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Sale of New Aircraft With Used Engine Supports Claim of Fraud

The Texas Court of Appeals in Dallas ruled this week that a buyer purchasing a new aircraft from the manufacturer made a submissible case of fraud against the seller when it introduced evidence that one of the aircraft engines had previously been used on another aircraft, and that this fact had not been fully disclosed to the buyer. Bombardier Aerospace Corporation v. SPEP Aircraft Holdings, LLC affirmed a judgment entered on a jury verdict of fraud, with an assessment of both actual and punitive damages against the manufacturer. The Court was unpersuaded by contract language in which the buyer agreed that it was making the purchase “as is,” where the buyer had been induced to sign the contract because of a fraudulent representation or concealment of information by the seller. The ruling also rejected the seller’s undisputed evidence that the repair history of the engine did not present a safety concern. Finally, the Court refused to enforce contract language precluding punitive damages, holding that a buyer cannot be bound by an agreement waiving exemplary damages if the seller commits fraud by nondisclosure.