David Wood revisits the Olympic Airlines case to assess when certificates can be relied upon by lessors.

Although certificates of acceptance are often insisted upon by funders, they are usually signed at the same time as the lease, when all parties are aware that the asset has yet to be delivered. The circumstances and terms of the certificate often determine whether the court will allow these to be relied upon.

While the supplier is usually responsible for the physical aspects of delivery, non-delivery can affect enforceability of the lease. Contractual exclusion of the lessor’s liability for such non-delivery may be deemed unreasonable and may not be permitted under the Unfair Contract Terms Act 1977. However, suitably worded acceptance certificates could prevent any claims based on non-delivery.
In order to be effective, the certificate needs to be clear and unambiguous and the lessor has to show reliance on it. However, the certificate is often ineffective because the lessee is asked to sign before delivery at a time when the lessor knows (or should have known) delivery could not have taken place, and so, it is difficult to show the lessor genuinely relied upon it.

The position is more complex when certificates are being used to preclude a lessee complaint about quality, performance or correspondence with the terms of the lease.

The certificate could be seen as a means of excluding liability for statutorily implied terms as to quality and so on – something which is clearly not permitted in consumer transactions.

Otherwise, in business transactions, exclusion is subject to the test of reasonableness. Certificates can nevertheless serve a purpose in certain circumstances. The recent case of ACG Acquisition XX LLC v Olympic Airlines SA [see Stranded on the runway LL July 228 2012 for a summary by Norton Rose] showed principles of estoppel (a concept which prevents a party from denying something they allowed another to believe), may prevent a lessee from escaping the consequences of a suitably worded certificate.

In order for estoppel to preclude a lessee from denying the terms of a certificate, clear and unambiguous language must be used, the lessee must have intended it to be acted upon by the lessor and the lessor must have believed it to be true and relied upon it.

However, certificates are usually signed as part of a bundle of documents without thought or consideration; the lessee will have hardly had the time to fully satisfy themselves that the asset is compliant and the lessor will, or ought to have known, that this was the case. It is on that basis that certificates of satisfaction are rarely deemed to be sufficient to result in the lessee being estopped from raising any complaint.

Things to consider

The recent Olympic Airlines case, although subject to appeal, has examined these issues in detail and has confirmed that, while certificates can be useful as evidence of delivery or conformity with the contract, very clear and plain language is required before they can be treated as excluding liability or giving rise to an estoppel. It is vital, therefore, that the terms and the circumstances under which certificates are obtained are subject to careful consideration if they are to be relied upon.

David Wood is a partner at DWF