Question

Consider a transaction that has three parties: (1) JWCJR Corp. (JWCJR) and its owner, John W. Cumberledge, Jr., (2) Bottomline Systems, Inc., and (3) Colonial Pacific Leasing Corp. JWCJR/Cumberledge, an autobody shop and its owner, sought a computer and software package that would allow the shop to generate estimates for insurance companies and improve the way the shop was managed. Bottomline demonstrated a computer and software system to JWCJR/Cumberledge. JWCJR/Cumberledge decided to obtain the system Bottomline demonstrated and subsequently entered into an agreement with Colonial Leasing. Colonial Leasing then purchased equipment from Bottomline. JWCJR/Cumberledge agreed to make payments to Colonial Leasing. What kind of lease do these facts indicate? If the computer system does not work, why does it matter what kind of lease exists?[Colonial Pacific Leasing Corp. v. JWCJR Corp., 977 P.2d 541 (1999).]

Answer 1

What kind of lease do these facts indicate?

It indicates finance lease, because JWCJR/Cumberledge accepted the terms and agreed to take rental f the equipment to pay the rentals for the defined period. Under Article of 2A, of UCC once the goods are accepted by lessee, it has to be leased.

If the computer system does not work, why does it matter what kind of lease exists?

Before accepting the goods, it was to be inspected. But if the acceptance is given, the lease cannot be cancelled. If theh computer doesnt work properly, the lessee should have inspected before accepting the lease, now once the lease is accepted, lessee cannot cancel. And if the equipment fails to perform its work effectively, it should be reported within a specified time period after the initiation of the lease, failing to do so indicates that the lease was accepted, and hence cannot be cancelled later