P&I Club

Update Volume 2020/38 Hidden defects and ”as is where is”

Published on 18 december 2020

We regularly receive a request for assistance in matters involving alleged defects after the purchase or sale of a second hand craft. Ultimately, the legal position will have to be assessed on the wording of the purchase contract, which is why it is important to ensure that proper terms are being used and to properly review the contract when assessing the rights of the insured.

Needless to say there are various different approaches to such disputes, however often the most significant part of a dispute turns on the phrase ”as is where is”. This phrase means that the craft has been purchased in the condition in which it was at the moment when an agreement was reached on the sale. As a buyer, it is important to be aware of the inclusion of this phrase in a contract, given that it may be determinative for your legal position. 

In order to argue a breach of contract based on hidden defects after a craft is purchased, it is necessary to establish whether the seller has complied with his duty of disclosure and whether the buyer has complied with his duty of inquiry.  Relevant information has to be provided by the seller and the buyer has the obligation to thoroughly investigate the condition of the craft prior to purchase. Based on jurisprudence it is clear that the courts often, when “as is where is” terms are agreed, tend to attach greater value to the duty of inquiry. 

There is some debate as to whether “as is where is” has a significant impact on the existing legislative framework, which is why a contract will often include a more extensive word providing that the craft “will be delivered ‘as is where is’ with all “visible and hidden defects”.

According the above, we recommend that when purchasing a craft, you should pay close attention as to whether the contract contains ‘as is where is’ or similar wording and to be aware of the potential implications for the condition of the vessel. In addition, we recommend that every purchaser properly investigates the condition of the craft and where appropriate appoints a surveyor.

Should you require assistance in a matter concerning a dispute after the purchase of a second hand craft please do not hesitate to contact us.

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