Never enter a commitment without first signing a contract. Paul Clough explains why.
When I was a pilot, it was axiomatic that one prepared a flight plan, frequently filed a flight plan and then flew in accordance with the flight plan. Rarely was I expected nor did I just take off and devise what I was going to do when I had fresh air under the aircraft.
However, as a lawyer, it is very common to be confronted by a client with some concerns relating to an unpleasant experience where the client had no plan in place before he went into a course of action. Few LAMEs when they take on work for the itinerant pilot enter into a contract of service in regard to the aircraft being maintained. Few pilots when they go to buy a very valuable aircraft, worth say $250,000, enter into a formal contract or plan detailing what they are getting for their $250,000. It is quite common for pilots and LAMEs to just wing it or worse undertake a commitment entailing many thousands of dollars on a hand shake or even a wink.
It must be pointed out that when push comes to shove, as a lawyer, I have to give legal advice based on the terms and conditions of whatever passes as a contract. Clients then have an uphill battle based on very little to enforce their rights. It should be stressed that contracts are an important part of life in business. One of the most important skills your clients can learn is how to get a contract right. An important part of getting a contract right is learning from the failures of others. Or in the words of flight, any plan is better than no plan.
The three fundamentals of a formal contract are;
1. The parties;
2. The property;
3. The price.
Lawyers learn the fundamental of this as “Offer and Acceptance”; ”Consideration” and “An Intention to Create Legal Relations”. Shaking hands on a deal with a person you know is not the same as contracting with a party. The person shaking hands may be a partner in a partnership; a sole trader, a company director or a trustee; or the beneficiary of a trust. Each of the parent bodies is the party to the contract not necessarily the person shaking your hand. Clients have some difficulty in accepting that the person they dealt with may not be the party they contracted with. Other aspects of this feature impact on how litigation is conducted. The defendant must be sued in the jurisdiction where the defendant carries on business or resides.
The property in the LAME’s contract to repair an aircraft is a contract of personal services. What the LAME is going to do is the subject of the contract as far as both parties are concerned. This should be written down lest one party is expecting more than he bargained for. For example, if a pilot brings his aircraft into a LAME’s approved workshop and says the aircraft is due for a 100 hourly, the pilot will expect that he will get a service on his aircraft which will include the detail in CAR Schedule 5, any outstanding A/Ds provided or attended to, a fresh maintenance release with any future A/Ds entered in the endorsements section. The LAME on the other hand will be concerned that the aircraft has not suffered any unreported events, accidents or incidents that have been bodgied over. He will be concerned as to any lifed items that need changing in accordance with the manufacturer’s maintenance manual and he will look for corrosion in the airframe to mention just a few of the matters a LAME is responsible to look at prior to giving the aircraft a new MR. Clearly these two viewpoints cannot be canvassed or concluded in a hand shake and a wink.
In respect of a purchase of an aircraft, the vendor wants an amount of money. The purchaser wants to get an aircraft that he values at the purchase price. An aircraft without a current MR or, God forbid, no certificates of airworthiness or registration has little or no value. A single engine aircraft that is due for an engine change in 40 hours has a much reduced value in comparison to an aircraft with 1,500 hours to run on its engine. This detail cannot be imparted on a hand shake.
The price is always important. It is possible that a price can be fixed in negotiation between people. But the party who pays must be accountable for that money value or consideration. In the LAME personal services contract the price may be fixed or on an hourly basis. The payment for spare parts may be upfront or deferred until completion. It is difficult to envisage how this can be done on a handshake.
Some of the other features of a contract between aviators are that a contract for personal services cannot be assigned. The LAME cannot evade his responsibilities by getting someone else to do the work unless it is beyond the capability of the LAME’s workshop.
Of course a contract can be varied and frequently is varied. A LAME may receive an aircraft into his workshop that looks the goods. When he removes some inspection panels he may see some tell tale signs of corrosion in the airframe, some fine white powder on the inside of the airframe or small bubbles in the paintwork in an inaccessible area of the airframe. On investigation, the extent of the corrosion is marked. The contract of service was for a 100 hourly in accordance with Schedule 5 but a fresh MR cannot be issued until the corrosion is removed. The LAME then needs to vary the original contract in writing to reflect the increased work necessary to remove the corrosion. If there was no original contract the increased cost of this extra corrosion work may cause the owner to be upset and from the LAME’s point of view not recoverable. The reason is that the owner thought he was getting just a 100 hourly at the average cost. He now finds he is up for many thousands of dollars for corrosion repair. This is the stuff of litigation, angst and finger pointing in courts.
Samuel Goldwyn was a principal director in film makers Metro Goldwyn Mayer. Sam wasn’t a native English speaker and was given to mangling the English language with pithy sayings. One of his sayings was “A verbal contract is not worth the paper it’s written on”. Sam was only partly right. A verbal contract can be substantiated by an equitable principle called part performance. This doctrine was originally only applicable to contracts for land which contravened the Statute of Frauds. In the modern legal world it is explained as follows:
“A claimant must show that he has done acts which can be explained only on the basis that some contract has been made which is consistent with the particular contract alleged and proved to exist.”
Usually, at least two acts consistent with the alleged contract need to be carried out to satisfy the principle. The lodgment by the owner of the aircraft in the LAME’s workshop for repair is one act. The provision of spare parts and labour by the LAME or his workmen, the additional work sheets, parts invoices and ARCs referable only to the owner’s aircraft are all acts that point to a contract of repair entered into by the aircraft owner with the LAME. There is no other explanation for the LAME undertaking such work and expense unless there was a concluded service repair contract between the aircraft owner and the LAME.
Frequently, one is confronted with the statement, “This is the standard contract for our dealings”. Alternately, “This is the only type of contract that is a standard contract for our dealings”. This is arrant nonsense. All contracts have unique features and circumstances. On occasion, one is presented with a form of contract that is all questions with boxes to tick. A pilot or a LAME should define for themselves what they want out of the contract rather than have foisted on them a proforma document to summarise the requirements of each.
It follows that I suggest anyone who is contemplating buying an aircraft or having work done on an aircraft that they enter into a formal written contract expressing their individual requirements. Or in the words of aviation “Any plan is better than no plan”.
Watch this space…