Opinion ID: 1128901
Heading Depth: 1
Heading Rank: 1

Heading: The termination value adjustment agreement

Text: Executive leased Alodex the 1969 Ford at a monthly rental of $116.50. The lease was for an indefinite period. However, the lease provided for an adjustment in the compensation to be computed at the time the lease was terminated. The legality of this termination value adjustment is at issue. The lease provides that, when it will be terminated, the wholesale value of the leased vehicle should be ascertained as provided by the agreement. [1] If at termination this wholesale value is less than the depreciated value of the vehicle, i. e., due to its leased use (computed under the lease as an original value of $3,067 less $81.29 for depreciation each month), then the lessee Alodex agreed to pay the difference as additional rental. [2] (If, on the other hand, the wholesale value at termination is greater than the depreciated value of the vehicle, then the lessor Executive agrees to refund the excess value as a credit against the monthly rental paid.) The general intent of the termination value adjustment provisions is to assure that the lessor collects the loss in value of the rental vehicle to the extent it exceeds the depreciation included in the monthly rentals collected. On the other hand, if at the termination of the lease the wholesale value of the vehicle exceeds its loss in value due to depreciation during use under the lease, then the lessee-user is entitled to a refund to that extent. In effect, at the termination of the lease, the monthly rental is adjusted up or down. The lessee-user either pays for any loss in value greater than the estimated depreciation over the lease-months, or else he receives credit against the monthly rentals paid to the extent that the actual loss in value is less than the estimated depreciation over such period. In the present instance the court of appeal awarded judgment to Executive for $905.55 for the termination value adjustment agreed upon, since the wholesale value was less than the estimated depreciated value. (This award was in addition to the unpaid rental of $582.50 for the five months' use of the leased vehicle and to $207.97 for penalty payment (see footnote 2 above) for the cancellation of the lease in less than a year.) The defendant-lessee Alodex attacks this award as contrary to the law and public policy of this state.