Source: https://www.ulcc.ca/en/annual-meetings/359-1999-winnipeg-mb/civil-section-documents/200-the-law-of-commercial-leasing-in-canada-1999?showall=&amp;start=8
Timestamp: 2019-04-19 13:17:38+00:00

Document:
Marion Benfield, Lessor's Damages Under Article 2A After Default by Lessee as to Accepted Goods (1988), 39 Ala. L. Rev. 915.
Richard Best, The Availability of Loss of Bargain Damages (1994), 24 Vict. U. of Wellington L. Rev. 349.
Amelia H. Boss, The History of Article 2A: A lesson for Practitioner and Scholar Alike (1988), 39 Ala.L. Rev. 575.
Amelia H. Boss, Panacea or Nightmare? Leases in Article 2 (1984), 64 Boston Univ. L. Rev. 39.
M.B. Bridge, Sale of Goods (Toronto & Vancouver: Butterworths, 1988).
John J. A. Burke and John M. Cannel, Leases of Personal Property: A project for Consumer Protection (1991), 28 Harv. J. Legis. 115.
Ronald C.C. Cuming, An Article 2A for Canada? A Comment on Professor Ziegel's Paper (1990), 16 C.B.L.J. 439.
Ronald C.C. Cuming, Legal Regulation of International Financial Leasing: The 1988 Ottawa Convention (1989), Arizona J. of Int'l and Comp. Law 39.
Ronald C.C. Cuming and Roderick J. Wood, Saskatchewan and Manitoba Personal Property Security Acts Handbook (Carswell, 1994).
Ronald C.C. Cuming and Roderick J. Wood, Alberta Personal Property Security Act Handbook, 4th ed. (Carswell, 1998).
Iwan Davies, Equipment and Motor Vehicle Leasing and Hiring (London: Sweet & Maxwell, 1997).
A.D.M. Forte, Finance Leases and Implied Terms of Quality and Fitness: A Retrospectie and Prospective Review,  Jurid. Rev. 119.
G.H.L. Fridman, The Law of Contract, 3rd edn. (Carswell, 1994).
W. Gelb and Peter N. Cubita, Toward a Uniform Consumer Leases Act? (1998), 53 Bus. Law. 1041.
W. Gelb and Peter N. Cubita, An Overview of State Automobile Leasing Legislation (1997), 52 Bus. Law. 1087.
W. Gelb and Peter N. Cubita, The Advent of Comprehensive State Automobile Leasing Legislation (1995), 50 Bus. Law. 1171.
R. M. Goode, Hire-Purchase Law and Practice (London: Butterworths, 1970).
Steven L. Harris, The Rights of Creditors Under Article 2A (1988), 39 Ala. L. Rev. 803.
Michael J. Herbert, Getting Better all the Time: The Official (Revised) Remedy Provisions of The Uniform Commercial Code's Article 2A (1990), 96 Comm. L. J. 1.
Lawrence F. Flick, Leases of Personal Property (1990), 45 Bus. Law. 2331.
Edwin E. Huddleson, Old Wine in New Bottles: UCC Article 2A - Leases (1988), 39 Ala. L. Rev. 615.
Thomas B. Hudson, Consumer Leasing and Personal Property Financing Developments: Motor Vehicle Leasing Statutes (1995), 50 Bus. Law. 1171.
Brent Kraus, Leasing as an Alternative to Secured Financing (1999), Sask. L. Rev. 173.
John Levin, Lease Terms Implied Under UCC Article 2A (1994), 27 U.C.C.L.J. 227.
Fred H. Miller, Consumer Leases Under Uniform Commercial Code Article 2A (1988), 39 Ala. L. Rev. 957.
Charles W. Mooney, Personal Property Leasing: A Challenge (1981), 36 Bus. Law. 1605.
Charles W. Mooney, Filing Requirements for Personal Property Leases: A Comment and Response to Professor Ziegel (1990), 16 C.B.L.J. 419.
The National Conference of Commissioners on Uniform State Laws Report of the Study Committee on a Proposed Uniform Consumer Leasing Act, 1995.
N.E. Palmer, Bailment, 2nd ed. (Australia: The Law Book Company, 1991).
Donald J. Rapson, Deficiencies and Ambiguities in Lessors' Remedies Under Article 2A: Using Official Comments to Cure Problems in the Statute (1988), 39 Ala. L. Rev. 875.
Martin B. Robbins, Come Hell or High Water or Article 2A: How Legislatures and Practitioners Can Cope with Several Drafting Anomalies in Article 2A of the Uniform Commercial Code (1996), 101 Comm. L.J. 357.
G.H. Treitel, The Law of Contract, 9th edn. (London: Sweet & Maxwell, 1995).
Stephen T. Whelan, Lawrence F. Flick & Robert D. Strauss, Leases (annual review of developments in leasing law) at; (1997), 52 Bus. Law. 1517, (1996), 51 Bus. Law. 1381, (1995), 50 Bus. Law. 1481, (1994), 49 Bus. Law. 1857.
Jacob S. Ziegel, Should Canada Adopt an Article 2A Type Law on Personal Property Leasing? (1990), 16 C.B.L.J. 369.
Footnote: 1 Canadian Finance & Leasing Association, CFLA Backgrounder on the Asset-based financing, equipment & vehicle leasing industry, May 1999, available online at http://www.canadianleasing.ca/backgroundermay99.html. This report offers a useful overview of leasing devices and practices in the Canadian marketplace.
United States statistical data indicates leasing activity in the hundreds of billions of dollars annually. In 1996, the U.S. Commerce Department estimated that leasing transactions accounted for approximately $168.9 billion dollars of new equipment installed in 1995, an expansion of 11.6% over 1995. In 1995, the volume of equipment leasing activity had increased by an estimated 28.1% over 1994. See Stephen T. Whelan, Lawrence F. Flick II and Robert D. Strauss, Annual Review of Leases (1997), 52 Bus. Law. 1517, (1996), 51 Bus. Law. 1381. It is not clear whether these statistics include consumer leases.
Footnote: 2 Another study indicates that 41.7% of new vehicles registered in 1997 were leased, up from 35.1% in 1996. See Vertex Consultants report on Canadian New Vehicle Leasing Data, April 1998, available online through the Canadian Bankers Association website at http://www.cba.ca.
Footnote: 3 Canadian Finance & Leasing Association, supra note 3.
Footnote: 4 The most recent proposals are incorporated in a Draft Revision 2A dated March of 1999.
Footnote: 5 United States consumer protection legislation is discussed in more detail infra, at heading 5.
Footnote: 6 As at the date of this writing, the most recent draft was that prepared for the NCCUSL annual meeting scheduled to take place in July 1999. It is available online at http://www.law.upenn.edu/library/ulc/consleas/claam99.htm. The working draft previous to that was Number 7, dated March 1999.
Footnote: 7 The Convention was adopted at the Diplomatic Conference for the Adoption of the Draft Unidroit Conventions on International Factoring and International Financial Leasing held in Ottawa in May, 1988.
Footnote: 8 Of primary significance is the regulation of defined leasing transactions by the provincial Personal Property Security Acts (PPSAs), discussed infra. The Saskatchewan Personal Property Security Act, 1993, S.S. 1993, c. P-6.2, is referred to hereafter as a generally representative model of the legislation in effect in the common law provinces other than Ontario. Some leasing transactions are also subject to one or more components of a haphazard patchwork of consumer protection statutes, also discussed infra.
Footnote: 9 In 1990, eminent commercial law scholars Jacob S. Ziegel and Ronald C.C. Cuming publicly agreed that the enactment of a comprehensive Canadian uniform leasing statute comparable to UCC Article 2A was unfeasible and largely unnecessary. They did, however, point to some aspects of leasing law that could and should be addressed by legislation. See Jacob S. Ziegel, Should Canada Adopt an Article 2A Type Law on Personal Property Leasing? (1990), 16 C.B.L.J. 369, Ronald C.C. Cuming, An Article 2A for Canada? A Comment on Professor Ziegel's Paper (1990), 16 C.B.L.J. 439. At the time those articles were written Professor Ziegel observed (at note 36) that the Canadian jurisprudence was "surprisingly modest given the number and value of outstanding equipment leases." A current review of the cases indicates that little has changed, save for those moderately developed bodies of caselaw addressing priorities issues in the context of the PPSAs and the question of lessors' monetary remedies upon the lessee's default.
Footnote: 10 This study is limited to the law in effect in the common law jurisdictions of Canada. No attempt has been made to address the distinctive legal regime in place under the Quebec Civil Code. Appropriate adjustments in any proposed uniform treatment of leasing issues would be required to accommodate its application to Quebec.
Footnote: 11 The distinction between a true lease and a security lease, or a lease that is in substance a security agreement, is relevant in connection with the priority provisions and registration requirements of all of the Canadian PPSAs. The distinction is particularly important in Ontario, where only security leases fall subject to the PPSA. It is similarly relevant for some purposes in other jurisdictions, as will be discussed infra at heading 3.
Footnote: 12 This may involve an assignment of title to the goods along with the contractual rights of the assignor under the lease contract, or may be limited to assignment of the contractual rights alone. See in this regard R. M. Goode, Hire-Purchase Law and Practice (London: Butterworths, 1970) at 667-670.
Footnote: 14 This is clearly the view of commercial lessors, as represented by the Canadian Finance & Leasing Association. See CFLA Backgrounder, supra note 1.
Footnote: 15 The Sale of Goods Acts of the Canadian common law provinces mirror the British Sale of Goods Act of 1893. The British Columbia Sale of Goods Act, R.S.B.C. 1996, c. 410 is an exception, to the extent of the relatively minor amendments it incorporates. Under that Act, consumer leases are subject to those provisions that imply terms relating to quality and title into contracts of sale. See ss.1, defn. "lease," "lessee," "lessor," 15 - 20. The efforts of the Uniform Law Conference of Canada to modernize the Canadian law of sales through its publication of the Uniform Sale of Goods Act in 1981 have gone unrewarded. See the proceedings of the Uniform Law Conference of Canada, Sixty- Third Annual Meeting (1981), Appendix S, as modified by Proceedings of the Sixty-Fourth Annual Meeting (1982), Appendix HH.
Footnote: 16 For a sampling of cases addressing the substantive nature of a transaction as either one of sale or lease, see Uniform Laws Annotated, Volume 1, Uniform Commercial Code (West Publishing Co. 1989 and suppl.) at Â§ 2-106, Note 10. See also Amelia H. Boss, Panacea or Nightmare? Leases in Article 2 (1984), 64 Boston Univ. L. Rev. 39 at 48, 49, Charles W. Mooney, Personal Property Leasing: A Challenge (1981), 36 Bus. Law. 1605 at 1618-1621. The problems of characterization endemic to the functionalist approach have largely been overcome in the United States with the enactment of UCC Article 2A, which imposes upon parties to a lease (other than a finance lease) obligations largely equivalent to those imposed on parties to a contract of sale under UCC Article 2.
Footnote: 17 For a critique of this debate, see Boss, ibid.
Footnote: 18 M.B. Bridge, Sale of Goods (Toronto & Vancouver: Butterworths, 1988) at 45-46.
Footnote: 19 Keneric Tractor Sales Ltd. v. Langille (1988), 43 D.L.R. (4th) 171 (S.C.C.).
Footnote: 20 There are relatively few reported Canadian cases on point. Those that articulate a standard of care appear to have adopted the lower standard. See Coleshaw v. Lipsett (1973), 33 D.L.R. (3d) 382 (Sask. Q.B.), M. v. Sinclair (1980), 15 C.C.L.T. 57 (Ont. H.C.), Boorman v. Morris,  3 D.L.R. 382, Crawford and Crawford v. Ferris,  O.W.N. 713. On this view, the lessor's liability for the fitness of goods supplied is more limited than that of a seller, who is strictly liable for breach of the statutorily implied condition that the goods will be reasonably fit for their intended purpose. The "reasonableness" qualification relates to the degree to which the goods fulfil their purpose, not the degree of care that must be exercised by the seller. If goods are not reasonably fit, the seller is not excused by having taken reasonable care to ensure that they are reasonably fit. See Bridge, supra note 18 at 461-62. For a through discussion of the terms implied in contracts of lease, see N.E. Palmer, Bailment (Sydney: The Law Book Company Limited, 1991). The implied term of fitness is discussed at 1220 et.seq.
Footnote: 21 See the obiter discussion on this point in Burlington Leasing Ltd. v. DeMoura (1975), 60 D.L.R. (3d) 71 (Ont. Cty. Ct.) at 74.
Footnote: 22 See Palmer, supra note 20 at 1246-47. Some have suggested that a lessor is subject to an implied duty to provide goods that are "hireworthy" - a term that would seem to connote the leasing equivalent to the requirement that goods sold be "merchantable". However, this appears to be a relatively uncommon view. See A.D.M. Forte, Finance Leases and Implied Terms of Quality and Fitness: A Retrospectie and Prospective Review,  Jurid. Rev. 119 at 123 - 126.
Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description that it is in the course of the seller's business to supply, whether he be the manufacturer or not, there is an implied condition that the goods will be reasonable fit for such purpose. See e.g. Saskatchewan Sale of Goods Act, R.S.S. 1978, c. S-1, s.16.1.
The requirement of reliance in the context of contracts of hire is confirmed by Astley Industrial Trust, Ltd. v. Grimley,  2 All E.R. 33 at 42, 44, Burlington Leasing Ltd. v. DeMoura, supra note 21 at 74.
Footnote: 24 Palmer, supra note 20 at 1230.
Footnote: 25 Ibid. at 1235. See U.C.B. Leasing Ltd. v. Holtom,  R.T.R. 362, in which the court refused to find a continuing obligation that a car should remain fit through the term its hire, a car, though it acknowledged that the position might be different in the context of other kinds of goods.
Footnote: 26 The question of what descriptive words are to be included in the "description" of goods for purposes of determining compliance with the implied condition is not always easy to resolve. However, if the description simply identifies the goods without accompanying qualitative adjectives, it is only necessary that the goods provided meet the identity test - e.g., a computer is a computer, regardless of how well it works. For the principles pertinent to contracts of sale, see Bridge, supra note 18 at 431-51.
Footnote: 27 Burlington Leasing Ltd. v. DeMoura, supra note 21 at 79.
Footnote: 28 Chrysler Credit Canada Ltd. v. Shipperbottom,  O.J. No. 1707 (Ont. Ct. Just. Gen. Div.), GMAC Leaseco Ltd. v. 405818 Ontario Ltd.,  O.J. No. 2827 (Ont. Ct. Just. Gen. Div.). There is authority for the view that at common law the lessor impliedly contracts that the chattel is reasonably safe. See Palmer, supra note 20 at 1220.
Footnote: 29 Palmer, supra note 20 at 1215.
Footnote: 30 Ziegel, supra note at 406.
Footnote: 31  1 S.C.R. 426, 57 D.L.R. (4th) 321.
Court of Appeal decided in the earlier case of Canadian-Dominion Leasing Corp. Ltd. v. George Welch & Co. (1981), 125 D.L.R. (3d) 723 that a lessor was entitled to recover damages for the lessee's failure to pay the rental due on a photocopying machine even if he (the lessor) was in fundamental breach (apparently of an implied term as to quality), since the contractual exclusion clause operated to relieve him of liability.
Footnote: 33 For a discussion of authorities see Chrysler Credit Canada Ltd. v. Adorable - Pacific Rim Boarding Kennels for Dogs and Cats Ltd. (1992), 130 A.R. 273 (Q.B. Master).
Footnote: 34 See the "Hell or High Water" Provision, infra at heading 3.6.
Footnote: 35 The theory of collateral contract is demonstrated in the context of a hire purchase agreement by the decision in Andrews v. Hopkinson,  3 All E.R. 422. See also Goode, supra note 12 at 638-42.
An asset management-based business requires specialized industry and equipment/vehicle expertise. With operating leases in particular, lessors must be able to accurately estimate residual values several years hence at lease-end when the equipment or vehicle must be re-leased or sold on the secondary market.
Because of this critical requirement, leasing companies frequently specialize in a limited range of equipment or vehicles. This is another important difference between bank lending and leasing. The expertise developed of the lessee's industry and on specific equipment or vehicles allows lessors a greater advisory role to lessees on appropriate equipment or vehicles to use in a specific business.
Footnote: 37 See Forte, supra note 22. This position was adopted in Scotland in the case of G.M. Shepherd Ltd. v. North West Securities Ltd.,  S.L.T. 499.
Footnote: 38 See Ziegel, supra note 9, Boss, supra note 16 at 62.
Footnote: 39 Supra note 31. It seems that Wilson J's notion of unreasonableness has neither been clearly defined nor seriously pursued since the judgment in Hunter. It was rejected in the context of a lease transaction in Chrysler Credit Canada Ltd. v. Adorable - Pacific Rim Boarding Kennels for Dogs and Cats Ltd., supra, note 33. Nevertheless, the potential for its invocation by a court sympathetic to a lessee remains.
Footnote: 40 Ordinarily, the lessor will assign the entire lease, including its title to the goods. However, in some instances only the lessor's right to payment will be assigned, leaving title resident in the lessor. The route chosen will depend upon the nature of the financing arrangements between the lessor and the assignee. The law of assignment is very complex, and a full analysis of the various issues that might arise from an assignment by either lessor or lessee is beyond the scope of this paper. For an overview of the relationships arising from various forms of assignment, see R.M. Goode, supra note 12, Chapter 23, at 511 et. seq.
Footnote: 41 The common law rules of assignment are largely replicated in statutory form under provincial legislation. See e.g. the Choses in Action Act, R.S.S. 1978, c. C-11, the Saskatchewan PPSA, supra note 8, s. 41, discussed in Ronald C. Cuming and Roderick J. Wood, Saskatchewan and Manitoba Personal Property Security Acts Handbook, (Carswell, 1994) at 328-32.
Footnote: 42 The lessee will be entitled to pursue the lessor-assignor for breach of warranty in the absence of a contractual term permitting assignment of the lessor's obligations, since the burdens of a contract cannot be assigned along with its benefits without the consent of the opposite party. See R.M. Goode, supra note 12 at 513. A lessee so foolish as to agree both to assignment of the lessor's contractual obligations and to a cut-off of defence clause would seem to have thereby deprived himself or herself of any remedy for deficiencies in the goods.
Footnote: 43 Theoretically, an anti-assignment provision may be included in the lease to prevent an assignment by the lessor, though lessors are in practice generally in a position to refuse such a clause. The effectiveness of an anti-assignment provision as between lessee and assignee in the face of an unauthorized assignment is not entirely clear, though recent authority suggests that an equitable assignment may operate in spite of an anti-assignment clause. See Yablonski v. Cawood,  3 W.W.R. 351 (Sask. C.A.). See also Cuming & Wood, Alberta Personal Property Security Act Handbook, 4th edn. (Carswell, 1998) at 390-91.
Footnote: 44 See Mooney, supra note 16 at 1618-1621.
Footnote: 46 For an outline of Article 2A's implied terms, see John Levin, Lease Terms Implied Under UCC Article 2A (1994), 27 U.C.C.L.J. 227.
Footnote: 49 The concept of merchantability is defined in some detail, following Article 2's apparent attempt to resolve the considerable uncertainty arising from judicial efforts to define the meaning of merchantable quality as the term appears in the British Sale of Goods Act. For a discussion of the Sale of Goods Act provision, see Bridge, supra note 18 at 489 et. seq.
Footnote: 50 The Official Comment to UCC 2A-211 indicates that the general purpose of the warranty is to ensure that no person holding a claim or interest that arose from an act or omission of the lessor will be able to interfere with the lessee's use and enjoyment of the goods for the lease term.
Footnote: 51 See Ziegel and Cuming, both supra note 9 at 406-407 and 432-436 respectively.
Footnote: 52 UCC 2A-214. Though the prima facie rule is that warranty disclaimers must be in writing and conspicuous, exclusion or modification of the statutory warranties by course of dealings, course of performance or usage of trade is also countenanced.
Footnote: 53 USS 2A-216. Some provincial consumer protection legislation, discussed infra at heading 5.3, accommodates third party claims for breach of warranty. Otherwise, injured parties who are not contractually related to the lessor must rely on their rights under the law of tort, which are dependent upon proof of negligence.
Footnote: 55 An exception should be made in cases in which the lessor in fact offers advice as to the suitability of the goods subject to the lease. See supra, note 36.
Footnote: 56 Note that the finance lessor warrants freedom from interference with enjoyment by a third party whose claim or interest arose from the lessor's own act or omission. UCC 2A-211(1). However, the finance lessor is not subject to the broader warranty given by other commercial lessors, that the goods "are delivered free of the rightful claim of any person by way of infringement or the like." UCC 2A- 211(2).
Footnote: 57 UCC 2A-209. This provision was amended in 1990 to also extend to the lessee the benefit of manufacturers' warranties provided in connection with the supply contract.
"Finance lease" means a lease in which ... (iii) either the lessee receives a copy of the contract evidencing the lessor's purchase of the goods on or before signing the lease contract, or the lessee's approval of the contract evidencing the lessor's purchase of the goods is a condition to effectiveness of the lease contract.
Footnote: 59 UCC 2A-102 provides that the Article applies to any transaction, regardless of form, that creates a lease. "Lease" is defined in 2A-103 in a manner that excludes a transaction involving the retention or creation of a security interest.
Footnote: 60 This approach is briefly criticized by Cuming, supra note 9 at 447.
Footnote: 61 Mooney, supra note 16 at 1610.
Footnote: 62 The amendments were made in 1987 to conform to Article 2A. For further discussion on this point, see infra at heading 3.4.
Footnote: 63 For a selection of cases on this point, see West Publishing Co., Uniform Laws Annotated, Volume 1 UCC Â§Â§1-101 to 2-210 (1999 Cumulative Annual Pocket Part) at 48-49.
Footnote: 64 Supra note 7. The terminology employed in the Convention is "financial leasing transaction", rather than "finance lease". However, the definitional provisions of Article 1 establish that the transaction addressed is substantially the same as that defined as a finance lease by Article 2A. Like the latter, the Convention contemplates knowledge and approval of the terms of the supply contract on the part of the lessee.
Footnote: 66 Article 10. That provision ensures that the supplier is not liable to both lessor and lessee in respect of the same damage.
Footnote: 68 Supra note 15.
Footnote: 69 This conclusion is subject to the discussion of consumer leasing, infra at heading 5.
Footnote: 70 Mooney, supra note 16 at 1610.
Footnote: 71 Supra note 19.
Footnote: 72 The lessee, like the lessor, is subject to certain obligations at common law. However, they are relatively few and appear to have raised little difficulty. Notably, the lessee must take reasonable care of the leased goods, must comply with the terms of the bailment or lease and must return the goods at the end of the term. For the duties of a bailee, see in general Palmer, supra note 20.
Footnote: 73 Supra note 19.
Footnote: 74 (1969), 3 D.L. R. (3d) 304, 67 W.W.R. 297.
Footnote: 75 For a comprehensive discussion of Keneric Tractor Sales Ltd. v. Langille and the British caselaw preceeding it, see Richard Best, The Availability of Loss of Bargain Damages (1994), 24 Vict. U. of Wellington L. Rev. 349.
Footnote: 76 See e.g. 32262 B.C. Ltd. v. See-Rite Optical Ltd.,  9 W.W.R. 442 (Alta. C.A.), 32262 B.C. Ltd. v. 544006 Alberta Ltd.,  A.J. No. 281 (Alta. Q.B.), 32262 B.C. Ltd. v. Blackfoot Metals Ltd.  A.J. No. 459 (Alta. Q.B. Master), Trexar v. Beckett,  O.J. No. 1125 (Ont. C.t Just. Gen. Div.), 32262 B.C. Ltd. v. Cryer Holdings Ltd.,  B.C.J. No. 1996 (B.C.S.C.), 32262 B.C. Ltd. v. Mohawk Oil Co.,  B.C.J. No. 2892 (B.C. S.C.), Wallace Sign-Crafters West Ltd. v. Delta Hotels Ltd.,  B.C.J. No. 896 (B.C.S.C.).
Footnote: 77 The lessor should only be required to deduct the full resale value of the goods if it is claiming rental payments equivalent to the full value of the leased goods. If the goods would have had some meaningful residual value at the end of the lease, the lessor need only deduct the difference between the sum recovered on resale and that residual value, appropriately adjusted for early receipt of the sum representing that value. Further, it would seem that a lessor should not be obliged to deduct the amount realized on a sale or a re-leasing of repossessed goods if it can establish that it could have sold or leased other goods to the buyer or subsequent lessee and thus enjoyed the benefit of two contracts. Though a seller can recover "lost volume," the issue does not seem to have been addressed in the context of leases. Regarding the question of lost volume in the context of a sale, see Victory Motors Ltd. v. Bayda,  3 W.W.R. 747 (Sask. D.C.).
Footnote: 78 At least one commentator has suggested that there is an ambivalence in the decision that may leave an opening for future courts to refuse enforcement of a liquidated damages clause. It is not entirely clear that the court in Keneric Tractor fully appreciated the distinction made by Dickson J. in his award of damages in Regent Park Butcher Shop. His view was that rental to the end of the lease term could not be taken into consideration when the lessee's non-payment of rent did not amount to a repudiation of the lease. If it were a repudiation - that is, a refusal to render any further performance - then the lessor would be entitled to recover damages for the future performance that it was thereby denied. However, if the non-payment could not be viewed as an indication that the lessee was repudiating the lease in its entirety, the lessor who chose to terminate the contract could not claim that the breach had caused it loss of the balance of the rental due. Had the lessor kept the lease open for performance, the lessee might very well have made the remaining payments. Though the judgment might have been clearer on this point, the view that Keneric Tractor leaves room for a refusal to enforce a liquidated damages provision if the default relied upon does not constitute a repudiation of the contract is not compelling. Although the facts before her involved a repudiation of the lease, Wilson J. appears to have quite clearly answered in the negative the question she poses in these terms, "The question at hand is whether the assessment of damages in a case of termination based on breach of a term of the contract should be any different from the assessment of damages in a case of termination based on repudiation." Supra note 19 at 180. After some discussion, she concludes (on the same page) that "There is no conceptual difference between a breach of contract that gives the innocent party the right to terminate and the repudiation of a contract so as to justify a different assessment of damages when termination flows from the former rather than the latter. General contract principles should be applied in both cases."
Footnote: 79 Supra note 76.
Footnote: 80 Sign-O-Lite v. David Henry and Bowlacade (1984) Ltd.,  O.J. No. 1138 (Ont. Ct. Just. Gen. Div.), Wallace Sign Crafters West Ltd. v. Delta Hotels Ltd.,  B.C.J. No. 896 (B.C.S.C.). Similarly, in 32262 B.C. Ltd. v. Mohawk Oil Co.,  B.C.J. No. 2892 (B.C.S.C.), the court refused to interfere with a liquidated damages clause on the ground that it did not discount the sum recoverable from the lessee to reflect the lessor's potential savings on servicing for the unexpired balance of the term.
Footnote: 82 See G.H. Treitel, The Law of Contract, 9th edn. (London: Sweet & Maxwell, 1995) under the heading "Rescission for Failure to Perform" at 674 et seq.
(b) without limiting the generality of clause (a), to a ... lease ... that secures payment or performance of an obligation.
"security interest" is defined in s. 2(qq) as an interest in personal property that secures payment or performance of an obligation.
Footnote: 84 Ibid. ss. 58, 59.
Footnote: 85 Ibid. s. 60.
Footnote: 86 Ibid. s. 61.
Footnote: 87 See e.g. Ibid. s. 55(7).
Footnote: 88 For an explanation of the operation of this provision, see Ronald C.C. Cuming and Roderick J. Wood, supra note 41 at 398-99.
Footnote: 89 Saskatchewan PPSA s. 62.
Footnote: 91 Ibid. s. 65(3).
Footnote: 92 The question of application of the PPSA inter partes enforcement provisions to true leases has been considered by Professor Ziegel, supra note 9 at 413-15. He suggests that it may be impossible to do so, and not particularly desirable if the need to maintain this distinction cannot be overcome. A number of approaches to the problem are suggested, though none ultimately endorsed as the solution.
The lessee has no right to redeem the collateral, nor any "equity interest" that may produce a surplus for the lessee, and it is unrealistic to think that lessees can effectively monitor the commercial reasonableness of what are usually private resales. If the holder pursues a deficiency claim, the holder will need to justify that claim in some manner.
Footnote: 94 See Ziegel, supra note 92.
Footnote: 95 Supra note 83.
Footnote: 97 The issue of characterization is discussed, with references to authority, by Cuming & Wood, supra note 41 at 41-47.
Footnote: 98 For an annual review of caselaw developments in the United States, see Stephen T. Whelan, Lawrence F. Flick & Robert D. Strauss, Leases (annual review of developments in leasing law) at (1997), 52 Bus. Law. 1517, (1996), 51 Bus. Law. 1381, (1995), 50 Bus. Law. 1481, (1994), 49 Bus. Law. 1857.
Footnote: 99 Supra note 19.
Footnote: 100 Problems in the quantification of damages payable to a lessee in the event of the lessor's breach are outlined by Professor Boss, supra note 16 at 90-91.
Footnote: 101 "Repudiation" is generally taken as synonymous with anticipatory breach. It refers to the situation in which one party has expressly or implicitly declared her refusal to perform her contractual obligations. See G.H.L. Fridman, The Law of Contract, 3rd edn. (Carswell, 1994) at 600-22.
Footnote: 102 Ibid. at 557-600.
Footnote: 103 Numerous Canadian courts addressing the enforceability of exclusionary provisions in contracts of lease fall prey to the unfortunate habit of declaring a "fundamental breach", without defining which contractual term is the subject of breach, or considering the characterization of the term.
Footnote: 104 See e.g. Saskatchewan Sale of Goods Act, supra note 23, ss. 13, 35.
Footnote: 105 Goode, supra note 12 at 450.
Footnote: 106 For a more comprehensive discussion of the hirer's rights upon breach by the owner in a contract of hire, see Goode, ibid., Chapter 20 "Remedies of the Hirer for Breach" at 447-468.
This Lease provides for a net lease, and the Rent due hereunder from Lessee to Lessor shall be absolute and unconditional, and shall not be subject to any abatement, recoupment, defense, claim, counterclaim, reduction, set-off or any other adjustment of any kind for any reason whatsoever.
Footnote: 108 Ibid. at 362-63.
Footnote: 109 As to all of the foregoing, see UCC 2A-523.
Footnote: 110 The right to possession is defined in UCC 2A-525. Rights of disposition are addressed in UCC 2A- 527.
Footnote: 111 "Default" is defined as, inter alia, the failure to pay or otherwise perform the obligation secured when due. See e.g. Saskatchewan PPSA s. 2(n).
Footnote: 118 One noted American commentator suggests that the remedial regime introduced through the 1990 revisions to Article 2A is for the most part "coherent, sensible and workable". See Michael J. Herbert, Getting Better all the Time: The Official (Revised) Remedy Provisions of The Uniform Commercial Code's Article 2A (1990), 96 Comm. L. J. 1. The coherence of the Article 2A provisions to an the mind of an American practitioner or academic may have a great deal to do with the fact that they echo in many respects the long established remedial regime of Article 2.
Footnote: 120 Unidroit Convention, Article 13.
Footnote: 121 Ronald C.C. Cuming, Legal Regulation of International Financial Leasing: The 1988 Ottawa Convention (1989), Arizona J. of Int'l and Comp. Law 39 at 61.
Footnote: 123 Unidroit Convention, Article 12.
Footnote: 126 Nevertheless, one commentator notes that "The right to cancel is more limited for the lessee than it is for the lessor, because the lessee usually loses the right to cancel the contract once the lessee has accepted the goods." See Herbert, supra note 118 at 3.
Footnote: 127 UCC 2A-516(2), 517(1)(b).
Footnote: 128 Admittedly, an American lawyer familiar with the intricacies of the Article 2 remedial regime would likely find them much more accessible than her Canadian counterpart.
Footnote: 129 See Robbins, supra note 107.
Footnote: 132 This point is noted by Ziegel, supra note 9 at 401.
Footnote: 133 Unidroit Convention Article 12. For a discussion of the lessee's rights under the Convention, see Cuming, supra note 121 at 55-61.
Footnote: 134 Unidroit Convention Article 10.
Footnote: 135 Remedies and enforcement issues are more problematic in the consumer context, as will be seen infra, at heading 5.
Footnote: 136 Palmer, supra note 20 at 82.
Footnote: 137 Ibid. at 81.
Footnote: 138 Steven L. Harris, The Rights of Creditors Under Article 2A (1988), 39 Ala. L. Rev. 803.
Footnote: 139 Supra note 8.
Footnote: 140 "Lease for a term of more than one year" is defined to as to include leases that have the potential to extend beyond one year. See eg. Saskatchewan PPSA s.2(y). The definition does not catch leases in which the lessor is not regularly engaged in the business of leasing goods. Query whether it should be amended to extend to lessors who, though not ordinarily involved in the leasing of goods, are involved in the business of selling goods of the kind subject to the lease. For a discussion of this provision see Ronald C.C. Cuming and Roderick J. Wood, supra note 41 at 51-52.
Footnote: 141 The Personal Property Security Act, S.M. 1993, c. 14.
Footnote: 142 All of the other Canadian PPSAs bring leases for a term of more than one year within the scope of their priorities provisions.
Footnote: 143 A special rule addresses the right of a lessor to damages when, having failed to register its interest, it loses the leased goods to the lessee's trustee in bankruptcy or judgment creditors. The lessor is deemed, as against the lessee, to have suffered damages in an amount equal to the value of the leased goods at the date of the bankruptcy or seizure and the amount of additional loss resulting from the termination of the lease. See British Columbia Personal Property Security Act, S.B.C. 1989, c. 36 as am., s. 21.
Footnote: 144 See the exchange between Professors Ziegel and Mooney on this point in Ziegel, supra note 9 and Charles W. Mooney, Filing Requirements for Personal Property Leases: A Comment and Response to Professor Ziegel (1990), 16 C.B.L.J. 419.
Footnote: 145 A lease for a term of less than one year would fall within the PPSA if it is "in substance" a security agreement. See supra at heading 3.4. However, short term leases will virtually always be true leases.
Footnote: 146 See eg. Saskatchewan PPSA s. 30.
Footnote: 147 Ibid. s. 41.
Footnote: 148 Pertinent provisions include UCC 2A-303 to 310.
Footnote: 149 Consumer Leasing Act, 15 U.S.C. Â§Â§ 1667 et seq.
Footnote: 150 12 C.F.R. Part 213.
Footnote: 151 See Joseph W. Gelb and Peter N. Cubita, An Overview of State Automobile Leasing Legislation (1997), 52 Bus. Law. 1087, and The Advent of Comprehensive State Automobile Leasing Legislation (1995), 50 Bus. Law. 1171, Thomas B. Hudson, Consumer Leasing and Personal Property Financing Developments: Motor Vehicle Leasing Statutes (1995), 50 Bus. Law. 1171. Note that the latter two articles were referred to by and appended to the National Conference of Commissioners on Uniform State Laws, Report of the Study Committee on a Proposed Uniform Consumer Leasing Act, July 1995 (available through NCCUSL).
Footnote: 152 NCCUSL, ibid. at 8.
Footnote: 153 The current draft is that prepared for the July 1999 annual meeting of the NCCUSL. The most recent previous working draft was number 7, dated March of 1999. The annual meeting draft is the subject of references hereafter to the UCLA.
Footnote: 154 It is anticipated that a second and final reading will occur at the Commission's annual meeting in the year 2000.
Footnote: 155 The list of topics identified by the study committee as among the most important to be considered in the preparation of draft legislation is attached hereto as Appendix A.
Footnote: 156 They include the interest rate disclosure suggestion (ALR), mandatory GAP coverage, "burdensome" procedures regarding end-of-term charges, the requirement for provision of lease forms prior to the transaction, and the prohibition of open-end leases, all discussed below. See the National Vehicle Leasing Association, Vehicle Leasing Today, "Uniform Consumer Leases Act Update" (Spring 1999 - Volume 21, No. 2).
Footnote: 157 See Joseph W. Gelb and Peter N. Cubita, Toward a Uniform Consumer Leases Act? (1998), 53 Bus. Law. 1041, John J. A. Burke and John M. Cannel, Leases of Personal Property: A project for Consumer Protection (1991), 28 Harv. J. Legis. 115.
Footnote: 158 Regulation M, supra note 150 Â§213.2. The "gross capitalized cost" is the total value of the leased property (ie., total anticipated depreciation and estimated residual value at the end of the lease term) plus any items that are capitalized or amortized during the lease term, such as taxes, insurance and service agreements. The "capitalized cost reduction" is the total amount of any rebate, cash payment, trade-in or other credit deducted from the gross capitalized cost. The "adjusted capitalized cost" is the gross capitalized cost net of the capitalized cost reduction, representing the amount used by the lessor in calculating the base periodic payment.
Footnote: 159 See Draft UCLA Â§Â§201, 207.
Footnote: 160 An ALR can only be used in connection with leases that state a lease-end purchase option price as a specific dollar figure. See the Reporter's Notes to Draft UCLA Â§203.
Regulation M and a dozen states have disclosure requirements. A critical shortcoming of existing disclosure regulation is the failure to require disclosure of the capitalized cost and the failure to create and require disclosure of a figure analogous to APR. They will be unable to compare one potential lease with another, and they will be unable to compare leasing with purchasing... The Fed may revise Regulation M to require disclosure of capitalized cost, but until Regulation M creates an APR concept for leases, disclosure regulation will be inadequate.
Footnote: 162 See Gelb & Cubita, supra note 157 at 1048. An ALR provision is apparently opposed by United States vehicle lessors. A recent update on the UCLA in a newsletter published by the United States National Vehicle Leasing Association, indicates that "In its present form, the UCLA is extremely problematic for vehicle lessors. Among the more troubling provisions is an interest rate disclosure suggestion for leases with a fixed price purchases option." See The National Vehicle Leasing Association, supra note 156. The same newsletter refers to successful efforts to block Kansas legislation that would have required an interest rate disclosure. Association members lobbying the Kansas legislature relied on the existing protections included in Regulation M of the federal Consumer Leasing Act ("NVLA Members Stop Kansas Legislation"). See also the UCLA Reporter's Note 1 under heading C. Key Issues in the Draft, indicating strong industry opposition to the ALR provisions.
Footnote: 163 Since disclosure and advertising using an annual lease rate is currently prohibited by federal Regulation M, the ALR provisions of the UCLA cannot become operative without modification of Regulation M.
Footnote: 164 For a discussion of the various approaches that have been adopted, see Gelb and Cubita, An Overview of State Automobile Leasing Legislation, supra note 151.
Footnote: 165 Draft UCLA 406.
Footnote: 166 For a discussion of the potential unfairness inherent in early termination provisions, see Burke & Cannel, supra note 157 at 119-125. The authors suggest at 120 that "The combined penalties and damages imposed upon default and early termination of the lease can often exceed the amount the consumer would have paid under the lease had the consumer completed performance."
Footnote: 167 See Draft UCLA, Part 2. Disclosures relating to insurance address the lessee's obligation to procure insurance coverage for loss or damage to the leased goods and, in the context of motor vehicle leases, liability insurance. In addition, the Act addresses the provision of insurance by the lessor. See Â§204.
Footnote: 168 Gelb & Cubita, supra note 157 at 1049.
Footnote: 169 For the treatment of "gap" liability in state legislation, see Gelb & Cubita, An Overview of State Automobile Leasing Legislation, supra note 151 at 1095-97.
Footnote: 170 Draft UCLA Â§402.
Footnote: 171 Ibid., Reporter's Notes.
Footnote: 172 See Gelb & Cubita, An Overview of State Automobile Leasing Legislation, supra note 151 at 1097.
Footnote: 173 15 U.S.C. Â§1667b(a); 12 C.F.R. Â§ 213.4(g)(8).
Footnote: 174 Draft UCLA Â§407. Motor vehicle leases are given separate treatment. An excess milage provision is also subject to a reasonableness standard, referable to the expected diminution in value of the vehicle on account of the excess milage.
Footnote: 175 See Burke & Cannel, supra note 157.
Footnote: 176 Draft UCLA Â§306.
Footnote: 177 The table of contents of the Draft UCLA is attached hereto as Appendix B by way of outline of the scope of its coverage.
Footnote: 178 Draft UCLA Â§108.
Footnote: 179 The law of contract ordinarily penalizes only unconscionable conduct occurring prior to formation of the contract. The UCLA departs from tradition in attaching sanctions to identified forms of post- contract behavior.
Footnote: 180 Draft UCLA Â§109. UCC 2A-108 contains similar unconscionability provisions, including a provision for recovery of attorneys fees.
Footnote: 182 Infra note 216.
Footnote: 183 In its current draft form, the UCLA includes a section number to accommodate provisions referable to warranties of quality and title, but indicates "no text pending review of UCC Articles 2 and 2A."
Footnote: 184 A precedent may be found in some of the provincial consumer protection legislation applicable to consumer purchases. For example, the Saskatchewan Consumer Protection Act, S.S. 1996, c. C- 30.1, defines rights of rejection in relation to the seriousness and remediability of the seller's breach. See ss. 57-60.
Footnote: 185 Note that the statutory "hell or high water" provision of Article 2A does not apply to consumer leases. See UCC 2A-407(1).
Footnote: 186 Draft UCLA Â§305(b).
Footnote: 187 Draft UCLA Â§302.
Footnote: 188 Draft UCLA Â§304. Pyramiding refers to the practice of adding a late charge to subsequent on-time payments, on the grounds of non-payment of the late charge arising from a prior default - ie., the imposition of a late charge on payment of the original late charge.
Footnote: 189 Draft UCLA Â§301.
Footnote: 190 See Proposed Comments to Â§301.
Footnote: 191 Draft UCLA Â§403.
Footnote: 192 Draft UCLA Â§404 - 405. Lessors may elect to retain repossessed goods rather than dispose of them, in which event "realized value" is determined as prescribed. The the Draft differs from the PPSA in that it does not currently require the giving of notice prior to disposition. The Reporter's Notes to the realization provisions query strongly whether a pre-disposition notice comparable to that required under UCC 9-614 is appropriate.
Footnote: 193 Draft UCLA Â§405.
Footnote: 194 This approach stands in contrast to that adopted under the British Columbia PPSA, supra note 143. A lessor who repossesses consumer goods leased under a security lease is precluded from enforcing the personal covenant to pay. However, this "seize or sue" regime does not appear to have obstructed consumer leasing in that province, or added appreciably to its cost. Further empirical investigation of the impact of such legislation may therefore be worthwhile.
Footnote: 195 E.g. see Saskatchewan PPSA, s.65(8). For a discussion of the provision, see Ronald C.C. Cuming and Roderick J. Wood, supra note 41 at 470-71.
Footnote: 196 Draft UCLA Â§501.
Footnote: 198 See e.g. Saskatchewan Consumer Protection Act, supra note 184, Part III, s. 64.
Footnote: 199 Draft UCLA Â§102, "consumer lease", "lessee".
Footnote: 200 The $150,000 sum is exclusive of the residual value of the goods, payments for options to renew or purchase and payments to third parties (eg. for insurance or service).
Footnote: 201 See Draft UCLA Â§102(3), Reporter's Notes.
Footnote: 203 Draft UCLA Â§303. The Reporter's Notes imply that the reference is to a lessor under a true lease, who is permitted to take a security interest limited to the leased goods to secure the payment obligations owed by the lessor. Conceptually, it is difficult to understand how a lessor, who by definition holds title to the leased goods, may take a security interest in those goods.
Footnote: 204 Other provisions of Draft UCLA reflect a similarly divided approach. While a person with a security interest in a lease as chattel paper is not a "holder" by virtue of that interest, the assignee of a lessor is. This is an extremely fine if not incomprehensible distinction. Nevertheless, if a person who holds a security interest in chattel paper undertakes collection, she becomes de facto an assignee, and thus subject to the Act as "holder". See the Reporter's Notes to Â§102(8).
Footnote: 205 Manitoba Consumer Protection Act, R.S.M. 1987, c. C200 as am., Northwest Territories Consumer Protection Act, R.S.N.W.T. 1988, c. C-17, Yukon Consumer Protection Act, R.S.Y. 1986, c..
Footnote: 206 Motor Dealer Leasing Regulation, B.C. Reg. 391/94, under the Motor Dealer Act, R.S.B.C. 1996, c. 316.
Footnote: 207 S.A. 1985, c. C-22.5, ss. 32,33.
Footnote: 208 Consumer purchasers and borrowers are protected in the other provinces under the following legislation: Ontario Consumer Protection Act, R.S.O. 1990, s. 31 as am., New Brunswick Cost of Credit Disclosure Act, R.S.N.B. 1973, c. C-28 as am., Nova Scotia Consumer Protection Act, R.S.N. 1989, c. 92 as am., Newfoundland Consumer Protection Act, R.S.N. 1990, c. C-31 as am., Prince Edward Island Consumer Protection Act, R.S.P.E.I. 1988, c. C-19 as am., Saskatchewan Cost of Credit Disclosure Act, R.S.S. 1978, c. C-41 as am.
Footnote: 209 British Columbia Sale of Goods Act, supra note 15, Saskatchewan Consumer Protection Act, S.S. 1996, c. C-30.1, Part III, New Brunswick Consumer Product Warranty and Liability Act, S.N.B. 1978, c. C-18.1.
Footnote: 210 Manitoba Consumer Protection Act, Northwest Territories Consumer Protection Act, Part VI, Yukon Consumer Protection Act, Part VI, all supra note 205.
Footnote: 211 Consumer Protection Act, supra note 184, Part III.
Footnote: 212 Motor Dealer Leasing Regulation, supra note 206, s. 3(d).
Footnote: 213 Consumers who lease automobiles for a term greater than twelve months may look to the Canadian Motor Vehicle Arbitration Plan (CAMVAP) for resolution of disputes involving manufacturers, subject to the agreement of the lessor to submit to the Plan. There are, however, a number of limitations on the scope of CAMPVAP.
Footnote: 214 E.g. see P.E.I. Consumer Protection Act, supra note 208, s.3, which prohibits a "person" from engaging in an unfair practices.
Footnote: 215 A number of statutes prohibit a "supplier" from engaging in unfair practices. Supplier is generally defined as a person who is engaged in the business of selling or leasing, manufacturing or distributing goods. See e.g. Manitoba Consumer Protection Act, supra note 205, s. 1.
Footnote: 216 R.S.C. 1985, c. C-34, ss. 2 "supply", 36, 52-54, 60.
Footnote: 217 Most of this legislation also provides for administrative intervention and penalties at the instance of designated government officials. However, there is little evidence of active administrative enforcement practices in today's cash-strapped provincial beauracracies.
Footnote: 218 See the discussion of lessors' remedies, supra at heading 3.
Footnote: 219 Supra note 206.
Footnote: 220 See e.g. Saskatchewan PPSA, Part V.
Footnote: 221 E.g. Saskatchewan PPSA s. 65(8) and (5).
Footnote: 222 Ibid., s. 65(6).
Footnote: 223 British Columbia PPSA, supra note 143, s. 67.
Footnote: 224 See e.g. Saskatchewan PPSA, s. 55(2), providing that Part V does not apply to transactions referred to in s. 3(2), which include a lease that does not secure payment or performance of an obligation. For a discussion of the "substance" test, see Cuming and Wood, supra note at 42-47, Ronald C.C. Cuming, True Leases and Security Leases Under Canadian Personal Property Security Acts (1982- 83, 7 Can. Bus. L.J. 251.
Footnote: 225 In the context of open-end leases, such liabilities may accrue at the end of the lease term, even where there has been no early termination.
Footnote: 226 This point is made quite forcefully by Professor Cuming, supra note 9 at 424-44.
Footnote: 227 See Ziegel, Cuming, both supra note 9.

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