Pre-Buy Inspections Continued from page 45 reflect the buyer and seller’s agree- ment on specific inspection items. It is also important to clearly identify the number of calendar days any pre-purchase inspection is likely to take, as well as customer decision deadlines that must be kept to stay on schedule. Generally, the repair of discrepancies is not included in the quoted timeframe and this should be explicit. Further, if an inspection were to generate a large quantity of a par- ticular type of work, corrosion repairs for example, the limits of manpower and resources available to resolve the discrepancy should be explained. Set the Price and Get Paid For a typical pre-buy, it is usual practice for a repair station to provide a fixed-price quote with a separate hourly rate for repairs of discrepan- cies or later add-on work. It must be clearly noted what is and is not included in the flat-rate and hourly rates. The handling of taxes (if ap- plicable), shop supplies, shipping of parts, and other miscellaneous charges should be clearly indicated. Not only must these different price el- ements be clearly distinguished, there should also be a clear understanding when each segment of the bill must be paid. It is not unreasonable to require a deposit or mid-stream payments when the inspection begins, because the repair station must acquire and pay for parts, supplies, and potentially specialized tooling before the aircraft even arrives. As long as the payment requirements are clearly set forth in the signed agreement, they are fully enforceable in the event of a dispute. Understand the Choice of Law and Venue Often overlooked in repair sta- tion agreements are the choice of law and choice of venue provi- sions. Without a stated choice of law and choice of venue provision in its agreements, a repair station can be forced to defend itself under laws with which it is not familiar and do so in a far-away location. By agreeing on the choice of law, the parties agree that a particular state’s laws will govern over any dispute. For instance, if the repair station operates in Syracuse, New York, it likely would prefer the law of the state of New York to govern over disputes. Parties can choose any state for the choice of law; it is not required that one of them does business in that state. This may occur for instance where a chain of repair stations oper- ates across the U.S., but the company is headquartered in Texas. In that case, the repair station’s agreements may state that Texas law is selected as the choice of law, regardless of where the work was actually done. By selecting a consistent choice of law state, the corporate parent company can better understand, predict, and implement the laws and standards of the chosen state. The choice of venue is a separate provision that refers to the actual court in the actual county or state which any lawsuit must be brought in. The benefit to the repair station is obvious – a repair station based in Pennsylvania does not want to defend itself in New Mexico where it will have to hire a local counsel and spend time traveling to and from. Most often the choice of law and choice of venue provision is the same state, but it doesn’t have to be the same. The parties may choose New York law, but the courts of New Jersey as the actual location for handling disputes. When the choice of venue and choice of law states differ, the repair station should obtain the advice of expe- rienced local counsel to review the exact choices to verify that the courts will abide by the parties’ selection. These choices can profoundly impact the repair station’s rights and, importantly, the cost and complexity of resolving disputes. The bottom line is a repair sta- tion should evaluate its own busi- ness model and locations and make smart law and venue choices based on its’ unique business criteria. Liability, Indemnification and Insurance At a minimum, the repair station should consider a waiver clause limit- ing liability to the amount charged for the pre-buy inspection and limiting it to only the scope of the specific item or items covered in the inspec- tion. Such a clause would prevent the repair station from being liable for the later failure of components or systems of the aircraft that it did not inspect. Some repair stations have indemnification clauses that reject liability for negligence in performing inspection or repair services, mak- ing the buyer or seller liable for any resulting damages, even if the repair Continued on page 47 46 Aviation Business Journal | 4th Quarter 2016
