August 2016 Issue
The New Icon Aircraft Purchase Agreement
When Icon released its original aircraft purchase agreement for the A5 the response within the industry was intense. While understanding that Icon was trying to control its product liability exposure contractually, the terms were decried as unreasonable.
Icon listened and in mid-June rolled out a newer, shorter agreement. It is a combined purchase and operating agreement that, we think, is designed to help reduce Icon’s exposure to product liability claims over accidents where the pilot is at fault and to increase the level of safety of operation of the A5 by getting the owner to agree to certain operating and maintenance standards. It also has obligations that the owner must meet when selling the airplane on the used market.
We’ll go through some of the points of the agreement, which is to be interpreted under California law.
The purchase agreement and the included operating agreement require that the buyer designate a managing pilot who has responsibility to assure that no one who has not completed Icon-approved flight training from an Icon-approved CFI fly the airplane and that only CFIs who have completed Icon-approved training give instruction in it.
Both the owner and managing pilot agree for themselves and their heirs to waive their right to sue Icon should they crash and the NTSB doesn’t find THE probable cause to be due to something Icon did wrong in manufacturing or training. (The contract doesn’t say if Icon may be sued if its wrongdoing was only one of two or more probable causes of the accident.) And, it won’t be a lawsuit in the courts; the buyer agrees that the case will go to arbitration.
For an extra $10,000, the buyer can have the waiver of liability section of the contract removed. However, in another section that is not removed, the buyer and managing pilot both agree that there are risks involved with flying and that those risks include defects in the aircraft. The buyer and managing pilot then agree to assume those risks—which seems to us to give Icon a very powerful defense if the buyer or managing pilot ever crashes and sues.
The buyer is also obligated in certain circumstances to defend and indemnify Icon should it get sued—that is a significant exposure for the buyer. We are aware of no insurance a buyer can obtain to protect against that serious financial risk.
We like that Icon requires the owner and managing pilot to recognize and agree that it is their obligation to recognize and manage risks when flying.
We can’t help but think that putting personal responsibility in writing may cause some pilots to make better operational decisions (to think twice, so to speak, before saying, “Watch this!”). It may also cause the high-risk set—those who don’t give a fig about risk analysis—to take a pass and buy some other type of airplane. Those are sales Icon doesn’t need.
The contract repeats the LSA requirement that maintenance is to be carried out in accordance with the manufacturer’s procedures, but takes it a step further—the owner must agree, in writing, to do maintenance as directed by Icon, using maintenance personnel who meet Icon’s requirements. The only way the owner of an S-LSA can avoid the manufacturer’s maintenance requirements is to convert the airplane to an experimental—E-LSA. Under the purchase agreement, the A5 buyer agrees not to make that conversion.
We think the agreement is heavily slanted toward the seller. We recommend that anyone considering the purchase of an A5 retain a lawyer admitted to practice in California who knows California contract and product liability law to review the purchase agreement and get her or his advice on signing.