A leasing agreement cannot be dissolved if the financing party has not set an additional deadline for repaying an instalment. Neither can a fee be charged for renewing it.
The Supreme Court’s findings, after considering a dispute between a transport firm and one of the biggest leasing firms, could greatly influence market practice. The proceedings concerned a contractual penalty for failure to return a truck-tractor after the leasing firm terminated the agreement. However, when analysing the actual circumstances, the judges concluded that contractual penalties were out of the question, because the agreement had not been terminated effectively.
Under Article 70913 par. 2 of the Civil Code, if a user delays with the payment of at least one instalment, the financing party should set it, in writing, an adequate additional deadline to pay the outstanding amount, pointing out that if this passes ineffectively it can terminate the leasing agreement with immediate effect – unless the parties have agreed a termination date. Contractual provisions less favourable for the user are invalid under the Code.
The previous practice, however, was that, in a situation where the client delayed paying an instalment, firms would dissolve an agreement and then renew it, charging a fee.
Greater protection for lessees
“Legal doctrine is in agreement that the Civil Code provisions concerning leasing agreements relate, in principle, to financial leasing agreements”, says Attorney Maciej Raczyński of the law firm Raczyński Skalski & Partners, who represented a transport firm in a dispute. “The Supreme Court confirmed that one of those provisions is Article 70913 par. 2 of the Civil Code. It therefore admitted that in the case of a clear majority of leasing agreements concluded in Poland (operational leasing agreements), if the user delays with the payment of instalments, the leasing firm must summon the client in writing to make the payments, before dissolving the agreement”.
The Supreme Court also stated that renewing a leasing agreement – after it is dissolved by the financing firm – must also be done in writing. Today, in a situation where an agreement is terminated because of a delay in payment, after settling the outstanding payments, the charge for the summons and the interest, it is renewed by e-mail, phone or even text message.
“Added to that, for the mere fact of renewing the agreement, a fee specified in the general terms and conditions of the agreement is also charged, from several hundred zlotys upwards. Two conclusions at which the Supreme Court arrived are therefore of fundamental importance for practices on the leasing market”, said Attorney Maciej Raczyński.
Advocate Bartłomiej Bronisz, legal expert of the Polish Leasing Union, confirms that if the agreement was terminated by a leasing firm, the process of renewing it should be done in writing.
“Such a letter should also contain the signatures of both parties”, he stressed. “If, in accordance with the Civil Code, the agreement should be concluded in writing in order to be valid, then so should its renewal”.
The question therefore arises of whether, if the agreement was dissolved without setting an additional payment deadline, and then renewed not in writing, after the Supreme Court ruling lessees can demand reimbursement of the charges incurred for its renewal. According to Dr. Artur Krzykowski of the law firm AK Legal, this is indeed possible.
“That reimbursement can be made by a set-off, if the agreement is still being performed by the parties, or by the lessor repaying the charge for unlawful termination of an agreement on the basis of Civil Code provisions concerning unjustified enrichment”, says Dr. Krzykowski.
Possible good change
According to Attorney Bronisz of the PLU, applying clauses providing for an automatic termination of a leasing agreement in the event of a delay in paying an instalment is an isolated case.
“There shouldn’t be more questioning of the legality of collecting fees for renewing an agreement by leasing firms. The Supreme Court ruling should not have a major impact on how leasing firms operate”.
Not everybody agrees with this
“In practice, the Supreme Court’s requirements are very often neglected by leasing firms, as is confirmed by the case involving the client I represent”, says Attorney Raczyński. “For that reason, the ruling is of great importance to clients of such firms”.
Attorney Krzykowski, on the other hand, notes that the Supreme Court ruling affords a great opportunity to ease the requirements and clauses of leasing agreements, but everything depends on how aware companies are.
“The practice of leasing firms can only change if lessees start to pursue refunds of fees unduly collected, along with interest”, says Dr. Krzykowski. “This ruling can therefore give many companies a chance, and even protect some of them from bankruptcy”. ©?
Edited by: Piotr Szymaniak (DGP)
JUDICIAL DECISIONS
Supreme Court ruling of 29 April 2016, case file no. I CSK 283/15.