Seaworthy means seaworthy: a reminder about implied terms

The High Court has given a useful reminder of how stringent the test for implying a term into a contract is. On the facts, a promise that a yacht was seaworthy meant exactly that, even if the underlying fault started earlier.

The access promise and a breakdown at sea

Pleon sold the Maltese Falcon, one of the largest masted yachts in the world, to Leonis. The deal gave Pleon, the seller, 61 days to use the yacht after delivery. The access provisions dealing with this use stated that the yacht and gear “shall be in commission and in full working order” and “shall be seaworthy” during Pleon’s use. During the access period, a generator failed at sea and the trip ended, meaning Pleon’s access was cut short. 

Leonis argued that there was an implied term that its obligations were conditional on the yacht's hull and machinery on delivery under the sale contract having been properly maintained.

An arbitration tribunal agreed on the basis that “without the term, the contract would lack commercial or practical coherence”. Pleon appealed on a point of law to the court.

No implied term

The court said that the seaworthiness promise was clear and, in context, allocated risk to Leonis for the 61 days. If the yacht was unseaworthy, then Leonis bore the consequences, even if the cause lay in pre-sale maintenance. That was the bargain.

This was not about fault or fairness. It was about risk allocation across two linked deals. The sale contract let Leonis take the yacht “as is” after trial and an optional survey, with broad exclusions. The access deal flipped the risk allocation. Leonis chose to promise a fully working, seaworthy yacht for Pleon’s access. Reading in a maintenance condition would rewrite that split.

In reaching its conclusion, the court did not adopt the “commercial or practical coherence” formulation (which the Supreme Court has cast doubt on), rather it asked itself whether the implied term was necessary to give business efficacy to the agreement between the parties. To do this, you need to identify the purpose of the provision and that was found to be to allocate risk.

Judgment: Pleon v Leonis