Aircraft Purchase Agreement

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Aircraft Purchase Agreement

The aircraft purchase agreement, sometimes also referred to as aircraft sales agreement provides the details of how the aircraft will be operated and transactions that happened between a seller and purchaser of an aircraft. This agreement helps to know the expectations of both the purchaser and seller of the aircraft to avoid misunderstandings.

What Is an Aircraft Purchase Agreement?

This is a legally enforceable document made between a buyer and seller of an aircraft. The aforesaid agreement provides the details of the aircraft purchased and mentions the identity of the seller and buyer of the aircraft.

What Is the Purpose of an Aircraft Purchase Agreement?

This agreement outlines the purchase terms for the aircraft so that the rights and obligations of both parties are clearly mentioned in the contract. This clarifies the contractual performance as part of the contract.

Contents of an Aircraft Purchase Agreement

A sample aircraft purchase agreement generally contains the following terms.

  • The details of the parties to the contract including the incorporated names of the companies, contact details, and addresses.
  • The validity period for the agreement — the duration for which the contract shall be enforceable.
  • Details of termination of the contract — whether the contract would be terminated after the sale is effected or after the purchases are made.
  • Key definitions of the terms in the contract and their interpretations
  • Any warranties or representations that each party may make
  • The scope and the terms of engagement
  • Details of the purchase price, any security deposits required to be made and any taxes due on such sale
  • Permissions for inspection of the aircraft before sale, and the extent to which such inspection may be allowed.
  • Responsibility of the parties for damage, losses and faults in the aircrafts prior to delivery — applicability of the transfer of property laws.
  • Disclaimers and waivers of liability applicable to both parties.
  • Details of insurance provided on the carrier and the liabilities as part of such insurance
  • Responsibility of any costs that might arise during the agreement signing
  • Termination grounds, arbitration clauses, and provisions that deal with breach of contract.
  • Other boilerplate clauses.

[ Also Read: Aircraft Leasing]

How to Draft an Aircraft Purchase Agreement?

When signing an aircraft purchase agreement form, some points need to be considered in the process.

  • Ensure that the details of both signatory parties are mentioned clearly. If the purchasing company is a group company, mention the name of the subsidiary that is buying the aircraft along with who the parent company is
  • Ensure that the duration of the agreement is specific right down to the time to avoid misinterpretation of the deadlines
  • Elaborate on the liability for payment and responsibility in case of non-performance for group companies.
  • Mention the laws that govern the contract and which law the agreement is subsidiary to.
  • Mention the jurisdiction for dispute and conflict resolution in the contract
  • The details of the purchase price should be mentioned in the agreed-upon currency along with the payment schemes. Each payment schedule should be accompanied by clear deadlines and modes of payment to avoid vague and convenient interpretations of the law.
  • The extent to which the buyer is eligible to inspect the aircraft before purchase should be mentioned.
  • The responsibility of loss or damage before the contract is complete subject to the transfer of property laws.
  • Details of the delivery — location, period, and the responsibility of the costs involved.

Negotiation Strategy

Negotiation as part of the aircraft sales agreement, apart from the purchase price, happens regarding the inspection authority as well the ability for trials. The other aspect about negotiation would be about the sharing of liability before completion of contract or delivery of the aircraft.

Benefits of an Aircraft Purchase Agreement

One of the essential benefits of having this agreement to avoid any sort of misunderstanding the confusion between the seller and purchaser of the aircraft in the future. This will help to know the expectations of both the purchaser and seller of the aircraft to avoid misunderstandings. Just having a contract does not obligate the parties to perform. A well-drafted purchase agreement can act as sound evidence in a court of law against the breaching party.

What Happens in Case of Violation?

In case of violation of this agreement on the part of both the parties involved, they can sue each other of breach of contract and also claim for compensation considering the terms and conditions of the agreement. In case the agreement provides the remedies for breach of agreement, then the parties can settle the dispute accordingly.

This agreement these days considered a formally required document for the purchase of an aircraft to maintain transparency and also to avoid disputes if arise in future between the seller and purchaser of the aircraft as it provides how the aircraft will be operated and transactions happened between the parties.

[Also Read: Aircraft Mortgage and Security Agreement]

Sample for Aircraft Purchase Agreement

A sample of the agreement can be downloaded from below.

Download Aircraft Purchase Agreement - PDF

Aircraft Purchase Agreement

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