Aircraft Purchase Agreements

It always surprises me when a potential aircraft buyer is unsure of whether he or she should use a purchase agreement when buying an aircraft. Most of these individuals have purchased homes and no doubt used a purchase agreement in such transactions.

Yet, many of these same individuals would spend the same amount of money to purchase an aircraft, and often times a great deal more money, without the protection of a written aircraft purchase agreement.Aircraft purchase agreements should be used in almost every aircraft sale transaction. First, the law in most states requires that a contract for an amount greater than $500.00 be in writing in order for it to be enforceable. This is called the statute of frauds. Although exceptions to this legal doctrine exist, complying with the law is usually safer than hoping you will be able to take advantage of an exception.

Further, using an aircraft purchase agreement can also help avoid confusion and misunderstandings. If the agreement clearly explains how the transaction will happen, when it will happen and what is included in the deal, the greater the likelihood that the buyer and seller will each know the other party’s expectations and the less chance for surprises or misunderstandings.

The buyer on the other hand, can be an individual or a corporation or limited liability company. If an individual is the buyer, that person will be listed and upon registration will be the record owner of the aircraft. To fully take advantage of release and indemnity language discussed in greater detail below, the seller may also want to consider having an individual buyer’s spouse execute the purchase agreement.

If a corporation or limited liability company will be registering the aircraft, the purchase agreement should identify that entity as the buyer. Alternatively, an individual can sign an agreement as the buyer and, as long as the agreement allows the buyer to assign his or her rights under the agreement, that individual may still assign the agreement to a corporation or limited liability company prior to closing.