3.3 Management of Capital Invested in Assets 33terms (see Volume II) and in cases of fraud.^41 Exclusion clauses can also be bind-
ing and enforceable. For example, under German law, the lessor’s exclusion
clause is valid and enforceable, where the potential claims of the buyer (lessor)
under the sales contract have been assigned to the lessee.^42
The second way to manage this problem is by using a Participation Agreement
or a similar master agreement that sets out the main characteristics of the transac-
tion as a whole, requires the parties to enter inte various contracts, and is signed
by all parties.
Maintenance: rules on rental v rules on financial leasing. Another cause of le-
gal concern is the maintenance of the object. There can be tension between finan-
cial leasing and legal background rules. The legal background rules have been
drafted with traditional rental of movables in mind, and they can resemble rules on
sale of goods.^43 According to those rules, the lessor is responsible for the fitness of
the object for the agreed purpose^44 and, indirectly, for the maintenance of the ob-
ject (the object would not remain fit for the agreed purpose otherwise).^45 The lack
of maintenance can mean that the lessee may eventually suspend the making of
payments,^46 demand a reduction in payment obligations,^47 claim the reimburse-
ment of damage,^48 or terminate the contract,^49 among other things.
The lessor may therefore prefer to exclude its own maintenance obligations in
financial leasing and ensure that the maintenance obligations are undertaken by
the lessee. The exclusion of the lessor’s maintenance obligations might not be re-
garded as unreasonable for the lessee where potential claims of the buyer (lessor)
under the sales contract have been assigned to the lessee.
Maintenance leasing. In contrast, the lessor will be responsible for the mainte-
nance of the leasing object in maintenance leasing. Maintenance leasing is used by
manufacturers. For example, Wärtsilä, a supplier of ship machinery and power
plants, provides operating and financial lease structures through a subsidiary.
Wärtsilä also provides Operations & Maintenance (O&M) agreements under
which it takes performance and operational responsibility for installation, engines
and auxiliary systems.
IFRS. Unlike operating leasing, financial leasing is not a source of off-balance-
sheet financing. Businesses are required to show both the leased assets and the
capital value of the obligation to the owner on the balance sheet.
(^41) § 536d BGB: “Auf eine Vereinbarung, durch die die Rechte des Mieters wegen eines
Mangels der Mietsache ausgeschlossen oder beschränkt werden, kann sich der Vermie-
ter nicht berufen, wenn er den Mangel arglistig verschwiegen hat.”
(^42) BGHZ 68, 118 = BGH, NJW 1977, 848.
(^43) See Article 61 of the CISG.
(^44) See DCFR IV.B.–3:103 (fitness for purpose, qualities, packaging). See also §§ 326, 536,
536a(1), 536c(1) and 543(2) BGB.
(^45) See nevertheless DCFR IV.B.–3:104(2).
(^46) See § 326 BGB.
(^47) § 536 BGB.
(^48) § 536a BGB.
(^49) § 543 BGB.