Business And Legal:
Not always one against the other.
by Jay Mesinger
I had the
great pleasure of sharing a podium recently with a very
skilled aviation tax attorney, Keith Swirsky, at the NBAA
Regional Forum in Washington, D.C. The topic: ‘Purchasing an
Aircraft, The Contracting Process’. A very powerful topic,
it was made even more powerful by looking at it from two
very distinct and important sides: legal and business.
and sellers, the idea of creating offer letters and
contracts is always somewhat daunting, since they’re never
created in a vacuum, and they must be created to account for
both the legal and business needs of a transaction. Often,
the buyer, or their representative, will create the Offer
Letter or Letter of Intent (LOI), negotiate for some period
of time back and forth, and then hopefully strike a meeting
of the minds. This meeting is usually focused on business
points such as price, terms, condition of the aircraft at
closing and the deposit. The LOI is usually short, sweet and
to the point.
completed and signed by both sides, the next piece is the
Purchase Contract. It is usually at this stage that an
aviation attorney is introduced to the process. The attorney
is often given short notice and business terms that do not
blend easily into the contract. Usually, at the time of
drafting the Purchase Contract is when most feel the need to
engage the attorney. Of course, there is no bad time to
introduce the legal strategist into the process; there are
just much better times to embrace this critical team member.
collaborative effort between brokers and attorneys, a
careful balance needs to exist between legal issues and the
reality of selling that legal issue to the other side. Hard
work and constant communication between the client, the
broker and the attorney will provide an outcome that is
correct in its legal needs, yet thoughtful and saleable to
the other side. Survivable reps and warranties are a perfect
example of areas of collaborative consideration.
As a buyer,
you would want everything to survive closing and as a seller
there are only limited reps and warranties that will be
allowed to survive. Understanding the implications from both
the legal and business side will be the key to creating this
section of the contract. There are several areas that will
require this kind of effort between all team members.
attorney will create language that speaks to precedent
conditions for closing. Words like "airworthy and system
functioning" may be used here. The inspection facility that
is chosen, however, may not use those words to describe
deficiencies. The broker needs to help the attorney craft a
document that incorporates the language that matches the
deal. Gulfstream, for instance, does not tell you if a
discrepancy is airworthy or not. It describes items as
needing to be corrected to "return the aircraft to service."
So the team marches on.
our entire speech was as much about team building and
collaboration as it was about process and details. As I said
in the speech, I often try to come into a new selling
situation and act more like an eye doctor than a broker,
working to give the other side peripheral vision so they can
begin to see that our side is on their side, rather than
Additionally, there are certain myths that pertain to
attorneys, from the broker’s perspective and myths about
brokers form the attorney’s perspective. We started our
speech by joking about them. I’m sure you have heard them
all, but you might not have ever considered them myths. A
few of these myths follow:
Lawyers are deal breakers.
is why many wait so late to embrace the attorney into the
process. The fear of adding the legal side to the Offer
Letter, possibly scaring off the seller with "mumbo jumbo,"
keeps many brokers from suggesting that the attorney
actually write the Offer Letter and in fact, add critical
legal pieces to the LOI.
the attorney at this stage, however, prevents the later
introduction of foreign concepts that may be rebuked and
create what sellers might feel are new terms.
Attorneys are OK with using contract templates provided
by brokers from past deals.
again. Attorneys are not pushing back on this one because
they want to charge the client more; they are pushing back
because templates from past deals are just that. No two
deals are alike. They have different state tax
considerations, inspection criteria and many other
components that make fitting a square peg into a round hole
cumbersome and ineffective.
I work for you, Mr. Buyer, but the seller is paying my
anyone possibly work for one side while being paid by the
other side? That could be the definition of a spy. In fact,
the greatest reason this occurs is not because of rogue
brokers trying to work both sides, but because often buyers
suggest to the broker that they get paid by the seller.
Brokers always do "back-to-back" deals. It is just what
is expected and accepted.
should be sure that when doing a deal, they’re dealing
through their broker with the real owner of the aircraft.
Back-toback deals do not give you the contractual protection
you must have.
Jay Mesinger is the CEO of J. Mesinger Corporate
Jet Sales, Inc. He is on the NBAA Board of Directors
and is Vice Chairman of the AMAC. Additionally, he
served on the Duncan Aviation Customer Advisory
Board for two terms, is a member of MEBAA, EBAA
and is associated with IBAC.