The American Civil court system is comprised of two separate systems – the federal court system and state court system. The state court system is considered a court of general jurisdiction wherein a party can haul in another party for any reason. In contrast, the federal court system is considered a court of limited jurisdiction wherein a party can only haul in another party for three items:
- Federal question;
- Diversity jurisdiction; and
- Maritime jurisdiction.
As such, a dispute with respect to a maritime contract, in its basic form, falls under federal jurisdiction and is applicable to a federal court. If one party files suit in a civil court regarding a maritime matter, the other party has the right to move the case to a federal court. Likely, parties seeking to litigate would prefer that maritime litigation occurs in federal court because the judges generally have more experience with maritime matters than their state-court counterparts.
If a contract is a maritime contract then it falls under federal, not state law. There are various differences, including federal pre-judgment attachment and interest payments.
Sometimes it is easy to determine what type of contract is a maritime contract and therefore falls under federal court jurisdiction. Often times, however, categorizing a contract as a maritime contract is unclear and may lead to significant litigation between the parties.
As mentioned, the determination that a contract falls under the maritime definition is not always clear. However, case law provides that the following items are persuasive in determining the status of a maritime contract:
- Contracts for the shipment of goods by sea;
- Vessel charters;
- Contracts for the towage of one vessel by another;
- Contracts for the repair of vessels;
- Contracts for pilotage of vessels;
- Contracts for other services to vessels;
- Vessel crew employment contracts;
- Marine insurance contracts;
- Contracts for supplies provided directly to vessels;
- Shipping container lease agreements; and
- A contract to dredge a navigational channel.
Walking into a store that sells kayaks and drafting a contract for the purchase of such a kayak is not a maritime contract. If there is a dispute with respect to that contract, it will likely go to state court unless it falls under diversity jurisdiction. It will not be subject to federal remedies or the like.
In addition, many courts find that large financing contracts are not maritime contracts. A large fishing company that contracts with a shipbuilder has not made a maritime contract and would be subject to state remedies. Other courts treat some contracts as mixed contracts that are generally not subject to federal maritime law, unless the contract is primarily for maritime purposes or if it is possible to parse the maritime and non-maritime aspects of the contract.
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