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Understanding Business Jet Purchase Contracts

Aircraft buyers and sellers both count on purchase agreement language to protect them. Will it really?

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Buyers and sellers count on commonly used purchase-contract language to protect them. Whether it really will depends on exactly what an agreement says and how courts interpret it.

The first seller of an airplane—the manufacturer—has an advantage here. In response to concerns that zealous plaintiffs’ lawyers were endangering general aircraft production by holding manufacturers “strictly liable” for damages caused by defects, Congress passed the General Aviation Revitalization Act of 1994. Under the Act, the airframer is essentially off the hook 18 years after the aircraft was first delivered, assuming it did not engage in certain kinds of bad acts, such as fraudulent misrepresentations about the aircraft’s capabilities. This is true even if the manufacturer’s original customer no longer owns the aircraft. As a result, a subsequent buyer’s attorneys may look to another seller: the previous owner who sold it to their client.

But sellers have lawyers too, and they invariably provide in the purchase agreement that the aircraft is delivered to the buyer at closing “as is, where is,” a magic phrase that’s supposed to ward off post-closing liabilities. The phrase absorbs added talismanic power by being typed in ALL CAPS.

Though the “as is, where is” phrase is widely used, its suitability for a business jet sale is strained, since aircraft purchase agreements almost always indicate exactly where the aircraft will be delivered and the closing will take place. But attorneys are typically loath to alter the magic phrase and insist that the “where is” language be included, anyway... continued on PDF