Contracts to Lease Goods

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Did you know that the Consumer Protection Act protects you when you lease goods for four months or more from a merchant? This protection applies to leases of works of art, refrigerators, tents for an event and other things you might need.

Leasing means to rent.

As the person leasing the goods, you have rights … but the merchant you’re doing business with has rights too!

Important! For the the lease of a used car or motorcycle, there are extra rules not explained in this article.

Also, the rules for rental housing are different.

What Can Be Included in the Lease Contract

When you lease goods from a merchant you don’t become the owner. Instead, you become the “lessee” of the goods and the merchant remains the owner.

The merchant can offer to sign a contract of lease with an option to purchase or with guaranteed residual value. What do these terms mean?

Contract of Lease With an Option to Purchase → At the end of the lease, it’s possible to buy the leased goods and become the owner for a price set ahead of time in the contract (the buyback price).

Example:  

You want to buy a pair of trendy new skis this winter, but you’re worried about buying because you’re not sure that you’ll like the new technology. You decide to rent a pair with an option to purchase. This lets you buy the skis at the end of the season if you like them.

Contract of Lease with Guaranteed Residual Value → You promise that the leased goods will have a certain value at the end of the lease. In other words, your use of the goods will not cause them to lose any more value than the value that you agree on with the merchant.

Example:

You rent a log splitter for three years. When you sign the lease, you promise that the tool will be worth exactly $300 at the end of the lease. If its market value is $200 at the end of the lease (because, for example, you used it a lot), you must pay the merchant $100. This amount is the difference between the $300 value that you guaranteed and the $200 real value of the log splitter at the end of the contract.

Rights of the Person Leasing and the Merchant

 

Rights of Person Renting

(“lessee”)

Merchant’s Rights

(“lessor”)

Rent

When you pay “rent” to lease goods, you can insist on paying it

 

  • in equal payments (except for the last one which can be lower than the others), and
  • at regular intervals of up to 35 days (though it’s more common for payments to be made monthly, for example, on the 28th of each month). 
  • The merchant can demand that the rent be paid.
  • The merchant can also require you to pay up to two instalments in advance, but the merchant cannot require this before the beginning of the rental period.

If you don’t make your payments, the merchant can

  • require that you make all of the payments that are due and unpaid, and
  • ask you to return the leased goods back without having to reimburse payments that were due and paid.

If the contract says so, the merchant can require that you make all of the payments mentioned in the contract. In other words, payments that are due and unpaid + all future payments.

Insurance

If the leased goods are lost or destroyed because of an event beyond your control, (also called an "act of God") you don’t have to pay for this loss. The merchant suffers the consequences.

You can still decide to insure the goods against loss and damage not caused by an act of God, for example, you drop the leased goods and they break.

The merchant can require you to insure the goods against loss and damage not caused by an act of God.

But the merchant cannot require that you choose a specific plan or buy from a specific company.

Warranties

The leased goods must be in good condition. You must be able to use them for the purpose for which you rented them. 

You therefore have all of the regular warranties on the goods as though you were the owner

The merchant can insist that you take care of the leased goods and use them properly.

Returning the Goods

At the end of the lease, you must return the goods to the merchant. They must be in good condition, which means with only normal wear and tear.


However, if you made a contract with an option to purchase and you decide to buy the goods, you don’t have to return them to the merchant.

The merchant must take back the leased goods, unless you buy them with your option to purchase.

However, if the goods have abnormal wear and tear or if they’re worth less than the guaranteed residual value, the merchant can claim money from you for the loss in value of the goods.

Important !
This article explains in a general way the law that applies in Quebec. This article is not a legal opinion or legal advice. To find out the specific rules for your situation, consult a lawyer or notary.

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