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When Is Equipment Not 'Equipment'? Inventory Leasing or Leasing to Rental Companies
It is not unusual for a finance lessor to discover that its Lessee intends to enter into a contract with a third party whereby the Lessee delivers possession of the leased equipment to that third party. Although many finance lessors may be aware of the practical risks associated with having its leased property/collateral in the hands of a third party, many are unaware of the increased legal risks that result from such a situation. This article addresses some of the key issues. For the sake of clarity, the third party receiving possession and control of the leased equipment will be referred to as a 'Sublessee,' and the agreement between the Lessee and the Sublessee will be referred to as a 'Sublease.' It should be noted that a contract of service pursuant to which the Sublessee receives possession also constitutes a 'Sublease' for purposes of this article.
The key legal distinction between this type of transaction and the standard finance lease is that the leased property is treated under the Uniform Commercial Code ('UCC') as 'Inventory' in the hands of the Lessee. It would have been ordinarily considered 'Equipment' were it not for the Sublease. This classification results from the fact that under '9-102(a)(48) of the UCC as Revised in 2001, goods constitute 'Inventory' if they 'are leased by a person as lessor [or] held by a person for sale or lease or to be furnished under a contract of service [or] are furnished under a contract of service.'
As will be discussed in more detail, the classification of the leased property as 'Inventory' raises perfection issues and also allows a Lessee, in certain circumstances, to provide a Sublessee with greater rights with respect to the equipment than the Lessor originally provided to the Lessee.
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The ever-evolving digital marketing landscape, coupled with the industry-wide adoption of programmatic advertising, poses a significant threat to the effectiveness and integrity of digital advertising campaigns. This article explores various risks to digital advertising from pixel stuffing and ad stacking to domain spoofing and bots. It will also explore what should be done to ensure ad fraud protection and improve effectiveness.
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