Aircraft Purchase Agreement: Key Clauses and Negotiation Points

What is an aircraft purchase agreement?

An aircraft purchase agreement (APA) is the binding contract that governs the sale of a specific airframe between a named seller and buyer, executed after a Letter of Intent and before pre-purchase inspection. It defines purchase price, deposit handling, inspection rights, delivery condition, the deliverables list, warranties, indemnities, and the closing mechanics. On a typical pre-owned jet transaction, the APA runs 25-40 pages plus exhibits, takes two to four redline rounds to finalize, and is drafted by aviation counsel on at least one side — usually both. Expect $15,000-$50,000 in legal fees per side for a clean deal, more if the aircraft has international history, leasing encumbrances, or complex tax structuring.

How is the deposit structured and when does it go hard?

Standard structure: 10% of purchase price wired to a neutral escrow agent within 2-3 business days of LOI execution or APA signature, fully refundable until the buyer issues technical acceptance after pre-purchase inspection. Insured Aircraft Title Service, Aero-Space Reports, and AIC Title Service in Oklahoma City handle the vast majority of U.S. transactions because they sit next to the FAA Aircraft Registry and can file documents same-day at closing. The deposit "goes hard" — becomes non-refundable — at technical acceptance, which is the buyer's written confirmation that the aircraft is acceptable subject only to the seller correcting agreed discrepancies. Sellers occasionally push for an earlier hard date or a partial hard deposit; resist this unless you've already done extensive records review. If you walk after going hard for any reason other than seller default, the deposit is forfeited as liquidated damages.

What does the pre-purchase inspection clause actually need to say?

The PPI clause needs to name the facility, define the inspection scope, set a calendar deadline, and spell out who pays for what. Typical scope is a mid-level phase inspection at a manufacturer-authorized service center — Bombardier, Gulfstream, Textron, or Duncan Aviation, West Star, Stevens for independents — with borescopes, engine inspections per the engine program's mid-life criteria, and a test flight. Buyer pays for the inspection itself ($25,000 on a light jet, $75,000-$150,000+ on a heavy jet). Seller pays to correct any "airworthy" discrepancy (anything grounding the aircraft per its type certificate and AD compliance). Non-airworthy items — cosmetic squawks, deferred maintenance, cabin cosmetics — are negotiated. Roughly 70% of PPIs surface $50,000+ in discrepancies beyond what the listing disclosed; budget for it. The clause should give the buyer the right to terminate and recover the full deposit if the parties cannot agree on discrepancy correction within a stated cure period, typically 5-10 business days.

What delivery condition should the buyer demand?

Demand "airworthy with all systems functioning in accordance with the type certificate, all ADs and mandatory service bulletins complied with through the closing date, fresh from the inspection event triggered by the PPI, and with no open discrepancies." Engine and APU programs (CAMP, JSSI, ESP, MSP Gold, Corporate Care) should be paid current through closing with no buy-in owed. Avionics databases current. Interior and exterior in the condition documented at PPI, normal wear excepted. Fuel at tabs or a defined quantity. If the aircraft is on a maintenance tracking system, all entries reconciled. The seller will try to soften this to "as-is, where-is subject to PPI" — that language belongs in a salvage transaction, not a $5 million-plus jet purchase.

What goes on the deliverables list?

The deliverables exhibit is where deals quietly fall apart at closing, so it gets written carefully. Required: all original logbooks (airframe, engines, APU, propellers if applicable) from new, with no gaps; all AD and SB compliance records; weight and balance current; FAA Bill of Sale (AC Form 8050-2); Warranty Bill of Sale; aircraft registration application; all STC paperwork with FAA Form 337s; flight manual and supplements; maintenance manuals and CD/USB media; engine and APU program transfer documents executed by the program providers; export Certificate of Airworthiness if the aircraft is moving cross-border; gear-up keys, tow bar, GPU adapter, and any loose equipment listed in the LOI. Missing original logbooks can knock 5-15% off resale value permanently, so confirm their physical presence during records review, not at closing.

Warranties, disclaimers, and indemnities — what's standard?

Sellers disclaim all implied warranties of merchantability and fitness; that's standard and survives negotiation. What the buyer gets instead is a tight set of express representations: clean title, no liens other than those discharged at closing, no undisclosed damage history, no missing logbook entries, accurate total time and cycles, no involvement in incidents or accidents not disclosed, and authority to sell. These reps should survive closing for 12-24 months. Post-closing indemnity typically covers pre-closing tax liability, undisclosed liens, and breach of reps. Cap is usually the purchase price for title and authority issues, and 10-20% of purchase price for everything else. A title search through the FAA Registry in Oklahoma City and the International Registry (for aircraft under the Cape Town Convention) is non-negotiable and runs $500-$1,500.

Where should the buyer push hardest in negotiation?

Push hardest on PPI scope, delivery condition, the deliverables list, and survival of reps. These four govern whether you actually get what you paid for. Price is largely set by AMSTAT and JetNet comparables before the APA is drafted; the legal terms are where value is created or destroyed after the headline number. Also negotiate the truth-in-leasing carve-out if applicable, the tax structuring (state sales and use tax planning, fly-away exemptions, trust ownership), and the location of closing and delivery — moving the aircraft to a no-sales-tax state like Oregon, Montana, or to international waters for delivery can save 4-9% of purchase price depending on the buyer's home state. Engage aviation tax counsel before the APA is signed, not after. Finally, never sign an APA without a financing contingency if you're financing — most lenders want 20-30% down with 10-15 year amortization at 6-9%, and underwriting takes 30-60 days. If you're paying cash, you have leverage; use it on terms, not just price.