Very lame end of lease situation

[mnewport]

I've got a lease for some manufacturing test equipment that just ended, and it's quickly turning ugly with the lease company. I won't name names, but their initials are American Capital Group.

First, the lease was supposed to be set up with a $1 buyout. When I originally looked at the test equipment, I had enough cash on hand as well as other sources of financing that I could purchase it outright. The leasing company sales guy talked me into taking the lease because of better interest rates, allocation of capital, blah blah blah. In the end the promise of the $1 rider was the key deciding factor for me.

Now that the lease is up, the leasing company is insisting that I pay a $13k buyout or return the equipment. The lease manager refuses to entertain the notion of a $1 buyout. Both the sales person AND the president of the test equipment manufacturer are furious with the leasing company over this, and have taken my side. Both are putting pressure on the leasing company, insisting that the original deal as they understood it included the $1 buyout.

To make things worse for me, the original equipment invoice lists five options that were installed in the test equipment. The lease company insists these five options are separate items that need to be returned along with the testing device. They won't entertain the notion that it's one device with five options inside it, which makes me worry that I'll be looking at a costly legal battle because of their misunderstanding.

What should I do? I've turned this over to my attorney, but I fear that I will be the loser in the end. I'm pretty sure that no matter what happens I can kiss the $5000 deposit I paid goodbye.

[stomachmonkey]

Sucks. Is the $1 buy back spelled out in the lease papers?

Sounds like you don't have any leverage on future business either.

[mnewport]

Sucks. Is the $1 buy back spelled out in the lease papers?

Since the leasing sales guy and the equipment sales guy were both pitching the $1 buyout to me, I (foolishly) assumed it was spelled out. My attorney says it wasn't spelled out in this case, but since we have two witnesses to the original transaction that are willing to be deposed in my favor, we may have a small chance of success.

I guess the bright side is that I'll never make that mistake again.

The thing is, this equipment manufacturing company and this leasing company do loads of deals together. From what the equipment guys tell me the $1 buyout is the way it's always done. I think that's why they're upset about this; they feel it's a bad reflection on them.

[skunked]

I had a similar situation recently however I was told "couple hundred bucks" at the end of the 4 year term however it was actually $2,800. I ended up buying the equipment since it had a current value of $6,500 however I felt mislead with the verbal end of term buyout figure. Of course the sales guys blame the financing company......

[fastfredracing]

I have done quite a few lease agreements with the 1 dollar buyout at the end . All of my transactions went smooth, and I still have all that equipment. I guess I will pay better attention if I ever do it again

[Tobra]

you are boned

[McLovin]

The lease is going to have an "integration clause" in it. That provision will say that the written agreement is the entire agreement between the parties, it supercedes any verbal representations, no verbal representations were made, you did not rely on any verbal representations, etc.

Standing alone, that is likely to kill you.

However, equipment leasing companies are notorious for their fraud, esp. when it comes to "end of term" issues. It's how they make their money.

I'd start investigating the company, start by simple googling, for complaints against them re this type of fraud (both informal complaints, and complaints filed in court). If you can get enough negative info on them, and raise enough of a stink, you might be able to work something out. I've seen leasing companies fight, and lose, big time.

Unlike most PPOT'er whose knee jerk reaction to just about everything is "hire a dozen lawyers," I dont' often say that, but any time a company enters into an equipment lease, it isn't a bad idea to pay a lawyer for a couple of hours of time to go through it and explain it. Equipment leases are pretty tricky, and they are highly designed to be misleading and make a fairly extreme rate of profit for the leasing company.

[Zeke]

Originally Posted by Tobra

you are boned

Maybe, but if he were in CA, verbal contracts are honored. Even in contracting. Ask me how I know as I won in court over a verbal contract agreed to by myself and another party who then refused to pay.

The best part is, I DIDN'T EVEN HAVE A WITNESS!! And he did and he still lost, twice as he appealed and I won.

Of course a lot of people say I missed my calling as a lawyer. (Maybe I just didn't heed that call )

[McLovin]

The only problem with that theory is he doesn't have a verbal contract, he has a written contract.

[Eric Coffey]

Originally Posted by mnewport

Now that the lease is up, the leasing company is insisting that I pay a $13k buyout or return the equipment.

Rather than spend (waste?) money on attorneys, why not just return the equipment, collect your deposit and find another source for what you need?

I'm guessing your situation is a bit more complicated than you describe, but at the end of the day, I would not want to conduct any business with a company trying to screw me over. YMMV.

[Zeke]

Originally Posted by McLovin

The only problem with that theory is he doesn't have a verbal contract, he has a written contract.

But with verbal amendments. A combination of written and verbal will stand in court here. I forgot where I read that, but if you need a citation, I'll get one.

Another way to put it is that one can't promise one thing and write down another for the purpose of deception, gain or whatever.

[Neilk]

Just to make confirm they are screwing you...

Can you calculate the negotiated price of all the equipment you leased- the total cost of the lease payments. If that gets close to $1 or less, then I would imagine they are trying to screw you. If the lease payments are are way less than the total cost, perhaps the terms were misunderstood and buy out was expected.

Do I make any sense? Good luck.

[McLovin]

Originally Posted by Eric Coffey

Rather than spend (waste?) money on attorneys, why not just return the equipment, collect your deposit and find another source for what you need?

I'm guessing your situation is a bit more complicated than you describe, but at the end of the day, I would not want to conduct any business with a company trying to screw me over. YMMV.

Because when he analyzed and priced the lease, he took into account that he could buy the equipment for $1 at the end of the lease term.

Based on that, he agreed to make monthly payments that were much, much higher than he would have made, if he had known there was no $1 option.

Essentially, he made payments in amounts assuming that he was BUYING the equipment.

So yes, he could return the equipment and walk away, but by doing that, he's been screwed.

[McLovin]

Originally Posted by Zeke

But with verbal amendments. A combination of written and verbal will stand in court here. I forgot where I read that, but if you need a citation, I'll get one.

Another way to put it is that one can't promise one thing and write down another for the purpose of deception, gain or whatever.

No, that is exactly the opposite of what is correct.

In general, for fully integrated written agreements, you CANNOT use evidence of "verbal" agreements that supplement or contradict the written agreement.

I don't need a citation. It's called the parol evidence rule.

It has a purpose. People need to be able to rely on written contracts. If written contracts could easily be supplemented or contradicted by supposed "verbal" agreements, contracts wouldn't be worth the paper they are written on.

There are exceptions, but they are tough and generally do not work. Esp. when you sign a contract that specifically says it is the entire agreement between the parties, and specifically says there are no verbal agreements "supplementing" it. (You can be 100% sure his contact has this provision).

As far as your last sentence, in general, people who sign a written contract are charged with the responsibility of having read it. "He told me X, and I know the contract says Y but I just relied on what he said and didn't bother to read the contract before I signed it" won't work.

[mnewport]

I have documentation to prove that this was a $1 buyout lease, but it's in the form of email communication.

Also, I have copious emails and correspondence between the manufacturing company and the leasing company that show the leasing company's original intent was that this is a $1 buyout lease.

I'm in Chicago, the lease company is based in California.

My attorney seems to think we have somewhat of a chance here. I'm worried though.

The total cost of the lease payments is somewhere around $52,000. The cost to buy outright was somewhere around $35k.

[Zeke]

Originally Posted by McLovin

No, that is exactly the opposite of what is correct.

In general, for fully integrated written agreements, you CANNOT use evidence of "verbal" agreements that supplement or contradict the written agreement.

I don't need a citation. It's called the parol evidence rule.

It has a purpose. People need to be able to rely on written contracts. If written contracts could easily be supplemented or contradicted by supposed "verbal" agreements, contracts wouldn't be worth the paper they are written on.

There are exceptions, but they are tough and generally do not work. Esp. when you sign a contract that specifically says it is the entire agreement between the parties, and specifically says there are no verbal agreements "supplementing" it. (You can be 100% sure his contact has this provision).

As far as your last sentence, in general, people who sign a written contract are charged with the responsibility of having read it. "He told me X, and I know the contract says Y but I just relied on what he said and didn't bother to read the contract before I signed it" won't work.

Well, it seems I've been arguing issues with regard to law quite a bit lately and I'm tiring of it. So, in this case, I'm going to defer. You seem to know quite a bit about legal issues yourself. If you're not an attorney, perhaps you studied law.

I'm no match for even an armchair lawyer. Wait, all lawyers use arm chairs.

[Zeke]

I just can't resist.

David M. Tomer v. Hollister Associates, Inc.
E-mail Exchange May Result in Contract Amendment : Good Company : Sheehan Phinney Bass + Green

But, that's in MA.

[RWebb]

I don't know if Calif. law prohibits fully integrated clauses in the presence of oral agreements (or inducements). If it does, then state law controls as it is not possible to contract around public policy.

I'd be surprised if it does tho, and more surprised if it protects business contracts, not just consumer contracts (and this sounds like the former).

They may just have left out a fully integrated clause -- I smacked a local rip-off construction co. real good a couple of years ago on that issue. I don't want to name names, but avoid Stonewood Construction in Eugene -- actually, you should avoid most contractors in Eugene: Rainbow Valley, Hardscape, yada yada. I found out that contractors who are kicked out of biz in Calif. often move up I-5 and cheat people here. I also found one company that was sued by the Girl Scouts! How bad do you have to be to rip off the Girl Scouts?

Your attorney may also be able to achieve a settlement, as they may not want to be sued, even if they think they can win.

Good Luck.

[McLovin]

Originally Posted by Zeke

I just can't resist.

David M. Tomer v. Hollister Associates, Inc.
E-mail Exchange May Result in Contract Amendment : Good Company : Sheehan Phinney Bass + Green

But, that's in MA.

That's a completely unrelated issue.

In the case you linked to, one of the parties claimed a SUBSEQUENT written amendment to their contract.

That's not really controversial. The parties to a written contract can, of course, later agree to amend the contract by another writing. No one in that case is claiming that the "real" terms of the written contract are something different than what is written in the contract. (The reason they posted it on their website is it addresses an interesting issue of whether or not email exchanges can legally be a "writing" for purposes of a subsequent written amendment to a contract).

In our lease case, the OP would be claiming a prior "verbal agreement" (prior to signing the contract) that contradicts or supplements the written agreement. It's not a "subsequent amendment" case at all. A completely different legal scenario.

[McLovin]

Originally Posted by RWebb

They may just have left out a fully integrated clause --

Personal property equipment form leases are among the most highly "lawyered" documents in the business world.

And, these "verbal promises" are a key to these companies getting business and making money.

You can be 100% sure that his lease has an integration clause -and one that have been vetted word by word for maximum enforceability. The leasing company and their lawyers view it as just about the most impt provision of the agreement.