The Law of Commercial Leasing in Canada 1999

6. Conclusion

[206] There is no doubt that the current law of leasing in Canada is both complex and, in some respects, poorly defined. However, this study has not revealed a pressing need for a comprehensive, all-encompassing leasing statute of the kind represented by UCC Article 2A. Equally important, the achievement of such legislation is likely unfeasible in the Canadian context.226

[207] Article 2A addresses all of the issues raised in this study (with the exception of those specific to consumer leases), along with a considerable range of other issues that have not been discussed. They include basic contract formation, writing requirements, choice of law, construction of the contract, insurance and risk and contract modification. The codification of Canadian leasing law in legislation comparable to Article 2A would be a very substantial undertaking. Moreover, the appropriateness of a comprehensive statutory exercise of this kind must be considered in context. That context is, in the United States, a tradition of codification in matters of private commercial law. Article 2A was a natural outgrowth of Article 2 on Sales and, to a lesser extent, a corollary of Article 9 on Secured Transactions. Canadians share neither that tradition, nor the highly developed code of commercial law in which it is manifest.

[208] Some have also observed that a comprehensive leasing statute would be anomalous in the absence of a sales law counterpart, an observation with which I agree.227 Moreover, the fact that parties almost uniformly contract out of statutorily imposed obligations inconsistent with their chosen allocations of risk means that comprehensive legislation is likely to be largely symbolic.

[209] These points do not, however, preclude serious consideration of a consumer leasing statute. Since such legislation would impose non-waivable substantive and procedural obligations, it would represent a meaningful exercise in both rationalization of the law and protection of consumers.

[210] Consumer leasing, particularly in the motor vehicle market, has become very significant, both in terms of the number of transactions taking place each year, and in terms of their individual and cumulative value. As the foregoing discussion indicates, these transactions are not regulated by an coherent body of law. To the extent that they are subject to existing provincial legislation, there is no nation-wide uniformity in treatment. In sum, the law in this are is substantively deficient, difficult to ascertain and lacking in uniformity - three good reasons for statutory reform.

[211] There are practical obstacles to the enactment of consumer leasing legislation that cannot be ignored and that may require further investigation. First is the anomaly mentioned earlier of promulgating uniform consumer leasing legislation in the absence of uniform consumer sales law. Ideally, this could be overcome by addressing both forms of transaction, either in a single statute or through companion legislation. Consumer sales law across the country is not uniform, and is long overdue for rationalization and modernization. However, the decision to proceed with consumer leasing legislation should not be entirely dependent on the possibility of reforming consumer sales law. Consumer lessors are in a very different position than consumer purchasers in terms of the nature and extent of the liability to which they are subject in connection with lease transactions, and the need for disclosure is particularly acute in this area. At a minimum, disclosure standards should be established and termination liability addressed through legislation.

[212] The second obstacle to the realization of statutory reform in this area is the apparent lack of political interest in consumer protection. Governments have largely dismantled consumer affairs departments, and limited funding is available to administer existing legislation. This difficulty may be exacerbated by a third obstacle to reform, namely industry opposition to comprehensive legislation.

[213] Another feasible and worthwhile project for reform lies in the creation of a finance leasing statute addressing the unique tripartite relationship involved in a finance lease. The heart of such legislation would be; i) the extension of suppliers' and manufacturers' warranties to the lessee, ii) definition of the lessor's obligations to the lessee in connection with the goods, specifically in connection with undisturbed possession and in connection with fitness for use where the lessee has relied upon the lessor's advice, and iii) restriction of the lessee's claims against the lessor in matters relating to the goods' quality and performance.

[214] In addition, the statute might address such ancillary matters as the lessee's rights in the event of non-delivery, the effect of acceptance of goods in connection with the lessee's rights of rejection, the supplier's or lessor's right to cure defective performance, the relationship between the supplier's liability to the lessee and its liability to the lessor under the contract of sale (ie., so as to avoid duplication of liability), general remedies and enforcement rights and the assignability of the lease.

[215] Uniform legislation governing finance leases would address the current absence of rules of law tailored to these transactions and would promote harmonization of law at the international level, particularly as between Canada and the United States. Further, it would enhance the transactional efficiencies realized by parties to a finance lease by providing a default set of rules that would eliminate the need for contractual terms designed to effectively define the parties respective relationships in a fashion appropriate to the nature of the transaction.

[216] In conclusion, this study is founded almost entirely on an examination of current leasing law and the available literature. It is not an empirical investigation of the commercial leasing market. Any decision to proceed with the drafting of uniform legislation of any kind should therefore be founded on more broadly based consultations with the profession and further investigation of prevailing practices and acknowledged practical issues in the marketplace. Professional accounting firms and others may also make a valuable contribution to these deliberations.

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