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The BUSKLAW April Newsletter: Pulling Apart the Purchase Agreement for the ICON A5: "The Jet Ski with Wings"

The ICON A5 is an amphibious "light-sport aircraft" that is marketed primarily to adventurous amateur pilots with deep pockets (and spacious home garages in which to store their ICONs). The plane has a recreational focus; it can seat only two, has limited load capacity, and isn't intended to go very far. The cost of the plane was $139K when first introduced in 2006 but is now $389K for a "fully-loaded version."

YouTube is full of videos showing how much fun you can have with an ICON A5 (especially with water landings and take-offs), bringing to mind the "jet ski with wings" analogy. So the ICON A5 is perhaps the ultimate high-tech, outdoor adult toy (unless you're afraid of heights). There have been several fatalities with the A5, but these apparently resulted from pilot error in one case and reckless flying in another rather than from mechanical defects or design flaws. 

The ICON A5 Purchase Agreement (including the Operating Agreement as Exhibit B) may be freely downloaded from the ICON Aircraft, Inc. website. Because folks have criticized ICON for these one-sided contracts in the past, I decided to review the circa 2016-2017 (and supposedly more user-friendly) versions and evaluate them from a structure, style, and content perspective. Here's what I found:

Structure
Lawyers don't often worry about how a contract "looks and feels" on the page, but they should. Font choice and size, text justification, kerning, page margins, numbering schemes and "waterfall" text (long paragraphs with no breaks) adversely affect a contract's readability. If the writing is too dense, the less likely it will be for a deal to be consummated. Contract structure matters. 

The ICON Purchase and Operating Agreements are poorly structured, for example:
> The font is too small, giving a new meaning to the term "fine print."
> Kerning issue - the space between the characters is inadequate. 
> The text is fully justified but should be left-margin justified for easier readability.
> The Agreements confusingly refer to both "Sections" and "Paragraphs" without explaining a reason for that distinction. 
>The Agreements put key provisions in CAPS (again affecting readability) when bold text is sufficient. And there's no need to put the paragraph headings in underlined CAPS. PUTTING TEXT IN CAPS IS SHOUTING, AND NO ONE APPRECIATES THAT!  AND BOLD TEXT IN CAPS IS WORSE!
>Romenettes ("i," "ii," "iii," etc.) are used that are non-intuitive. 
> Much of the Operating Agreement's legal content could be included in the Purchase Agreement; the Operating Agreement could be shortened and simplified as a result. There's no reason to say the same thing twice - once in the Purchase Agreement and again in the Operating Agreement. 

Style
The style of a contract is whether the plain language is used rather than archaic, ambiguous, and confusing legal jargon.

The ICON Purchase and Operating Agreements are rife with legal jargon, for example:
> Use of RECITALS with multiple "WHEREAS" clauses and completely unnecessary consideration recitations.
>Unnecessary capitalizations (e.g., "Parties," "Paragraph," "Agreement,").
>Using the word "executed" when "signed" is intended.
>Use of archaic legalisms (e.g., "IN WITNESS WHEREOF").
>Use of the confusing "and/or" term and redundant phrases like "among other things" and "payment by check will not be deemed received until final funds have cleared the issuing bank."

Content
The content of a contract is judged on whether it efficaciously accomplishes the intended legal and business purpose. In ICON's case, the purpose is twofold: first, to create a legally-binding ICON A5 aircraft purchase obligation; and second, protect ICON from liability for property damage or death resulting from the A5's ownership and operation. 

The ICON Purchase and Operating Agreements contain several ambiguous provisions that don't protect the company but are likely to trouble a potential pilot/purchaser:
> The Agreements contain broad liability release and covenant not to sue provisions that include ICON'S negligence, but these provisions will be deleted if the customer agrees to pay $10K more for the aircraft. But $10K more is only a mere 2.6% increase in the cost of the plane! Why not simply exclude the broad liability exclusions from the agreements and increase the cost of the plane to begin with? This would help simplify the contract and make the deal much more palatable to potential ICON A5 purchasers. 
>At the aircraft sale closing, ICON will deliver the "then-current" A5 Limited Warranty. If I'm the buyer, I'd want a representation that the Warranty delivered at the closing won't be any less favorable to me than the Warranty that I reviewed when I signed the purchase agreement. 
>As stated in the agreement, ICON may delay the sale closing date indefinitely (but must adjust the purchase money deposit due dates). Buyer should have the right to cancel the purchase agreement (and receive a full refund of their deposit) if ICON delays the estimated closing date by more than "X" days. (30 days would be typical.) 
>Buyer acknowledges that the A5 is not "suited or authorized...for aerobatics." The buyer should ask that "aerobatics" be defined since part of the appeal of flying the aircraft is that it can be used for fun, arguably including "aggressive flying." 
>Buyer understands that it is "receiving an early production run aircraft and as a result, service bulletins may initially be frequent, and that ICON's service network is not yet fully developed." The buyer should demand this sentence be deleted because the aircraft was first marketed in 2006 and the ICON service network should be fully developed (in the U.S.) by now. (If the service network isn't fully developed, the gaps should be identified.)
>I have several "inside baseball" criticisms better discussed between lawyers. 

The purchase and operating agreements show that ICON is very sensitive about its reputation. It doesn't like negative publicity, including reports of accidents involving its aircraft. And ICON recognizes that it has liability exposure to amateur pilots looking to have fun in an aircraft that can cause trouble; there's little chance of successful legal action against ICON for death, injury, or property damage resulting from the plane's use or ownership. So if you buy an ICON A5, you are "joined at the hip to ICON" for as long as you own the plane (and you can only re-sell it to an ICON-approved buyer). Caveat emptor. 

Conclusion
ICON's purchase and operating agreements aren't acceptable from either a structure or style view - they are over-lawyered. The sleek lines of the ICON A5 aren't carried over to their contract documents. Their content is generally acceptable but should be reworked and reorganized. This contractual renovation wouldn't be a trivial undertaking; however, it could be accomplished without reducing the protection that the contracts' risk-shifting provisions afford to ICON. And here's the upside of a clear and concise ICON A5 purchase and operating agreement: selling more airplanes! 

I plan to send ICON a link to this post to see if they care to respond to this constructive critique, and I'll let you know if they do. 
If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is www.busklaw.blogspot.com and my website is www.busklaw.com. And my email address is busklaw@charter.net. Thanks!

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