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Equipment Leases: When Can You Get Out of Them? What you need to know about contract law and how it applies to your leased office equipment

By Joan E. Lisante

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Q: Twoyears ago, my company leased a printer-which could not print on thecardstock the salesman said it could. We then leased a differentprinter from the same company, and payments were high because itessentially tacked on the remainder of the previous lease. Thelease warned us about what would happen if we stopped payment. Wehave a year and a half left, at $839 a month, and no longer wantthe printer. Can we get out of the lease?

A:Although there's not a simple yes or no answer, yourpredicament is fairly common. Can you ditch this contract? Itdepends on whether:

Resource Guide
Get the lease you want with Negotiating Business Equipment Leases byRichard M. Contino.

Any contract terms are so unfair, it might allow you tocancel.
Promises made to you about the equipment were oral orwritten.
You backed up the company's lease with a personalguarantee.

First, a whirlwind lesson in contract law. Some contracts arevoidable (can be cancelled). Situations include:

Illegality. If you signed acontract charging 49 percent annual interest on a loan, state andfederal regulations would make it illegal (andunenforceable).
Blatant unfairness. If a dealis too one-sided, a court can refuse to enforce the contract, orcan take out the offensive section (if possible) and enforce therest.
Misrepresentation. Example:"This car, with side-impact protection, can hit a redwood at100 mph, and no one will get hurt." A misrepresentation thatpersuades you to sign a contract is always suspect.
Significant mistake ormisunderstanding.
Oral promises. Promises notincluded in a written agreement are usually disregarded.

The salesman goofed on the first printer, but substituted onethat fit your needs. So misunderstandings related to the firstprinter were addressed.

Let's look at other defenses: Is your monthly paymentexorbitant, compared to similar printers? If so, you might attackthe contract on grounds of blatant unfairness.

Read your contract carefully. The Uniform Commercial Code (UCC),which governs most sales/leases of merchandise in the UnitedStates, includes a warranty guaranteeing that an item is fit forits intended purpose. If you can show that neither printer was upto the task, you might prevail. Caution: the seller/lessor canexclude this warranty.

It's going to be tough to get out of this, especially if youpersonally guaranteed the lease. I'd recommend these defensivemeasures:

Try negotiating a lower payment or shorter lease term.
If the lessor won't deal with you, get a mediator.
Hire a local business attorney to negotiate for you and check outyour legal options.
Figure out whether there's any other ammunition (aside from notwanting to make the high monthly payment) that will allow you toget out of the lease.
If all else fails, finish the lease or find someone to take itover.

And in the future, before you lease or buy office equipment:

Closely read the contract. Ask questions if there's anythingyou don't understand.
Run the equipment through a dress rehearsal before you commit toit.
Check with your accountant or CFO to see whether leasing is thebetter option.
Shop around. Like prescription drugs, there's often a widerange of costs.
Unless you need this item for a long time (and it won't becomeobsolete), get the shortest lease term you can.


Joan E. Lisante is an attorney and freelance writer who lives inthe Washington, DC, area. She writes consumer-related legalfeatures for The Washington Post, the Plain Dealer,the Spokane Spokesman-Review and the Toledo Blade(Ohio). She is also a contributing editor to LawStreet.com and ConsumerAffairs.com.
In her practice, Lisante is counsel to ConsumerAffairs.com andwas counsel for Zapnews, a fax-based customized news service forradio stations. Previously, she served as Assistant DistrictAttorney in Queens County, New York, and Deputy District Attorneyin Nassau County, New York.


The opinions expressed in this column are thoseof the author, not of Entrepreneur.com. All answers are intended tobe general in nature, without regard to specific geographical areasor circumstances, and should only be relied upon after consultingan appropriate expert, such as an attorney oraccountant.

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