Numerous finance companies were no doubt keen to review clauses placed in their own agreements following a successful appeal against the enforceability of a term in a hire agreement in 2007.
The successful challenge to this claim invalidated the liability of the claimant; including any Personal Guarantee securing the agreement.
In this particular case, against a car hire company, one of the clauses in the agreement was judged to be unenforceable on the grounds that it was considered to be a penalty.
The clause in question was a stipulation of the costs the hirer would have to pay in the event of a repudiatory breach of the agreement.
A repudiatory breach is defined as a breach considered serious enough as to justify termination of an agreement.
The clause had not factored in many possible variables such as the ability to offset loss of rental during the agreement period against the potential additional revenues generated by the car hire company to re-hire the returned/recovered vehicle; the vehicle was returned just over 1 year in to a 3 year agreement.
Other factors not considered were the condition of the vehicle and depreciation.
For the term to have been considered enforceable the hire company had to have provided a genuine pre-estimate of the loss it was likely to be subjected to; failure to do this resulted in the decision that the clause was in fact a penalty.
This gives hope to people who find themselves in the unenviable position of dealing with a Personal Guarantee being called following a breach of contract; relevant to contracts signed before the end of 2008.
Many leasing companies do not have the internal resources to deal with breaches in contracts and are quick to outsource these problems to solicitors; this can be very intimidating to someone already struggling to negotiate their position with the leasing company.
Essentially, with the right advice, it may be possible to reduce the substantial financial burden down to that which encompasses the arrears of payments at the time of termination of contract plus the repossession costs.
We have ourselves been involved in just such a personal guarantee claim to one of our clients from a leasing company, where the original claim of £140K was settled for less than £10K, which just emphasizes how critical it is to seek good advice at any stage when faced with a Personal Guarantee issue whether or not it is linked to termination, or prospective termination, of a lease agreement.
The successful challenge to this claim invalidated the liability of the claimant; including any Personal Guarantee securing the agreement.
In this particular case, against a car hire company, one of the clauses in the agreement was judged to be unenforceable on the grounds that it was considered to be a penalty.
The clause in question was a stipulation of the costs the hirer would have to pay in the event of a repudiatory breach of the agreement.
A repudiatory breach is defined as a breach considered serious enough as to justify termination of an agreement.
The clause had not factored in many possible variables such as the ability to offset loss of rental during the agreement period against the potential additional revenues generated by the car hire company to re-hire the returned/recovered vehicle; the vehicle was returned just over 1 year in to a 3 year agreement.
Other factors not considered were the condition of the vehicle and depreciation.
For the term to have been considered enforceable the hire company had to have provided a genuine pre-estimate of the loss it was likely to be subjected to; failure to do this resulted in the decision that the clause was in fact a penalty.
This gives hope to people who find themselves in the unenviable position of dealing with a Personal Guarantee being called following a breach of contract; relevant to contracts signed before the end of 2008.
Many leasing companies do not have the internal resources to deal with breaches in contracts and are quick to outsource these problems to solicitors; this can be very intimidating to someone already struggling to negotiate their position with the leasing company.
Essentially, with the right advice, it may be possible to reduce the substantial financial burden down to that which encompasses the arrears of payments at the time of termination of contract plus the repossession costs.
We have ourselves been involved in just such a personal guarantee claim to one of our clients from a leasing company, where the original claim of £140K was settled for less than £10K, which just emphasizes how critical it is to seek good advice at any stage when faced with a Personal Guarantee issue whether or not it is linked to termination, or prospective termination, of a lease agreement.
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