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“As Is” Clause Held to Preclude Claim Arising From Seller’s Oral Representations That Damaged Parts on an Aircraft Were Repairable

The significance of “as is” language in an aircraft sales agreement is demonstrated again in a recent decision of the Federal District Court for the Northern District of Texas.  In Red River Aircraft Leasing, LLC v. JetBrokers, Inc., the aircraft buyer had learned of hail damage to an aircraft during the course of negotiations, but was assured by the seller that the damaged parts were repairable.  Of course, after taking possession of the aircraft, the buyer learned that the parts in question were not repairable, and proceeded to sue the seller on a theory of negligent misspresentation.  The Federal Court, however, ruled that because the buyer had accepted the aircraft “as is” and “with all faults” in its purchase agreement, it would be unable to establish that it relied on the seller’s statement in buying the aircraft.  The court therefore entered a summary judgment for the seller, leaving the buyer without a remedy.

Mistaken Use In Sales Contract Of Spec Sheet For A Different Aircraft Is Held To Void Buyer’s Purchase Obligation

The importance of selecting the correct specification sheet is driven home in a recent decision of the Federal District Court for the Western District of New York.

Sale of New Aircraft With Used Engine Supports Claim of Fraud

The Texas Court of Appeals in Dallas ruled this week that a buyer purchasing a new aircraft from the manufacturer made a submissible case of fraud against the seller when it introduced evidence that one of the aircraft engines had previously been used on another aircraft, and that this fact had not been fully disclosed to the buyer.

Certificate of Airworthiness Ineffective When Noncompliance with FAR is Present

In Munich v. Columbia Basin Helicopter, Inc., the U.S. District Court for the District of Oregon found that a contract term requiring delivery of an airworthiness certificate by the seller may be breached even when a certificate is provided at the time of delivery.

Washington Decision Rejects Seller’s Reliance on Boilerplate Warranty Disclaimer

The Seattle seller of a used aircraft discovered that its use of an “as is” clause in its general disclaimer of warranties did not suffice to exonerate it from the consequences of delivering an unairworthy aircraft, even after the buyer’s conditional acceptance of the aircraft.

Closing on Sale and Acceptance of Aircraft with Bill of Sale Specifying “As Is” Delivery Waives Contract Provisions Requiring Seller to Correct Discrepancies and Deliver an Airworthy Aircraft

The aircraft buyer in Wedderburn Corporation v. Jetcraft Corporation learned the hard way that a contract term calling for delivery of an airworthy aircraft with discrepancies repaired would not protect the buyer under all circumstances.

Contract with Foreign Buyer Calling for Delivery in Airworthy Condition may Imply Compliance with Airworthiness Standards of Foreign Nation

In a recent decision in Daiichi Koku Co. v. J.E. Aero, Inc., the U.S. District Court for the Northern District of Illinois considered a claim in which the plaintiff, a Japanese air carrier, had entered into an Aircraft Purchase Agreement to acquire a used aircraft from an Illinois broker.

No Missouri Use Tax Due When Aircraft is Purchased for Immediate Lease to a Missouri Common Carrier

In its recent ruling in Five Delta Alpha, LLC v. Director of Revenue, the Missouri Supreme Court has ruled that an aircraft transfer is exempt from Missouri use tax under the “sale or resale” exemption even when the aircraft is leased rather than sold to a Missouri common carrier.

Alter Ego and Joint Venture Theories Permitted Under Montreal Convention

The Montreal Convention provides that carriers are liable for damages when a passenger is injured or killed on an international flight. When a carrier lacks the assets to cover these damages, however, claimants may have no recourse unless liability under the Convention may be applied against other parties. A recent ruling by the U.S. District Court for the Southern District of Florida has endorsed a theory for expanded liability in a noteworthy decision.

Court Rejects Claim That Fractional-Share Owner Holds An Interest In Operator’s Entire Fleet

The bankruptcy of fractional-share operator Avantair triggered a dispute regarding exactly what property its fractional-share owners held. Like other fractional-share operators, Avantair operated a fleet of airplanes, selling fractional shares in each of them to individual participants.

Contract Language Calling For Sale “As Is” Prevails Over Airworthiness Provision When Prepurchase Inspection Fails To Note Condition Compromising Airworthiness

The aircraft buyer in McMahan Jets, LLC v. Roadlink Transportation, Inc. discovered that a contract term calling for delivery of the aircraft “in airworthy condition” was not sufficient to protect it from aircraft discrepancies found after the buyer’s prepurchase inspection and acceptance of the aircraft.

Contract Term Requiring Delivery of Aircraft in Airworthy Condition Prevails Despite “As Is” Language in Sale Agreement

The United States District Court for the Northern District of Texas recently decided a case involving an aircraft sales agreement with seemingly conflicting provisions.

New Ruling: “All air transportation services are not subject to South Dakota sales or use tax.”

The South Dakota Department of Revenue recently issued a release stating that “all air transportation services are not subject to South Dakota sales or use tax” after June 9, 2014.  Find the release here: http://sdrevenue.blogspot.com/2014/06/all-air-transportation-services-are-not.html.

Lessor of aircraft denied Michigan use tax exemption because aircraft was not leased to the general public in an arm’s length transaction

In FMG Leasing, LLC v. Dep’t of Treasury, FMG Leasing was a limited liability company formed to hold title to an aircraft. No. 312448, 2014 WL 2931938 (Mich. Ct. App. June 26, 2014) (no reported citation available). FMG leased the aircraft to a concrete company that was one of FMG’s forming partners, and to the company’s president. FMG then sought to take advantage of a statutory exception under Michigan law that permits a lessor of tangible personal property to pay use tax on receipts from the rental of the property, instead of paying a sales or use tax on the full cost of the property at the time of purchase.

Missouri Governor Signs Bill Extending Sales Tax Exemption

Missouri Governor Jay Nixon has now signed a bill extending indefinitely the exemption of aircraft replacement parts from the Missouri sales tax.

“Common Carrier” and “Sale for Resale” Tax Exemptions Denied to Lessor of Aircraft

The Missouri Administrative Hearing Commission has held that a lessor of an aircraft does not qualify for the “common carrier” or the “sale for resale” tax exemptions, even if the lessee of the aircraft would qualify.

“Common Carrier” Tax Exemption Lost When Operator Reserves the Right to Select Its Passengers

A recent ruling by the Missouri Supreme Court considered whether an aircraft ride operator qualified for the “common carrier” exemption from Missouri use taxes on its out-of-state equipment purchases. In Balloons Over the Rainbow, Inc. v. Director of Revenue, the Court denied this exemption to an operator that reserved the right to reject passengers presenting themselves for carriage.  Under these circumstances, the Missouri Supreme Court found that it did not qualify for “common carrier” status and was therefore liable for Missouri use taxes.

Tickets for Scenic Aircraft Rides are Exempt from Missouri Sales Tax

The Missouri Supreme Court has held that tickets sold for hot air balloon rides are exempt from the assessment of Missouri sales tax.

Aircraft Repair Lien Takes Priority Over Lender’s Security Interest

A recent decision of the Oklahoma Court of Civil Appeals reinforced the priority of statutory liens protecting aircraft repair facilities.

Missouri Legislature Considers Proposals to Extend Sales Tax Exemption on Aircraft Replacement Parts

Both the Missouri House and Senate are currently considering bills that would extend indefinitely the exemption of aircraft replacement parts from the Missouri sales tax.

Compliance with FARs Provides Defense to Claim of Negligence Against Aircraft Manufacturer

A February decision by a federal court in Washington State found that federal regulation of aviation safety has “occupied the field” with respect to aircraft design and testing.

Report to IRS Is Required for Sales Not Paid by Personal Check or Bank Wire

Federal regulations make most aircraft sellers subject to mandatory reporting requirements when they are involved in transactions of more than $10,000.  Since a failure to report may trigger both civil and criminal penalties, aircraft dealers should be aware of the need to comply with these requirements.  A dealer is required to file Form 8300, reporting the transaction to the IRS, under any of the following circumstances:

Missouri Use Tax Applies To In-State Aircraft Sale When Sales Tax Not Collected

In Featherston v. Director of Revenue, the Missouri Supreme Court addressed the question of whether Missouri use tax applied to an in-state sale of an aircraft that fell outside the scope of Missouri’s sales tax statute. Missouri sales tax applies only to in-state transactions. Sales tax does not apply unless the seller is engaged in the business of selling tangible personal property.

Presence Of Unrepaired Squawks Does Not Overcome Sale Contract’s Allocated Risk Of Loss

In a recent decision in the case of Eagle Jets, LLC v. Atlanta Jet, Inc., the Georgia Court of Appeals considered the claim of an unfortunate buyer whose aircraft crashed during the ferry flight from the seller’s locale to the buyer’s.  The case illustrates the importance of including a clear allocation of the risk of loss in any aircraft sale contract.

Aircraft Dealer’s Compliment Concerning A Distressed Manufacturer Does Not Constitute Fraud

Though buyers sometimes seek to undo purchase agreements by claiming they were misled by a crafty salesperson, a recent federal case illustrates the limits of this tactic. In Morris Aviation, LLC v. Diamond Aircraft Industries, Inc., the Sixth Circuit Court of Appeals upheld the dismissal of an aircraft buyer’s claim of fraudulent misrepresentation.

The State Selected For Delivery Of An Aircraft May Exercise Personal Jurisdiction Over The Seller

A recent federal case in the Western District of Tennessee demonstrates the importance of including a forum selection clause in any aircraft sales agreement. In McMahan Jets, LLC. v. Roadlink Transportation, Inc., the court ruled, in the absence of such a clause, that the Utah seller of an aircraft was subject to the jurisdiction of a Tennessee court when it acceded to a Mississippi buyer’s request that the aircraft be delivered to it in Tennessee.

Use Of Intermediary Precludes Set-off Of Trade-In Value For Calculation Of Missouri Use Tax

In a recent use tax ruling, the Missouri Supreme Court addressed the circumstances that would entitle a buyer to use an offset for trade-in value in calculating the use tax due on an aircraft purchase.

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