## Facts

- General Electric Capital Corp. (GECC) and FPL Service Corp. (FPL) entered a written “Lease Agreement” covering two copiers.
- The agreement provided that FPL’s payment obligations were “absolute and unconditional,” not subject to setoff or other defenses.
- The agreement allocated risk of loss to FPL and stated that if a copier was lost or damaged, rent would continue to accrue until FPL (a) repaired or replaced the copier or (b) paid GECC all then-due and future rent.
- Hurricane Sandy destroyed nearly all of FPL’s equipment, including the two GECC copiers.
- After the storm, FPL stopped making the required rental payments and did not repair or replace the copiers or pay the remaining scheduled amounts.
- GECC repossessed the copiers and disposed of them, then sued FPL for breach of contract and sought the unpaid balance and related charges.
- FPL denied liability and asserted affirmative defenses, including supervening impracticability and frustration of purpose based on the hurricane.
- FPL also challenged GECC’s entitlement to a deficiency, arguing GECC had not shown compliance with Iowa UCC Article 9 requirements governing disposition of collateral (including notice and commercial reasonableness).
- GECC moved for summary judgment on liability and on the amount of damages.

## Issues

1. Whether FPL’s payment obligations remained enforceable after Hurricane Sandy destroyed the copiers, given the agreement’s unconditional payment and risk-of-loss terms and FPL’s defenses of impracticability and frustration of purpose.
2. Whether GECC was entitled to summary judgment on its claimed damages, including any deficiency after repossession and sale, without a trial on Article 9 notice and commercial reasonableness.

## Decision

- The court granted summary judgment for GECC on liability for breach of contract.
- The court enforced the agreement’s “absolute and unconditional” payment terms and its allocation of casualty risk to FPL, rejecting FPL’s impracticability and frustration defenses.
- The court treated the transaction as a secured transaction for purposes of GECC’s remedies and analyzed GECC’s post-default disposition under Iowa UCC Article 9.
- The court denied summary judgment as to the amount of damages, concluding the summary-judgment record did not eliminate factual disputes regarding Article 9 requirements (including whether the disposition was commercially reasonable and whether adequate notice was given).

## Legal Principles

- Contract terms making a commercial obligor’s payment duty “absolute and unconditional” are generally enforceable and can bar casualty-based defenses when the contract assigns the risk of loss to the obligor.
- Impracticability and frustration of purpose do not excuse performance when the agreement expressly places the relevant risk on the party seeking excuse and expressly requires continued payment despite loss or damage.
- Payment duties are not excused merely because the leased or financed equipment is destroyed, when the contract provides that rent continues until repair/replacement or payment of remaining amounts.
- When a transaction is treated as creating a security interest, a creditor seeking a deficiency after repossession and sale must show compliance with UCC Article 9, including reasonable notice and a commercially reasonable disposition; inadequate proof can defeat summary judgment on damages even when liability is established.

## Conclusion

The court held that FPL breached an equipment lease that required unconditional payment and placed the risk of loss on FPL, so Hurricane Sandy did not excuse nonpayment; however, the court declined to award final deficiency damages on summary judgment because GECC still had to prove Article 9 notice and commercial reasonableness for its disposition of the copiers.


General Electric Capital Corp. v. FPL Service Corp., 986 F.Supp.2d 1029 (2013)