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Uncertainty about whether to have an Agreement when buying an aircraft may be addressed by considering those items which ought to be included within an Agreement! You need an experienced Aviation Lawyer to guide you through what can be a minefield and can turn into a nightmare, if you do not obtain the right advice. Buying a home would be carried out with appropriate legal documentation, so why buy your aircraft for the equivalent, or for much greater value, with only a handshake?

Drawing up an Agreement is a bit like programming a computer! The first step is to outline the points of the transaction, which is equivalent to the outline specification. The next step is to sketch out how the transaction will work, which is equivalent to specifying the features and functions of the program. This is a good way of identifying the “must-have provisions”. Drafting is the equivalent of coding. Just as there can be no ambiguity in an instruction to a computer, so there should be no room for ambiguity in the provisions of an Agreement. Sentences should be short and contain as few clauses and sub-clauses as possible. After the first draft is complete, it should be subjected to “exhaustive malicious analysis”. That requires looking at the Agreement from the point of view of a party who wants to avoid or circumvent an obligation, or to use a provision in a way which was never intended. That is the equivalent of bug fixing and it is possibly the most important stage of drafting. All these stages are time consuming, but they are a great deal less expensive than litigation!

Here are 25 example items:-

The Seller

Is this an individual or a Company? If a Company, does the signatory actually have authority to sign on its behalf? What authority is legally needed? If a Contract is entered into by you, what if you later want to take the Transfer in the name of a Company? Can the documents be entered into by fax or other electronic means? What Searches can be made against the Seller? What if there is a Floating Charge over the aircraft? What if the aircraft is subject to an HP Agreement, how can you be satisfied as to transfer of title? If a Company; you should seek warranties that there is nothing which would prevent it from performing and meeting its obligations under the Agreement, it has full power to enter into perform and meet its obligations, performance or compliance will not be any contravention, no registration consent or approval is necessary, all information and documents given are true and accurate, there are no proceedings pending, all necessary permissions and approvals have been obtained, there has been no meeting convened for dissolution or which concerns solvency and no petition or proposal is outstanding.

The Aircraft

A list of equipment and paperwork should be laid down, to specify those items which are included and avoid uncertainty about what is to be handed over on completion. Where is the handover to take place and by what time? What Searches can be made against the Aircraft? For example, is the aircraft type certified to transport at least 8 persons including crew, or the helicopter so certified for at least 5 persons including crew? Are there any Manufacturer's Warranties to be transferred to you? You will want warranties from the Seller at least that they will pass good title free of mortgages, liens etc., that the aircraft will conform to its description in the Agreement, that the aircraft has a valid Certificate of Airworthiness, dealing with any substitution or alteration between exchange of Agreements and completion, and that the log books and records are accurate and maintained.

Survey and air test

This is essential, for custom is that aircraft are sold "as is". Can you fly the left-hand seat? How detailed can the survey be? Who pays the cost of the test flight? If you are not satisfied with the aircraft, then you want to have the right to reject it or present a list of remedial work.

The Deposit

Can the Seller forfeit the deposit if you do not complete the acquisition? Will you risk just paying the deposit to the Seller, or will you want the protection of an Escrow Service? Who pays the cost of the Escrow Agent?

What if you withdraw?

What will you have to pay? If the Seller is able to sell the aircraft to another Purchaser, but at a lesser price, can a shortfall be claimed against you?

What if the Seller withdraws?

What are your remedies?

The Price

Are you entitled to make any deduction? In what currency is it to be paid? What duties, levies, etc. are you responsible to pay?

Is VAT applicable?

If the price is in a foreign currency, then you will need to know how VAT is to be converted.

Will you be able to inspect the aircraft again and test fly it again?

If so, when and what will be the arrangements? What if defects are found and you do not wish to complete or want a reduction in the price? What sort of defect is the Seller obliged to repair and can they be penalized for delay? What if an Airworthiness Directive is issued between exchange of Agreements and completion? For how long can the Seller suspend completion? Do you wish to limit the number of hours/landings between exchange of Agreements and completion?

How is payment to be made?

What steps do you have to take to ensure payment is cleared before the aircraft will be released?

What if you do not take delivery/pay the balance on the agreed date?

Is that date essential? Will you have to pay interest and recompense the Seller for other expenses if they agree to delay? What will be a deadline date which will entitle the Seller to terminate the Agreement?

What if the aircraft has been damaged between exchange of Agreements and completion?

Is the Seller obliged to repair, under what timescale, and can they be penalized for delay? What if their insurance company won't pay out? For how long can the Seller suspend completion?

What if the aircraft has been damaged beyond repair between exchange of Agreements and completion?

Are you entitled to compensation for wasted expenses? You will want to have the Agreement terminated without any responsibility on you, and to receive the deposit back.

What steps must have taken place before legal title will pass to you?

At what stage will risk and insurance responsibility pass to you? What can you do if documentation is not available to be handed over at completion?

What if completion has been delayed due to circumstances beyond your control?

Can you be penalized? How long can you make the Seller wait?

If the Seller gives warranties, can they restrict their duration and amount?

You will want warranties to be effective for as long as possible.

The Agreement should be declared to include all the terms.

It is essential that all the terms are recorded in the Agreement, rather than rely on verbal statements.

If you allow an extension of time for the Agreement, can you require compliance at a later date?

You should have it recorded that you do have the right.

Balance of the Price

Will you risk just paying the balance of the price to the Seller, or will you want the protection of an Escrow Service? What if there is a Priority Notice, or a Mortgage on the aircraft? How can you ensure that a Mortgage is paid off and registrations cleared?

What if the Agreement is to be varied or added to by mutual agreement? How is this to be recorded?

What if some other essential document or action is needed which had not been anticipated, can you make the Seller comply?

Third Parties

You should prevent any party other than the Seller who benefits from the Agreement from enforcing any term within it.

Dispute Resolution

You should consider a requirement to refer disputes to Arbitration, rather than to Court.

Governing Law

If the Seller is from another country, then you will want the Agreement to be governed by your jurisdiction.

What steps do you have to take after completion?

What if a defect in the aircraft causes an accident subsequent to the sale?

Can you claim against the Seller? Is it in your interests to have the Seller named on your insurance policy?

Do documents need to be notarised?

Contact Jobling & Knape with your Aircraft Purchase question:

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