Legal Question in Business Law in California

repo of leased equipment for unpaid late charges

We have business equipment lease contract with a lender, with a $1.00 option to buy the equipment at the end of the lease. The lease was for five years and is almost over. The last payment is this month. We want to buy the equipment. The problem is, that in about 1994, when business was bad and we were close to bankruptcy, we missed a couple payments. We caught up, finally, but for awhile our payments were being applied the previous month by the company. The contract allows for late fees on all late payments, and states that "not more than one such service charge shall be made on any delinquent payment regardless of the length of the delinquency." Because of this, we thought that we could just keep the late payment late, and pay the current month on time. But the lease company credited all payments to the back payments, to the month that was already late. Now they have sent a bill for late fees that is in the thousands of dollars (three months' payments worth!), and they say they are going to send their people to pick up the equipment unless all late fees are paid. The contract does not say how they will credit payments. Is the law on their side?


Asked on 5/04/98, 10:02 pm

1 Answer from Attorneys
Ken Koury Kenneth P. Koury, Esq.

Need to read the contract

Crediting current payments to past due amounts is pretty standard and legal unless the contract specifically states otherwise. You really need to have someone read the contract. If the contract is not to long or complex you can fax it to me and I�ll read it and email you an opinion at no charge.

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Answered on 5/21/98, 9:20 pm


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