Cases concerning financial leasing

FINANCIAL LEASE PAYMENTS

In a judgment of 9 May 2017, the Supreme Court of Cassation ruled on questions concerning payments under a financial lease that had been decided inconsistently by the courts (a ground for admitting the appeal under Article 280, paragraph 1, item 2 of the Code of Civil Procedure): Which limitation period—general or shortened—applies to a creditor’s claim under a financial lease agreement for payment of lease instalments, insofar as they represent principal? Do those instalments constitute periodic payments within the meaning of Article 111(c) of the Obligations and Contracts Act?

In Judgment No. 16 of 9 May 2017 in Civil Case No. 50185/2016, the First Division of the Civil Chamber of the Supreme Court of Cassation answered the question as follows: “A three-year limitation period applies to a creditor’s claim under a financial lease agreement for payment of lease instalments, insofar as they represent principal, because the claim constitutes a periodic payment within the meaning of Article 111(c) of the Obligations and Contracts Act.”

In that judgment, the Supreme Court of Cassation reviewed the previously inconsistent case law and set out the following reasons. According to the generally accepted authoritative interpretation given in Interpretative Judgment No. 3 of 18 May 2012 of the General Assembly of the Civil and Commercial Divisions of the Supreme Court of Cassation in Interpretative Case No. 3/2011, “periodic payments” within the meaning of Article 111(c) of the Obligations and Contracts Act are characterised by the performance of recurring obligations to transfer money or other fungible property; those obligations arise from a single legal fact; their due dates occur at predetermined intervals; and the amounts are fixed or determinable from the outset, without the intervals having to be equal or the payments identical. The interpretative judgment explains that the legislature lists rent and interest claims in Article 111(c) merely as examples and that all types of periodic payments cannot be exhaustively listed because the legal facts giving rise to them may differ.

A financial lease agreement is a commercial transaction under which one party, the lessor, undertakes to acquire an asset from a third party under terms specified by the other party, the lessee, and to provide it for use in return for consideration. During the agreement or after expiry of the term agreed by the parties, the lessee may acquire ownership of the asset, while in all circumstances the risk of its accidental loss or damage is borne by the lessee. The lessee’s principal reciprocal obligation is to pay consideration in the form of specified lease instalments due under an agreed repayment schedule. Each instalment pays part of the price of the asset as an equivalent for the use provided, together with interest for the deferred payment of that price. Accordingly, the claim for consideration under a financial lease agreement falls within the definition of “periodic payments” in Interpretative Judgment No. 3 of 18 May 2012 in Interpretative Case No. 3/2011, and the special three-year limitation period under Article 111(c) of the Obligations and Contracts Act applies to it.

On those grounds, the First Division of the Civil Chamber of the Supreme Court of Cassation delivered Judgment No. 16 of 9 May 2017 in Civil Case No. 50185/2016, finally holding that lease instalments, insofar as they represent principal, are periodic payments within the meaning of Article 111(c) of the Obligations and Contracts Act and are therefore subject to a three-year limitation period.