Lease Agreement - Equipment

EQUIPMENT LEASE AGREEMENT

This Equipment Lease Agreement (the “Agreement”) is entered into as of [__/__/____] (the “Effective Date”) by and between:

Lessor: [________________________________], a [state and entity type], with an address at [________________________________] (“Lessor”); and

Lessee: [________________________________], a [state and entity type], with an address at [________________________________] (“Lessee”).

Lessor and Lessee are each a “Party” and together the “Parties.”

1. TRANSACTION AND SCOPE

1.1 Lease

Lessor leases to Lessee, and Lessee leases from Lessor, the equipment identified in Schedule 1 (the “Equipment”) for the term and rent stated in Schedule 2.

1.2 Commercial-purpose limitation

Lessee represents that it is acquiring possession and use of the Equipment primarily for business, commercial, agricultural, or professional purposes and not primarily for personal, family, or household purposes.

1.3 Required classification review

Before signing, the Parties must complete Schedule 4 to identify:

• the governing state and that state’s enacted personal-property lease law;
• whether the transaction is intended to be a finance lease;
• whether the economic terms could cause the transaction to be treated as a secured transaction rather than a lease;
• any filing, licensing, tax, consumer, motor-vehicle, fixture, or industry-specific requirements; and
• any mandatory state-law language or prohibited remedy.

The Parties’ label does not control a court’s legal classification of the transaction. If applicable law treats the transaction as creating a security interest, the Parties intend that Lessor retain the rights of a secured party to the extent permitted by law, and the Parties shall complete any required financing statements or other filings identified in Schedule 4.

1.4 Finance-lease election

Select one:

☐ Finance lease intended. Lessor did not select, manufacture, or supply the Equipment; Lessor acquired the Equipment or the right to possess and use it in connection with this Agreement; and the supplier information and supply-contract disclosures required by the governing state’s enacted finance-lease law have been delivered to Lessee and listed in Schedule 3.

☐ Finance lease not intended. The Parties do not intend to rely on statutory finance-lease treatment or any statutory “hell-or-high-water” rule.

No statement in this Agreement that the transaction is a finance lease overrides unmet statutory conditions.

2. EQUIPMENT, DELIVERY, AND ACCEPTANCE

2.1 Equipment description

Schedule 1 must identify each item by type, manufacturer, model, serial number, condition, location, accessories, and any software, manuals, or replacement parts included in the lease.

2.2 Delivery

Delivery date: [__/__/____]

Delivery location: [________________________________]

Delivery responsibility and cost: [________________________________]

Installation and testing obligations: [________________________________]

Any shipping term, including an Incoterms rule, applies only if expressly written here with its named place and version: [________________________________]

2.3 Inspection and acceptance

Lessee shall inspect and test the Equipment within [____] business days after delivery and installation. Lessee shall then:

☐ sign the Acceptance Certificate in Exhibit A;

☐ provide a written list of nonconformities; or

☐ reject the Equipment if rejection is permitted by this Agreement and applicable law.

Acceptance does not waive a claim for a latent defect, fraud, or an express warranty that applicable law does not permit the Parties to waive.

2.4 Risk of loss

The Parties select the following negotiated allocation, subject to applicable law:

☐ Risk of loss remains with Lessor until Lessee receives and accepts the Equipment.

☐ Risk of loss passes to Lessee when the Equipment is delivered to the carrier at [place].

☐ Risk of loss passes to Lessee when the Equipment is tendered at [destination].

☐ For a qualifying finance lease, risk of loss passes as provided by the governing state’s enacted finance-lease law.

☐ Other: [________________________________]

Damage caused by a Party’s breach or fault remains that Party’s responsibility to the extent required by applicable law.

3. TERM, RENT, AND SECURITY

3.1 Term

The initial term begins on [__/__/____] and ends on [__/__/____], unless earlier terminated in accordance with this Agreement and applicable law.

3.2 Renewal

Select one:

☐ No automatic renewal.

☐ The Agreement renews for successive [____]-month periods unless either Party gives at least [____] days’ written notice before the current term ends.

☐ Lessee may renew on the terms stated in Schedule 2 by giving notice no later than [__/__/____].

Any renewal notice or automatic-renewal provision must be revised to satisfy the governing state’s notice and disclosure requirements identified in Schedule 4.

3.3 Rent

Lessee shall pay the rent shown in Schedule 2 without demand, to the account or address designated by Lessor. Rent is due on [day or schedule].

3.4 Late charge and interest

An overdue undisputed amount accrues:

☐ a one-time late charge of $[__________];

☐ interest at [____]% per [month/year]; or

☐ the lower of [____]% per [month/year] or the maximum lawful rate.

No late charge, interest, or fee applies to the extent prohibited or reduced by applicable law.

3.5 Security deposit

Security deposit: $[__________]

Lessor may apply the deposit to a matured, unpaid obligation after giving Lessee an itemized notice. Lessor shall return any unapplied balance within [____] days after the Equipment is returned and all matured obligations are paid, subject to the governing state’s law.

3.6 Independent-payment election

Select one:

☐ Finance-lease election. If this transaction qualifies as a nonconsumer finance lease under applicable law, Lessee’s promises become irrevocable and independent only when and to the extent the governing law provides.

☐ Negotiated net-lease covenant. After acceptance, Lessee shall pay rent without setoff or deduction, except for defenses or claims that cannot lawfully be waived.

☐ No independent-payment covenant. Lessee retains all defenses and setoff rights available under this Agreement and applicable law.

4. TAXES, USE, MAINTENANCE, AND INSURANCE

4.1 Taxes and governmental charges

Lessee shall pay the sales, use, rental, personal-property, registration, and similar transaction charges allocated to Lessee in Schedule 2. Lessor remains responsible for taxes measured by Lessor’s net income unless Schedule 2 lawfully provides otherwise.

4.2 Permitted use and location

Lessee shall:

• use the Equipment only for lawful purposes and in accordance with manufacturer instructions;
• keep it at the approved location in Schedule 1 unless Lessor gives written consent;
• obtain required permits, licenses, and operator qualifications;
• not remove or obscure ownership, serial-number, or safety markings; and
• not use or install the Equipment in a manner that causes it to become a fixture unless Schedule 4 addresses fixture status and filings.

4.3 Maintenance and alterations

Lessee shall perform the maintenance allocated to it in Schedule 2 and keep records of material service and repairs. Lessee may not make a material alteration without Lessor’s written consent. Approved additions become:

☐ Lessor’s property without payment when installed;

☐ Lessee’s property and removable without material damage; or

☐ as otherwise stated here: [________________________________]

4.4 Inspection

On reasonable prior notice, Lessor may inspect the Equipment and relevant maintenance records during normal business hours in a manner that does not unreasonably interfere with Lessee’s operations. No advance notice is required in an emergency presenting an imminent risk of material damage, subject to applicable law.

4.5 Insurance

Lessee shall maintain the coverages and limits stated in Schedule 2. Property coverage shall identify the Party bearing the insured risk and any required loss payee. Liability coverage shall identify any required additional insured. Certificates of insurance do not amend the policy or create coverage.

5. TITLE, WARRANTIES, AND SUPPLIER RIGHTS

5.1 Title and quiet possession

Lessor represents that it owns the Equipment or has authority to lease it. So long as Lessee is not in uncured default, Lessor shall not wrongfully interfere with Lessee’s possession and use.

Disclosed liens or third-party interests: [________________________________]

5.2 Express warranties

The only express warranties made by Lessor are:

[____________________________________________________________]

Supplier or manufacturer warranties assigned or made available to Lessee are listed in Schedule 3. Lessor shall reasonably cooperate, at Lessee’s expense, with a permitted warranty claim against the supplier or manufacturer.

5.3 Disclaimer of implied warranties

EXCEPT FOR THE EXPRESS WARRANTIES IN THIS AGREEMENT AND TO THE MAXIMUM EXTENT PERMITTED BY THE GOVERNING STATE’S LAW, THE EQUIPMENT IS LEASED “AS IS” AND “WITH ALL FAULTS.” LESSOR DISCLAIMS THE IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. THERE IS NO WARRANTY THAT THE EQUIPMENT WILL BE FIT FOR A PARTICULAR PURPOSE.

Schedule 4 must confirm that this disclaimer is sufficiently specific, written, and conspicuous under the governing law and must add any mandatory language. This disclaimer does not negate an inconsistent express warranty or a warranty that applicable law does not permit Lessor to exclude.

6. DAMAGE, LOSS, AND RETURN

6.1 Casualty

Lessee shall promptly notify Lessor of loss, theft, seizure, destruction, or material damage. The Parties shall apply insurance proceeds and select a remedy in the following order, to the extent commercially reasonable and lawful:

1. repair the Equipment;
2. replace it with substantially equivalent equipment acceptable to Lessor;
3. pay the casualty amount stated or calculated in Schedule 2; or
4. terminate the affected item’s lease schedule and reconcile rent, proceeds, salvage, and saved expenses.

Any casualty value or stipulated-loss amount must be reviewed under the governing state’s liquidated-damages law and may not operate as an unenforceable penalty.

6.2 Return

By the end of the term, Lessee shall return the Equipment to [location] in the condition required by Schedule 2, ordinary wear and tear excepted. Lessee shall remove its data and return included manuals, accessories, keys, and records. Lessee remains responsible for secure data deletion unless Schedule 2 assigns that task to Lessor.

6.3 End-of-term option

Select one and complete all economic terms:

☐ Return only; no purchase option.

☐ Purchase at fair market value determined at the time of exercise.

☐ Purchase for $[__________].

☐ Renew at fair market rent determined at the time of exercise.

☐ Other: [________________________________]

Schedule 4 must analyze whether the term, nontermination obligation, renewal option, or purchase option causes the transaction to create a security interest.

7. DEFAULT AND REMEDIES

7.1 Lessee defaults

Subject to the notice and cure periods below, Lessee defaults if it:

• fails to pay a matured, undisputed amount;
• materially breaches a use, maintenance, insurance, return, or transfer obligation;
• makes a material misrepresentation on which Lessor reasonably relied;
• abandons, conceals, unlawfully transfers, or materially impairs the Equipment; or
• suffers another event expressly stated here and enforceable under applicable law: [________________________________]

The commencement of a bankruptcy case, insolvency, or appointment of a trustee or custodian is not by itself an enforceable termination or default trigger to the extent prohibited by 11 U.S.C. § 365 or other applicable law.

7.2 Notice and cure

Payment default: [____] days after written notice.

Other curable default: [____] days after written notice, extended for up to [____] additional days if cure cannot reasonably be completed within the initial period and Lessee promptly begins and diligently pursues cure.

No cure period applies to abandonment, fraud, an unauthorized disposition, or an imminent threat of material loss if applicable law permits immediate action.

7.3 Lessor remedies

After an uncured default, Lessor may exercise cumulative remedies available under this Agreement and applicable law, including:

• canceling the affected lease schedule;
• withholding delivery;
• requiring Lessee to assemble and make the Equipment available at a reasonably convenient location if the governing law and this Agreement permit;
• taking possession without judicial process only if it can be done lawfully and without breach of the peace, or proceeding by judicial action;
• disposing of or releasing the Equipment in good faith and in a commercially reasonable manner when required by law; and
• recovering accrued rent, permitted future-rent damages, incidental damages, residual-value loss, and other proven damages, less proceeds and expenses saved as required by law.

7.4 Acceleration and liquidated damages

Select and complete only after governing-law review:

☐ No acceleration or liquidated-damages remedy.

☐ Lessor may recover the present value of rent and other damages only under the measure authorized by the governing law, with required credits for market rent, disposition proceeds, saved expenses, and other mitigation.

☐ The Parties adopt this reasonable liquidated-damages formula because actual loss would be difficult to determine: [________________________________]

No remedy permits double recovery. An exclusive or limited remedy is subject to any applicable rule concerning unconscionability or failure of essential purpose.

7.5 Lessor default and Lessee remedies

Lessor defaults if it materially breaches an express warranty, wrongfully interferes with possession, or fails to perform another material obligation and does not cure within [____] days after written notice. Lessee may exercise the cancellation, cover, damages, specific-performance, or other remedies available under the governing law, subject to this Agreement’s lawful limitations.

7.6 Enforcement costs

The prevailing Party may recover reasonable attorneys’ fees and costs only if and to the extent permitted by the governing law. This clause must be revised if the governing law requires reciprocity or restricts fee recovery.

8. INDEMNITY AND LIABILITY LIMITS

8.1 Lessee indemnity

To the extent permitted by law, Lessee shall indemnify, defend, and hold harmless Lessor and its personnel from third-party claims arising from Lessee’s possession, operation, maintenance, storage, or transport of the Equipment, except to the extent caused by an indemnified person’s breach, negligence, gross negligence, willful misconduct, or other conduct that applicable law does not permit the Parties to indemnify.

The indemnified Party shall promptly notify Lessee, permit Lessee to control the defense with qualified counsel, and reasonably cooperate. Lessee may not settle a claim by admitting fault of or imposing a nonmonetary obligation on an indemnified Party without that Party’s written consent.

8.2 Consequential-damages waiver

TO THE EXTENT PERMITTED BY LAW, NEITHER PARTY IS LIABLE TO THE OTHER FOR CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING FROM THIS AGREEMENT. THIS WAIVER DOES NOT APPLY TO THIRD-PARTY INDEMNITY CLAIMS, FRAUD, WILLFUL MISCONDUCT, CONFIDENTIALITY OR DATA-SECURITY BREACHES, OR LIABILITY THAT CANNOT LAWFULLY BE LIMITED.

8.3 Liability cap

Select one:

☐ No general liability cap.

☐ Except for the exclusions below, each Party’s aggregate liability is limited to $[__________].

☐ Except for the exclusions below, Lessor’s aggregate liability is limited to rent paid for the affected Equipment during the [____] months before the event giving rise to the claim.

Cap exclusions: payment obligations; property damage to the Equipment; indemnity obligations; fraud; gross negligence; willful misconduct; confidentiality or data-security breaches; and liability that cannot lawfully be limited.

Schedule 4 must review enforceability, conspicuousness, unconscionability, essential-purpose, personal-injury, and public-policy limits under the governing law.

9. DISPUTE TERMS

9.1 Governing law

The law of [State], including its enacted personal-property lease law, governs without applying a choice-of-law rule that would select another jurisdiction. Schedule 4 must confirm that this choice has a sufficient relationship to the Parties or transaction and does not displace mandatory law.

9.2 Forum

Unless arbitration is selected below, each Party consents to the exclusive jurisdiction of the state and federal courts located in [County, State], subject to applicable venue and jurisdiction law.

9.3 Arbitration election

☐ No arbitration.

☐ Binding arbitration. A dispute arising out of or relating to this Agreement shall be resolved by [administrator] under its [rules] by [one/three] arbitrator(s) in [City, State]. The Federal Arbitration Act applies to the extent the transaction involves commerce. Judgment on the award may be entered by a court with jurisdiction.

If arbitration is selected, attach or identify the rules, allocate fees, address emergency relief and discovery, and have counsel review formation, scope, delegation, class-action, jury-waiver, and state-law requirements. Under 9 U.S.C. § 2, a written arbitration provision in a transaction involving commerce is enforceable subject to generally applicable contract defenses and statutory exceptions.

10. GENERAL TERMS

10.1 Assignment and sublease

Lessee may not assign this Agreement, delegate material duties, or sublease the Equipment without Lessor’s written consent, which shall not be unreasonably withheld if this box is checked: ☐. Any restriction is subject to applicable bankruptcy and other mandatory law.

Lessor may assign: [its payment rights / this Agreement / neither without consent], subject to applicable law and any defenses or claims that cannot be waived.

10.2 Confidentiality and equipment data

Ownership of operational, diagnostic, location, usage, and personal data generated by or stored on the Equipment: [________________________________]

Security, access, retention, deletion, incident-notice, and return requirements: [________________________________]

10.3 Force majeure

Except for matured payment obligations, a Party is excused from delay caused by an event beyond its reasonable control that it could not reasonably avoid or overcome. The affected Party shall promptly notify the other, mitigate the effect, and resume performance. If the delay exceeds [____] days, [either Party / the unaffected Party] may terminate the affected obligation on written notice.

10.4 Notices

Notices must be in writing and delivered by [personal delivery / nationally recognized courier / certified mail / email with agreed confirmation] to the addresses below. A notice is effective: [________________________________]

Lessor notice address: [________________________________]

Lessee notice address: [________________________________]

10.5 Entire agreement; amendments; waiver

This Agreement and its schedules and exhibits are the entire agreement concerning the Equipment. An amendment or waiver must be in a writing signed by the Party against whom it is asserted. A waiver on one occasion is not a continuing waiver.

10.6 Severability and reformation

If a provision is unenforceable, it shall be enforced to the maximum lawful extent only if doing so does not materially change the Parties’ bargain; otherwise it shall be severed, and the remaining provisions shall continue to the extent permitted by law.

10.7 Counterparts and electronic signatures

The Parties may sign counterparts and use electronic records and signatures. Under 15 U.S.C. § 7001, a transaction in or affecting interstate or foreign commerce generally may not be denied legal effect solely because an electronic record or signature was used, but no person is required to agree to use or accept electronic records. The Parties shall also comply with the governing state’s electronic-transactions law and any applicable consent, disclosure, retention, notarization, filing, or recordability requirements.

11. SIGNATURES

EXHIBIT A — ACCEPTANCE CERTIFICATE

Agreement date: [__/__/____]

Equipment or schedule: [________________________________]

Delivery and installation date: [__/__/____]

After inspection and testing, Lessee:

☐ accepts the Equipment;

☐ accepts the Equipment subject to the attached punch list; or

☐ rejects the Equipment for the attached stated nonconformities, subject to the Agreement and applicable law.

Lessee: [________________________________]

By: [________________________________] Date: [__/__/____]

SCHEDULE 1 — EQUIPMENT AND LOCATION

Included software, accessories, manuals, and parts: [________________________________]

SCHEDULE 2 — ECONOMIC AND OPERATIONAL TERMS

• Rent amount and schedule: [________________________________]
• Taxes and fees: [________________________________]
• Security deposit: [________________________________]
• Maintenance allocation: [________________________________]
• Insurance coverages and limits: [________________________________]
• Casualty-value formula: [________________________________]
• Return condition and shipping allocation: [________________________________]
• Renewal or purchase option: [________________________________]

SCHEDULE 3 — SUPPLIER AND WARRANTY INFORMATION

• Supplier legal name and address: [________________________________]
• Supply-contract date and description: [________________________________]
• Supplier selected by: [________________________________]
• Copy of supply contract delivered to Lessee on: [__/__/____]
• Supplier/manufacturer promises and warranties: [________________________________]
• Disclaimers, remedy limits, and liquidated-damages terms in supply contract: [________________________________]
• Warranty claim contact and procedure: [________________________________]

SCHEDULE 4 — GOVERNING-LAW COMPLETION CHECKLIST

Complete with licensed counsel before signing:

☐ Governing state and official code URL identified: [________________________________]

☐ State Article 2A or other lease sections mapped for definitions, finance leases, risk of loss, warranty disclaimers, default, possession, damages, and limitation of remedies: [________________________________]

☐ True-lease versus security-interest analysis completed; filings listed: [________________________________]

☐ Finance-lease statutory conditions and supplier disclosures confirmed or finance-lease language removed.

☐ Consumer-lease, motor-vehicle, fixture, agricultural, medical-device, telecommunications, or other special rules checked.

☐ Rent, late fee, interest, taxes, security deposit, automatic renewal, and end-of-term option checked.

☐ Warranty disclaimer and liability limitations checked for required wording and conspicuousness.

☐ Self-help, breach-of-peace, repossession, disposition, mitigation, credit, acceleration, present-value, and liquidated-damages rules checked.

☐ Bankruptcy-triggered default language reviewed under 11 U.S.C. § 365 and applicable exceptions.

☐ Arbitration, forum, electronic-signature, notice, indemnity, and attorneys’ fee provisions checked.

SOURCES AND REFERENCES

• California Legislature — Commercial Code § 1203, lease or security interest
• California Legislature — Commercial Code § 10103, lease and finance-lease definitions
• California Legislature — Commercial Code § 10214, warranty exclusions
• California Legislature — Commercial Code § 10219, risk of loss
• California Legislature — Commercial Code § 10407, irrevocable promises in nonconsumer finance leases
• California Legislature — Commercial Code §§ 10523–10532, lessor remedies
• California Legislature — Commercial Code §§ 10503–10504, remedy limits and liquidated damages
• GovInfo — 9 U.S.C. § 2
• GovInfo — 11 U.S.C. § 365
• GovInfo — 15 U.S.C. § 7001

The California provisions are official examples of an enacted Article 2A framework; they do not govern unless California law is selected. Schedule 4 must replace or supplement them with the current official law of the chosen jurisdiction.