March 2007
Financing Payment Obligations for Services: Are ‘Hell or High Water’ and ‘Waiver of Defenses’ Clauses Enforceable in Contracts for Future Services?By Raymond W. Dusch and Marc L. Frohman
The primordial cornerstone of financing equipment lease receivables has been the ability of funding sources to rely on the enforceability of two related provisions contained in the underlying lease documentation: 1) “Hell or high water” clauses, where the lessee agrees that its payment obligations under the lease are “absolute and unconditional” and are not subject to any defense, setoff, or counterclaim that the lessee may have against the lessor, its assignee, the manufacturer or seller of the equipment, or against any person for any reason whatsoever — essentially, it agrees to pay “come hell or high water.” 2) “Waiver of defense” clauses, where the lessee “agrees not to assert against an assignee” of the lease payments, any defenses, setoffs, or claims it may have against the lessor, as the original payee under the lease.
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