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Contracts for Purchase and Sale of Vessels

Admiralty law may not apply to issues relating to the sale of a vessel itself unless other circumstances are involved.  If the vessel is considered personal property, the Uniform Commercial Code will apply and state courts will have jurisdiction.  The issues involved are many and may include shipbuilding contracts, marine surveys, mortgages, liens and others.

A contract for the sale of a vessel is generally not within a federal court’s admiralty jurisdiction, because such a contract is not maritime in nature.  Thus, a claim for the breach of a purchase agreement for a ship, which agreement does not constitute a maritime contract, does not invoke admiralty jurisdiction.  Although it is firmly established by reason and authority that admiralty has no jurisdiction to grant specific performance of a contract to purchase a vessel, it does not necessarily follow that all contracts of sale are nonmaritime.  Since admiralty can pass on questions of title in petitory and possessory cases, an admiralty court has jurisdiction to determine rights under lease-purchase contracts.  However, a contract primarily for the sale of a vessel at the end of a short charter term is not maritime.

The shipbuilding industry also includes naval architecture companies, businesses that manufacture and supply component parts, and other related services.  Although their contracts are also not within admiralty jurisdiction, shipbuilders and component manufacturers are subject to suit in admiralty jurisdiction for products liability.  Such torts for products liability have been introduced in maritime law but court interpretation remains narrow on the subject.  Further, a manufacturer has no duty under either negligence or a strict products liability theory to prevent a product from injuring itself.  A claim in admiralty, therefore, cannot be brought where the only loss claimed is economic loss resulting from the product injuring itself.

Since large sums involved in the purchase of a large commercial vessel, central to the transaction is the ship mortgage.  The Ship Mortgage Act of 1920 conferred maritime lien status to ship mortgages, which meant they became entitled to admiralty jurisdiction.  However, it only covered a mortgage on a “vessel of the United States over 200 gross tons and upwards”.

Inside Contracts for Purchase and Sale of Vessels