CLFP Lease Documentation & Contracts 3

Question 1

What is an 'evergreen' lease clause?

Accepted Answer

A provision that automatically renews the lease unless proper notice is given to terminate

Answer

A green energy equipment discount

Answer

A clause requiring annual rent increases

Answer

A term for indefinite-length leases with no fixed end

Question 2

What is the difference between a 'true lease' and a 'conditional sale' from a documentation standpoint?

Accepted Answer

A true lease has no automatic ownership transfer; a conditional sale transfers ownership upon final payment

Answer

A true lease requires more collateral

Answer

A conditional sale cannot be assigned

Answer

A true lease always has a $1 buyout option

Question 3

What is the purpose of an 'interim rent' provision in a lease?

Accepted Answer

To collect rent from the equipment delivery date until the lease commencement date

Answer

To cover late payment fees

Answer

To adjust rent for inflation

Answer

To compensate for early payoff

Question 4

In a lease agreement, what does a 'financial covenants' section require?

Accepted Answer

The lessee to maintain specified financial ratios or conditions throughout the lease term

Answer

The lessor to maintain certain capital reserves

Answer

Both parties to use the same accounting standard

Answer

The lessee to report equipment location monthly

Question 5

What is a 'hell or high water' clause's relationship to the 'quiet enjoyment' provision?

Accepted Answer

Hell or high water obligates lessee payments unconditionally; quiet enjoyment obligates the lessor not to disturb the lessee's use of equipment

Answer

They are two names for the same clause

Answer

Quiet enjoyment overrides hell or high water

Answer

Hell or high water only applies if quiet enjoyment is breached

Question 6

What information is typically contained in a lease 'rider' or addendum?

Accepted Answer

Special terms that modify or supplement the base lease agreement

Answer

Standard boilerplate language

Answer

The lessor's corporate bylaws

Answer

UCC filing confirmations