A common problem among finance companies seeking to enforce a commercial finance lease against a defaulted debtor/lessee is that documents are not fully executed or are otherwise disorganized.  Unfortunately, for large finance companies that have hundreds, or even thousands, of accounts, not all the “i’s” are always dotted, nor are all the “t’s” always crossed.

This problem often leads to a defaulted lessee/debtor moving to dismiss your lawsuit on the grounds that the copy of the lease the debtor was given isn’t executed by the lessor/finance company. At first glance, one might think that such a contract is not enforceable, since it was never executed. However, such an assumption would be wrong.

Under both New Jersey and Pennsylvania law, so long as the finance lease is signed by the debtor/lessee, the finance lease is enforceable against him.

Article 2A, Section 201(b) of the Uniform Commercial Code (UCC) — codified in New Jersey as  N.J. Stat. § 12A:2A-201(b) and in Pennsylvania as 13 Pa.C.S. § 2A201 — states that “a lease contract is not enforceable by way of action or defense unless there is a writing, signed by the party against whom enforcement is sought or by that party’s authorized agent…”

In other words, even if the lessor/finance company didn’t sign the Lease, the Debtor that did sign it still can’t escape liability.

Of course, an ounce of prevention is worth a pound of medicine, so making sure your documents for each account are in order at the outset of the transaction will avoid the additional cost of litigating the issue on a motion to dismiss. However, for those occasions when a finance company wants to initiate a lawsuit against a debtor and discovers a glaring problem with their documents, such as a signature missing from the lease, a good lawyer can find a legal remedy to such a problem, one example of which is explained above.

It is imperative that creditors speak with sound creditor’s rights counsel to avoid having a case against a debtor dismissed for such technicalities. Stark & Stark’s Creditor’s Rights Group can help. Our attorneys regularly represent banks and creditors in New Jersey and Pennsylvania on a variety of issues, including lawsuits against commercial equipment lessees.