Jason Dickstein, president of the Washington Aviation Group, warns how contracts can be the hidden daily trap in repair station work

How often do you think about contract law? Contract law is important to repair stations because everything you do is a contract. When you purchase tooling, that is a contract. When you purchase materials, that is a contract. And when you agree to repair a customer’s articles, then that is a contract, too.

When things go right in a transaction, you don’t really have to think about the contract. Both sides got what they expected. But when things go wrong, that is when you want to have a contract that allocates rights appropriately. When things go wrong, that is when repair stations tend to test their contract terms; and that is when you most need your contract terms to fully support your expected position.

Manage  your communications

Contracts can be oral or written. While oral contracts are enforceable, there can be problems with ascertaining the true intent of the parties and the precise parameters of their agreement. Attorneys prefer written contracts because it is easier to parse the contract language and identify the terms that apply to the arrangement.

This doesn’t mean that your contract needs to be on 14-inch-long yellow paper with numbered paragraphs to be enforceable. Any writing will do. The modern trend is for courts to accept emails as written evidence of the parties’ intent, so in many cases, an exchange of emails can form a contract.

It is important to manage your communications so that they yield clear descriptions of the rights and responsibilities of the parties.

Under modern contract law, contracts are formed by an offer and acceptance. Under the law that typically applies to the sale of services both in the US and in many other countries as well, the offer and acceptance must be mirror images; this means that they must both contain the same terms. Most jurisdictions will also allow an offer to be accepted by conduct – so if you get a repair order from a customer with their component, and then you repair it according to the terms of the repair order, then the repair order can be treated as an offer and your conduct (the performance of the requested repair) serves as the acceptance.

The best way to assure that both sides agree to the same terms is to have them both agree to the same document. In aviation repair, this may be accomplished by the repair station generating a work order or pro forma invoice that describes the work to be performed (this is the offer, and asking the customer to sign and return the document to authorise the work (this is the acceptance). Now, both parties have agreed to the scope of work to be performed. When this is done, it is helpful to include language specifying that this document supersedes all prior communications. That way, prior inconsistent communications will be overridden. This is especially important where the scope of work changes.

Why would the scope of work change before the contract is established? Some sample reasons might be because the customer could ask for a specific repair, and the initial inspection of the component could reveal that (a) the customer was wrong and a different repair is needed, (b) the customer’s order was incomplete and another repair is also needed to achieve an airworthy condition, or (c) additional work could be indicated by an airworthiness directive or a service bulletin.

In each case the repair station needs to offer to perform the substitute/ additional work and the customer needs to accept that offer. Once the customer has authorised performance of that additional work, it makes sense to explicitly state that prior requests are superseded so there is no confusion about which offer was accepted, and by whom.

Carefully review the terms and conditions

Read contract terms carefully, especially if they were drafted by your business partner and not by your own company. It may seem like wasted time to carefully review the terms and conditions associated with your contract but remember that the purpose of the contract is to protect you when things go wrong.

The contract terms should reflect the mutually agreed standards for amicably resolving disputes, so that those disputes can be resolved according to the contract terms. If something could reasonably go wrong, and you don’t like the way that the contract resolves that event, then that may be language that should be changed before you agree to those terms and conditions.

Look especially for terms that you know are contradicted by your business model. For example, it is normal today for a repair station to use DER repairs and/or PMA parts in order to offer extra value for their customers; but we continue to see legacy contract terms that exclude these sorts of governmentapproved solutions.

With the recent supply chain issues, we have heard about repair stations begging airlines to approve PMA parts, because the OEM part is simply unavailable, and the unavailability is impacting turnaround time. Make sure you are not contacting away your rights to use DER repairs or PMA parts because in today’s environment of supply chain issues risks, you need to make sure that all of your options are available – especially if the customer has a strict turnaround time expectation.

Check for conformity

Managing contracts is about more than just managing the communications that lead to a contract. Repair stations should be examining each potential contract to ensure that the repair station is capable of supporting the contract.

Special areas of emphasis for repair stations include ensuring that the proposed work falls within the repair station’s ratings and operations specifications (op specs). Ratings creep has been a problem in the past, where a repair station continues to add capabilities and those capabilities eventually outstrip the repair station’s ratings and operations specifications.

This is especially insidious in cases where the repair station has an internal audit that ensures it has adequate personnel, training, data, tooling, and facilities to support the work, but that internal audit fails to examine the relationship of the work to the ratings and op specs.

If the repair station fails to check for conformity to its ratings and op specs, eventually it can add something to its capabilities list that falls outside of the scope of the ratings and op specs. The repair station’s capabilities have then grown beyond the scope of the repair station’s legal limitations.

If you perform a pre-project audit and find that the project falls outside of your ratings and op specs (but within the technical capabilities of the facility), then you should work with your principal maintenance inspector to update the ratings and op specs to ensure they continue to support the scope of work that you intend to perform.

This should be considered an element of ‘contract review’ in which your personnel are judging whether an offered work scope will fall within your physical and legal limits before that offer is provided to a customer.

This sort of early contract review will also help you to plan for expected workflow, ensuring that you have adequate personnel and materials available to support your efforts.

This feature was first published in MRO Management – July 2024. To read the magazine in full, click here.