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Uncertainty about whether to have an Agreement for the process of selling an aeroplane can be addressed by considering those matters which ought to be included within an Agreement! You need an experienced Aviation Lawyer to guide you through what can be a minefield and could turn into a nightmare, if you do not obtain the right advice. Selling your home would be carried out with appropriate legal documentation, so why sell an Aircraft for the equivalent, or for much greater amount, with only a handshake? Why risk incurring significant legal costs after the event, by trying to save legal fees before the event?

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 issues:-

The Purchaser

Is this an individual or a Company? If a Company, does the signatory actually have authority to bind it? What authority is legally needed? If a Contract is entered into by an individual, what if they later want to take the Bill of Sale in the name of a Company? Can the Purchaser make you sell to some completely different person or Company? Can the documents be entered into by fax, or other electronic means?

The Aircraft

A list of equipment and documents should be laid down, to specify those items which are included and avoid uncertainty about what is to be given over on completion. Where is the handover to take place and by what time? Is the Purchaser entitled to have the Aircraft surveyed and to test fly it? You should regulate the arrangements and provide for the consequences of the Aircraft being damaged during the survey and if there is an accident whilst undergoing the air test.

The Deposit

A deposit should be paid. Can you forfeit the deposit if the Purchaser does not complete the acquisition? What if the Purchaser reneges? If you are able to sell the aircraft to another Purchaser, but at a lesser price, can you claim for a shortfall?

The Price

Is the Purchaser entitled to make any deduction? In what currency is it to be paid? You will want the Purchaser to pay all duties, levies, etc.. Is VAT applicable? If the price is in a foreign currency, then you will need to know how VAT is to be converted.

How is payment to be made?

How can you be sure the payment is cleared by your Bank before releasing the Aircraft?

What if the Purchaser does not take delivery/pay the balance on the agreed date?

Is that date essential? Are you entitled to interest and recompense for other expenses if you agree to delay? What will be a deadline date which, if breached, will entitle you to terminate the Agreement?

Will the Purchaser 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 the Purchaser will not complete or calls for a reduction in the price? What sort of defect are you obliged to repair and can you be penalized for delay? What if an Airworthiness Directive is issued between exchange of Agreements and completion? For how long can you suspend completion?

What if the Aircraft has been damaged between exchange of Contracts and completion?

Are you obliged to repair, under what timescale, and can you be penalised for delay? What if your insurance company won't pay out? For how long can you put off completion?

What if the Aircraft has been written off between exchange of Agreements and completion?

You will want to have the Agreement terminated without responsibility upon you, save to return the deposit.

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

At what stage does risk and insurance responsibility transfer to the Purchaser?

What if completion has been delayed because of circumstances beyond your control?

Can you be penalised? How long can you make the Purchaser wait?

Can you exclude liability for any form of legal warranty?

You should restrict your obligations, provide that the Aircraft is sold “as is” and that you will not be responsible for any economic consequences of defects.

If you do give a warranty, can you restrict its duration and amount?

You will not want a warranty to be unlimited in time and total. You will want an acknowledgement from the Purchaser they have not placed any reliance on any statement or representation by you. The Agreement should be declared to include all terms.

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.

What if there is a mortgage on the Aircraft?

How do you pay it off and satisfy the Purchaser that this has been achieved upon completion? What if the Aircraft is subject to an HP Agreement or floating charge, how will you satisfy the Purchaser as to transfer of legal title?

What if the Agreement is 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 Purchaser comply?

Third Parties

You should prevent any party 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 a Court.

Governing Law

If the Purchaser is from another country, then you will want the Agreement to be governed by your law and courts. Do documents need to be notarised?

What if a clause in the Agreement is later adjudicated to be unreasonable?

You ought to specify that this would not affect the whole Agreement.

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

You will need the Purchaser to maintain your name on their insurance policy and that you are entitled at any time to inspect the policy. At whose expense? Future claims could still involve you and you will want to be indemnified against them.

Contact Jobling & Knape with your Aircraft Sale question:

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