Legal Question in Business Law in California

Re: Emissions upgrade responsibility

Read The Friendly Contract. If the issue is not specifically addressed in the contract, probably the lessor (them) is responsible for the upgrade and they would be in breach of the lease with the lessee (you) by not bringing the non-emissions-compliant goods into compliance. After all, you, the lessee, do not have (I am assuming without my having read the contract) the right to go around making engine modifications to their equipment.

Re: Emissions upgrade responsibility

Most leases I have read or written cover this. It may be in a separate provision regarding modifications required by law, or covered by a more general provision regarding "compliance with all laws."

In an operating lease, the lessor is more likely to be made responsible, while in a finance lease, the responsibility is more likely to lie with the lessee.

How do you know which is which? In an operating lease, the term of the lease is likely to be much less than the useful life of the equipment, and the lessee has no particular right to acquire the equipment at the end of the lease. More often than not, the lessor, not the lessee, decided what equipment to buy, has its own maintenance people, and might have yards or stores where lessees come to pick out what they want.

On the other hand, financial leases are arranged by money people in pinstripes with offices on the 40th floor in midtown. They arrange to buy and deliver equipment you specify, and are more concerned with your credit rating than your operators' skills. You are expected to take care of the equipment (they don't know which end of a screwdriver is sharp), and more likely than not you have an option to acquire the equipment at the end of the lease, often for a fixed or below-market price, but the lease will be relatively long.

Still, I bet the controlling language is to be found somewhere in the lease. If not, figure with a finance lease you pay for the modifications, and with an operating lease the owner-lessor arranges, makes and pays for them.

Re: Emissions upgrade responsibility

The law regarding leases of personal property is at Commercial Code Secs. 10000+. For example Sec 10507 says a lessee can revoke acceptance of a lot or unit that is found to be nonconforming. Notice of revocation of acceptance must be made within a reasonable time.