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Leasing Agreements

Business clients do seem to get into difficulties with leasing agreements. The nice salesman speaks warmly of the attractions of leasing, and of the bright new machine which will soon smooth operations in your office. Everyone else does it, what can possibly go wrong?

Things are rarely that simple. A case in Birmingham in 1997, Danka Rentals Ltd v XI Software Limited (unreported), is a case in point. Despite, or possibly because of, protracted negotiations, the arrangement which was eventually entered into was seen quite differently by the two parties. The customer thought he was getting a new machine, the supplier thought not. Similarly there were substantial differences on issues of the financing arrangements, and even perhaps the identity of the parties and the relationships between the finance company and the original vendor of the machine. This reflects my own experience (at Swarbrick & Co) when once we were misled by a copier company who sold us what turned out, years later, to have been at best 'iffy'. On checking the original documentation, what was in our office was not what he had told the maintenance company had been installed.

The case is not untypical, and shows many of the disputes which arise in these circumstances and how they might be resolved.

There are some simple rules. First it should be clear to any customer that leasing agreements are detailed and very restrictive documents. They do differ significantly from company to company, and the different provisions need to be read and understood. Do not accept verbal assurances from salesmen about how the agreement will be interpreted.

If you do have a long series of negotiations it is usually worth having a working paper containing all the special terms which you think have been agreed by the vendor. In these days of word processors, and electronic communications, it is relatively easy to manage such documents. You will probably be spending several thousand pounds, and the additional care taken to make sure that you and the salesman are agreed on the promises made is well worth it.

In the nature of such agreements, the finance company never see the equipment and have no wish to see it and therefore have no wish to be responsible for whether or not it suits your purposes. Be clear on the precise model to be supplied and its specification, but you should act on the assumption that the leasing company will have no responsibility, save that what is delivered to you is the machine mentioned on the agreement. If it is not suitable for your purposes they will say that it is not their responsibility.

Similarly, there are often unclear boundaries between responsibility for the machine in general, and repairs and consumables. Be very clear precisely who is to provide what, under what terms, and in particular also you should check and have clear arrangements for future price increases.

All is not gloomy however. There are several ways in which the restrictions and exclusions in such contacts can be challenged. Sometimes these challenges will be successful and sometimes not. Please do not under estimate the complexity and subtleties involved. Last but not least, the costs of resolving these difficulties in Court are usually quite disproportionate to the cost of the equipment, and any losses you may suffer. Never rely upon the possibility of being able to sue. Litigation in this area is both uncertain and expensive.

Important: Please note that our law-bytes are retained for archival purposes only. The law changes, and these notes are often, now, out of date. You must take direct advice on your own personal situation and the law as it currently stands.
All information on this site is in general and summary form only. The content of any page on this site may be out of date and or incomplete, and you should not not rely directly upon it. Take direct professional legal advice which reflects your own particular situation.
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18 October 2013 42 18 October 2013