Which item is NOT a stated benefit to the lessor under UCC Article 2A?

Which item is NOT a stated benefit to the lessor under UCC Article 2A?

• A. Warranties are passed to the lessee
• B. Lessor absolved from equipment issues
• C. Hell or high water clause should be in the lease
• D. The lease must be signed by both parties

Answer: (A)

Under UCC Article 2A, the lessor typically benefits from provisions that protect cash flow, limit the lessor’s liability, and ensure enforceability of the lease. A clause that makes the lessee responsible for continuing payments regardless of whether the equipment works (the “hell or high water” clause) directly protects the lessor’s ability to receive rent. Requiring signatures from both parties helps ensure the lease is a valid, enforceable contract, which also protects the lessor’s interests. And shifting risk away from the lessor by absolving the lessor of responsibility for equipment issues means the lessee bears more of the maintenance and failure risk, again benefiting the lessor. Warranties being passed to the lessee, however, primarily benefits the lessee (and often the manufacturer) by placing warranty coverage and related claims with the party that actually bears the risk of defects or maintenance under warranty. This arrangement reduces the lessor’s warranty exposure but is not a direct stated benefit to the lessor. That’s why this option is not a stated benefit to the lessor under UCC Article 2A.

Under UCC Article 2A, the lessor typically benefits from provisions that protect cash flow, limit the lessor’s liability, and ensure enforceability of the lease. A clause that makes the lessee responsible for continuing payments regardless of whether the equipment works (the “hell or high water” clause) directly protects the lessor’s ability to receive rent. Requiring signatures from both parties helps ensure the lease is a valid, enforceable contract, which also protects the lessor’s interests. And shifting risk away from the lessor by absolving the lessor of responsibility for equipment issues means the lessee bears more of the maintenance and failure risk, again benefiting the lessor.

Warranties being passed to the lessee, however, primarily benefits the lessee (and often the manufacturer) by placing warranty coverage and related claims with the party that actually bears the risk of defects or maintenance under warranty. This arrangement reduces the lessor’s warranty exposure but is not a direct stated benefit to the lessor. That’s why this option is not a stated benefit to the lessor under UCC Article 2A.