Primer on Fractional Contract Documents
James Butler Cautions, “Don’t Be Fooled!”
Bethesda, Maryland • January 2012
In his debut contribution to Sherpa Report, Shaircraft CEO and attorney, James Butler, cautions prospective fractional owners to look beyond the fancy brochures and the so-called “boilerplate” contracts, and read the fine print. Butler looks at the four key documents that can make or break your fractional investment:
- Binder/Deposit Agreement — Should specify the model/year of your aircraft, the price, the delivery date and the bases upon which the deposit will be refunded or will become nonrefundable.
- Purchase Agreement — Should include “iron clad” representations and warranties from the provider and a fair method for valuing your share when the provider repurchases it at the end of your contract.
- Master Dry Lease Exchange Agreement — Should clearly state how your aircraft will be shared with other members.
- Management Agreement — Should tell you when you can fly, how many hours you can fly and what costs you’ll incur when you fly.
“These contract documents, and not that beautiful brochure, will govern your rights and obligations,” says Butler. “The contracts may look simple, but if you don’t read and negotiate them carefully, you may make a multi-million dollar mistake.”
To learn more about these essential contract documents, see the full text of this