Opinion ID: 888353
Heading Depth: 1
Heading Rank: 12

Heading: Analysis of the Agreement

Text: A. Right to Inspect ¶ 33 The Agreement discusses at several points the right of the purchaser, A. Clifford Edwards, to inspect the aircraft, though the Agreement is far from a model of clarity on this point. Section 10 of the Agreement, titled Warranties, states: Seller makes the following warranties, AND NO OTHERS, EXPRESS OR IMPLIED, which shall be true and correct as of the date of closing, but shall not have liability if the warranties cease to be true following closing through no fault of the Seller. With the exception of the express warranties stated in this Agreement, Buyer purchases all assets and equipment AS IS: (a) Both King Air Aircraft are and shall be at the time of closing in good operating condition, with all systems operational, in full Part 135 compliance for operation as passenger charter aircraft under Corporate Air's 135 certificate, subject to the qualification concerning engine hours of operation. With respect to the aircraft engines, Seller states that it has furnished all written information in its possession concerning the engines to date. Seller agrees to provide reasonable assistance in the 90-day period following closing to Buyer so that Buyer may elect to either (1) replace the engines, or (2) consider operating practices similar to those of Seller to permit extended time before overhaul. Seller makes no warranty or representation as to the replacement of the engines, nor as to any operating practices which Buyer may elect to adopt so that the engine time may be extended. BUYER PURCHASES THE KING AIRS AS IS, AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO FULLY INSPECT THE AIRCRAFT, AND RELIES ON ITS OWN INVESTIGATION AS TO THE CONDITION OF THE AIRCRAFT AND THEIR COMPONENT PARTS. EXCEPT AS STATED IN THIS AGREEMENT, SELLER MAKES NO EXPRESS OR IMPLIED WARRANTY AS TO THE AIRCRAFTS' AIRWORTHINESS, MERCHANTABILITY, DURABILITY, INCOME-PRODUCING POTENTIAL, FITNESS FOR A PARTICULAR PURPOSE OR USE, AND TO THE EXTENT ALLOWED BY LAW, BUYER DISCLAIMS SUCH WARRANTIES. ¶ 34 This provision contains conflicting statements as to whether Edwards' right of inspection exists until closing two weeks hence, or whether, by signing the Agreement, Edwards is agreeing that all inspections have already been completed and that the aircraft are being accepted on the date of signing (May 23, 2002) as is. On one hand, subsection (a) states that Edwards purchases the King Airs `as is', and represents that it has had the opportunity to fully inspect the aircraft. This language goes against Edwards' interpretation. Yet, while Corporate Air chooses to isolate Section 10(a), the fact of the matter is that the language is preceded by the following opening statement: Seller makes the following warranties ... which shall be true and correct as of the date of closing  (emphasis added). This latter language suggests that everything which follows shall be true and correct as of the date of closing. In other words, Edwards will be purchasing the aircraft as is on the date of closing, having had the opportunity to fully inspect the aircraft and their component parts by that date. ¶ 35 Other provisions of the Agreement support the latter interpretation. Section 11, titled Transitional Assistance, states: Buyer is solely responsible for doing any and all inspections or investigations of the King Air Aircraft prior to closing  (emphasis added). Why would Edwards have a right to conduct any and all inspections or investigations of the King Air Aircraft prior to closing if that right terminated when he signed the Agreement? Section 13, titled Disclosures by Seller/Due Diligence by Buyer/Mutual Cooperation between Seller and Buyer, provides: The Buyer and the Buyer's agents have had and will continue to have full access to the Business and financial records pertaining to the Purchased Assets, including their past operation  (emphases added). Section 14, titled Representations and Warranties, states:  At closing Seller warrants to Buyer: ... (d) ... Buyer has conducted inspections and investigations to determine whether or not the Sellers' warranties contained in this Agreement are true, and has stated no objections to Seller (emphasis added, paragraph break omitted). Again, the question arises: If Edwards' right to inspect the aircraft terminated when he signed the Agreement on May 23, 2002, then why would he continue to have full access to the records, why would he conduct[ ] inspections and investigations to determine whether or not the Sellers' warranties contained in this Agreement are true, and why would he indicate to Corporate Air [a]t closing that he has no objections to the aircraft? ¶ 36 Of course, these are rhetorical questions. The point is that the foregoing provisions of the Agreement, taken together, are susceptible to two reasonable but conflicting meanings. We certainly cannot state, as a matter of law, based on the language, that Edwards' right to inspect terminated on May 23, 2002. Accordingly, we hold that the Agreement is facially ambiguous on this point and that it is necessary for a fact-finder to determine what the parties intended with regard to Edwards' right to inspect the aircraft. B. Closing Date ¶ 37 Aside from whether the Agreement permitted Edwards to inspect the aircraft after May 23, 2002, Edwards also contends that he rejected the aircraft within the timeframe permitted by the Agreement. Section 18 governs the closing date and states: This Agreement and the sale and purchase transaction shall close no later than fourteen (14) days, inclusive of weekends, from the date of execution. Closing of the aircraft purchase shall occur at an aircraft title company selected by Buyer. Closing of the sale of other assets shall occur at American Title and Escrow in Billings, Montana. Both closings shall occur simultaneously. Both parties agree to tender to the title companies all documents and monies necessary to the closing. Extension of this closing date requires the written consent of both parties. ¶ 38 The parties executed the Agreement on May 23, 2002. Fourteen days from that date was June 6, 2002. Edwards rejected BB-198 by letter dated June 19, 2002, and rejected BB-279 by letter dated July 3, 2002. These dates are clearly past the June 6, 2002 deadline. However, both parties acknowledge the language of Section 18 stating that the closing date can be extended by the written consent of both parties. While Corporate Air contends that there was no such extension and that the parties agreed to close on both the FBO and the two aircraft on May 30, 2002, Edwards Jet states that there are numerous writings in the record reflecting an executed agreement to extend [the deadline]. Accordingly, we turn to the question of whether the parties effectively extended the closing date. ¶ 39 Edwards Jet references a series of letters that allegedly constitute a written record of an agreement to extend the closing date. The first letter, dated June 3, 2002, from Corporate Air to Edwards Jet, states: This letter is to confirm that on May 30, 2002, an agreement was made concerning the financing Edwards Jet Center Montana, Inc. was to obtain from Key Bank. It is my understanding that both parties agreed that in the event Buyer could not obtain financing by 12:00 p.m. on Monday, June 3, 2002, Buyer would pay Seller interest in the amount of $328.00 per day. This per diem interest was to begin on Monday, June 3, 2002, and is payable that day and each day thereafter until financing from Key Bank is secured. ¶ 40 The next letter, dated June 4, 2002, from Edwards Jet to Corporate Air, acknowledges receipt of the June 3, 2002 letter and states, in pertinent part: Please allow this letter to confirm the agreement to pay $328.00 per day for each day that closing is delayed through the fault of the Buyer or Key Bank. We did not close on Monday because of Key Bank's delay. You are $328.00 to the good. Yesterday afternoon we were able to test fly the second airplane. Neither airplane completely conforms to the warranty that all systems are to be operational on the date of closing. We also need to accomplish a complete review of the log books now that the aircraft have been flown. ¶ 41 Another letter from Edwards Jet to Corporate Air dated June 4, 2002, discusses an inspection of BB-279 scheduled for the following day and notes that [i]t would sure help speed up the process if the flight manuals, the 337 Addendum to the flight manuals (flight manual supplements), together with the log books could be made available at [Edwards Jet Center's] shop tomorrow. A letter from Edwards Jet to Corporate Air dated June 11, 2002, states that Edwards Jet was arranging for translation of the log books [for BB-279] in light of the problem with the other aircraft. The letter also includes Edwards Jet's inspection report on BB-279. Finally, a letter from Corporate Air to Edwards Jet dated June 14, 2002, discusses loan financing documents and states: I would appreciate it if you could confirm to my office that you have received the package from Key Finance. If so, please proceed to close this transaction as soon as possible. ¶ 42 These letters suggest that the parties may have extended the closing date on the aircraft. Corporate Air's June 3 letter indicates that the parties agreed Edwards Jet would pay $328.00 per day if Edwards Jet could not obtain financing by noon that day. Edwards' June 4 letter confirms an agreement to pay $328.00 per day for each day that closing is delayed through the fault of the Buyer or Key Bank. Several letters discuss ongoing inspections on either side of the June 6 deadline; and Corporate Air's June 14 letter expresses a desire to close this transaction as soon as possible. On the other hand, Corporate Air provides a letter it sent to Edwards Jet, in which Corporate Air asserted that Edwards was in default for his failure to close and pay the full purchase price within fourteen (14) days of execution, as agreed. ¶ 43 We conclude that it cannot be said, as a matter of law, based on these letters, that the parties did or did not give written consent to extend the closing date as contemplated by Section 18 of the Agreement. As with the right to inspect, this is a disputed matter that must be resolved by a fact-finder.