buyer’s remorse is far less likely. The amount paid for this privilege being deducted from the final balance, he or she is no worse off after completion.
Crewmembers will have an opportunity to display their skills to a prospective new employer, increasing the chances of them being retained by the new owner.
CONCLUSION
The 10% deposit owes as much to tradition than to the practical needs of today’s marketplace. It’s time to take a fresh look at this subject and make sale agreements work more effectively for everyone involved.
Yes, there would need to be a dialogue with Flag States and insurance underwriters – to ensure that they understand that the sea trial is not a charter by another name. But both have shown in recent years that they are open to fresh ideas. Certainly, the sale agreement incorporating such dual upfront payments will need very careful drafting.
Thank you to all our Members who provided perspectives for this white paper.
The 10% deposit is a relic of tradition, misaligned with modern yacht transactions. This white paper proposes splitting upfront payments: one paying for a more comprehensive sea trial, the other for a purchase option. The model compensates brokers much more fairly for their hard work, ensures that sellers are fairly protected, and creates a more balanced and practical framework for high-value sales.
15 October 2025
Last revised
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15 October 2025
Last revised
The 10% deposit is a relic of tradition, misaligned with modern yacht transactions. This white paper proposes splitting upfront payments: one paying for a more comprehensive sea trial, the other for a purchase option. The model compensates brokers much more fairly for their hard work, ensures that sellers are fairly protected, and creates a more balanced and practical framework for high-value sales.
For over a century, yacht brokers and lawyers have treated the 10% deposit as gospel. A ritual payment that signals commitment, deters flakiness, and soothes sellers’ nerves. But this figure, rooted in dusty English caselaw and carried into modern international agreements, is starting to look hopelessly outdated. In today’s yacht market, where buyers expect flexibility and transparency, this old model is looking outdated. This paper argues that the industry should abandon the “one-size-fits-all” single deposit and embrace a more nuanced, dual-payment model — one that reflects modern realities, aligns incentives, and makes the buying process fairer for sellers, brokers, and serious purchasers alike.
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