What's New in the Law

In re Rafter Seven Ranches L.P. (Rafter Ranches L.P. v. C.H. Brown Company), 2008 WL 4787106 (U.S.Ct.App. 10th Cir. Nov. 4, 2008). A divided Tenth Circuit panel affirms the decisions of a bankruptcy court and bankruptcy appellate panel that a lessee of irrigation sprinkler systems was liable for unpaid rentals on its leases despite the facts that the systems supplied by a company chosen by the lessee did not conform to specifications of the equipment in the leases and, in the case of some of the equipment, was never used after the lessee inspected it and determined it to be “junk.” The primary basis for finding liability with respect to the unused equipment was that the lessee failed to notify the lessor of its rejection of the equipment in a reasonable period of time as required by Article 2A ' letting the equipment sit in the fields for six weeks before notifying the lessor. The dissent argues, to the contrary, that a reasonable opportunity to inspect should include an opportunity to test, which in the case of the “junk” would have been futile. The majority had also noted that the lessee authorized the lessor to pay the supplier before the equipment was delivered and agreed that it would look only to the supplier in the event the equipment was defective. Whether such promises would obligate the lessee to make all lease payments owing under the leases ' under contract law if not under Article 2A finance lease provisions requiring a reasonable opportunity to inspect ' even if prompt notice of nonconformity was given, is not made clear.

Frontier Leasing Corp. v. Bowlers Country Club, Inc., 2008 WL 4725183 (Iowa App. Oct. 29, 2008) (final publication decision pending). In a case with a factual background similar to, and decided by the same court as, C and J Leasing Corp. v. Hendren Golf Management, Inc., 2007 WL 257955 (Iowa App. Jan. 31, 2007), this appellate court affirms a lower court's grant of summary judgment for the lessor based upon the “hell and high water” provision in the lease notwithstanding a vendor's financial inability to pay for advertising on golf carts in amounts sufficient for the lessee to make the payments owing on the lease. The court notes that since “hell and high water” provisions are enforceable in Iowa and since the lessee had every opportunity to read the lease, there was no genuine issue of material fact to support a claim that the lease was unconscionable.