You have chosen the equipment leasing to finance new equipment. This is an important step. Now it's essential to fully understand the implications of the contract you are about to sign or have already signed. This document is more than just a formality; it defines a precise legal framework that sets out your responsibilities (those of the lessee, also known as the creditor) as well as your protections throughout the lease period. Ignoring or misinterpreting certain clauses can have significant consequences for your business. The aim of this article is to explain the key points of this contractIt focuses on your active role in setting it up, your major obligations during its term, and the essential rights that protect you.
Setting up the contract: your active role
Contrary to popular belief, you are not simply a passive user in a leasing operation. From the outset, you play a decisive role.
The choice of equipment and supplier: your freedom, your responsibility
One of the main principles of leasing is that you, the future user, are free to choose the equipment that best meets your business needs. You also choose the supplier or manufacturer from whom the equipment will be purchased. This freedom of choice is an undeniable advantage, as it ensures that you get the right equipment for your business. However, this freedom comes with a responsibility: the lessor, whose role is mainly financial, is not usually involved in this technical choice. Except in very specific cases, the appropriateness of the equipment chosen is therefore a matter for your own judgement and expertise.
Acceptance of the property: a fundamental stage
Once the equipment has been ordered (often by the lessor on the basis of your selection), it is time for delivery. Acceptance of the equipment is a major legal stage. It is generally formalised by the signing of a acceptance report (PV) or delivery. Why is this document so important?
- It often marks the official start of the rental period and therefore the obligation to pay rent.
- By signing it, you acknowledge (unless you have express reservations) that the equipment delivered is as ordered and in good working order.
It is therefore essential to check the equipment carefully before signing the contract. Contracts often stipulate a short period (often eight days) after the equipment has been made available for you to refuse to accept it and to inform the supplier and the lessor if the equipment does not conform or has any apparent defects. After this period, you are generally deemed to have accepted the equipment without reservation vis-à-vis the lessor. Signing this document carelessly, or worse, "in blank", can deprive you of any subsequent direct recourse against the lessor for initial compliance problems and trigger payment to the supplier by the lessor, even if the installation is not complete or satisfactory.
Your role as lessor's agent
Legally, when you choose the equipment and take delivery of it, you are very often acting in the capacity of representative of the lessor. In other words, you carry out these acts in the name and on behalf of the leasing company, which is legally the buyer and owner of the asset. This qualification has implications: it highlights your responsibility for ensuring that these initial steps are carried out correctly. Any negligence on your part in selecting or accepting the equipment could, in theory, render you liable to the lessor.
Your major obligations during the term of the contract
Once you have taken delivery of the equipment and started the hire contract, you have a number of obligations as a hirer. These are generally detailed in the general terms and conditions of your contract.
Pay the agreed rent
This is the most obvious obligation. You must pay the rent according to the amounts, frequency (monthly, quarterly, etc.) and terms set out in the contract. Visit non-payment of a single instalment Depending on the clauses, this may lead to early termination of the contract and the payment of compensation. Action to recover unpaid rent is generally barred after five years.
Use the asset sensibly
As with any rental, you must use the equipment "with due care", i.e. with care and in accordance with its intended use (its normal professional use). You may not change its purpose without our agreement.
Maintain and repair equipment
This is a point that often differentiates leasing from conventional rental. Leasing contracts very often all maintenance and repair costs are the responsibility of the tenant, as if they owned the property. This includes not only routine maintenance but also any major repairs that may be required. This derogation from article 1720 of the Civil Code (which normally makes major repairs the responsibility of the lessor) is valid because this text is not of public order. You are therefore contractually responsible for maintaining the equipment in good working order.
Insuring your property against risks
The contract almost always requires you to take out and maintain throughout the lease period insurance covering the equipment against the main risks: theft, fire, material damage, civil liability arising from its use, etc. There are two options: either you take out the policy yourself with the insurer of your choice (providing proof of cover to the lessor), or the lessor offers a group insurance policy to which you subscribe (in which case the premiums are often collected with the rental payments). In the event of a total loss (destruction, theft, etc.), the contract generally provides for you to be covered for the loss. termination and the payment of specific indemnities to the lessor.
Complying with accounting and advertising requirements
Even if the asset does not appear as an asset on your balance sheet, the law requires you to be transparent about your leasing commitments. In the notes to your annual financial statements, you must include precise information about your current contracts (original value of the assets, rents paid and outstanding, residual value, etc.). The aim is to give a true and fair view of your financial position to third parties (bankers, investors, partners, etc.). These obligations are set out in articles R. 313-3 et seq of the French Monetary and Financial Code.
Respecting contractual prohibitions
Unless expressly authorised in writing by the lessor, you are generally prohibited from :
- Sublet the equipment to a third party.
- Lend equipment, even free of charge.
- Transfer the equipment or the contract itself. If an assignment of the contract is envisaged, it requires the agreement of the lessor and may take the form of a novation (change of debtor).
- Nantir equipment (pledge it).
Failure to comply with these prohibitions constitutes a breach of contract and may even, in certain cases (such as the sale of the property belonging to the lessor), give rise to criminal penalties such as breach of trust.
Your basic rights as a tenant
In addition to these obligations, you also benefit from important rights designed to ensure that you can use the equipment in good conditions.
The right to delivery of compliant equipment
Even if the lessor does not choose the equipment, it has a fundamental obligation under the leasing contract (based on article 1719 of the French Civil Code) to provide you with an asset that fit for purpose and what was ordered. This includes not only the main equipment but also its accessories, which are essential for normal use (for example, the software needed to run a computer).
If the equipment delivered is unfit for its intended use, or if it is simply not delivered, the leasing contract may be considered to be devoid of purpose or cause, which may lead to its nullity or termination. A significant delay in delivery may also justify a request for termination.
Warranty action against the supplier
What happens if the equipment delivered breaks down frequently, has hidden defects or doesn't perform as expected? Normally, in an operating lease, you would turn to your lessor. With leasing, the mechanism is different and often more direct for you.
The majority of leasing contracts provide for a transfer of warranty claims to the tenant that the lessor itself holds against the supplier as purchaser. In practical terms, this means that you can take action directly against the seller or manufacturer to invoke the legal guarantee against hidden defects (article 1641 et seq. of the French Civil Code) or the guarantee of conformity.
This transfer is generally carried out by means of a mandate given by the lessor in the leasing contract, authorising you to act on his behalf, or sometimes by a mechanism assimilated to an assignment of receivables warranty. The advantage for you is considerable: you don't need to go through the lessor to assert your rights in the event of defective equipment. You deal directly with the supplier.
However, it is essential to read the clauses of your contract carefully on this subject. They define the exact scope of the actions transferred to you and the procedures for exercising them (for example, the obligation to inform the lessor in advance). Sometimes, the contract may limit the types of recourse available.
In the event of a technical dispute with the supplier, the first step is therefore to check what your leasing contract says about the transfer of warranty, and then act accordingly, usually after informing your lessor. Successful action against the supplier (obtaining repair, replacement or even cancellation of the sale) will of course have repercussions for the rest of your leasing contract.
Understanding precisely the extent of your obligations and rights as a lessee is the key to a smooth and efficient leasing relationship. A careful reading of the contract and, in the event of doubt or difficulty, appropriate legal advice are recommended.
If you encounter difficulties in the performance of your leasing contract, whether concerning the payment of rent, the condition of the equipment or a dispute with the supplier, our firm can help you help you analyse your situation and defend your interests. We look forward to hearing from you.
Sources
- Civil Code: articles 1134, 1184, 1603, 1615, 1641 et seq., 1709, 1719, 1721, 1728, 1991, 1992.
- Monetary and Financial Code: articles R. 313-3 et seq (accounting publicity).
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