Beware of strange men bearing gifts' in leases

I make no apologies for returning to the subject of leasing contracts, because it is a regular item in my postbag. "Astounded" of Watford and "Gobsmacked" of Corby ­ this is for you. Instead of buying equipment outright, which is an expensive and capital-intensive way to start the business, many landlords are attracted by the "easy terms" and service facilities offered by plausible salesmen. All the contact work is carried out by this company representative, who appears to act for all those with whom the licensee is dealing. But he isn't. He is not acting in any way for the finance company which is underwriting the deal. It follows that any promises he makes, or undertakings which he gives on the nature of the deal itself, are quite meaningless. He can say what he likes ­ it makes no difference to the contract's legal validity. I am sure this story is known to many readers. The salesman says: "Don't worry about a thing, Mr Licensee. We will service all this regularly, and if you are not completely satisfied we'll come and take the things back and that will be the end of it." Hundreds of similar promises are made every week. And what happens? The equipment goes wrong, or is found to be less effective than promised. The landlord telephones several times, to no avail. The supplier doesn't respond, or you discover that they have gone out of business. So you stop making the payments. This is where the problems really begin ­ when the finance company waves the original agreement in front of you and says things like: "Where does this say you can stop making payments?" "What agreement about taking the equipment back? "You have signed for five years and you must pay for five years. Or else you can pay a lump sum of several thousand pounds, to represent their lost rental income." It is all very well protesting that this is unfair. But you signed the agreement in the first place as a professional trader. You did not sign it as a private individual, who may be protected against "sharp practices" by legislation. You are expected, in law, to make a contract by agreement if the terms suit you. If they do not, then you don't sign. I agree with those readers who say that this situation ought to be widely publicised, but I do not agree necessarily that it represents any sharp practice by the finance companies. Their business is to make money by entering into binding agreements. If all their agreements could be broken on a whim, what security do they have? They don't want an office full of second-hand catering equipment. The real blame lies with the suppliers of the equipment. They are aware that licensees may be strapped for cash, so they offer credit or lease terms as an attractive alternative. But few suppliers have their own credit facilities, so they use a finance house, which may act for several hundred suppliers all over the country. The binding element of the contract lies on the back of the second or third piece of paper you sign (which most licensees are persuaded to do on the spot). For it is there that the terms for the lease finance are spelled out. Signing that paper commits you to a long-term payment cycle, as laid down by the finance company. In general, it is irrevocable, which means that you cannot get out of it, even by returning the equipment. What is the answer? Not new legislation, but a more business-like approach by licensees with the companies they deal with. The terms of a contract are negotiable between the parties. If you don't know what the terms are, you should ask. If the salesman doesn't know, you must ask his boss. In particular, you must ask about the length of the contract and the severance terms. If you want to rely on any undertaking about the equipment itself, you must get it in writing from the firm.