## Facts

- Austrian Airlines Oesterreichische Luftverkehrs AG (seller) and UT Finance Corp. (buyer) entered an Aircraft Purchase Agreement (APA) for a used Airbus A310 for approximately $32 million, governed by New York law and the UCC.
- The transaction arose within a broader commercial relationship in which a United Technologies affiliate sought to secure Austrian’s selection of affiliated jet engines for new aircraft, and UTF agreed to buy a used aircraft later at a specified price.
- The APA made UTF’s obligation to purchase contingent on multiple detailed conditions precedent concerning the aircraft’s condition, documentation, and regulatory eligibility.
- The APA made time of the essence, with delivery targeted for March 2004, and provided that UTF had no obligation to purchase if the conditions were not satisfied by the contractual deadline.
- Key conditions included that, at delivery, the aircraft be fully eligible for an FAA Certificate of Airworthiness and capable of 180-minute ETOPS operations.
- Between contract execution and the delivery date, the used-aircraft market declined substantially, increasing UTF’s incentive to insist on strict compliance.
- Austrian tendered the aircraft, but the aircraft did not satisfy major contractual conditions by the required time, including FAA airworthiness eligibility and ETOPS capability.
- UTF rejected the tender and refused to close, citing nonfulfillment of conditions precedent.
- Austrian sued for breach of contract, arguing UTF rejected in bad faith and used technical objections as pretext; the case proceeded to a bench trial.
- After Austrian’s case-in-chief, UTF moved for judgment on partial findings under Federal Rule of Civil Procedure 52(c).

## Issues

1. Whether Austrian satisfied the APA’s conditions precedent—especially FAA airworthiness eligibility, ETOPS capability, and timely delivery—triggering UTF’s duty to purchase.
2. Whether UTF’s rejection of the tender in a sharply declining market constituted bad faith under the UCC duty of good faith.
3. Whether UTF waived strict compliance with the conditions, or whether usage of trade/course of performance limited UTF’s right to insist on exact compliance.

## Decision

- The court granted UTF’s Rule 52(c) motion and dismissed Austrian’s claims after Austrian’s case-in-chief.
- The court found Austrian failed in major respects to satisfy conditions precedent to UTF’s obligation to purchase, including the FAA airworthiness and ETOPS requirements by the contractual deadline.
- The court held UTF did not act in bad faith by insisting on strict compliance and rejecting a nonconforming tender, even if market conditions made the deal economically unfavorable.
- The court rejected arguments that UTF waived the conditions or that industry custom displaced the APA’s express right to reject nonconforming tender.

## Legal Principles

- When a contract makes performance expressly contingent on conditions precedent, the counterparty’s duty does not arise unless those conditions are satisfied by the time required.
- In a merchant sale governed by the UCC, the duty of good faith does not negate clear, negotiated contract terms allocating risk and permitting rejection when specified conditions are unmet.
- A buyer’s economic motive to avoid an unfavorable bargain does not establish bad faith where rejection is based on actual nonconformity and an express contractual right to refuse the tender.
- Usage of trade and course of performance cannot override explicit contractual language authorizing rejection for failure to meet defined conditions.

## Conclusion

The court enforced the APA’s detailed, time-sensitive conditions precedent for a high-value aircraft sale and held that UTF lawfully rejected Austrian’s nonconforming tender; the UCC duty of good faith and asserted industry custom did not prevent UTF from insisting on the contract’s express requirements.


Austrian Airlines Oesterreichische Luftverkehrs AG v. UT Fin. Corp., 567 F. Supp. 2d 579 (S.D.N.Y. 2008)