Important result for Fladgate Aviation team: Lease terms upheld

Our team:

The Fladgate Aviation team has secured an important result for an aircraft leasing company facing a claim by an airline lessee for the full costs of a performance restoration of engines. The issue was whether the airline could circumvent the strict terms of the lease which limited the leasing company’s liability to contribute to the sum in the maintenance reserve. The airline claimed it had been pressed to go through with a performance restoration despite there being a “collateral agreement” or alternatively a promise or representation that it would not need to do so. This alleged collateral agreement or promise/representation was said to have arisen in the course of pre-contractual discussions between the parties while an extension to the lease was being negotiated.

The leasing company’s position was that pre-contractual discussions were not admissible and were irrelevant because the culmination of those discussions was a detailed written agreement. The lease had an Entire Agreement clause by which the parties had agreed expressly that the lease was the entire agreement between them and they acknowledged expressly that no representations or promises had been made and no other agreements had been entered into. The Entire Agreement clause had been adopted in the lease extension that the parties concluded.

The leasing company applied to strike out and/or enter summary judgment on the airline’s claim for the full costs of the performance restoration. HHJ Pelling QC agreed with the leasing company’s position. The Entire Agreement clause meant that it was “unarguable” that there could be a collateral agreement or any promise or representation that had binding effect.

This decision will be of great interest to leasing companies. Entire Agreement clauses are fairly standard in leases but not all are drafted as thoroughly as they could be. Further, it is worth thinking about whether your lease extensions/variations contain a well drafted Entire Agreement clause or expressly incorporate any Entire Agreement clause contained in the main lease that will protect you from claims over things said in emails which were never intended to be more than a proposal in the course of a negotiation.

If you would like further information about the judgment, please contact Bree Taylor.

The members of the Fladgate Aviation team on this case were Bree Taylor and Reece Davison. Fladgate LLP instructed Philip Shepherd QC and Erin Hitchens of XXIV Old Buildings.

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