Airline loses dispute over faulty engine accepted ‘as is’
An airline that leased an engine on an “as is” basis has lost a dispute over having to continue paying for it when it turned out to be faulty.
The issue arose when the airline needed an engine while one of its own engines was undergoing maintenance. It agreed a 10-month lease with a supplier.
Clause 5 of the lease stated that the engine would be delivered and leased "as is, where is". The supplier made no representations of any kind, and the airline waived all rights, remedies and damages regarding the engine.
Clause 7 stated that the risk of loss or damage to the engine during the lease period rested with the airline.
The engine suffered major failure three months after delivery. The supplier claimed for unpaid rent and damages for the loss of the engine.
The airline argued that the lease had been breached because the engine was faulty. It said it was entitled to rescind the lease as the supplier had misrepresented the engine's condition.
The court found in favour of the supplier. It held that the lease was unambiguous that the engine would be delivered on an “as is” basis.
The contract stated that the engine would be delivered in compliance with certain conditions concerning its performance and maintenance; however, it also referenced an acceptance certificate that the airline signed to say that it had fully inspected the engine and was satisfied that it met the delivery conditions.
The fact that both parties knew that the airline had not inspected the engine did not affect the contract.
Please contact Mark Pelopida for more information about the issues raised in this article or any aspect of contract law.