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First Sierra Financial, Inc. v. General Tool Specialties, Inc.

A-1762-01T2 (N.J. Super. App. Div. 2003) (Unpublished)

LEASES; DAMAGES—A court that found a finance lease agreement to be a contract of adhesion recalculated the damages owed to the lessor by estimating lost profits.

A leasing company purchased equipment at the request of an equipment lessee under a non-recourse lease/finance agreement. The initial payment under the lease was made. “However, the tools failed to do the job and were promptly returned to [the supplier] which refunded the entire amount [the leasing company] had advanced in the transaction.” The equipment lessee and guarantor contended that the lease agreement was terminated by the return of the tools and the refund to the lessor. The lessor sought acceleration of the entire amount financed which would have been in excess of $100,000. The lower court held that the terms of the agreement “expressly barred” the lessee’s defense to its payment obligations and held a proof hearing on damages. After the proof hearing, the lower court “described the agreement as a contract of adhesion and concluded that it would be unconscionable to enforce” the acceleration provision because it represented “an excess penalty on default.” However, the court also held that the lessor was entitled to a reasonable calculation of lost profits which, together with reasonable attorney’s fees and costs, amounted to almost $50,000. The Appellate Division affirmed.

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