Opinion ID: 1318239
Heading Depth: 2
Heading Rank: 1

Heading: The Crane Transaction

Text: The parties mainly dispute whether McGee's agreement with McDonald bound McGee to pay for a three month guaranteed rental. We agree with the trial court that the transaction between McGee and McDonald included a guaranteed rental of the crane. McGee signed a rental agreement and a purchase option for the crane. The purchase option incorporated the rental agreement and stated that the agreement included a [g]uaranteed [r]ental [p]eriod of three (3) months. These documents, read together, comprise a contract which explicitly includes three months of guaranteed rental. Therefore, McGee is potentially liable for the three months rent whether the transaction is characterized as a lease or sale. Although the true nature of the transaction is only tangentially related to McGee's liability, it becomes important in determining Fireman's Fund's liability. In determining the meaning of a contract, we will consider relevant extrinsic sources. North Slope Borough v. Sohio Petroleum, 585 P.2d 534, 540 n. 7 (Alaska 1978). To determine whether a particular transaction is a sale or lease, we must consider, in addition to pertinent documents, whether the purchase option price is nominal, the extent to which the lessee acquires an equity interest in the property, whether the option is unconditional, the past practices of the parties and the actual terms of the agreement. Western Enterprises v. Arctic Office Machines, 667 P.2d 1232, 1236 (Alaska 1983). According to the terms of the purchase option, McGee could buy the crane only by notifying McDonald in writing of his desire to do so. McGee, therefore, was not committed to a purchase at all. McGee did not have any title or ownership rights and never acquired an equity interest in the crane. McGee's intent to purchase the crane in the future is consistent with our determination that he agreed to a rental with a purchase option. Customers who lack immediate cash commonly rent a crane with a purchase option; this standard transaction was consistent with the industry custom. Finally, the express terms of the documents, including the bold-face headings, the reserved right of McDonald to repossess and retain all property interests, and the designations of the parties further support McDonald's contentions that there was a rental, not a sale. Viewing the evidence in the light most favorable to McGee, [5] we conclude that, even if he intended to purchase the crane, he was renting it at the time of the damage. Therefore we affirm the superior court insofar as the order granting summary judgment was premised upon the conclusion that McGee rented the crane. Because the contract provided for three months guaranteed rental, McGee is potentially liable for the full rental amount. Nevertheless, we agree with McGee that the trial court erroneously granted summary judgment on liability. Unresolved factual issues remain for trial.