Waiver & Releases: Buying and selling a homebuilt, Part 3

    R. PATRICK PHILLIPS

    Sport Aviation - January 2000

    “How can I protect myself from liability when I sell my experimental homebuilt aircraft?” This common question is one that is most difficult to answer because there is no perfect, fail-safe method of liability protection. All we can do is minimize the risk of liability based upon the total circumstances of the sale and purchase of a particular homebuilt aircraft. 

    One way to do this is to create a liability waiver and release of personal injury form in which the buyer waives his or her rights to file a lawsuit or make a claim against the seller in the event that a defect in the aircraft causes a crash resulting in personal injuries, death, or property damage. A waiver and release is nothing more than a contract between two parties, and it may be enforced against the signers the same as any other contract. To be legally effective it must contain the elements of a contract. To be valid, it must clearly inform the signing parties what is being waived. In its entirety the document must alert the signer to the nature and significance of what he is agreeing to. There must be consideration provided, and it must not have been secured by fraud. The most prominent problem in enforcing a release of personal injury is that many courts have judged them to be contrary to public policy—against the public interest. In other words, they are invalid and unenforceable where a person is chargeable with using ordinary care in the interest of public safety. 

    In legal language, releases of this nature are sometimes called “exculpatory contracts.” The law doesn’t favor them because they tend to encourage or allow conduct below an acceptable standard of care applicable to the activity. 

    Most lawyers and many members of the public are aware of this general philosophy of discouraging the use of liability waivers and releases. The result is that most people reach the conclusion that they are not enforceable and therefore don’t consider their use. But two persons or entities are free to contract any agreement they desire so long as it doesn’t contravene public policy. It’s therefore expected that should it go to court, the court will closely scrutinize any waivers and releases used in the sale of a homebuilt aircraft to determine whether such agreement violates public policy. The release will be construed strictly against the party seeking to rely on it, which would be the homebuilder/seller. Such agreements may not be necessarily favored, but they are not automatically void and unenforceable as contrary to public policy. In support of the waiver and release, courts in various states have upheld such agreements where automobile race tracks have required the drivers to sign releases of liability prior taking to the track. The courts have found the releases enforceable when executed prior to any claim and were unambiguous in meaning and supported by valuable consideration and not procured by fraud.

    Using a Waiver and Release 
    Generally, I recommend using the waiver and release when selling a homebuilt aircraft because it often discourages claims against the seller in the event of a later accident. For additional protection, persuade the buyer’s spouse to sign the agreement. If the buyer signs it, I feel that most courts would uphold any claims against the seller so long as the seller has not intentionally damaged the aircraft or been grossly negligent in its construction. If the buyer were to have an accident and become injured, he’d most likely lose if he were to sue the homebuilt’s seller for personal damages or injuries. If the spouse has signed the agreement, the spouse would likewise lose any claim against the seller of the aircraft. 

    The real problem in selling homebuilt aircraft is that if the buyer dies in an accident, the buyer’s minor children could bring a lawsuit against the seller for wrongful death. The children wouldn’t have been a party to the contract and, therefore, the release would not extend to them or other members of the family who had not signed the release. Further, a parent generally cannot sign to release a legal right of a minor child. 

    Another major deficiency with the release is that if an aircraft were to crash in the middle of a neighborhood and cause injuries, death, or property damage to others, the agreement would most likely afford no protection. Saddled with these realistic limitations, I still encourage the use of the waiver and release because it creates an obstacle or a hurdle that the aircraft’s buyer must overcome in the event he decides to bring legal action against the seller for some defective condition with the aircraft that caused injuries. It’s generally presumed that a responsible aircraft owner would carry sufficient liability insurance to cover any damages caused to the public as a whole. I’m personally aware of several people who have used a waiver and release in the sale of their homebuilt aircraft that crashed and injured the purchaser. Because they executed a waiver and release at the time of the sale, it discouraged the buyer’s attorney from bringing a personal injury lawsuit against the seller. Because personal injury attorneys generally work on a contingency fee basis, they may back away from filing a lawsuit if it appears the waiver and release may be an effective defense. 

    Further, I have seen potential lawsuits warded off by immediately providing the buyer’s attorney with a waiver and release, coupled with the fact that the seller had little or no assets in which the plaintiff attorney could attach to satisfy a judgment. Fortunately, for these reasons and the inherent nature of an experimental homebuilt aircraft, lawsuits against the homebuilder/seller are rarely pursued. When an attorney learns that a builder is free to change the design as he sees fit and that this is an experimental homebuilt aircraft based upon the creative genius of the builder, he may look elsewhere for a more promising suit. The sidebar gives a checklist you can use with your attorney to draft a document that will help you attain the greatest liability protection. It’s important that this document is written in accordance with the laws and practices of your state or community. Courts may look at these agreements as contrary to public policy and will seek ways to void them. It is also important that the release be in bold letters so the purchaser can see it. The use of a release from liability may be a beneficial document in deterring a lawsuit for damages against the seller of an experimental homebuilt aircraft, but it can also be frustrating to the seller because no one can predict or guarantee the results of using it. As we can see from the seller’s viewpoint, the fault lies with the sentiments of the general public, and the decisions of juries and judges who may not be understanding or sympathetic with those of us who engage in the activities and hobbies we all love and support. 

    R. Patrick Phillips, EAA 124466, practices aviation law in Orlando, Florida. A member of the EAA Legal Advisory Council, he is a Board Certified Aviation Law Attorney, and holds ATP, CFII, and A&P certificates.  

     Seller’s Checklist
    To obtain the maximum liability protection provided by your state’s laws, you should consider consulting an attorney when selling your aircraft. The attorney should be knowledgeable in aviation matters, specific to a hold-harmless agreement for the sale of your homebuilt or restored aircraft. The law doesn’t favor these types of hold-harmless agreements, but both the seller and the purchaser can benefit greatly from a well-written aircraft sale agreement. 

    In addition to the specifics of the agreement, the seller and the purchaser of the homebuilt or restored aircraft may wish to consider, with legal counsel, the inclusion of the following into the sale agreement. Understandably, you may wish to use some or all of the suggestions below based on your particular requirements. This list is not intended to be a complete guide, but represents suggestions for you and your local attorney.

    • A warranty by the seller that the aircraft is free and clear of all liens, claims and encumbrances, including any applicable federal and state taxes. 
    • An agreement by the seller and the purchaser that the aircraft is sold on an “as is” basis with a disclaimer of any express, implied or other warranties specific to airworthiness or mechanical condition.
    • A warranty by the seller that the aircraft will be delivered with an appropriate FAA Bill of Sale; other required registration documents and clear title, where appropriate.
    • An acknowledgment by the purchaser that he is buying a homebuilt or restored aircraft.
    • An offer by the seller to make the aircraft available to the purchaser at an agreed location prior to delivery of the aircraft to allow the purchaser to have a pre-purchase inspection performed by the purchaser’s agent.
    • An acknowledgment by the purchaser that he/she has had the aircraft and its records inspected by an FAA rated mechanic or FAA approved repair station.
    • The sale of the homebuilt or restored aircraft should be based on the completion of a pre-purchase inspection.
    • An agreement by the seller to transfer to the purchaser all logbooks and other records pertaining to the operation and maintenance the aircraft at the time of delivery.
    • An agreement as to which state’s law will govern the interpretation of the contract.
    • A statement that the purchase agreement shall not be modified except by an instrument in writing agreed to by both the seller and the purchaser.
    • An agreement by the purchaser that the seller disclaims the accuracy of any maintenance records, other than those during the time of ownership by the seller.
    • Appropriate witness signatures, signatures of the purchaser and the seller, as well as notarization of signatures.
    • An agreement by the purchaser to defend and indemnify the seller for losses occurring out of the subsequent operations of the homebuilt or restored aircraft.
    • An affirmation by the purchaser and the seller that they are of legal age, under no disability, and have related upon the advice of counsel specific to the aircraft sale agreement.
    • The seller and the purchaser should ensure that the following documents are mailed to the FAA on the day of the sale:
    1. The completed FAA Aircraft Registration Application   (FAA Form 8050-1)
    2. The completed Bill of Sale (FAA Form 8050-2)
    3. The “signed over” current Aircraft Registration Form  (FAA Form 8050-3) (The FAA will consider the owner of the aircraft to be the one who files the Bill of Sale and Registration with its Oklahoma City office first. Aircraft have been sold twice in one day to different and unsuspecting “purchasers.” 

    Your aviation attorney will explain the importance of forwarding these documents to the FAA immediately for liability and other legal purposes.)

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