Unidroit Convention on International Financial Leasing

Unidroit Convention on International Financial Leasing

 

CHAPTER I – SPHERE OF APPLICATION AND GENERAL PROVISIONS

Article 1

1. – This Convention governs a financial leasing transaction as
described in paragraph 2 in which one party (the lessor),

(a) on the specifications of another party (the lessee), enters into
an agreement (the supply agreement) with a third party (the supplier)
under which the lessor acquires plant, capital goods or other equipment
(the equipment) on terms approved by the lessee so far as they concern
its interests, and

(b) enters into an agreement (the leasing agreement) with the lessee,
granting to the lessee the right to use the equipment in return for the
payment of rentals.

2. – The financial leasing transaction referred to in the previous
paragraph is a transaction which includes the following characteristics:

(a) the lessee specifies the equipment and selects the supplier
without relying primarily on the skill and judgment of the lessor;

(b) the equipment in acquired by the lessor in connection with a
leasing agreement which, to the knowledge of the supplier, either has
been made or is to be made between the lessor and the lessee; and

(c) the rentals payable under the leasing agreement are calculated so
as to take into account in particular the amortisation of the whole or a
substantial part of the cost of the equipment.

3. – This Convention applies whether or not the lessee has or
subsequently acquires the option to buy the equipment or to hold it on
lease for a further period, and whether or not for a nominal price or
rental.

4. – This Convention applies to financial leasing transactions in
relation to all equipment save that which is to be used primarily for the
lessee’s personal, family or household purposes.

Article 2

In the case of one or more sub-leasing transactions involving the same
equipment, this Convention applies to each transaction which is a
financial leasing transaction and is otherwise subject to this Convention
as if the person from whom the first lessor (as defined in paragraph 1 of
the previous article) acquired the equipment were the supplier and as if
the agreement under which the equipment was so acquired were the supply
agreement.

Article 3

1. – This Convention applies when the lessor and the lessee have
their places of business in different States and:

(a) those States and the State in which the supplier has its place of
business are Contracting States; or

(b) both the supply agreement and the leasing agreement are governed
by the law of a Contracting State.

2. – A reference in this Convention to a party’s place of business
shall, if it has more than one place of business, mean the place of
business which has the closest relationship to the relevant agreement and
its performance, having regard to the circumstances known to or
contemplated by the parties at any time before or at the conclusion of
that agreement.

Article 4

1. – The provisions of this Convention shall not cease to apply
merely because the equipment has become a fixture to or incorporated in
land.

2. – Any question whether or not the equipment has become a fixture
to or incorporated in land, and if so the effect on the rights inter se
of the lessor and a person having real rights in the land, shall be
determined by the law of the State where the land is situated.

Article 5

1. – The application of this Convention may be excluded only if each
of the parties to the supply agreement and each of the parties to the
leasing agreement agree to exclude it.

2. – Where the application of this Convention has not been excluded
in accordance with the previous paragraph, the parties may, in their
relations with each other, derogate from or vary the effect of any of its
provisions except as stated in Articles 8(3) and 13(3)(b) and (4).

Article 6

1. – In the interpretation of this Convention, regard is to be had to
its object and purpose as set forth in the preamble, to its international
character and to the need to promote uniformity in its application and
the observance of good faith in international trade.

2. – Questions concerning matters governed by this Convention which
are not expressly settled in it are to be settled in conformity with the
general principles on which it is based or, in the absence of such
principles, in conformity with the law applicable by virtue of the rules
of Private International Law .

CHAPTER II – RIGHTS AND DUTIES OF THE PARTIES

Article 7

1. – (a) The lessor’s real rights in the equipment shall be valid
against the lessee’s trustee in bankruptcy and creditors, including
creditors who have obtained an attachment or execution.

(b) For the purposes of this paragraph “trustee in bankruptcy”
includes a liquidator, administrator or other person appointed to
administer the lessee’s estate for the benefit of the general body of
creditors.

2. – Where by the applicable law the lessor’s real rights in the
equipment are valid against a person referred to in the previous
paragraph only on compliance with rules as to public notice, those rights
shall be valid against that person only if there has been compliance with
such rules.

3. – For the purposes of the previous paragraph the applicable law is
the la of the State which, at the time when a person referred to in
paragraph 1 becomes entitled to invoke the rules referred to in the
previous paragraph, is :

(a) in the case of a registered ship, the State in which it is
registered in the name of the owner (for the purposes of this
sub-paragraph a bareboat charterer is deemed not to be the owner);

(b) in the case of an aircraft which is registered pursuant to the
Convention on International Civil Aviation done at Chicago on 7 December
1944, the State in which it is so registered;

(c) in the case of other equipment of a kind normally moved from one
State to another, including an aircraft engine, the State in which the
lessee has its principal place of business;

(d) in the case of all other equipment, the State in which the
equipment is situated.

4. – Paragraph 2 shall not affect the provisions of any other treaty
under which the lessor’s real rights in the equipment are required to be
recognised.

5. – This article shall not affect the priority of any creditor
having:

(a) a consensual or non-consensual lien or security interest in the
equipment arising otherwise than by virtue of an attachment or execution,
or

(b) any right of arrest, detention or disposition conferred
specifically in relation to ships or aircraft under the law applicable by
virtue of the rules of Private International Law .

Article 8

1. – (a) Except as otherwise provided by this Convention or stated in
the leasing agreement, the lessor shall not incur any liability to the
lessee in respect of the equipment save to the extent that the lessee has
suffered loss as the result of its reliance on the lessor’s skill and
judgment and of the lessor’s intervention in the selection of the
supplier or the specifications of the equipment.

(b) The lessor shall not, in its capacity of lessor, be liable to
third parties for death, personal injury or damage to property caused by
the equipment.

(c) The above provisions of this paragraph shall not govern any
liability of the lessor in any other capacity, for example as owner.

2. – The lessor warrants that the lessee’s quiet possession will not
be disturbed by a person who has a superior title or right, or who claims
a superior title or right and acts under the authority of a court, where
such title, right or claim is not derived from an act or omission of the
lessee.

3. – The parties may not derogate from or vary the effect of the
provisions of the previous paragraph in so far as the superior title,
right or claim is derived from an intentional or grossly negligent act or
omission of the lessor.

4. – The provisions of paragraphs 2 and 3 shall not affect any
broader warranty of quiet possession by the lessor which is mandatory
under the law applicable by virtue of the rules of private international
law.

 

Conclusion

Notes

See Also

References and Further Reading

About the Author/s and Reviewer/s

Author: international

Mentioned in these Entries

Conventions: Chronological Index 1971-1990, Private International Law, Trade and Commercial Relations conventions, Unidroit Convention on International Financial Leasing 2, Unidroit Convention on International Financial Leasing 3.

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