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Edison Generator Exchange, Inc. v. Quality Business Communications, Inc.

A-0715-09T1 (N.J. Super. App. Div. 2010) (Unpublished)

LEASES; UCC — Under the Uniform Commercial Code, a finance lease that is not a consumer lease becomes irrevocable upon the lessee’s acceptance of the leased goods, and the terms of the lease remain fixed unless consent is given by the party who receives the benefit of the promises under the lease.

A business entered into an agreement with a telecommunications company to acquire an office telephone system. Rather than purchase the equipment, the business elected to lease the equipment through a finance company. It entered into a sixty-month lease of the office system. The lease stated that the business had an unconditional obligation to make all payments due under the lease, with no right to withhold, setoff or reduce payments for any reason. The equipment was delivered, and the owner of the company, on the company’s behalf, executed a delivery and accepted certificate) for the equipment.

A year later, the business filed suit, alleging that its agreement with the telecommunications company was for a thirty-six month lease, and that the company caused the business to enter into a longer lease by dishonest means. It also alleged the phone system was not the correct system and did not perform as promised. It alleged a breach of contract, breach of implied warranty, and violation of the New Jersey Consumer Fraud Act. Both the telecommunications company and the finance company were named in the lawsuit.

The finance company filed a motion for summary judgment seeking dismissal of the complaint. It argued that the business had an unconditional obligation to make the payments under the lease and had failed to do so. The business’s owner stated he did not recall signing the lease, and asserted that when he was presented with the lease he was both rushed and hurried through the signing process. The owner stated that he had no idea that he was signing a sixty-month lease. The owner acknowledged that he signed the delivery certificate, but said the leasing company never reviewed the lease terms and conditions with him. The lower court granted the motion, finding that the agreement with the financing company was a financing lease under which the business had an unconditional obligation to make the monthly lease payments. The business appealed.

The Appellate Division affirmed, finding that under the Uniform Commercial Code, a finance lease, that is not a consumer lease, becomes irrevocable upon the lessee’s acceptance of the leased goods, and the terms of the lease remain fixed unless consent is given by the party who receives the benefit of a promise under the lease. In this matter, the business promised to make all monthly payments. The Court said that term was binding as the lease was not a consumer lease, and was not made primarily for a personal, family or household purpose. Therefore, it held that the promises under the lease, including the business’s promise to make sixty monthly payments, became effective and enforceable between the parties when the business accepted the goods. The Court also dismissed the business’s argument that it could disclaim liability under the lease because of the close connection between the telecommunications company and the finance company. The “close connection” doctrine only applies to the sale of consumer, and not commercial goods where it would allow a consumer to assert a defense against a finance company whose involvement in the seller’s business is close and knowledge of the terms of the underlying sales agreement was pervasive.


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