Randall Stone is licensed to practice law in Arizona. He assists our members with various aviation related matters including transactions, accidents/incidents and FAA Pilot and Medical Certificate actions.
An implied warranty arises from the buyer’s assumptions and understandings of the transaction when the seller is silent. Usually, the only implied warranties in an aircraft transaction are: (1) the seller is the owner of the aircraft; (2) the seller has the legal right to sell the aircraft; and (3) there are no undisclosed liens on the aircraft. An express warranty is a verbal or written representation made by the seller usually regarding the condition, status, or abilities of an aircraft. The seller should be careful not to make any express warranties when selling a used aircraft “as is.” Courts often rule that express warranties can be enforced by the buyer even when the aircraft is sold “as is.”
To illustrate, in a Texas case, a Pre-Purchase Inspection Agreement between the buyer and seller stated, “The Aircraft will be delivered with Fresh Annual Inspection with all systems in an airworthy condition and a current Certificate of Airworthiness,” despite claiming that the aircraft was sold “as is.” The court ruled that this language was an express warranty and the “as is” disclaimer only applied to implied warranties. Another example would be stating there is no “damage history.” This could be found to be an express warranty, and selling the aircraft “as is” would not protect the seller if such damage did occur.
So, if you are selling a used aircraft “as is” be sure to use proper language and provide all logs, Airworthiness Directives (ADs), and other required documents to the buyer, but be careful about making any representations concerning the condition or state of the aircraft. Put the burden on the buyer to do whatever inspection they deem appropriate. If you make express warranties, understate what their conditions and factor any express warranties into the price. Generalized and opinion-based statements, such as this is a “great airplane,” are generally considered “puffery” and would not be deemed an express warranty.
If you are purchasing a used aircraft, you should have an independent A&P (not associated with the seller) perform a “pre-purchase inspection” or “evaluation.” There is no FAA definition of these words, so be very careful of identifying and defining what the A&P will be inspecting and reporting, and how long the inspection will take. Also, consider including avionics in the A&P’s inspection. Ideally, the inspection should include a review of all aircraft logs, inspection of the engine and propeller, compliance with ADs, and a review of the Airworthiness Certificate. If the A&P fails to discover something you consider important, be prepared to defend your position that, based on the pre-purchase workorder and documents provided, the A&P should have discovered and reported the issue. If the aircraft’s annual inspection is close to expiring (within 3 months or so), consider completing the annual inspection since there is less ambiguity about the requirements of the annual inspection (and you would have to complete the inspection in the near future anyway).
If you are the buyer, remember that express warranties are not waived by the use of “as is” language, but make sure they are in writing and clearly specify the scope and nature of the warranties to avoid a costly legal battle.
If the seller fails to provide all known relevant information to the buyer or the buyer’s A&P in an “as is” sale, it could be considered fraud and expose the seller to liability for the buyer’s loss of value and related expenses.