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For example, many leases pointedly mandate monthly payment of rent regardless of a force majeure – the so-called “hell or high water” clause. An adhesion contract refers to an agreement where one party has substantially more power than the other in creating the contract terms and conditions. Hell or high water clauses are protected by the Uniform Commercial Code (UCC). Enforceability of 'Hell or High Water' Clauses in the COVID-19 Business Environment Troutman Pepper on 5/8/2020 The COVID-19 pandemic has resulted in dramatic shifts in the way many companies operate. UCC §1-103. The viability of the acquisition agreement could be tied directly to the buyer's ability to resolve such matters and clear the way for the deal to proceed. The lessee sought to circumvent the “hell or high water” clause by alleging fraudulent inducement. The term "hell or high water clause" comes from the expression “come hell or high water,” which means that an action must be done regardless of what happens. Hell or high water contracts can be enforced even in instances where there is some fault or defect in the property at the center of the agreement. Hell or high water clauses bind the purchaser or lessee to the terms of the contract until the contract's expiration. Simplistically, this clause is the absolute contractual obligation every lessor and lessor investor relies upon. Flaws in the equipment may be because of an issue with its manufacturing. A true lease is a type of multi-year lease where the lessor bears both the risks and rewards of property ownership. notes finance lease, hell or high water clause, and third party beneficiary theory in article 2a of the uniform commercial code introduction If the supplier took on a loan to finance his operations, the supplier will need assurance that he will get payments to pay the loan. In this case, the payments may help with repairs or financing. The legal basis for such claims stems from §1-103 of the UCC, which states that “the principles of law and equity, including … principal and agent [and] fraud … shall … Hell or High Water Clause Hell or High Water Clause; Hell or High Water Clause Definition. Hell or high water clause is a provision in a contract directing the buyer to continue making the payment to the seller. 1. When a Contract Cannot Be Enforced Even If It Has a Hell or High Water Clause, 4. Such clauses describe an independent and absolute contractual obligation of a party to perform under an agreement without any contractual defense, including force majeure. In other words, the payment to the Lessor or Seller should continue as per the stipulated terms of the contract regardless of any issues or problems. The risk can be in terms of the capital committed or even the customization of a product in such a way that makes it unlikely that there is another purchaser on the market. A hell or high water contract (also known as a promise-to-pay contract) is a non-cancelable contract whereby the purchaser must make the specified payments to the seller, regardless of … A hell or high water contract (also known as a promise-to-pay contract) is a non-cancelable contract whereby the purchaser must make the specified payments to the seller, regardless of any difficulties they may encounter. A frustration of purpose argument by an airline is almost certain not to survive the wrath of the typical – and aptly named - “hell or high water” payment clause. The lessee sought to circumvent the hell or high water clause by alleging fraudulent inducement. Share it with your network! Some of the difficulties that may be encountered include equipment failure, damage, loss, and even death of the purchaser. A hell or high water clause in a contract is a provision that states that a purchaser must pay the stipulated payments at the agreed time regardless of any difficulties he may encounter. A termination date is the day on which a financial contract ends, a final payment is made and no further exchanges will occur. In response, the lessor (or any related financier) should look to the “hell or high water” clause typically included in aircraft operating leases. . If the finance company decides to exercise its rights under hell-or-high-water clauses or other contractual remedies, it should make sure that its paperwork is in order and includes the contract, promissory note or lease agreement; any mandated notices, including a notice of default; and an accurate accounting of amounts due. A hell or high water clause is a clause in a contract, usually a lease, which provides that the payments must continue irrespective of any difficulties which the paying party may encounter (usually in relation to the operation of the leased asset). The equipment may be shipped directly from the manufacturer or supplier to the lessee without the lessor ever coming into contact with it. The lessee in such an agreement usually selects the equipment they wish to procure. Why You May Need a Hell or High Water Clause, 2. No need to spend hours finding a lawyer, post a job and get custom quotes from experienced lawyers instantly. The hell or high water clause is the foundation stone of aircraft operating lease agreements and it, or its equivalent, form part of every lease we review at IBA. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb. In a merger or purchase agreement, a hell or high water clause may be included when one of the parties to the agreement requires the other to take on all the antitrust risk arising from the transaction. The buyer must make the payment irrespective of any difficulties. Other Contract Clauses Similar to the Hell or High Water Clause, Boilerplate Clauses In Commercial Contracts. In addition, with respect to the enforceability of hell-or-high-water provisions by finance companies and lenders, the Tenth Circuit Court of Appeals has noted: The essential practical consideration requiring liability as a matter of law in these situations is that these clauses are essential to the equipment leasing industry. The legal basis for such claims stems from Section 1-103 of the UCC which states that "the principles of law and equity, including . Most importantly, §§2A-407 and 508 create a statutory “hell or high water” clause by making the lessee’s obligations (including payment obligations) irrevocable and independent of the lessor’s or supplier’ s obligations. Hell or High Water Clause. Equipment lessors may require the equipment lessee to continue making payments even if the equipment breaks down. Come hell or high water, another key area of our services of public interest is to be sacrificed to the profit motive. What Courts Think of the Hell or High Water Clauses, 3. For example, if a lessee agrees to rent or lease a piece of equipment or machinery under hell or high water terms, they are responsible for those payments regardless if the equipment malfunctions. Hire the top business lawyers and save up to 60% on legal fees. A buyer’s commitment to do whatever is necessary to obtain antitrust clearance, commonly known as a “Hell-or-High-Water” provision, featured prominently in a recent merger case decided by Delaware’s Court of Chancery. UpCounsel accepts only the top 5 percent of lawyers to its site. A financing agreement with hell or high water language is designed to ensure that the lessee will pay the lessor under no uncertain terms. at §3:1.10[A]. A contract provision that requires payment regardless of any events that might occur, such as the destruction of … europarl.europa.eu Contre vents et marées, voilà qu'un autre secteur clé de nos services d'intérêt public est sur le point d'être sacrifié sur l'autel du profit. A lessee is a person who rents land or property and must follow restrictions and guidelines set by a lease agreement. This Standard Clause has integrated notes with important explanations and drafting tips. The operation of the ‘hell or high water’ clause must be considered in tandem with the delivery of the aircraft on an ‘as is, where is’ basis. in clause [*] above. Understanding Hell or High Water Contracts. Courts have historically ruled that the clause is valid in different lawsuits. Want High Quality, Transparent, and Affordable Legal Services? Some suppliers of equipment insist on the clause to be able to supply uninterrupted. The term comes from the expression "come hell or high water," which means an action or obligation must be … principal and agent [and] fraud….

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