Pub. 8 2017 Issue 4

Winter 2017 19 West Virginia Banker diligence of the various repair and maintenance teams in keeping records intact. In light of these practical issues, a bank’s equipment sale contract is usually documented with an “as-is, where-is” war- ranty disclaimer and the buyer may be invited to complete a pre-purchase inspection by its own expert. If material condi- tion discrepancies are found, the contract will typically give the buyer the right to have the bank correct the discrep- ancies at the bank’s expense, to cancel the contract, or to reduce the purchase price to the satisfaction of the parties. The purpose of this article is not to analyze the pros and cons of the decisions in the above cases or the quality of the legal drafting for the litigated sale contracts, but instead to recom- mend that banks review their equipment sale documents to include the following: 1. STRONG WARRANTY DISCLAIMERS: The sale docu- ments (purchase/sale agreement and any related bill of sale) should include strong warranty disclaimers (more than just an “as-is, where-is” disclaimer). 2. EXPRESS EQUIPMENT ACCEPTANCE TERMS: The sales process should add a document that is signed by the buyer at the time it takes delivery that includes: (1) the buyer’s uncon- ditional and irrevocable acceptance of the equipment; (2) the buyer’s confirmation that the equipment complies with the con- ditions stated in the sale contract; and (3) the buyer’s release of any claims/warranties related to the condition of the equipment. These terms could be included as part of a final bill of sale. 3. LIMIT THE EFFECT OF CONDITION PROVISIONS: If the sale contract does include any reference to the expected condition of the equipment, make sure that any those provi- sions are identified as pre-conditions to the closing that are waived at the time of delivery instead of product warranties that survive after delivery. By reviewing and updating your equipment sale process and documents now, banks are less likely to be embroiled in litiga- tion due to the inherent tension between warranty disclaimers and delivery condition issues. Furthermore, if a bank finds itself in such a dispute and it has upgraded its sale documents as outlined above, then the allocation of risk regarding the con- dition of the equipment in the sale documents is much more likely to result in a decision in the bank’s favor.  AndrewKalgreenconcentrateshispractice intheareasofcommercial equipment finance and leasing, municipal lease-purchase financing and other commercial lending and public sector financing transactions. As a former senior counsel for two national equipment finance companies, Mr. Kalgreen has extensive experience in structuring, documenting, and negotiating commercial and governmental financing transactions and in advising financial institutions regarding federal and state laws affecting their business operations. REPRESENTATIVE EXPERIENCE Provided legal guidance on structures, terms and conditions for equipment leasing and financing transactions including compliance with banking laws, tax benefits and requirements, residual protection, early termination provisions and lease-end return and sale options. Documented and negotiated middle-market and large ticket loan and equipment lease transactions for commercial, government and nonprofit customers. Substantial experience in financings for business aircraft, helicopters and brownwater vessels, tax- exempt municipal leases for state and local governments and equipment financings for nonprofit organizations by conduit structures.