The lack of formal written agreements is a longtime tradition in aviation. This stems from several factors, including the close-knit nature of the flying community, which creates a sense of mutual trust.
Unfortunately, this sense of camaraderie often leads reasonable people to make decisions in aviation that they wouldn't consider in other areas of life. Trust developed within flying circles frequently overrides routine business caution and common sense.
Most people reading this would never purchase $100,000 worth of land without proper written documentation establishing ownership. Yet many of our clients have purchased aircraft worth even more with nothing but a signature on the FAA Bill-of-Sale. Similarly, clients often enter aircraft partnerships based solely on verbal agreements, leaving them open to legal risks.
Getting into an agreement without a written contract is easy; getting out of it is much harder. After verbal agreements, it's extremely common for parties to discover they had different understandings about how things were supposed to work. This frequently ruins friendships and sometimes spurs attorney involvement.
A well-drafted written agreement provides clear expectations for everyone involved. It also establishes practical exit strategies if the relationship doesn't work out as planned. In fact, a written agreement might prevent partnership breakups in the first place. Writing down all functions, considerations, and concerns gives everyone involved an opportunity to address potential issues early.
Beyond the practical implications, there are legal considerations as well. For example, in most states, agreements above a certain value (often $500) or extending beyond a year require a written agreement to be enforceable in court. This is known as the statute of frauds and the specific rules vary from state to state.
In addition to the statute of frauds, there are third-party considerations. You might think an agreement between flying friends only affects those directly involved. But circumstances can change for reasons beyond your control.
If your aviation partner dies unexpectedly, their estate likely will only recognize what's in writing and will not honor verbal "understandings." Your unwritten lease may mean you no longer have access to the airplane you chipped in to help maintain. Similarly, when a partner goes through divorce proceedings, their aircraft ownership interest may be treated as an asset subject to division regardless of verbal agreements with co-owners. Finally, financial difficulties can force the sale of assets like aircraft or hangars through bankruptcy proceedings, which typically acknowledge only properly documented ownership interests.
Obviously, we cannot create a written agreement for every transaction in life. Buying a coffee doesn't require a notarized document. But purchasing a six-figure aircraft deserves better recording than just the FAA Bill-of-Sale and a deposited check. The formality of documentation should correspond to the financial significance of the transaction.
Our recommendation is straightforward. Create a formal written agreement anytime the money involved is too much for you to comfortably lose. This personal threshold varies for everyone.
If something goes wrong with a $4 coffee purchase, you'll hardly notice the financial impact. Losing $20,000 on a handshake deal gone wrong, however, would be a big problem for most people. Moreover, the emotional and financial cost of litigation frequently exceeds the cost of properly documenting the agreement in the first place.
Remember this rule: If you can't afford to write off the value of the transaction – make sure you write down the terms in a clear and comprehensive agreement. This simple practice can save tremendous hassle, expense, and disappointment not only in your aviation endeavors, but also in other aspects of your life.
