The “hell-or-high-water” clause is an essential provision in today’s equipment finance contracts. It helps protect lessors in contractual agreements and reassures their funding sources. “Among equipment leasing lawyers, there is perhaps no contractual provision more important, more universal, more indispensable — perhaps more sacrosanct,” writes Paul Bent in the January issue of LJN’s Equipment Leasing Newsletter.

Yet the future of the clause is debatable. So much so, that HOHW was the focus of lively debate at the ELFA Convention.

Bent’s article, “Trial of the Century Takes on Hell or High Water,” discusses whether the rising tide of managed solutions transactions will sink the most venerated of leasing provisions. He also recaps the real-life debate during a breakout session of the convention dubbed the “Trial of the Century.” Though the session was presented as a light-hearted mock trial, its subject was treated as a serious question for the audience’s consideration.

Participants included:

  • A prosecutor, played by Rafael Castillo-Triana, attorney and CEO of The Alta Group’s Latin America Region, who argued for the elimination of the “archaic” HOHW clause;
  • A defense attorney, played by Bent, attorney and leader of Alta’s Legal Services Practice, who argued that the provision is still essential to the industry and must be retained;
  • A presiding judge, expertly (and comically) portrayed by Attorney Allan Umans, general counsel of Pacific Rim Capital;
  • Expert witnesses for the prosecution Scott Thacker, CEO of Ivory Consulting Corporation, and Diane Croessmann, managing director of Lenovo Worldwide Financial Services before recently joining Alta’s Management Consulting Practice;
  • Expert witnesses for the defense Dominic Liberatore, attorney and deputy general counsel of De Lage Landen Financial Services, and Henry Duncan, chief risk officer of Société General Equipment Finance; and
  • The jury, played by the audience attending the session.

Their verdict? Read Bent’s article for the outcome, details of the debate and possible implications.

LJN’s Equipment Leasing Newsletter January issue also includes stories on 2018 tax changes affecting companies involved in truck acquisitions, recognizing signs of financial distress in companies, and shipping insolvencies.