The author was recently involved in a dispute between a new client (“client”) and a company the client believed was a supplier of equipment. Instead the client discovered it was in a dispute with a finance company and the equipment supplier no longer had any interest or obligations.

  The client had visited a trade show and saw some new equipment. The client decided to acquire the equipment for one of its locations. The supplier had several different options for acquiring the equipment. One option was to purchase the equipment. Another was to lease the equipment for several years with an option to purchase the equipment at a substantially reduced price at the end of the lease.

  The client decided a lease would be financially more beneficial than using current funds or borrowing the money to purchase the equipment. In addition, the client thought that if the equipment did not work out as anticipated the lease could be terminated.

  The client was provided with a document that was titled “Lease Agreement” but in fact it was a lease and financing agreement. The author did not review the agreement prior to being retained to handle the dispute. The client either was misled about the agreement or did not understand it.

  While the agreement covered the equipment, the agreement specifically indicated there was no warranty or representation that the equipment was fit for the purpose intended. The Lease Agreement provided for payments to be made to a box number at a different location from the supplier, that had been established by the finance company.

  The equipment did not operate as expected and the client notified the supplier it was terminating the lease and requesting the supplier to pick up the equipment. At that point the client learned that the supplier was not responding to the request as it had already been paid and the finance company was now the controlling party. When the client stopped payment, the finance company exercised its rights under the agreement, requested full payment of balance due on the lease and refused to take back the equipment.

  Unfortunately, the law favored the finance company, though there was a basis for a claim of misrepresentation and possibly fraud. The dispute was settled at a lower amount and the client retained the equipment. The moral of the story is to be careful what you sign no matter what the title states. Also, read any legal document carefully and it probably is prudent and less expensive to have any legal document reviewed by your attorney.

  This article is for the information of subscribers and does not constitute legal advice about this subject. All subscribers should accordingly consult with their own attorney to make sure they are in compliance with the laws in their state.