## Facts

- Construction Resources Group, LLC (CRG) and its principals, Mark Livingston and Max Muller, operated an excavation business and needed a wheel loader for a project.
- Thomas Maxwell (associated with CRG) identified a Doosan wheel loader for CRG to use, and CRG obtained the loader through H&E Equipment Services, an authorized dealer.
- Because CRG did not have sufficient cash to purchase the loader outright, H&E recommended equipment-lease financing through Element Financial Corp. (Element).
- Element bought the loader from the dealer and leased it to CRG under a written equipment lease.
- The lease stated it was a “finance lease” under UCC Article 2A, disclaimed/waived warranty remedies against Element, and contained a “hell-or-high-water” clause requiring rent payments regardless of equipment performance.
- H&E delivered the loader to CRG before the paperwork was signed; Element provided the lease to CRG for signature roughly three weeks after delivery.
- Over the next approximately 11 months, CRG reported repeated equipment failures (at least 19) and related downtime.
- CRG stopped making lease payments, and Element repossessed the loader.
- CRG and its principals sued Element (and also sued the manufacturer/related entities), asserting warranty-based claims tied to the loader’s performance.
- Element counterclaimed against CRG for nearly $100,000 in unpaid rent and moved for summary judgment seeking (a) judgment on its rent counterclaim and (b) dismissal of the claims against Element based on the finance-lease structure and the lease’s waiver and payment provisions.
- CRG argued the transaction did not qualify as a finance lease under Oklahoma law, the waiver and hell-or-high-water clause were unconscionable or unenforceable given the post-delivery signing, and CRG could rescind and avoid further rent.

## Issues

1. Whether the written lease qualified as a UCC Article 2A “finance lease” under Oklahoma law, even though the equipment was delivered before CRG signed the lease.
2. If the transaction was a finance lease, whether CRG could maintain breach-of-warranty (or similar product-performance) claims against Element as the finance lessor despite the lease’s warranty waiver/disclaimer language.
3. Whether the lease’s hell-or-high-water rent obligation and waiver of warranty remedies were unenforceable due to unconscionability, lack of assent, or a rescission theory based on the loader’s alleged defects and the timing of execution.
4. Whether Element was entitled to summary judgment on its counterclaim for unpaid rent under the lease.

## Decision

- The court granted Element’s motion for summary judgment.
- The court held the transaction met the statutory requirements of a finance lease under UCC Article 2A as adopted in Oklahoma.
- Because Element acted as a finance lessor (not the supplier/manufacturer) and the lease allocated product-performance risk away from Element, the court ruled that CRG could not recover warranty-based relief from Element for the loader’s alleged defects.
- The court enforced the lease’s waiver/disclaimer provisions and the hell-or-high-water clause in this commercial equipment-finance setting, rejecting CRG’s unconscionability and rescission arguments on the summary-judgment record.
- The court entered summary judgment for Element on its counterclaim for the unpaid rent and disposed of CRG’s claims against Element.

## Legal Principles

- A lease is treated as a UCC Article 2A “finance lease” only if it satisfies the statute’s elements (including that the lessee selects the goods and supplier and the lessor provides financing rather than supplying the goods).
- In a finance lease, the finance lessor typically does not provide product warranties; the lessee’s remedy for defective goods is generally against the supplier/manufacturer, not the financing lessor, subject to the parties’ contract terms and applicable Article 2A provisions.
- A hell-or-high-water clause in a commercial finance lease can make the lessee’s rent obligation independent of the equipment’s performance once the lessee accepts the goods, allocating the risk of defects to the lessee and supplier rather than the finance lessor.
- Commercial warranty disclaimers and waivers are generally enforceable when clearly stated and not invalidated by traditional contract defenses; unconscionability requires a strong showing based on the circumstances of contract formation and the substance of the challenged terms.
- Summary judgment is appropriate when the material facts are not genuinely disputed and the moving party is entitled to judgment as a matter of law on contract classification, enforceability, and damages.

## Conclusion

Construction Resources Group, LLC v. Element Financial Corp., 2017 WL 2266894 (W.D. Okla. 2017), enforced a written equipment lease as a UCC Article 2A finance lease and upheld the lease’s warranty waiver and hell-or-high-water payment obligation despite the lease being signed after delivery, granting summary judgment to the financing lessor on the lessee’s warranty-based claims and awarding the lessor summary judgment for nearly $100,000 in unpaid rent.


Construction Resources Group, LLC v. Element Financial Corp., 2017 WL 2266894 (2017)