Marks & Associates, P.C. 
July 2015
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We are a little late in getting this issue out and offer the following creative excuses:


  1. The dog ate our homework.

  2. We never recovered from springing ahead to daylight savings time.

  3. It's summer, after all.

  4. We have been engaged in the highly distracting exercise of moving to new offices "across town".

  5. (See information elsewhere in this issue regarding our new address - PO Box is unchanged). 


That being said, summer is very much upon us. As you read this, yours truly will be returning from having been hidden from all electronic communication in the town of Postignano, Umbria, Italy. Poor Matt (who has already had his vacation) and Bill (who has been threatening to go on one for weeks) bore the brunt of your calls. Long-suffering Tammy doesn't get a vacation because if she takes one the place falls apart.

Before signing off this entirely silly missive, I want to continue the harangue I started last time: we continue to hear about (and have had a couple of inquiries from) lessees who are being dunned because their "leases intended as security agreements" have "renewed". If you know of lessors who engage in this practice, please do not send them business. If you are doing it or anything like it, please stop.




The offices of Marks & Associates, P.C. have relocated to:


400 Century Park South

Suite 100

Birmingham, AL 35226


Our mailing address remains:


P.O. Box 11386

Birmingham, AL 35202



Direct Contact Information:


Barry Marks



Bill Phillips



Matt Evans





To lawyers, those words are about as iconic as "do not bend, fold or mutilate" or "control alt delete." Unfortunately, they are a mantra more often recited than understood. In order for a lease, equipment finance agreement or contract to be enforceable it must, among other things be duly authorized, executed and delivered. Many contracts used in equipment finance contain representations by a lessee, borrower, broker, vendor or originator to that effect.

 A document or action to be taken by a corporation or other business entity (we will say generically, a "company") is authorized when the appropriate company representative(s) grant their approval.   In the case of transactions in the "ordinary course of business", the senior officers of a corporation, limited liability company or partnership (the general partner in a limited partnership) are generally assumed to have that authority. For example, the president or a vice president of a bakery corporation would have authority to purchase flour and hire bakers. Even within transactions in the ordinary course, a review of the lessee's or borrower's charter documents should be done. Remember that the risk is on the lender or lessor to ensure proper authority exists.

The officers' authority does not extend to transactions outside the ordinary course of business. These require additional approval, which may be specifically stated in the charter documents (such as Articles of Incorporation or By-Laws for a corporation, Articles of Organization or Operating Agreement for a LLC, or Certificate of Limited Partnership or Partnership Agreement for a limited partnership and the Partnership Agreement,(and in some states, a Certificate of Partnership, for general partnerships) or by specific approval from the company's governing body. In the case of a corporation, this governing body is usually the Board of Directors. In the case of a Limited Liability Company it may either be a manager or a group of members, depending on the terms of the Articles of Organization and the Operating Agreement. For limited partnerships, the general partner is generally vested with this power.

Sometimes the charter documents provided that specific actions, such as borrowing money or leasing equipment are specifically subject to authorization by shareholders, members or limited partnerships, or by a supermajority of members or partners.

If an officer exceeds his or her authority in signing a document or taking other action, company owners or creditors may be able to establish that the action is outside the scope of authority, aka ultra vires, and therefore void. Consider the example of the vice president of a bakery who, in addition to buying flour and hiring bakers, leases a pink Mercedes Benz for his secretary on the bakery's dime. You get the idea.

A duly executed document is one that has been signed within the authority of the signatory. This obviously overlaps with authorization but due execution also covers forgery and, more commonly, execution by a person claiming to be an officer he or she is not. Evidence of the officer's authority may be obtained by an Incumbency Certificate. This Certificate requires another corporate officer (presumably a secretary or assistant secretary) to verify that the person signing is (1) the person he or she claims to be and (2) the duly elected officer he or she claims to be.

Where a separate officer cannot be found to sign an Incumbency Certificate, we generally recommend a Notary furnish a Certificate that the signor has furnished evidence of his or her identity and sworn that he or she holds the appropriate office.

Delivery is a legal requirement for the enforceability of any lease or other agreement, just like due authorization and execution. More recent case law has held, however, that delivery can be constructive and can even be superseded by the manifest intent of the parties. In fact, many lawyers have come to ignore this requirement. We take a somewhat conservative view, however, and recommend that our clients always send an executed copy or facsimile of the lease to the lessee as soon as it fully executed. The requirement of due delivery may take on new life in the age of electronic signatures about which much has and will be written. For present purposes, suffice it to say that if the lessor intends to rely on a fax or electronically executed document, it should include appropriate language in the body of the lease.



New Jersey Law Change


The following must be included in collateral descriptions in NJ UCC filings:


The Collateral herein is within the scope of NJS 12A: Ch. 9,

pursuant to 12A: 9-102 and 12A: 9-109



We are studying the effects of this law change. For the present, we suggest that precautionary UCC filings for true leases also contain:


This is a precautionary filing with respect to a true lease. The foregoing statement, required by New Jersey law, does not represent an intention by the parties to characterize the transaction as a financing.



Can you count the number of contracts you have seen in which the date is not filled in? Do you ever wonder if it matters? What if there is a date on the contract but the date is intentionally designated as before or after the date the document was actually signed? What if the date is just wrong?

Quite some time ago, judges began giving broad latitude to contracting parties as to the date of their documents. Courts will generally honor contracts that have a date that has already passed when executed or executed "as of" a certain date.

If the date of the contract is wrong, why is it wrong?

If the contract was intentionally backdated to claim tax benefits in the prior tax year, this action could subject the parties to criminal action. If the contract was dated incorrectly to defraud a party to the contract or another party, then it could bring civil liability.

However, most of the time problems in dating documents arise because the parties in equipment financing generally do not all sit around a closing table to sign documents and fund the transaction the same day. The lessor may generate the lease with a date completed and email the form to the lessee in another state. The lessee may then wait several days before signing and returning the document. Alternatively, the lessor leaves the date blank with the expectation that the lessee will date it when it is signed. The document is the returned without a date. In these circumstances, the mere fact that the lease is not dated (or correctly dated) should not make it unenforceable.

If a court needs to determine the date of the contract under these circumstances it should look to the intent of the parties. It could look to the date the signed contract was mailed or emailed. It could look to evidence of when the parties started taking action in reliance on the contract. However, when a creditor files suit on a lease, EFA or any type of financing contract establishing the contract date adds time and cost to what should be a simple enforcement proceeding. It is best to take this issue off the table by getting the date right when the agreement is signed.

Which document?

 The ramifications of a missing date or incorrect date can differ with the document. If the date is left off a lease agreement then if the equipment is successfully delivered and accepted with a Certificate of Acceptance then the date on the lease is probably of little significance. However, if the Certificate of Acceptance is dated prior to the date the equipment is actually accepted (or if the lease commences on execution of the lease document) then the lessee may be harmed if the lease payments begin prior to delivery of the equipment or funding of the lease. If the agreement is an Equipment Finance Agreement the lender may actually be accruing interest before it has advanced the purchase money. Whether by accident or design we fear that this happens too often.

Of course, it is possible that the lessee could post-date a Certificate of Acceptance or fail to return the Certificate of Acceptance in a timely manner thus get some free use of the equipment before the lease term starts. This issue can be handled under lease terms that provide that equipment is deemed accepted once a certain number of days pass after deliver or the customer begins using it.

An error in dating a lease document can cause a breach of a lessor's representations or warranties in an assignment document. If a lessor or lease originator represents to its assignee that equipment has been "delivered, inspected and accepted by the lessee" in a document that is dated as of a date prior to when this actually occurred, the representation is technically incorrect. What about a representation that no liens exist in a contract dated as of a future date? If a lien attaches shortly after the contract is actually executed, is this a breach of representation because, as of the later date, the lien as already attached?

Effective date

As we mentioned above, leases and EFAs are frequently not signed on the date they are prepared. They may even be executed on multiple dates. For example a lease may be signed by the lessee on one date and "accepted" by the lessor a few days later. The lease may state that the agreement is effective on the date when the signed lease is received and accepted by the lessor as evidenced by lessor's signature on the lease. Without such a stipulation a court will probably determine the "date" of the contract is the date that the last necessary signature was made.

Many leases address this issue by stipulating an "effective" date or "as of" date. The lease will state that the effective date of the contract is a given date or will be the date of some future event. This is basically an agreement by the parties as to the date the agreement is effective regardless of the date it is actually signed by the parties. Such a provision should be enforceable.

However, a bad "effective date" can cause the same problems discussed above. If that date is routinely the date the form is prepared for the transaction, make sure that date makes sense under your documents.

The message here is not to change practices (unless you are booking deals and charging rent as of the date documents are prepared rather than the date funding occurs). The message is to be careful and think through the meaning of the dates in your documents, be they purportedly the date of signature or an "as of" date. If the parties desire an effective date different from the date the documents are signed, it is often best to state specifically that there will be a future effective date and how that date will be determined.


Special thanks to Patti Reid of Renasant Bank who suggested this article.

Happy Independence Day
From Marks & Associates, P.C.
 The Offices of Marks & Associates, P.C. will be closed
Friday, July 3rd in observance of the Independence Day. 

Marks & Associates, P.C.
400 Century Park South
Suite 100
Birmingham, AL 35226
(205) 251-8301
P.O. Box 11386
Birmingham, AL 35202

      • Barry S. Marks - 205.251.8303  -
      • William L. Phillips, III - 205.251.8306 -
      • Matthew D. Evans - 205.251.8302 -

Nothing in this newsletter constitutes legal advice or is intended as a substitute for consultation with a qualified lawyer, accountant or other professional.