Lessors v Nasair
The critical importance to aircraft lessors of a well drafted entire agreement clause and the inadmissibility of negotiations as an aid to construction was demonstrated in a judgment given on 27 February 2019 by the High Court in London (HHJ Pelling QC).
- This was a dispute under an operating lease as to whether the obligation of the lessor to contribute to performance restoration of engines was limited by the express terms of the lease.
- The parties negotiated an extension of the lease resulting in a formal written amendment that incorporated the terms of the lease which contained an entire agreement clause.
- In the course of negotiations for the extension of the lease the lessor agreed in principle to the idea that the lessee might supply a suitable substitute engine instead of performance restoration.
- When the lessor elected for performance restoration the lessee claimed that the lessor had given up the right to do so.
- The lessee asserted various causes of action including collateral contract and unjust enrichment that the lessor’s contribution obligation to performance restoration was unlimited.
- The lessee also sought to rely on the negotiations for the formal lease extension as relevant to the construction of the lease extension.
- The lessor countered with the entire agreement clause as preventing the lessee from making any such claims and that its obligation to contribute to performance restoration was strictly limited by the terms of the lease.
- The lessor also argued that reliance on what may have been said in the course of negotiations was generally inadmissible save in rectification claims which did not apply here
The lessor applied for summary judgment/ strike out against the claims made by the lessee which was granted by the High Court in favour of the lessor.
It held that the entire agreement clause was incorporated into the lease extension agreement and this prevented reliance on other causes of action.
It also held that the lessors obligation to contribute to performance restoration was strictly limited by the terms of the lease as the lessor contended.
Philip Shepherd QC and Erin Hitchens of XXIV Old Buildings were instructed by Bree Taylor of Fladgate LLP acting for the successful lessor.