The Court of Appeals of Tennessee confirmed that an equipment lessor is entitled to enforce the “hell or high water” provision of an equipment lease.  

Mountain Rentals entered into a finance lease agreement with Telimagine, Inc. (“Telimagine”) for the rental of telecommunications equipment. The agreement was termed a “finance lease,” which was governed under Article 2A of the Uniform Commercial Code (“UCC”), and included provisions that the equipment was rented “as is” with no warranties. The agreement required Mountain Rentals to waive all right and remedies, and allowed Telimagine to assign the agreement and convey to a new lessor the same rights and benefits that Telimagine had at the time of contract, but none of its obligations.  

Mountain Rentals acknowledged that Telimagine had no responsibilities or obligations regarding the service or maintenance of the equipment. Importantly, Mountain Rentals also signed a certificate acknowledging its acceptance of the equipment and agreeing that payment of rent was due to Telimagine without deduction, setoff, or abatement. Telimagine later assigned its rights under the agreement to Wells Fargo Financial Leasing, Inc. (“Wells Fargo”).  

Wells Fargo sued Mountain Rentals, asserting that Mountain Rentals had defaulted on the agreement and sought the remaining balance of all rental payments, discounted to present value, and attorney’s fees and costs. The court examined the lower court’s opinion, which granted summary judgment to Wells Fargo, pursuant to Florida law, which governed the contract, and in any event was consistent with the laws of Tennessee, as both, in turn are based on Article 2 of the UCC.  

Finance Lease

The court began its analysis by noting that the agreement at issue was defined as a finance lease, and would be analyzed as such under the UCC. The UCC defines a finance lease, in relevant part, as one that:  

  1. The lessor does not select, manufacture, or supply the goods
  2. The lessor acquires the goods or the right to possession and use of the goods in connection with the lease, and
  3. One of the following occurs:  

(a) The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract  

(b) The lessee’s approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract  

(c) The lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possessions and use of the goods  

The contract at issue also included a “hell or high water” clause, which required the lessee to pay the finance lessor even if the lessor’s performance after the lessee’s acceptance of the goods was not in accordance with the lease contract.  

‘Hell or High Water’

Affirming the trial court’s opinion, the Court of Appeals rejected Mountain Rentals’ argument that the contract was either ambiguous, a contract of adhesion, unconscionable, or otherwise contrary to public policy. The court noted the widespread enforcement of “hell or high water” provisions, and concluded that Mountain Rentals could not seek to avoid the lease agreement after receipt of the equipment.  

Mountain Rentals’ assertion that the leased goods were not satisfactory, and that Telimagine defaulted on the contract, did not raise issues of fact that were material, the court determined, because the law is clear with respect to a lessee’s obligations under a finance lease.  

The court also affirmed the award of attorney’s fees and costs to Wells Fargo.  

While the decision may seem harsh to lessees, it further solidifies significant precedent supporting the enforcement of “hell or high water” clauses in commercial finance leases. In this case, the court specifically rejected Mountain Rentals’ arguments that it was not aware of the implications of a finance lease. As the court stated, “[a] party is presumed to know the contents of a contract he or she has signed and, in the absence of fraud, is then bound by that contract.”