“Except as Otherwise Provided Herein” and Aircraft Lease Agreement Disclaimers

A common drafting comment in contract negotiations is “can we add ‘except as otherwise provided herein’ at the beginning of this sentence?”

My usual (admittedly suspicious) response when the comment is directed at my draft is always “what do you have in mind, what section in this document ‘provides otherwise’?”

If the lawyer on the other side cannot (or will not) give a good example, my response to the request will be “no.”  If the lawyer can provide a good example, then I will try to limit the exception to the example provided.

Usually a lawyer will request the “except as otherwise provided herein” exception where the drafting involves a broadly drafted waiver or limitation of liability–usually near the back of the contract where the wording is often boilerplate.  And the lawyer on the other side will say it is unreasonable for a boilerplate provision to trump a specific commercial agreement contained elsewhere in the contract.  Sounds like a fair comment, right?

If you are requested to add this exception to your draft, my advice is:  be very careful.

An example:

As discussed in another post the purpose of the disclaimer in an aircraft lease agreement is to place, as between the lessor and the lessee, all risk and responsibility for the condition of the aircraft after delivery on the lessee.

A not uncommon lessee comment on the lease agreement disclaimer is “can we change it to read ‘as between the lessor and the lessee, once the aircraft is delivered to the lessee, the lessor has no responsibility or liability with respect to the condition of the aircraft except as otherwise provided in this lease agreement?”

Like I said above, this comment sounds fair, but with this suggested addition the lessee’s lawyer may be trying to make the lessor’s obligations as to the aircraft delivery condition survive the delivery.

Although many lease agreements are (surprisingly) not very clear on this issue, the lease agreement disclaimer is intended to relieve the lessor from all responsibility with respect to the promised delivery condition of the aircraft–once the aircraft has delivered.  In other words, once the lessee has inspected the aircraft and signed the acceptance certificate (with or without waiving certain delivery conditions), the lessee should have no further rights under the provisions of the lease agreement dealing with the delivery condition of the aircraft (in the absence of a specific negotiated agreement with the lessor–which would be unusual).

In this context the more problematic delivery conditions are those that look past the delivery date.  For example, an engine delivery condition that says that each engine will have least a certain number of hours of operation until the next anticipated removal–or an AD compliance condition which provides for the lessor to clear AD for a certain period of time after delivery.  But even delivery conditions that relate only to the delivery date are fair game for the lessee if, notwithstanding the acceptance certificate, such conditions were in fact not met on the delivery date AND the disclaimer is not clear that the lessee has no recourse under the lease agreement’s delivery conditions once the lessee has accepted the aircraft.

Consequently, if you get the request to add “except as otherwise provided in this lease agreement” anywhere in the disclaimer I strongly suggest you follow the general advice above by asking the lessee’s lawyer what “other provisions” he or she has in mind.  If the answer is “the delivery conditions” then the answer should be a strong “no.”

A couple additional related notes:

  1. You may remember the ACG vs. Olympic Airlines case from a few years ago. My reading of the case, including the underlying transaction documents, is that an “except as otherwise provided in this lease agreement” clause in the disclaimer was a material factor and issue in the dispute.  Plus the lease agreement had some very vague delivery conditions (the aircraft would be “airworthy” and “in a condition for safe operation”), allowing the lessee to claim, credibly, that the aircraft was in fact not in the agreed delivery condition on the delivery date.  If you Google “ACG Olympic Airways” you’ll see lots of links to the court opinions and discussions about the case.
  1. It is common practice to address delivery condition discrepancies in the aircraft acceptance certificate, usually by allowing the lessee to return the aircraft with the same discrepancy or with the lessor agreeing to rectify the discrepancy post-delivery. When drafting rectification language, the lessor’s obligations should be drafted so that compliance can be achieved objectively and unilaterally by the lessor, without agreement or cooperation by the lessee (e.g., “Lessor will deliver to Lessee’s base a replacement armrest within 60 days after the Delivery Date”).  The rectification language should not say something like “Lessor will cause the Aircraft to comply with the delivery condition in Section [__] within 60 days after the Delivery Date” because, among various other reasons, the disclaimer in all likelihood (unless drafted very broadly) will not apply to that provision and the lessor’s agreement could be read as an ongoing warranty of compliance with that delivery condition.