Posted on Oct 19, 2020
by SCOTT WILLIAMS, ESQ.
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Looking to buy a used aircraft? You’ll often see an advertisement with the words “No Damage History” (NDH). What exactly does this mean? Are you selling your aircraft? If you advertised it “NDH,” what did you mean?
Let’s start with the first question in a two-question quiz. Which Federal Aviation Regulation (FAR) governs how sellers advertise their aircraft for sale? The answer is found on page 1638 of this edition of COPA® Pilot. If you quickly realized this magazine doesn’t have 1638 pages, then you also realized that there is no FAR governing the advertising of aircraft for sale. As a general rule, there are no federal or state laws which address the aircraft sale process, except for the final paperwork that is submitted to the Federal Aviation Administration (FAA). Unlike the sale of consumer goods by commercial retailers, aircraft sales are largely unregulated. Even though the buyer must beware, the seller must also guard against common-law claims of negligent misrepresentation and fraud. Those claims could occur months or years after the sale.
As a seller, you have no legal obligation to disclose defects in your aircraft (known or unknown). However, if you make any statements about your aircraft to a would-be buyer, those need to be accurate. If you tell the seller your aircraft has a useful load of 978 pounds, but you forgot to subtract some recent upgrades and now it’s only 961 pounds, that gives rise to a claim by the buyer; so, don’t make such representations! Let the buyer examine the latest weight & balance sheet and make their own calculations. Is there minor corrosion somewhere? Either leave it as is, or have it properly treated by a mechanic and logged. Simply painting over corrosion could be construed as fraudulent concealment.
What about the phrase “No Damage History”? This is a dangerous statement for any seller to make. First, every used aircraft has at least some prior damage, even if it is only cosmetic. If the intent was to imply no major damage, then that begs the question: what is “major”? That word is way too ambiguous to be using in any communication with a buyer, whether it be in an advertisement, email or even the spoken word. In sum, a seller should never represent their opinions about an aircraft’s prior damage history. Let the buyer inspect the aircraft and the logbooks and reach their own conclusions.
As to maintenance logbooks, are they “accurate”? As an aircraft owner, you don’t know for certain. Were you standing over every mechanic who performed every task and then made certain nothing was omitted from the logbook? Therefore, sellers should avoid making representations that the logbooks are “accurate.” Some may think it’s OK to say, “The logbooks are accurate to the best of seller’s knowledge,” but even that’s dangerous since it leaves open to interpretation whether the seller did or did not know about any inaccuracies. Having said this, sellers should never intentionally conceal prior damage by removing prior entries or pages. There is never an excuse to be less than truthful in any representation.
Perhaps the most dangerous representation a seller can make is that their aircraft is “airworthy.” You simply don’t know what hidden problems exist in your engine or other places that might render the aircraft unairworthy. Could there be a crack in the case? How about one deep in a wing spar? There is an excellent article written by Mike Busch of Savvy Aircraft Maintenance that describes in detail what bad things might happen when a seller represents the aircraft as airworthy.1
These warnings apply equally to aircraft brokers. Words like “no damage history” and “airworthy” should never appear in any advertisement or broker-drafted purchase agreement. Even though brokers use phrases such as, “Subject to verification by Seller,” these are not enough. Brokers should not advertise what they don’t know.
At some point in the sales process, the buyer and seller will sign a written purchase contract that details the terms of their sale. As a general rule that signed written agreement will supersede all prior oral and written understandings of the parties to date. Known as the “Parol Evidence Rule,” it is designed to avoid conflicting statements (or recollections) between the parties that predate the written agreement. This presumes that the contract is “integrated” and was meant to be a final expression of the parties’ intent. To be safe, every purchase contract should have this express provision: “Evidence of any inconsistent agreements to the contrary will generally be inadmissible in court.” So, if there was an inadvertent error in the original advertisement as to the engine time, as long as it’s corrected in the purchase agreement (usually in an exhibit), all is good. Any agreements made subsequent to the signing of the purchase contract would still be valid, whether oral or written. A common example is a reduction in the purchase price based on discrepancies found in the pre-purchase inspection. As a buyer, whatever promises you think the seller made to you, make certain they are repeated in the contract. As a seller, the Parol Evidence Rule won’t protect you from claims of fraud, so beware and use common sense.
In addition to the terms about price, delivery, escrow and deposits and inspection rights, every purchase contract should contain some form of disclaimer to protect the seller, such as: THIS AIRCRAFT IS SOLD “AS IS, WHERE IS” WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESSED OR IMPLIED.
While this disclaimer won’t protect a seller from false statements or fraudulent concealment, it does provide a layer of protection from misunderstandings. Fraud must usually be proven by clear and convincing evidence, as opposed to most other allegations, which only require a burden to preponderance of the evidence.
Moving on to question two of our quiz: Which FAR governs prepurchase inspections? The answer is on page 1782 of this magazine. Although the FARs are very specific about annual inspections, there are no such counterparts for pre-purchase inspections. It’s up to the buyer and their mechanic to agree on a specific list of items to be inspected. Anything not on that list is presumed to NOT be inspected, and the buyer must assume all risks of those items having problems. Buyer’s should not automatically settle for a prepackaged checklist from their mechanic but should be prepared to spend more money and add often missed items, such as a borescope. Also, a pre-purchase inspection does not mean an aircraft is “airworthy” as that warranty is limited to an annual inspection.
As a buyer, don’t base your purchase on an advertisement, or on what the buyer told you. Your only safeguard is a thorough pre-purchase inspection of the aircraft and the logbooks. This should never be done by a mechanic who has worked on the aircraft in the last 12 months (and preferably, ever).
As a seller, don’t make statements that are false, or ones that you are not positive are true. Don’t render opinions about your airplane. Beauty may be “in the eye of the beholder,” but damage history and airworthiness are in the eyes of a jury that hasn’t even been selected yet.
1https://www.savvyaviation.com/wp-content/ uploads/articles_aopa/AOPA_2016-07_whatdoes- airworthy-mean.pdf
This article was initially published in the September/October 2019 issue of COPA Pilot
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