Airport Business - 37

FBO MATTERS
a contract easier, though to the uninitiated, it may initially
create confusion. I'll provide an example. In a hangar sublease
agreement, when the subject aircraft is introduced in the contract,
it may be described as follows: The subject aircraft is a Cessna 172,
bearing FAA registration number N123AB, hereafter the ("Aircraft").
From this point forward in the agreement, the capitalized term
Aircraft means that specific Cessna 172.
As patterns emerge from reading contracts repeatedly,
confidence grows. Legal terms also come into focus, such as
commercially reasonable efforts and best efforts, which are two
very different standards of effort incidentally. Likewise, various
standards of conduct such as negligence, gross negligence and
willful misconduct begin to become familiar. Provisions that
mitigate risk amongst the parties (or "Parties" as it says in the
contract) such as insurance requirements, indemnification, and
others are similarly structured. These patterns are what makes
understanding contracts easier than they look. Remember, no
one has ever won a Pulitzer Prize for creative contract writing.
By definition, a contract is structured to remove ambiguity
between parties, not add to it.
As a result, virtually every provision with a contract will
also fall into one of three decision-making buckets for the
FBO manager to interpret and decide how to proceed. The
first bucket is a business decision. A business decision is exactly
what it sounds like, and it's up to the business to make the
call, not an attorney. This may include certain FBO services or
products and the attendant pricing of each in the contract. Next
is a risk-based decision, which may include involvement from
your insurance broker and/or attorney. An example would be
a proposed change to an insurance provision, such as a waiver
of subrogation. The last bucket is a true legal decision, which
is also a risk-based decision, but - returning to the wise use
of counsel - requires an attorney, not necessarily an insurer.
An example of this would be say, a proposed change in venue
to a different state in which a disagreement over the contract
would be handled. In such a case, it is still the business' call if
they choose to accept a change in venue. The attorney's role is
to advise their client (your FBO) what the associated risk is in
a change in venue and make a recommendation.
Lastly, once a firm grasp on the basics of a contract is in hand
including what decisions can be made solely by the FBO, and
what decisions are better made after consulting counsel or your
insurer, you're ready to execute on a tried-but-true contracting
process with a customer. For the purposes of this example, let's
assume the "deal," including the pricing of services and products
to be provided, is already verbally agreed to between the FBO
and customer.
The first step in the contracting process is for the FBO to
follow with either a term sheet, or a letter of intent (LOI) to the
customer. Binding or non-binding, the point of leading with
a term sheet, instead of a contract, is to negotiate the business
points of the deal up front. That way, when the deal points are
agreed to, they can be inserted into the contract cleanly, allowing
both parties can concentrate on the agreement itself. After term
sheet acceptance, the customer should be provided with a draft
contract, already pre-populated with the agreed-upon pricing
and deal points, as well as all identifying aspects of the customer
relevant to the contract.

#

1

BUSINESS
DECISION.

A business decision is exactly
what it sounds like, and it's up
to the business to make the
call, not an attorney.

2

#

3

#

RISK-BASED
DECISION,

which may include
involvement from your
insurance broker and/or
attorney.

TRUE LEGAL
DECISION,

which is also a risk-based
decision, but -returning to the
wise use of counsel- requires
an attorney, not necessarily
an insurer.

After a few days, or weeks, the customer might send back the
same agreement, except redlined by themselves or their attorney.
As it arrives in your inbox, embrace the moment. This is why
you practiced and read all those painfully long contracts the past
few months, because instead of simply hitting "forward" and
sending to an attorney to review and counter, you pour a cup
of coffee, and begin your review. It's only after your review and
redlines do you send the agreement to your attorney to finalize
it. Once finalized, you're ready to send it back to the customer
as a ready-to-sign agreement.
Despite the potential pitfalls, taming the contracting process
can be enjoyable (hereafter "Fun"). 

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Airport Business

Table of Contents for the Digital Edition of Airport Business
