A brief overview of the sales contract for the purchase of new or used aircraft – From the down payment to the contract.
Deposit:
A legal regulation on how much a down payment should be may not exist. The law provides for payment on delivery, the so-called payment Train-by-train ahead. The seller is basically free to determine and can even agree the whole amount as an advance payment. However, for this an individual regulation is necessary. In general terms and conditions this is usually not possible.
The down payment is intended to protect the seller from losses, which occur due to the fact that the buyer can not fulfill the contract, or else also serve to pre-finance production. Since the manufacture of a aircraft takes a longer time, it is not uncommon for higher Down payment quotas are required.
Under no circumstances should large down payments be made without security (e.g. bank guarantee) can be provided. Apart from the risk of loss, this can also be an indication that the seller or manufacturer in financial problems. Dangerous for the buyer is that in the event of in the event of insolvency, the down payment becomes part of the insolvency estate and in the worst case is lost. The reclaim must then be submitted to the insolvency administrator for the insolvency table must be filed. As a rule, it is then only possible with a reimbursement of a fraction can be expected.
In the event of the insolvency of the seller should never be from the Withdraw from the contract. This would be a mistake, because then the deposit is not more to save.
When buying a used aircraft should make a down payment, paid, if at all, into a domestic escrow account. Requires a seller located abroad a payment by cash transfer e.g. via Western Union, this is a warning signal and an indication of a Fraud attempt.
Caution should be exercised when an extremely favorable price the seller is located abroad and a payment (in advance) by bank transfer is required. Cash transfer is required or an unknown escrow service (i.e., not listed escrow service) or a freight forwarder is named, the fiduciary is to handle the payment processing.
Proof of ownership:
It is essential to request the registration certificate and a look at the register to see if there is any collateral. (lien) is registered. Especially when buying American Aircraft should have the previous Bill of Sale.
Before the final purchase, the aircraft should be technically and especially with regard to the documentation (CoA, CoR, ARC…). A Preliminary contract should include provisions on bearing costs in the event of detected defects following a Include prebuy inspection and, if applicable, add to the cost of the Certificate of Airworthiness for Export.
This should be in the purchase contract:
Depending on whether it is a used or new aircraft, the following points should be included in the purchase contract:
– Name and address of buyer and seller, ideally also the identity card or passport number
– Aircraft data (manufacturer, registration number, serial number)
– Notes on accessories and equipment sold with the product
– Purchase price and payment agreement, VAT statement, Reference to payment of import duty
– For international contracts: Applicable law and Jurisdiction
– Aircraft Condition Statement: Hours of Operation Summary with running times, airworthiness data, last ARC, last weighing, performed Repairs and maintenance, AD’s, LTA’s, SB’S, damage history….
– Assurances/ guarantee promises
– Place and time of handover and documents handed over
– Date and signature of seller and buyer
– As a jointly completed attachment: the notification to the Authority (e.g. LBA Form 10)
Which law applies when buying abroad?
Which law is applicable and which court is responsible for disputes is (locally) competent may be of essential importance. The regulations on this are far too extensive and would go beyond the scope of this Contribution blow up. For contracts within the EU, the European Civil Procedure Regulation (CPR). Thereafter, each contracting party may, in the state in which it is domiciled. Alternatively, at the place of performance be sued.
Furthermore, the principle of free choice of law applies. The Contracting parties are therefore free to choose which right in the case of cross-border contracts applies. Frequently, companies have included in their clauses corresponding to general terms and conditions, nothing has been agreed, the law of the country in which the company has its registered office shall apply.
However, something else may apply in the case of a consumer contract. A buyer is therefore well advised to seek not only professional but also legal advice before concluding a purchase agreement for an aircraft.
A pdf of this article published in Fliegermagazin 08/2019 you can find here
Frank Dörner, Attorney at Law, Munich