On 17 April, the Court of Appeal ruled that Olympic
Airlines' signature of an acceptance certificate at delivery of
an aircraft under an operating lease prevented Olympic from
claiming damages from its lessor when the aircraft later turned out
not to have complied with the delivery conditions in the lease.
The court decided that:
it was desirable
for parties to an aircraft lease to be able to agree on a simple
contractual mechanism to determine – finally and at delivery
– whether the aircraft complied with the lease for all
purposes. This was because the complexity of modern passenger
aircraft was such that, without that mechanism, the parties might
face years of uncertainty as to who was responsible for defects in
the aircraft; and
effect of the clauses in the lease designed to ensure that Olympic
took the aircraft "as is, where is" – particularly
a conclusive evidence clause that worked with the signed acceptance
certificate – was indeed conclusively to determine that
question between the parties to this lease.
The judgment quotes most of the clauses in the lease designed to
make the lease an "as is, where is" lease. However, it
focuses in particular on the text of the acceptance certificate and
on the conclusive evidence clause triggered when Olympic signed
that certificate. .
The key text in the acceptance certificate was:
"Lessee hereby confirms to Lessor that ... Lessee
irrevocably and unconditionally accepts and leases from Lessor, in
accordance with the provisions of the Agreement, the Airframe, as
more particularly defined in the Lease Agreement ..."..
The key text in the conclusive evidence clause was:
"DELIVERY BY LESSEE TO LESSOR OF THE CERTIFICATE OF
ACCEPTANCE WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE
THAT LESSEE HAS EXAMINED AND INVESTIGATED THE AIRCRAFT, THAT THE
AIRCRAFT AND THE AIRCRAFT DOCUMENTS ARE SATISFACTORY TO LESSEE AND
THAT LESSEE HAS IRREVOCABLY AND UNCONDITIONALLY ACCEPTED THE
AIRCRAFT FOR LEASE HEREUNDER WITHOUT ANY RESERVATIONS WHATSOEVER
In the earlier High Court ruling, the judge had construed the
conclusive evidence clause narrowly. He said it simply meant that
the leasing of the aircraft had begun and that Olympic could not
refuse to take delivery of the aircraft.
Taking a more commercial approach, the Court of Appeal said the
clause went further and prevented Olympic from arguing the aircraft
did not comply with the lease – thereby stopping Olympic from
claiming damages from ACG for failing to deliver the aircraft in
the condition required by the lease.
This is a very welcome decision as the court has given effect to
the understanding of most people in the aircraft finance and
leasing industry as to how this clause should be interpreted.
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