No two aircraft transactions are exactly alike. All contracts are different and the terms can change for almost all aspects of a transaction. The only terms which stay generally consistent from one transaction to the next are the delivery conditions; the conditions for which the aircraft must meet at the time of the closing of the transaction. They are not always well defined in an offer or a contract, but the better they are defined the more objective a litmus test they become helping both buyer and seller finalize a contract and complete a transaction. Good delivery conditions provide a black and white clear roadmap by which to navigate through the pre-purchase inspection process.
The following are the primary delivery conditions that I see in almost every transaction:
(a) All aircraft must be legally airworthy at the time of the closing per Part 91 of the Federal Aviation Regulations (“FARs”).
(b) All systems on the aircraft from the avionics to the engines to the cabin entertainment must be operating within manufacturer’s allowable tolerances as stated in the applicable components’ maintenance manual. Almost every system, with very few exceptions, has very clearly defined parameters describing the serviceable condition within which the system must be operating to be operating correctly. If a system or component of the aircraft is not operating within the allowable tolerance then it must be repaired to be within the allowable tolerance; not to new standards, but within the serviceable allowable tolerance.
(c) All calendar and hourly inspections must be current at the time of closing without extension or deferral.
(d) All AD’s and mandatory service bulletins with compliance date on or before the closing must be complied with.
(e) With all documents and records relating to or required to be maintained with respect to the Aircraft original complete and continuous up to date and maintained in accordance with the FARs and all flight manuals, manuals and subscriptions required for Part 91 operations up to date and current.
See Dean Welch’s blog entry, “Pre-Purchase Planning, Part 4 – Logs and Records”
(f) With no material corrosion beyond manufacturer’s allowable limits. Depending on how material corrosion is cleaned or repaired can cause material damage history as such term is defined in the next delivery condition below.
(g) With no material damage history, the repair of which would constitute a “major repair” as such term is defined in 17 CFR, Part 43, Appendix A of the FARs. If an aircraft does have any major damage history as such term is defined here, then it should be specifically referenced in a contract and excluded from this delivery condition.
(h) With no parts, systems or components installed in the Aircraft on a temporary, loan or exchange basis. Unless otherwise specifically agreed to.
(i) Free and clear of all liens and encumbrances. This is often stated in a different section of a contract because it will be the only delivery condition that will survive past closing.
(j) With all loose equipment, logs and manuals required for operations under Part 91 of the FARs and in the seller’s possession. I like to have a loose equipment list and detailed inventory of all logs and manuals to be delivered with the aircraft incorporated as an exhibit in a contract so that both parties know what to expect from the beginning.
(k) As defined in the aircraft specifications. An aircraft specification sheet should be incorporated into a contract as an exhibit clearly defining the aircraft and installed equipment.
Aircraft are typically sold on an “as-is-where-is” basis and “with all faults” and with no warranties or representations. That is why it is imperative that a buyer have a thorough pre-purchase inspection performed by an factory authorized service center to determine that the aircraft meets the delivery conditions at the time of closing.