This case serves as a reminder to
lessors to be familiar with their own pro-forma documentation.

In Waite v Paccar Financial Plc [201], the
parties entered into a lease agreement for the hire of a lorry to
Waite. Clause 8 of the agreement dealt with renewal option and
disposal and provided that the vehicle could be sold at the end of
the hire period with Waite acting as Paccar’s agent on certain

Those terms included:

8(b)(iii) the vehicle had to be sold for
business use without the benefit of any warranty, representation or
condition on Paccar’s behalf; and

8(b)(iv) Waite was to indemnify Paccar against
all losses, damage, costs, claims and expenses arising out of the
sale on a full indemnity basis in connection with any proceedings
against Paccar by the purchaser.

At the end of the hire period, Waite found a
buyer for the vehicle (Jones). The sale eventually took place
between Paccar and the finance company (Private) which facilitated
Jones’s purchase. It was an express term of the sale that the lorry
was “sold as seen”.

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Jones then complained the vehicle was defective
and brought proceedings against Private who notified Paccar of the
claim but did not issue proceedings against it.

Paccar made a contribution towards the
settlement of Jones’s claim and then issued proceedings against
Waite seeking reimbursement of that contribution and costs pursuant
to clause 8 of the lease agreement.

The Court of Appeal held that the lease
agreement had to be read as a whole and if there was a sale by the
hirer as agent, then each of the sub-clauses within sub-clause 8(b)
applied, as clause 8 governed that transaction.

Both parties had conducted themselves on the
sale as if Waite had acted as Paccar’s agent and therefore the
provisions of clause 8 applied. Accordingly, Paccar could rely on
clause 8(b)(iv) and Waite on clause 8(b)(iii).

The vehicle had been sold ‘as seen’ without any
warranty as to its condition. The sale was in accordance with
clause 8(b)(iii), and no liability would impact upon Waite.

Further, when the dispute between Jones and
Private arose, Paccar, for reasons of its own, opted to make a
contribution to Private. That contribution was made without any
finding or concession as to the condition of the vehicle.

As a result, that contribution, and any
expenses incurred by Paccar in relation to the dispute between
Jones and Private, had occurred outside the terms of the contract
and Waite had no liability in relation to it.

Lessors need to be wary of making ‘gratuitous’
payments to third parties in the expectation of being able to
reclaim it under their contract of hire. They will only be able to
do so if the contract expressly so provides.


Greg Standing is a partner in
Wragge & Co LLP’s finance litigation team