The Letter Of Intent

AVBUYER recently ran a feature article entitled Buying a Jet? Get your Letter of Intent Right! written by Gerrard Cowan.  The article featured expert advice from industry experts including the Founder and President of Aerlex Law Group–Stephen Hofer.  Steve’s comments follow.

Stephen Hofer, President of Aerlex Law Group, sees the LOI as one of the most critical documents in an aircraft purchase or sale transaction, second only to the Aircraft Purchase Agreement (APA) itself. That’s because a properly crafted LOI should make it relatively simple to draft the APA. However, Hofer warns against an overly simplified approach.

“I know there are many brokers who advocate for very simple LOIs – the so-called ‘cocktail napkin’ approach,” he says. “I have handled many aircraft acquisitions that were successfully closed over the years using the one-page LOI, but I am not a fan – in part because I’ve also seen would-be transactions crash and burn due to an inadequate or incomplete LOI.

“If an LOI is too vague in its drafting or fails to address important issues, it won’t necessarily represent the ‘meeting of the minds’ that is required to create a legally enforceable contract,” he warns.

“Sometimes this is only recognized after attorneys have started negotiating the APA, or perhaps even after the parties have already incurred significant expense to perform a preliminary visual inspection and initial records review, and placed a deposit into escrow.”

“If the negotiations ultimately collapse – and they sometimes do – both sides will have wasted each other’s time to no ultimate benefit.”

Hofer says that if clients and their brokers come to him before making an offer, he can work with them to clearly understand what they want to propose, and the terms and conditions they want in the LOI.

“My LOIs are not written on cocktail napkins, but they’re not as long as War and Peace either. They’re just long enough, and specific enough to say what my client wants to say. A good, smart, experienced broker has nothing to fear and everything to gain from working with a well-written LOI.”

You can read the full article on the AVBUYER website here.