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Chapter 17, 19, 24 Textbook Notes from 12th Ed... Covers every heading and subheading, as well as things he throws in during class (which as you know is a lot!)

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Charles Davidson

Chapter 17: Leasing and Bailment Leasing - Spectrum of Leasing: o True Lease Lease with genuine bona fide option to buy Lease with option Sale with VTB (Vendor Take Back Mortgage) Conditional Sale Purchase Lease with option: after the term, you only pay a nominal fee to purchase Its different from a Sale because it shows up differently on a balance sheet However, if it looks like a duck, quacks like a duck, sounds like a duck, it IS a sale! So even though they dont think title passes, it has passed at the signing of the contract, so the vendors interest is gone Sale w/ VTB keeps a security interest with vendor, so if customer is bankrupt vendor gets it back If the security interest isnt registered with the PPSA, it is unenforceable Defn: Gross Lease: everythings included in the rent Defn: Net, Net, Net lease: heres base rent, and any additional expenses that the landlord incur will be additional rent for the tenant - If its a lease that deals with land (ie retail premises), want to register in the Land Registry system this makes the lease binding in anyone who stands in yours or your landlords shoes LOOK ALL THESE UP TO DETERMINE WHEN TITLE PASSES AND TO WHOM IT PASSES TO - Hire-purchase = an agreement to lease an item of property with an option to purchase at the end of the stipulated term - Important terms: o Duration o Rent o Insurance/other costs payable by Lessee o Purchase Option o Early Termination minimum payment - Implied quiet possession on the lessor a warranty that they wont interfere with lessees possession of the asset - Implied warrantee of fitness (item does what it was leased to do) - Right of the Lessor: o Sue for unpaid rent Even if we win in court, were an unsecured creditor o Sue for damages for loss - Right of Lessee: o Quiet possession, warrantee of fitness Operating (true) Leases - No intention to transfer ownership; term is relatively short Purchase Leases - Important tax implications (owner gets to claim depreciation, is the rental payments deductible, etc), plus leasing results in getting a lot more money out of the consumer - Lessor may think that continued ownership until payment is full is more secure (they cant just stop paying, or else we take it back because title hasnt passed) o If title has passed, the trustee owns the widgets and sells them to repay creditors - Lessee may like it better as off-balance sheet financing - Regardless, leasing is better for tax-planning Security and Finance Leases - Security lease lessor provides the credit rd - Finance lease 3 person provides credit; becomes owner of the property and leases it to the lessee - Sale and Leaseback owner sells it and immediately leases it back from new owner Bailment - Transfer of possession of personal property without a transfer of ownership - Can be involuntary (if a customer leaves a coat behind in a restaurant, they have to return it) - Gratuitous bailment is where one party provides no consideration Similar Transactions - Sale: transfers ownership, but maybe not possession opposite of bailment - Trust: transfers possession to a trustee; does not create bailment it gives legal ownership to trustee, and beneficiary acquires equitable interest in the subject of the trust - Licence: no more than a grant of permission to use the licensors land Sub-Bailment - Sub-bailee someone who receives bailment of property from a bailee Rights and duties of a Bailee - Burden of proof is on bailee to show they werent negligent; consequently it may be easier for bailor to sue under the rules of bailment than the rules of tort - Standard of care depends on the type of bailment (gratuitous for the benefit of bailor, etc) o Depends on type of good (expensive? Fragile?) Rights and Remedies- Quantum meruit: an amount a supplier deserves to be paid for goods or services provided to the person requesting them (aka fair market value of the benefit conferred) o If a carrier contracted bailment, but cannot complete their part because the bailor only delivered part of the goods, the carrier can sue quantum meruit for the value of what they have done - Another remedy is a lien on the bailed goods o Bailee can retain possession until bailor pays what is due Lien is a possession remedy: when bailor obtains possession of goods, they lose the lien - If bailor ultimately cannot pay bailee to get back his goods, bailee has right of sale Types of Bailment - Storage and safekeeping: o Fungible goods: goods that may be replaced with different but identical goods - Repairs and Work on a Chattel - Transportation: o Private vs. gratuitous vs. common Burden of proof from lowest to highest ^ o Common carrier works for public to transport goods for a reward (ie. Railway company) Must indemnify bailor agai
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