Contract Provisions You Shouldn’t Ignore
James Butler Cautions Fractional Investors to be Wary of “Boilerplate” Contract Terms
Bethesda, Maryland • February 2008
In his recent “Inside Fractionals” column for Business Jet Traveler, Shaircraft CEO, James Butler, advises anyone considering a fractional contract to question “boilerplate” terms and identifies five “seemingly innocuous” provisions that you should thoughtfully consider when negotiating a deal.
- Definition of Aircraft – This provision describes what you’re paying all this money for. Make sure it includes not only the airframe, but also the engines, avionics, equipment and even the warranty rights and logbooks, all of which you‘ll need to convey when you sell your share.
- Liability Limitations – Your provider will try to disclaim as much potential liability as it can. Make sure that these limitations do not absolve the provider from liability if it fails to perform its basic obligations under the contract.
- Inspecting Records – This provision should give you the right to inspect, audit and copy records relating not only to your aircraft, but also to the provider‘s performance of your contract and its operation of the program generally.
- Assignment – By effectively restricting you to selling your share only back to your provider, the contract limits the liquidity of your investment and thus its value. Make sure you have the right to sell to a third party.
- Provider Defaults – All contracts specify owner defaults. A well-negotiated contract details provider defaults as well.
Inside Fractionals: “Contract Provisions You Shouldn’t Ignore”
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