Buyer beware! What to look out for when buying an aircraft

by Nicholas Christie, Founder / Principal broker - Light Aircraft Sales

In this post, we will focus on the (often misunderstood) concept of 'buyer beware'! It's a longer update this week, but hopefully worth the read for most of our LAS community! We will post it on the FAQ or BLOG section of the LAS website as well.

A contract is formed

In the sale of an aircraft, the seller typically advertises the aircraft for sale, and the buyer usually offers to purchase it, in consideration of money exchanged. A legally binding contract is formed and the parties proceed as agreed. Sounds simple enough? In principle, it is.

The risk

But, aircraft are complex. They are machines that often have had a long maintenance and operating history. They are also accompanied by multiple documents, and they have components with expected (or mandatory) lifespans ('choppers' are particularly complex in this regard). It follows that from a buyer's perspective, things can go very 'wrong' if an aircraft is purchased on the basis of 'blind' assumptions that the buyer has not thoroughly checked to be true! This is partly because of these complexities, and partly because the law does not 'wrap its protective arms' around the buyer, in all circumstances!

Australian Consumer Law

There are strict statutory laws in Australia (by world standards) around the sale of goods from vendors who are in the business of selling. So, as an example, if you purchase a new umbrella from a retail store, and it has a hole in it, or it doesn't open, the Australian Consumer Law (ACL) will generally step in to protect you with rights to a refund, replacement or repair. We all understand that these laws are designed to protect purchasers from product defects, poor design, or unscrupulous vendors! These protections can operate after the purchase takes place (ie. when you first open the umbrella, or even many months later!) This benefits Australian consumers considerably, and it has become just another part of the Aussie 'way of life', and the envy of the consumer world in many ways.

BUT...'buyer beware' is the rule!

However, the ACL protections operate as an EXCEPTION to the well-established legal principle that warns the buyer to 'be aware of the risks' (the legal term is 'caveat emptor', or 'let the buyer beware'), before purchasing anything. Put simply, a seller can sell whatever they want to sell, in whatever condition that it is in (including an aircraft) and it is for the buyer to beware of what they are purchasing before they purchase it. For our purposes, this overarching legal principle acts to 'push the onus' on to the buyer to ensure that the aircraft is acceptable to them, prior to purchase, or otherwise risk the consequences!

This is why, when purchasing an aircraft, LAS highly recommends that the buyer engages in their own responsible due diligence before the purchase, including (potentially) a personal inspection, a thorough read of the aircraft logbooks (it's why our platform allows for MAINTENANCE LOGS to be published on each listing), or an inspection by a qualified person. Test flights can assist too, but they have limited value. In general terms, a holding deposit should be refundable, based on these buyer-imposed conditions.

What about the seller?

That all said, the seller isn't completely 'off the hook'! Other exceptions include where the seller engages in fraud, deceit or misrepresentation. In these cases, the law can fall squarely on the side of the buyer. But, these are exceptions to the rule. While the Seller cannot engage in fraud, deceit or misrepresentation, they are not obliged to proactively provide all aspects, qualities or defects of the aircraft. This means that a Buyer should not rely on something that the Seller failed to represent to them.

Other than these seller obligations, any identification of a serious issue after the purchase is simply too late. It would then remain for the buyer to sue the seller to be compensated, or get another remedy from a court. This obviously comes with hurdles, namely, the prohibitive cost and stress of legal battles that can go on for months or years. (Yuck!)

So, always act to mitigate your risk (as a seller and buyer)

It's simply better to take the appropriate steps prior to purchase, to ensure that you are satisfied before you buy. One practical step is to ensure that you exercise a right to terminate the contract if you find something that is not satisfactory prior to purchase. Both parties should also have a written contract that makes what was agreed 'crystal' clear, or a very clear written 'trail' of correspondence as a minimum. 

We see it too often where a buyer blindly walks in to a deal, pays a deposit directly to a buyer (instead of into trust with a broker, with a clear written contract), and then tries to reverse out of a deal. The legal 'fun' then begins. And the lawyers are on the sidelines, 'rubbing their hands' with glee! It can ruin relationships, cause immense stress and it's simply unnecessary when there are viable alternatives. 

That's why understanding the principle of 'buyer beware' is a key starting point.

Our work

At LAS, we pride ourselves on an approach that aims to help both parties mitigate their risk. From our perspective, we don't just 'sell' aircraft. In fact we don't sell aircraft at all! We facilitate the sale between the parties by first understanding the agreement. We know each party's rights and we advise them accordingly. While lawyers shouldn't be required for simple transactions, legal advice is always an option for both parties, particularly when formulating a deal that carries significant risk. 

Otherwise, buyers, 'be aware'! 

Note: Any information provided is not legal advice and has not been independently verified.