The Importance of Consent and Joinder Language in Aircraft Purchase Agreements

NAFA member, Debbie Mercer-Erwin of Wright Brothers Aircraft Title discusses the importance of consent and joinder language in aircraft purchase agreements.

In the 15+ years we’ve been in business, we have witnessed the good, the bad, and the ugly when it comes to private aircraft purchases and sales. Whenever possible, we like to share experiences with our customers and readers to prevent you from having an unpleasant transaction.

Prior to preparing a sales agreement, there will be an offer letter. While the terms of the offer letter are not binding, pay close attention as it does represent a commitment and is often used to draw up the sales agreement. The terms of a sales agreement are binding barring a legal reason for being enforceable. It’s important that you understand what is and what is not included. Most likely, buyers and sellers are having agreements drawn up by professionals, but it is still prudent to understand what you’re signing. Surely this sounds like common sense, but it’s worth pointing out.

Before you find yourself preparing for an aircraft closing – either as a buyer or seller – we’d like to help you understand the intricacies of aircraft purchase agreements; in particular, the importance of including Consent and Joinder language.

What is the purpose of a purchase agreement?

A purchase agreement outlines the terms and conditions of the sale. It lets the seller know that you are serious about purchasing the aircraft, and if it meets all the requirements of the agreement (it’s everything it’s represented to be), the aircraft should not be sold to someone else during this time. To protect you from the unforeseen, a buyer should be sure that the deposit given when the purchase agreement is signed is refundable or the trigger for nonrefundable treatment of the deposit.

Whichever party you are in the transaction, understand that the terms are negotiable. Do not agree to or sign anything that makes you uncomfortable. Even if a contract format has worked numerous times in the past, that doesn’t mean it contends with the specific terms and conditions of the current transaction in which you are involved. What has worked in the past could be a trap for the unwary in the present. Don’t sign a contract until it’s revised to meet your needs.

Sales and Purchase problems

Consider this possible scenario without clarity as to the deposit in a purchase agreement:

A buyer puts money in escrow as a deposit on an aircraft. At this point, there are no rules guiding what the escrow agent is supposed to do with the buyer’s funds, because the escrow agent has not been made a party to the agreement.

The buyer changes his mind and decides he doesn’t want to make the purchase. He asks for his money back. Because the escrow agent who is holding the funds is not a party to any of the agreements that exist, there is no clear obligation to anyone except for the depositor of the funds.

When there’s an aircraft purchase agreement, it is often a trigger that obligates the purchaser and makes the deposit nonrefundable. Otherwise there is no direction to an escrow company that says the funds are nonrefundable.

Consent and Joinder language in a sales agreement will help guide an escrow company. It would then be up to a court to determine who gets the deposit money through an interpleader action.

Avoid Problems with Consent and Joinder Language

When aircraft purchase agreements are written or put together by either the legal counsel or the sellers or the buyers, they should include what is known as Consent and Joinder by escrow agent so that they become a party to the agreement.

If you don’t take the time to include this information, you could find yourself in an unexpected situation.

  • Under what circumstances does the deposit become nonrefundable?
  • What is the seller responsible for with regard to the condition of the aircraft?
  • What is each party responsible to do prior to closing?

At minimum, Consent and Joinder language included in your purchase agreement should include the following:

  • The Escrow Agent accepts appointment by the Purchaser and Seller hereby as document holder and stakeholder for the sale and purchase of the Aircraft
  • The Escrow Agent is acting as a document holder and stakeholder only
    • They are not the agent or trustee for either of the parties
    • They are not liable to either of the parties for any act or omission unless it involves willful misconduct or negligence on its part.
  • The deposit is held exclusively for the sale of the aircraft based on the terms of the Agreement only

These observations are merely points to consider and should not be construed as legal advice or guidance to take or refrain from a particular position. As we discussed in our blog, Can’t I Handle my own Aircraft Closing, parties to an aircraft transaction should seek the advice of legal counsel.

This article was originally published in Wright Brothers Aircraft Title Blog on July 23, 2018.