Buyer Beware: Scope of “As-Is” Disclaimer in Aircraft Purchase Agreements

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Buyer Beware: Scope of “As-Is” Disclaimer in Aircraft Purchase Agreements

 

Aircraft purchase agreements that contain language to the effect that the aircraft is being purchased “as-is” are not uncommon.  Typically, this provision in the purchase agreement may also include language stating that the seller is not making any representations or warranties as to the aircraft’s condition that the buyer should rely upon.  Further, it may also state that the buyer is making the purchase based only upon his or her own evaluation of the aircraft. 

The point of an “as-is” disclaimer is to indemnify the seller from a claim by the buyer for any potential problems with the aircraft that may occur after the purchase.  The seller is telling the buyer that the aircraft is being sold in its existing condition without any promises by the seller as to its condition.  The “as-is” disclaimer not only protects the seller, it can also protect an aircraft broker involved in the transaction.

The question of whether “as-is” disclaimers hold up in court may hinge on the jurisdiction where a claim is being made.  For example, in a recent Texas case, a buyer brought suit against a broker for negligent misrepresentation after purchasing a damaged aircraft.  The broker had allegedly made representations that the damage was repairable and the seller accepted delivery of the aircraft.  Subsequently, the buyer discovered the damage was not repairable and, because of the “as-is” disclaimer in the purchase agreement, elected to sue the broker instead of the seller.

The buyer argued that since the broker was not a party to the purchase agreement, the “as-is” disclaimer did not apply to the broker.  However, the Texas court disagreed, finding that the purchase agreement contained clear language showing the buyer’s intent to be bound by his own investigation of the aircraft.

But under Arizona law, the results would likely have been different.  This is because under Arizona law, “as-is” clauses are insufficient to protect a seller if it can be proved that the seller knew of a defect and failed to disclose it to the buyer.  Known defects must be specifically disclosed to a buyer in order for a seller to be protected from liability. 

Arizona courts view “as-is” clauses as a waiver by the buyer of breach of warranty claims only, which means that potential claims of misrepresentation or fraud are not waived.  Further, the courts have found that defects not readily discoverable by a reasonable inspection unfairly shift the burden of non-disclosure to the buyer, which violates the implied duty of fair dealing and good faith in contract law.

Williams Mestaz, L.L.P., has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Williams Mestaz, L.L.P., at (602) 256-9400, and see how we can help you resolve your legal matter.

 

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