CEU eTD Collection Hungary 9, Nadorutca 1051 Budapest, University Central European PROFESSOR: Tibor Tajti Transactions Secured Comparative COURSE: LL.M. SHORTTHESIS LEASING CONTRACT IN AZERBAIJAN IN COMPARISON TO INCOMPARISON AZERBAIJAN IN CONTRACT LEASING © Central © Central European University March 29,2009 ORKHAN BAYLAROV UNITED STATES by CENTRAL EUROPEAN UNIVERSITY CENTRAL EUROPEAN INTERNATIONAL LAW INTERNATIONAL BUSINESS LEGAL STUDIES CEU eTD Collection based on what was discussed in this thesis. in this was discussed what on based After Iwill objectvies achievingset Azerbaijan between comparison make States and United leasing inAzerbaijan and finally will describe situationthe leasingwith in United States. will anoverviewgive on history developmentof of leasing, then legal presentthe status of ishow regulatedand leasing contract howis itindeveloping Azerbaijan.At beginning the I comparison with the situation in United States of America. The aim of this research is to study This research is dedicated to the leasing contract in Azerbaijan Republic in Republic inAzerbaijan is leasingThis research tothe dedicated contract ABSTRACT i CEU eTD Collection parents andparents my especially wife. dear Finally workwouldthis nothave been possible without supportandthe my encouragement of time. the all I am also gratefull myto my from teachers universityprevious were alsowho me supporting myhelpat all of andassist to stages research. willigness likeI would also to RékaFutász from thank Writing for herAcademic Center permanent thesis. whose valuablehave advisesand support beenleadingme whole the throughout work on this First of all likeI would express to tomy gratitude extreme supervisor Professor Tibor Tajti ACKNOWLEDGEMENTS ii CEU eTD Collection ILORPY...... 54 BIBLIOGRAPHY...... 50 CONCLUSION...... LEASING 36 IN UNITED ...... STATES CONCEPT OF LEASING AND ITS HISTORICAL 5 FORMATION...... 1 ...... INTRODUCTION LEGAL REGULATION OF LEASING CONTRACT 16 IN AZERBAIJAN...... L S A T PARTIES S F E S A P H D C TAGES OF LEASING DEVELOPMENT IN UBLEASING ORM AND CONTENT OF THE CONTRACT LEASING OF THE ORM ANDCONTENT UBJECT OF THE LEASING CONTRACT LEASING THE UBJECT OF LEASING CONTRACT ARTIES THE OF EGAL REGULATION OF LEASING CONTRACT IN CONTRACT LEASING OF REGULATION EGAL YPES OF LEASING OF YPES SSENCE AND OFLEASING FUNCTIONS ONCEPT OF LEASING CONTRACT IN CONTRACT LEASING OF ONCEPT ISTORY ANDLEASING OF DEVELOPMENT ISTORY LTERATION AND RESCISSION OF THE LEASING CONTRACT LEASING THE OF AND RESCISSION LTERATION LLOCATION OF RISKS AND INSURANCE IN THE LEASING CONTRACT INTHE AND INSURANCE RISKS OF LLOCATION ISTINCTION OF LEASING FROM RENT AND CREDIT CONTRACTS ANDCREDIT RENT FROM OFLEASING ISTINCTION , SECURITY OF THE LEASE SUBJECT IN THE LEASING CONTRACT , TRANSFER OF THE RIGHTS AND OBLIGATIONS TO THE THIRD PARTIES BY THE CONTRACTING THE BY PARTIES THIRD THE TO OBLIGATIONS AND RIGHTS OF THE TRANSFER ...... 30 ...... TABLE OF CONTENTS A ...... 16 ...... 20 ...... 5 ...... ZERBAIJAN LAW ZERBAIJAN U NITED ...... 8 ...... S U TATES NITED ...... 21 ...... iii ...... 11 ...... 36 ...... S TATES ...... 27 ...... 9 ...... 43 ...... 18 ...... 24 ...... CEU eTD Collection someone else. to property the returns whosituation, the byowner, hiscan cover leasing sellingit costs or to non-payment entrepreneur’s of incase because financially, risk taking is not in practice investor Here the entrepreneur is notobliged toprove his solvency or to care about loan guarantee, while entrepreneur addresses to investorthe (lessor) who buys this equipmentand leases it tohim. the activity, hisbusiness for isnecessary which equipment the purchase to bank the from a dynamically market. developing and holding them level, on proper whichhelps them andcompete survive in conditionsthe of main in tasks business the sphere –providing permanentsupport meansto the of production with highly developed economies. Investments help business owners to cope with one of the Germany and Japan, whose economies were destroyed after World War II, to become countries one of the main toolsbecame for the attraction worldwide of fundsactivity to the economy.investment InvestmentRecently helped post-war securities. from coming profit and capital debt capital (authorized capital of legalthe person or personal funds of individualthe entrepreneur), Traditionally business owners used three sources for financing their activity: their own on state aid. chanceno expenses shareholders, totransferthese on employees enterprises these rely of orto havenot enough financial forassets the renewal of material-technicaltheir base. Thereis also economy,leadswhat disastrousto consequences forthe population.Most of enterprisesthe do activity are business entities Unfortunately,the mainthe of the is important.of assets enterprises very outdated and they have reachedINTRODUCTION their maximum almost in all spheres of our One of the main types of financing form is “leasing”. Instead of taking loan at interest at loan taking of Instead is“leasing”. form financing of types main the of One Azerbaijani of equipment and assets main the of renewal of question the Nowadays 1 CEU eTD Collection leasing is appearing regularly at the local printed media andbusiness and law reviews, where cent-equity incent-equity stake provide and a$3million to loanUnileasing” to growing leasing companies (Unileasing) in Azerbaijan - agreementacquire per to a33-1/3 most the of one support “to isaimed project The 2007. in March in Azerbaijan project leasing first the of implementation the to aimed contract signed Development) and Reconstruction for the purpose of leasing developmentin Azerbaijan, for example EBRD money investing also are organizations international The in2003. than more times 22 and 2006 The number of leasing contracts concluded in 2007 is 1659; it is twice more in comparison to example leasing turnover Azerbaijan Leasing Portal 1 in Azerbaijan is conducted by ALCA leasing companies areentering intoAzerbaijan market. The observation on the leasing market companies is increasing, the existing ones are widening their scope of activities and foreign markets. external business country, so more and more investments are made to its economy by representatives of economy is developing and businessmarket is day-to-day.growing Azerbaijan is an oil expression as “leasing”. It started to develop after the collapse of Soviet Union. Now the 2009. 5 2009. -lastvisited on 29 March, 2009. 2 5 . informationaboutThe > - last visited on29 March, > - last visited on 29 March, > - last visited on 29 March, 4 (European Bankfor > -last CEU eTD Collection www.lawyer.az (www.azerbaijanleasing.com English Translation of Articlesthe was citied from Azerbaijan Leasing Companies Association 6 (World Bank). Of course my current supervisor at CEU will support me also in my research portfolio provided by Azerbaijan Leasingleasing Companies Associationon and Finance International Corporation statistics annual example for – work thesis my in materials statistical specializingin business and civillaw spheres. Ihave alsoused information up-to-date and have used the help and recommendations of my teachers at previous university who are Republic and some other legal acts to emphasize legal regulation of leasing in Azerbaijan. I which I have used in my research. Ihave also used Civil Code andbooks materials to related theory of leasing inAzerbaijani, Russian and literature foreign leasing in United States and world leasing market. of development the with in Azerbaijan leasing of comparisons practical the Conduct contract. leasing regulates which legislation existing the of objection and modification on leasing, of development further on suggestions practical and conclusions on output Make relationships. the leasing contract. Analyzeits legal nature, normative legal basis which regulates the leasing in is Azerbaijan present situation also made. hadfirst it roots. Overview of developmentthe of leasingin US and its then comparison to made the comparison analysis with the situation in United States – the country where leasing paper remedies this by making research on regulations of leasing contract in Azerbaijan. I of leasing activity are also improving. the topical problems of leasingthe business are analyzed. Thelegislative and methodical bases Please note that I have used theArticles of the Civil Code from different sources in this work. Most of the As the sphere is quite new, not too much has been written about it. There are good The aim of this thesisis maketo research on leasingin Azerbaijan; legal regulation of Still, few very publications have been devoted to the specific ofleasing.topic This website where the texts of codes are provided in both Azerbaijani and Russian languages. Russian and Azerbaijani in both provided are of codes texts the where website ) website where the translation in English is provided. I have also used 3 6 , Tax Code ofAzerbaijan Code , Tax CEU eTD Collection Azerbaijan and based on this make a comparison with the situation is United States. is United situation the with a comparison make on this based and Azerbaijan Azerbaijani legislation leasing.on legalleasing relationships by makingtypes, output on suggestions for improvement the rights and obligations to the third parties by the contracting parties, classification of the of transfer and subject lease the of security relationships, subleasing the of definition contract, leasing the of termination and formodification grounds the of examination subject, and parties leasing legal the relationships,regulates definingwhich the legal legislation status and contentAzerbaijani of the leasingexisting and contract, it’s leasing of development the of history writing. by me directionsgiving and recommendations and observing my the progress of thesis By describing the above stated issues, I will be able to define the status of the leasing in The given research aim will be achieved by:defining the essence leasing,of overview of the 4 CEU eTD Collection - last visited on 29March, 2009. Thomson/West 5 , p.889, St. Paul, MN, 2004. 8 : 9 ; CEU eTD Collection Moskva,2000). 13 http://www.unidroit.org/english/conventions/1988leasing/1988leasing-e.htm 12 11 France, “operazioni di locazione finanziarla” in Italy and “arrendamiento of UNIDROIT Convention on International Financial Leasing Financial International on Convention UNIDROIT of 1 Article to According worldwide. leasing financial called is which rent, financial the of means lesser for lessee. the isThat why when somebody uses the term “leasing”in Azerbaijan law,it justnot traditional the butrent, the lease of equipmentthe which ispurchased especially by the Sukhanov.E.A., “Civil Law”, Vol 2, p.408, Moscow, 2000 (Suhanov.E.A., “Grajdanskoye Pravo”, Tom 2, Tom Pravo”, “Grajdanskoye (Suhanov.E.A., 2000 Moscow, p.408, 2, Vol Law”, “Civil Sukhanov.E.A., Translated from Azerbaijani Language – “lizinq” Citied from Official website of Azerbaijan Leasing Companies Association at - mere rental” a not and financing bank of one is transaction lease finance a of substance the transaction, UNIDROIT ConventiononInternational Financial Leasing (Ottawa,28 May 1988) - “Conditional sale” in USA, “hire-purchase” in England, “leasingvertag” in Germany, “leasingvertag” in England, “hire-purchase” in USA, sale” “Conditional Leasing andtraditional haverent differenteconomic bases. The main basis of rent 10 . 13 ”. Leasing is the result of different economic situation. The situation. economic different of result the is Leasing ”. > - last visited on 29March, 2009. 6 11 in Azerbaijan. All these terms define terms All these inAzerbaijan. 12 - last visited on 29 March, 2009. , financial leasing is legalthe CEU eTD Collection Jurnal Yurist Jurnal #2, p.35-36, 2000 (Egorova P.V.,Kurilo. V.V.“Nekotoriye aspekti pravovogo regulirovaniya dogovora lizinga”, 14 functions, but the four main ones are: or in other assets, words – financial financial of rent. investment on based is which rent but rent, traditional just not is leasing that is the act of control over his financial assets as the form of the investment. Itcan be stated then Egorova P.V., Kurilo. V.V., “Some aspects of the legal regulation of the leasing contract”, leasing of the regulation legal the of aspects “Some V.V., Kurilo. P.V., Egorova 4. 3. 2. 1. for his business activity and which is chosen and bought by his initiative. him to is necessary which property the of purchase for the expenses one-time having from lessee the saves also it goals, financial by executing is that leasing of feature main the So Using the tax and amortization benefits function - support from government in the way in the government from support - function benefits amortization and tax the Using Marketingfunction (sales) - widening the circleof consumers andnew developing Production function(industrial/equipment) way - the achieving theproduction of goals from producer commodity the of exemption the with expressed is – function Financial transactions in order to decrease expensesin todecrease transactions order of providing tax the and benefits participants amortization to the ofleasing once. at wholeasingpurchasecannot attraction market, property those to the spheres of sphere etc. and materials be byvarious insurance, followed technicalservice, supply services: raw the of property can the of transfer The progress. scientific-technical of results and technology newest tothe and access of production the procurement material-technical of by “temporary use” (not purchase) of the expensive machines. This is an effective way opportunity. credit long-term him one-time payment of wholethe price of requiredthe production assets and providing many has It highlighted. be can functions its leasing, of essence the to According , #2,2000). 7 14 . Lawyer Magazine , CEU eTD Collection first company which implemented leasing operations was American Leasing “United States their telephone devices firstimplementing leasing asthe long-term property rentdeciding sell, not to buttogivefor rent international economic dictionary in 1877 by American Telephone Company “Bell”, which was equipmentwas Statute Walesof dated1284. The term “leasing”itself was firstbroughtinto the around 1775BC-1750BC,while one the of firstthe specially accepted laws about the rent of the horses. http://www.sfgleasing.ru/about_leasing 16 Yurist Jurnal #2, p.35-36, 2000 (Egorova P.V.,Kurilo. V.V.“Nekotoriye aspektipravovogo regulirovaniya dogovora lizinga”, modernthe leasing in wereused Middlethe Ages further right tobuy itfor with the value of his plunder. InEngland,ammunition operations which the are similarof to lease for contract formed officially knights the of one – ammunition was conducted in 1248, when crusaders, whilepreparing for thenextmarch, got their who were conducting contracts with farmers. agricultural tools, land, water resources and animals, where the lessors were local church priests pottery which was found in 1984 in the Shumer’s Ur city tells us about the lease of the 15 (operational lease) conducted were evenin ancient the times of Shumers ofleasing development and History pravovoye regulirovaniye,praktika”, Moskva,1998). 18 pravovoye regulirovaniye, praktika”, Moskva,1998). 17 “Inter-regional leasing company SFG Leasing” (“Mejregionalnaya lizingovaya kompaniya SFQ Lizing” - Lizing” SFQ kompaniya lizingovaya (“Mejregionalnaya Leasing” SFG company leasing “Inter-regional Egorova P.V., Kurilo. V.V., “Some aspects of the legal regulation of the leasing contract”, leasing of the regulation legal the of aspects “Some V.V., Kurilo. P.V., Egorova Kabatova E.V., “Leasing – legal regulation and practice”, p.22, Moscow, 1998 (Kabatova E.V., “Lizing E.V., (Kabatova 1998 Moscow, p.22, practice”, and regulation – legal “Leasing E.V., Kabatova “Lizing E.V., (Kabatova 1998 Moscow, p.13, practice”, and regulation – legal “Leasing E.V., Kabatova Butleasing inits modern understanding appeared only in middlethe of 20 Some regulations regardingleasing could be foundin Hamurappi’s Laws accepted Many materials from legal literature dedicated to leasing describe thatleasing bargains , #2,2000). 18 . - visitedlast on29 March, 2009. 16 8 The first officially registered leasing bargain leasing registered officially first The 17 andtheir subjects were farm equipmentand 15 , dated 2000BC. The Lawyer Magazine th century. The century. , CEU eTD Collection 2003). (Allakhverdiyev SelimovS., S. ve bashqalari, “AzerbayjanRespublikasinin Mulki Huququ”, recurrence, as it should be returned in defined time; payment, interest using for is counted intime; payment, be should recurrence, asitdefined returned in way. same tenantto the the defined reward forof temporary transfers property,his and the the traditional usage renter property rent contracts credit and rent from leasing of Distinction has first appeared and is highly developed nowadays. have decided tomake comparison of leasing developmentin Azerbaijan to the country where it is I why is which That every day. leasing growing of transactions, implementation in leader the is the US time, present Atthe inUS. century last of 1950s in the only appeared transaction, where in 1969 “Century Leasing System” company was created. Mietfinanzierung GmbH” in 1962 in Germany. end By the of 1960s,the leasing reached Japan created in 1957, “Mercantile Leasing Company”in in 1960 England and“Locallease the influence of Americanthe ones. Thefirst leasing company in France “Sepafites” was 20 1980). 19 convinced by advantageof the gettingfrom profitsuch leasing operations inShonfeld USA San-Francisco, in 1952. After this Shonfeld many got followers whowere by Henry wascreated which Inc.”), International Leasing States “United called (today Corp.” Allakhverdiyev S., Selimov S. others, and “Civil Law of Azerbaijan Republic”, Medvedkov inUS S.U.,“Leasing economy”,1980 p.16, (Medvedkov “Lizinq v S.U., ekonomike SSHA”, Credit is based on three principles: urgency, because it is given for the exact time; exact the for is given it because urgency, principles: three on based is Credit credit and rent with similarities some has Leasing complex and financing of method novel a as leasing, that conclusion draw We can European leasing companies started toappear in themiddle of 1950sthe as a result of 9 20 . For example, in case of Digesta 19 . , p.237, Baku,2003 Digesta , Baki, , CEU eTD Collection the term of leasing contract for the price which is set beforehand set is which forcontract theprice leasing of term the leasingin contract purchase – endof purchase the after lesseehas ato the theproperty right leased term contractof with property. the of the service the is commensurate making any changes to the period of leasing contract. It is reasoned on the basis that the term 23 lizingovix operaciy”, of right The debtor. the by debt of discharge the of moment the before only property contractthe of issubject which property to the rentcontract. the property the risk of damage is also passing to the lessee of transfer Upon supplier. the to only claim bring can lessee and liable not is lessor property, the to damages any In caseof lessor. the on not supplier, the lessee is on to the property Fourthly Thirdly it is the property in orpurchased leasing property specially manufactured contract,the while inthe rentcontract which the party owns at the moment of the conclusion of the contract. “Azerbaiyjan Respublikasinin Mulki Mejellesi”, 2000). 22 lizinqa”, kontrakta “Ponatiye S.V, Komarova 21 tenant. and renter parties, two only are there contract rent usual the In property. the of (supplier) seller contract: lesseeand leasing lessor, involvedare inthe people arethree who of there andfrom itall, First credit. rent distinguish credit is that in leasing parties use property, notfinancial assets. leasing in used also are principles These credit. 24 March, 2009. Civil Code of AzerbaijanRepublic, Article 747.3 at - - last visited on 29 Finally , right of CEU eTD Collection March, 2009. 25 beforehand contract the in mentioned was option such if only property, the propertyover the property towhich belongs to him.the Upon the end of the contract,owner. lessee has to give back lessee full temporary property.useright Hegivesthe of only the the ownership the over right Lesseehas lessor the leasing the In credit. on payment last the with debtor the to passes ownership can redeem and get the right of ownership over the lessor islessor buy to obliged from property the which by is seller the selected lesseethe then and the parties participating in leasingthe operation. of obligations and rights the ends and changes sets, which contract, leasing is the relationships obligations which come from the leasinglaw. contract. That is why the basis of the leasing legal law inAzerbaijan contract leasing of Concept by itscontracts special which features discussedabove. were briefly gained as a resultof usageif “improper” itis notfixed in leasing the contract. can get thehe and wholewants he way inthe contract credit by bought is which profit property the use can debtor the for himself. The lessee cannot get an additional profit, which was Civil Code of Azerbaijan Republic, Article 747.3 at - < http://www.azerbaijanleasing.com According tothe Civil Code of Azerbaijan Republic, leasing contract is acontract where from andleasing credit sum rent beitTo bestated differentiated easily can that can up, Realization of leasing by business people can be done with the existence of the joint the of existence the with done be can people business by leasing of Realization In this partIwantemphasize to how on is leasing defined andregulated in Azerbaijan 11 25 . The last point is that > -last visited on 29 CEU eTD Collection english/r%C3%A8glement 28 visited on 29March, 2009. bin/guide.pl?action=article&id_razdel=67596&id_article=91109 26 Republic Azerbaijan Republic lesseefor the provide the use (Article property temporary this to 747of Civil Code of 30 2000). Moskva, imushestva”, Moscow, 2000(Braginskiy VitranskiyM.I., “DogovornoyeV.V., pravo. Knigavtoraya:Dogovori o peredache 29 March, 2009. right touseitduring leasing period the of contract has nobody him lessee’s and except by order manufactured is lease; the leasedproperty the lessislease not payment than marketpricethe 90% of before of property the the beginning of less than 20% of property the marketprice before thebeginning of lease;theamountthe of itsperiod by of service; endof value residual the lease of the property period constitutes the for the defined price by the endpurchaseproperty to the begiven lesseea right will orthe rights with transferred ownership of the lease period; the period be will leased property the a contractthat when in thestates cases has which a condition of lease exceeds 75% of the 27 with,let highlight us characteristics the leasing of contract. Therearesix ofthem its value regard with to amortization,interest for loan (if isthere and acredit) payment for third place leased equipment that is coming near de règlement to “jour by contract.the Thisislong which period covers wholethe period ofeffective service of the request. place, lessee gets objectwhich is specially purchased by leasing company for the lessee by his Tax Code Tax of AzerbaijanRepublic, Article 140 -< http://www.azerbaijanleasing.com Legislationof AzerbaijanRepublic Translated as “compulsory liquidation” atCollins Dictionary - http://dictionary.reverso.net/french- Braginskiy VitranskiyM.I., “Contract V.V., law. Second book. ontransferof Contracts property”,p.389, Official website of Azerbaijan Leasing Companies Association- – last visited on 29March, 2009. - - last visited on 29 29 . In the first > - last > - In the CEU eTD Collection (Allakhverdiyev NiyazovS., “AzerbayjanS., Respublikasinin Mulki Huququ”, opinion This contract. three-sided a is leasing that stated is it law legal the from materials many partiesthe leasing of contract are:lessor, lessee and seller the property.the of Inaddition,in specialize in the legal sphere. ideamore and more frequentis observed in worksthe of Russian and Azerbaijani authors who ”nominated contract” (independent type of contract like sui generis)Civil added to Code. This obligation. this of execution lessee nothave does any legal relationships. Nevertheless,lessor carries liability for non- whom with the property, sellerthe of by butbythe lessor, not done is usually in leasing contract feature leasingthe of wantpointthe transferleased factthe to I that out contract property the of Lessorin this case isliable not for selection of the leasing subjectand the seller.As lastthe lessor. by bought be should which property the on out point to and seller the select to right a has Lessee relationships. legal leasing the in lessee the of role active the is it all, of First legal nature of leasing contract. despite factthe beneficiary that here islessor. listed The characteristics give idea usan aboutthe sale-purchase; on obligations for property the of seller the to regards with obligations and highlights financial the nature of his obligations. the lessor isIn the fifth place set free fromleasinglessee contract usually rightgets the purchase to the leasing subjectfor its residual price. most obligations which are inherent to the renter. This feature 31 price, where differencethe will makeuplessor’s profit. lessor’s services. Thereby capacity the leaseof payments mustexceed equipment’s purchase Allakhverdiyev S., Niyazov S., “Civil Law of AzerbaijanRepublic”, According to the definition of leasing contract given above, it can be concluded that concluded be can it above, given contract leasing of definition the to According Leasing contract has definite features which mark out it as separate type of contract While mentioning this, it cannot be denied that maybe in the future there will be new be will there future in the maybe that be denied cannot it this, mentioning While , there is distribution of rights between the parties in the leasing contract where 13 In thesixth place, In the fourth place, Digesta lessee obtains some rights some obtains lessee Digesta , Baki, 2001). , p.622, Baku, 2001 by the end of the 31 . CEU eTD Collection finansovoy arendi (lizinga)”, arendi finansovoy 35 Respublikasinin Mulki Mejellesi”, 34 imushestva”, Moskva,2000. Moscow, 2000(Braginskiy VitranskiyM.I., “DogovornoyeV.V., pravo. Knigavtoraya:Dogovori o peredache 33 Republic”, S. Selimov S., Republic”, Allakhverdiyev of Law Azerbaijan 2000; “Civil others, and Moscow, of property”, transfer on Contracts book. Second law. “Contract 32 purchase contract, but who is given a right of the buyer on this contract selleris obligedtransfer to leasing the lessee subjecttothe is who not party the of sale-the debtor. special These rulesleasing of aremeantby Azerbaijan legislation, whenitis said that the from benefit his in performance the of execution the request to right a has which person the parties have concluded that debtor has to perform towards not creditor, but towards the third Azerbaijan Republic (Chapter29),thecontractin thebenefit of thirdisparty where acontract others and Afandiyev is supported by E.V.Kabatova, M.I.Braginskiy,V.V.Vitranskiy, S.N.Allahveriyev, E.I bargain two-sidednature,leasing but system asa the relationshipsof parties between the is three-sided relationshipsbetween participants: lessor, lessee and seller property.the of Leasinghas contract said that leasing relationshipsformed are with two contracts and include whole the complex of from the model of the constructed was contractcontract leasing the beginning very the from that isexplained contract purchase in the benefit of third party. parties of leasingthe contract. to find answer the to this question, letus make anoverview on relationshipsthe of subjectthe described differently in different sources. Konnova T. A., “Leasing (financial rent) contract”, rent) (financial “Leasing A., T. Konnova Aghazade “CivilF., Code of AzerbaijanRepublic”, Braginskiy VitranskiyM.I., “Contract V.V., law. Second book. ontransferof Contracts property”,p.394, Kabatova “Leasing E.V., –legal regulationand practice”, Moscow,1998; Braginskiy Vitranskiy M.I., V.V., 35 is it example, For literature. legal the in question this on views other also are There sale- the from cominglessee obligationstowards the sellerhas the thatfact The . So again. So question the regarding many how parties are inthere leasing the contractis Law Literature 32 , Baku, 1999. . This question is discussed very often in themodern law. In order to try Zakonodatelstvo Qanun , Baki, 2000). , #9, 1998). Digesta, 14 Legislation Law, Baku, 2003; Afandiyev E.I.,“CivilCode of Azerbaijan p.312,Baku,2000 (Aghazade “Azerbaiyjan F., , #9, p.16,1998 (Konnova T.A., “Dogovor 33 According Civilthe to Code of 34 . CEU eTD Collection http://www.unidroit.org/english/conventions/1988leasing/1988leasing-e.htm 36 Leasing Financial International on Convention UNIDROIT of 1 byArticle supported also is idea This Azerbaijani legislation notion and factthe financial that leasingis widely used in country.the point of viewleasing on contract being atwo-sided contract is notpersuasivefrom presentthe Azerbaijan Republicinterprets leasing contract asa three-sided contract. In my opinion the parties in the leasing contract, should be based on existing legislation. The Civil Code of 5) 4) 3) 2) 1) Republic, the following several are indicators of leasing contract: As conclusion of this chapter, by generalizing Civil the andCode Tax Code of Azerbaijan contract. UNIDROIT ConventiononInternational Financial Leasing (Ottawa,28 May 1988) - the leasing payments. This should be specified in the contract beforehand. contract in the specified be should This payments. leasing the Opportunity to redeem leasingthe subjectfor the ownership through waythe of conducting subject. leasing the of amortization full the of time the to close is which The transfer propertythe of is for done the exact period of time, usually for the period leasing contract. temporary use, itis mandatory to transfer the property both for the use and for possession in rentcontract itis permitted to transfer the property either for use and possession or only for Transfer oftheleasing subject tothe lessee both for use the and for possession. While Inthe Which and from whom the property should be bought by lessor is selected by lessee. given award in return. property which hepurchases as itis purchased only for the transfer ofit lesseethe to for the need the doesn’t lessor that the is obvious It lease payments. in form of the incomeis got the Lessor has an aim to invest financial assets to the property which then is leased and in result The conclusions of the researches made on this question of defining the number of the of number the defining of question this on made researches the of conclusions The 36 where lessor, lessee and seller (supplier) are all named as parties allleasing are namedas of the parties (supplier) lessee and seller lessor, where 15 - last visited on 29 March, 2009. CEU eTD Collection resident or non-resident of Azerbaijan Republic canbe subject party of leasingthe contract” transactions Accordingthe toArticle 747-1.5 of the Civil Code of Azerbaijan Republic, “any executing services onerous tothe parties of the leasing contract canparticipate in leasing 38 37 funds, acquired the asset which is transferred to the lessee for the specified fee, specified term Civil of Code Azerbaijan Republic leasing contract: lessor, lessee and seller (supplier).described first. Ihave decided not tobreak tradition and start with samethe section. This is stated in the Article 747-1 of the contract leasing the of Parties it andlogical followsalsoof things. the order the legal the literature this was Chapter builtin this way based things:can on two suchstructure be found usually in types leasing of how leasing in thiswill and show isregulated Azerbaijan. of structure The and leasing contract of andthe rescission of alteration procedures lease subject, the of security subleasing, and transfer third of contracting byparties, tothe obligations rights the parties the allocation the to much begiven will attention Besides this, of risks and insurance in leasing, contract. leasing the of content and form contract, of the subject thecontract, of parties Legal regulationof leasing contract inAzerbaijan Civil Code of Azerbaijan Republic , Chapter 38, Article 747-1.5, entered into Civilforce Code on 1 ofSeptember, Azerbaijan 2000 Republic , Chapter 38, Article 747-1.2, entered into force on 1 September, 2000 This chapter will be dedicated to the research on the main components ofleasing contract: components researchon mainthe the to bededicated will This chapter Lessor “is an individual First of all,letus take oran overview each on participant of leasinglegalthe contract. entity who, either using his own capital or external As it was mentioned above, there are minimumIn legal three literature participants devoted (subjectto any kind ofparties) contracts, in parties of the contract are usually 37 . Pledger (mortgagor), bailer and other participants who are 16 38 . CEU eTD Collection 41 “Ponatiye finasovoy (lizinga)”,arendi own or who have access to big financial assets. Those are 44 at - http://www.azerbaijanleasing.com/ 39 - use. for temporary or ownership leasing agreement of basis the lessee otherwise) on or to title ownership of (including transfer conditions and other and clinics can be showed hereasan be andshowed can example. clinics hospital by equipment medical the of lease The goals. their of achievement the for activity investment they that can with deal inif itconstitutions internal is as lessees, their stated business business purposes. Notonly people,also butnon-commercial legal persons act can conditions other ownership useon or basisthe for specified of fee, leasingthe contract specified term and commercial. - - at - - last visited on 29 March, 2009. –company which wascreated and is ownedby Azerbaijani (UniBank), “Joint Leasing “Joint (UniBank), 46 , #1,2000). 17 ” - Latvia) - last visited on 29 March, 2009. 39 Legislation ” Lessors are usually the parties who - last visited on 29 March, 2009. 40 - last visited on 29 March, 2009. : - visitedlast onMarch, 29 2009. , #1,p.24, 2000(Kharitonova U.S 43 ” (International Bank of - last visited on 29 March, – last – 41 CEU eTD Collection installation and operation, unless isotherwise specified in leasingthe agreement” destruction,loss, deterioration,malfunctioning before endthe of mistakesuseful life, during is responsibleinsurance for objectthe of oflease all against of kinds damage toproperty, sure. for mentioned be should contract leasing of implementation with connected is which risks of contract leasing the in insurance and ofrisks Allocation with tothepartiesdefinitions leasingregard of contract. the concrete provides legislation in can Azerbaijani It beseen that Azerbaijan. agreement leasing front both of lessor andlessee. in debtor a is seller lessee), - party third the of benefit the (in lessor the with concluded is which the sale-purchase contract (regulated by Chapter 29 of the Civil Code of Azerbaijan Republic Azerbaijan of Code Civil the of 29 byChapter (regulated contract sale-purchase the does not need this property because he has purchased it exclusively for the lessee. According to but usuallylessorthe on of conditions depending the contract, tothelessee,is itas transferred bin/guide.pl?action=article&id_razdel=67596&id_article=91109 at - -lastvisited on 29March, 2009. . Seller can. Seller transfer the property lessorto either orlessee 18 > – last visited on 29March, 2009. 50 . This is . This 49 > - ) CEU eTD Collection 51 insurancethe is defined by partiesthe of leasingthe contract of term the also and beneficiary be will who and insured will be who of question The Republic. insurance is implemented in accordance with Article 748.6 of Civilthe Code Azerbaijanof (financial)risks and risks lossof and damage of the subject of the leasingcontract. Such specified by contract is not rule if the object, the selected another of the leasing subject with the aims of the leasing, should be held by the party which have seller, he beliablein incompliance The liability should with such riskscase. for the connected specified rule by isnotanother contract the of leasingthe sohe contract, should befor all responsible consequences. lessee term the during of the is possession the property under the factthat the with explained last last visited on29 March, 2009. 55 2009. 54 2009. 53 2009. 52 2009. leasingthe contract in favor of lessorthe of breach the for responsibility his insure should lessee the legislation, Azerbaijan by provided rule is regulated by This Article 748.6.2parties. the of of the Civil Codeagreement of Azerbaijan the by out Republic.carried be Onlycan in and the cases mandatory not is risks) (financial not mentioned in the leasing contract, inmost riskis in casesthe mentionednot by lessee. carried leasing contract, the the lives, health or property in the process of use of object of lease” of Azerbaijan Republic, insureits responsibility liabilitiesfor concerning damage humanto Article 748.7.2 of the Civil Code of AzerbaijanRepublic at -lastvisited on29 March, > -lastvisited on29 March, > -lastvisited on29 March, > -lastvisited on29 March, > - CEU eTD Collection all accessories and documents (for example technical certificate). The right The of ownership certificate). technical example can (for documents and all accessories should with be Azerbaijan Thesubject Republic). of leasing contract the transferred Code of Civil of the (Article 748-2.2 leasing agreement” is inthe specified lessee, otherwise to unless absolute and is usually limited by conditions of the contract. right of ownership the over property which is leased to thelessee. However, this rightis not contract should be valued as usual rent or sale-purchase contract. subject of leasingthe contract is consumable thing, (for examplematerials) raw then such the If construction. and buildings, equipment, cars, example: for use, normal of conditions things which cannot be destroyed and which are serving for its with limitedfree withoutcivilturnover” goods goods civil or turnover purpose for a long period in enterprises, buildings, constructions can also be subjects of the leasing contract. leasing the of be subjects also can constructions buildings, enterprises, at - - last visited on 29 March, 2009. , Baki, 2000). 20 Law, p.312, Baku, p.312, 2000 (Aghazade “AzerbaiyjanF., 56 . Property such as 57 – CEU eTD Collection 58 shouldinleasing contract form beconcluded written the leasing. required by the type of transactions it is coming from. There are also special rules regarding Form and content of the leasing contract the topic. Azerbaijani legislation, butthose which are presented give reader clear the definition regarding regulatedis by Articleprovision 748.5 This of the Civil acts. legal Code of Azerbaijanother and Republic.Code this with conformity in Agencies State appropriate right of ownership over subject the of leasingthe contract should beregistered by the this subjectis regulated, should be done in orderthe which is defined by legislation.the The the leasing contract (Article 748-2.5). be transferred to the lessee in case all leasing payments are made according to the conditions of 2009. lessor,following It from this containsand seller lesseeof contract. and also obligations the with Article 747.5.3andother articles of Civil the Code which leasing.regulate in between parties accordance these contract or three-sided andseller, lessor between contract istransaction leasing concluded either lessor contract andlessee between andsale-purchase Azerbaijan Legislation, Civil Code of Azerbaijan Republic at- - last visited on 29 March, CEU eTD Collection 60 2003). 2003 (Khuduoglu S.,“AzerbaiyjanRespublikasininMulki Mejellesine Sherhler”, 59 is not concluded then itis considered that the parties have not agreed on this term and as a result leasing contract lessor to lessee, can be defined. This condition is mandatory and if it not stated in the from contract,be transferred to isgoing which property the by which information the state to mandatory obligations of other subject parties, if there are such presented. The legislation defines that it is subject of the leasing, the of if it is repairs not mentionedcapital inthe the contract;maintain to executeit; other dutiestransfer whichshould are he statedwhom to also state and contract leasing the of subject the as lessee the to transferred be to going is him from purchased property it tothe lessee according to the conditions of the leasing contract agreement.Lessor is obliged topurchase the defined property from the seller and then transfer Republic. leasingof This object. in is stated Articlethe 748.2.8of Civil the Code of Azerbaijan which are by done before start lessee the leasingof the use the and object during also use the leasing agreement with amending or not of the conditions of the leasing agreements." may otherwise leasingspecify is in extension agreement specified theleasing agreement; of unless leasing agreement, leaseto related of object to againstrisks insurance regarding calculatingin payments leasing case of prepayments onlease; of responsibilities parties lease of payments amount total and leasing; of the amount object of of operation bonusand of maintenance the lessor; leasing; of object schedule of leasing payments; procedures of the agreement; procedures leasing leasing;accounting of of transferof duration of object 61 visited on 29March, 2009. Citied from the Civil Code of AzerbaijanRepublic, Article 748 at - -last CEU eTD Collection 65 Republic. Articles2003) and 748.1.2, 748.1.8and 748.1.7(first sentence), 748-12.3 of CivilCodethe of Azerbaijan (Allakhverdiyev SelimovS., S. ve bashqalari, “AzerbayjanRespublikasinin Mulki Huququ”, 64 63 2003) and Articles 748.1.13 and 748.1.7(second sentence) of theCivil Code of Azerbaijan Republic. (Allakhverdiyev SelimovS., S. ve bashqalari, “AzerbayjanRespublikasinin Mulki Huququ”, 62 execute other duties which are stated in leasingthe contract contract; which isthesubjectof leasing the the property purchase in mentionedit contract the itreceivedinto beginning at the consideration conditionsthe ofnormal taking If depreciation. written approve of the lessor; return the subject of leasing in the same conditions as he has isdamages or not of quality;good not to transfer theproperty for subleasing without the is property in inform lessor his for case there transferred of leasing own costs; the contract leasing uses maintenance keep safe,conduct andthe subject; of service technical subject the payments in the order and at the time specified in the leasing contract; inform lessor how he ownership; use thesubject of in leasingthe make with leasingthe accordance contract; leasing Code of Azerbaijan Republic. Civil the of 748-12.1 748.1.12-748.1.2-4, byArticles stated case in the contract the rescind time contract leasing in the - last visited on 29 March, 2009. of lease objectpreparation of the acceptance of (if this material damageimplied cost)” so, is initiate judicial compensateentitled adamage to to proceedings itmadein to fulfil its obligations under the leasing agreement and, in case failureof of another party to do the leasing agreement, lessee (or respectively lessor) is entitled to request lessor (or lessee) to time subject the of leasingthe contract lessee; require the payment for delay if the lessee has not returned at all or has not returned in rule is applicable toboth lessor and lessee, depending from situation.the Citied from the Civil Code of AzerbaijanRepublic, Article 748.1.5 at - < http://www.azerbaijanleasing.com Allakhverdiyev S., Selimov S. others, and “Civil Law of Azerbaijan Republic”, Article 748.1.9 of the Civil Code of Azerbaijan Republic. Allakhverdiyev S., Selimov S. others, and “Civil Law of Azerbaijan Republic”, Lessee is obliged toaccept the subject of leasingthe agreement for temporary use and 62 . Lessor has a right to check how the leasing subject is used by the 63 ; get back money and subject of leasing and at the same 23 64 . “Following legal effectiveness of Digesta Digesta , p.264, Baku,2003 , p.262, Baku,2003 Digesta Digesta 65 . This , Baki, , , Baki, , > CEU eTD Collection 1997 (Gazman V.D., “Kak pravlno zakluchat dogovori finansovogo lizinga”, 66 stays with the person lesseesubleasing agreement” basis of on to the is transferred who has possession over subleasingthe contract the subject. “Writtenleasing contract) and transfersfor it temporary the use and ownership tothe lessee according to agreement of lessor(sometimes called sublessor) accepts leasingthe subjectfrom lessorthe (accordingthe to is subleasing executes who person the subleasing, In in return. payment and term specified lesseethe according tothe subleasing contract) for the temporary ownership and usefor the was givenhim to before by lessorthe according to leasingthe contract, to the third parties (to thirdthe by to obligations contracting parties. the parties gives permission to transfer leasing the subject tosubleasing or and rights the transfer from leasing contract. For such cases Article 747-4 of the Civil Code of Azerbaijan Republic, quit to wants he or payments leasing make be ableto not hewill when cases such for possibility contract leasing inthe subject thelease of security parties, contracting by the parties third to the obligations and rights of the transfer Subleasing, Azerbaijan legislation. - last visited on 29 March, 2009. 67 Gazman V.D., “How to conclude financial leasing comtracts in the right way”, Citied from the Civil Code of Azerbaijan Republic, Article 747-4.3 at - < http://www.azerbaijanleasing.com Despite the fact that lessee needs the subject of the leasing contract for his activity, there is a These are the main rights and responsibilities of lessor and lessee which are regulated by Subleasing is a type of under-lease, where lessee transfers the leasing subject, which 66 . “In providing object for subleasing, right to make. “In supplierforto claims subleasing, right object to providing 24 67 . It seems like the right toclaim Xozyaystvo i Pravo Law Law and Economy, #3, , #3, 1997). p.117, > CEU eTD Collection coming out from coming out leasing contract. quitfrom leasing legal relationships and discontinue any of kind andrights obligations fully they In this case, mutual agreement. basis, permanent by their or partiestemporary on parties. is dedicated to the transfer of rightsthe and obligations tothe thirdparties by contracting is the mostimportant information dedicated to regulation of subleasingin Azerbaijan. Nextpart because subleasingis regulated by Article 747-4 of the Civil Code of Azerbaijan Republic. This general rules which are applicable for traditional rent. There isway no for thisin Azerbaijan, that in such case thelegal relationships connected with subleasing should be regulated by Thatis why wholethe storyheresub isrental about purchase leasingthe to property from definedthe seller bythis person’s (new lessee’s)responsible request.not is he because possible, not is This lessor. of role in time same the at acting assumes thatlessee, bytransferring property the for theuse and ownership tothe third parties, is ideathe of using “subleasing”.term Vitranskiy for example says that“term “subleasing” consideredis to be a sub rentaltime andsame that is why the several at authors in lawthe literature notdo supportSubleasing agreement. lessor’s without allowed not is payments making leasing on obligation the of reassignment subleasing, In conditions. subleasing corresponding without lessor’s permission. 68 leasing”obligatory for of subleasing the object imushestva”, Moskva, 2000). Moskva, imushestva”, Moscow, 2000(Braginskiy VitranskiyM.I., “DogovornoyeV.V., pravo. Knigavtoraya:Dogovori o peredache 69 - last visited on 29 March, 2009. Citied from the Civil Code of Azerbaijan Republic, Article 747-4.4 at - < http://www.azerbaijanleasing.com Braginskiy VitranskiyM.I., “Contract V.V., law. Second book. ontransferof Contracts property”,p.401, The parties of the leasing contract can transfer their rights and obligations to the thirdThe parties the to of leasingthe obligations and rights contract can their transfer The content subleasing of agreementisleasing similar to contract addition with of 25 68 . Then subleasing cannot be implemented be cannot subleasing Then . 69 . If we follow this theory, it can bestated can it theory, this follow we If . > CEU eTD Collection Qanunverijilikde”, #5,Baki, 2005). #5, p.45-47, Baku, 2005(Qeyushov. R.A.,“Qirov Azerbayjanhuququ Respublikasinin Muasir 73 2003). 2003 (Khuduoglu S.,“AzerbaiyjanRespublikasininMulki Mejellesine Sherhler”, 72 2003). rent should be gone through the registration processes defined by the legislation by the defined processes registration the through be gone should rent concluded only in the written form. Security contract onimmovable property and also rights on 2003 (Khuduoglu S.,“AzerbaiyjanRespublikasininMulki Mejellesine Sherhler”, security. of issue the to related information the execution of obligations which are guaranteed by security of and term capacity content, the value; its and security of subject about: information contain contract as a security with an aim of attraction of financial assets. Security contract should leasing the of subject the use can lessee that states Republic Azerbaijan of Code Civil the of 4.2 right on claim on leasing contract in the capacity of guarantee on security contract. Article 748- cases when the leasing subject can be used as security. obligations is done in the simple written form and rights of transfer the that mention to good alsois It lessee. new with time this but operate, to continues contract leasing contract, leasing the of subject the is which property leased the of owner the of At replacement contract. leasing the of subject the for provided services additional example for contract: leasing in the mentioned are which obligations additional 71 70 without theconcern of lessee.the Qeyushov.R.A., “Pledge law in the modern legislation of Azerbaijan Republic”, Khuduoglu S., “The commentaries on the Civil Code of Azerbaijan Republic”, Azerbaijan of Code Civil the on commentaries “The S., Khuduoglu Khuduoglu S., “The commentaries on the Civil Code of Azerbaijan Republic”, Azerbaijan of Code Civil the on commentaries “The S., Khuduoglu Article 748-4.1 of the Civil Code of Azerbaijan Republic. In some cases parties of the leasing contract need to use the subject of leasing any or Lessor can transfer fully or partially his rights and (or) obligations to the third parties third the to obligations (or) and rights his partially or fully can transfer Lessor 70 However this does not release him from execution of 71 26 . The last topic which is left at this section is the section this at left is which topic last . The 72 . The security contract is contract security . The Legal Literature Legal Literature Bulleten ofnotarial practice Huquq Huquq 73 Edebiyyati Edebiyyati . That is. That the , p.54, Baku, , p.52, Baku, , Baki, , Baki, , CEU eTD Collection “Azerbaiyjan Respublikasinin Mulki Mejellesi”, 75 74 rent should be also applicable to the leasing Azerbaijan Republic,which arerelated tothe rent regarding alteration and rescission are describedin the Articles 700-705 of Civil Code of related tothe lessor.in But accordance with factthe leasing that is related rent,to the rulesthe leasing contractis statedin Chapterthe 38of Civilthe Code of Azerbaijan Republicisitand rescission of leasingthe contract. The only whichthing isdedicated to the termination of the rescission and alteration of the leasing contract. one partiesof the cancels contractaheadthe I want examine oftime. to basisbelow the for the when partiesthe execute theirall obligations on the contract. There arealsosuch cases when and agreement leasing of period the of end atthe stop relationships legal leasing Accordingly, the leasing contract. contract leasing ofthe rescission and Alteration changes under which parties,the if they have known or could predictsuch changes, would were originating while concluding contract the (substantial change of circumstances –is such concluding contract);the partywhich under inhas violation, a loss,casesuch is where (substantial heparty of one isby made deprivedsubstantial violations from substantial of somethingcase in what he changewas estimating toof get whilecircumstances under which the parties Afandiyev E., “Civil Code of AzerbaijanRepublic”, Republic. ofAzerbaijan Code Civil ofthe 700-705 Articles In this subchapter I will make an overview on grounds for alteration and rescission of rescission and alteration for grounds on overview an make Iwill subchapter this In Leasing contract canbe terminated or modified byany party in cases described below: There are no such regulations in Azerbaijan legislation dedicated to the alteration and As itwas mentioned before, leasing contractis concluded for aspecified period. Huquq 75 . 27 Edebiyyati Law Literature 74 . So the rules which are applicablefor the , Baki, 1999). , p.174, Baku,1999 (Afandiyev E., CEU eTD Collection 79 78 “Azerbaiyjan Respublikasinin Mulki Mejellesi”, 77 “Azerbaiyjan Respublikasinin Mulki Mejellesi”, 76 specified by contractthe never have concluded contract orif concluded, different with conditions); in other cases initiative) in cases:these lessorhas a right to requirelessee immediatelyto return leasedthe property. notmade specified atthe time consecutively twice subject of leasingthe contract and as a result its quality is decreased; if leasingthe payments are subleasingis by done lessee the without lessor’s agreement; if lessee the is not taking careof the ifthe for; used be should subject the that way other in the or contract leasing by the mentioned terminate contractthe in cases: if lessee the is usingleasing subjectin other way the isthat which is Article 748-1.12 of Civilthe Code of Azerbaijan Republic.states It that lessor the can initiative), lessor’s with court by the (or by lessor contract the of is termination contract leasing moment of the conclusion of the contract. damage, that this party would have been deprived from hewhat wasestimating togetat the its conditions would violate the ratio of ownership rights and bring interested the party such to changes making without contract the of execution the intercourse; business the of conditions takinginto consideration his level of care which requiredwas from him by contractthe and the happened because of reasonsthe that interested the party couldprevent not after appearance, its contractthe parties the estimating were such changes that notappear; would changesthe circumstances andexistence of belowthe listed conditions: atthemoment of conclusion the of Article 691 of the Civil Code of Azerbaijan Republic. Article 748-1.12-748-1.12.4 of the CivilCode of Azerbaijan Republic. Afandiyev E., “Civil Code of AzerbaijanRepublic”, Afandiyev E., “Civil Code of AzerbaijanRepublic”, The leasing contractcan be terminated by lesseethe (orby with court the lessee’s As it was mentioned at the beginning, the only Article related to the termination of the of termination the to related Article only the beginning, the at mentioned was it As Leasing contract can be terminated in one-sided order in caseof existence of 76 79 . the lessor is not providing or creating obstacles to lessee for use of for lesseecreatingproviding is lessorto obstacles or not the 77 Huquq Huquq 28 Edebiyyati Edebiyyati Law Literature Law Literature 78 . After the termination of the contract, the contract, the of termination the After . , Baki, 1999). , Baki, 1999). , p.194, Baku,1999 (Afandiyev E., , p.192, Baku,1999 (Afandiyev E., CEU eTD Collection one of the parties can claim the alteration or rescission of the contract at the court, only after he after only court, at the contract the of rescission or alteration the claim can parties the of one that fact the mention to good is also It force. into is coming decision the when decision, court agreementbetween alteration partiesthe on (rescission) of leasingthe contract. case In of the considered tobe modifiedstopped or accordingly from momentthe of conclusionthe of the of alteration rescissionor ofthe leasing obligations the contract lessor andof lessee are termination oftheleasing contract, the parties’ obligations on contractarethe stopped. Incase contract the obligations of partiesthe arekeptin thecontract in modified view.In case of mutual agreementin samethe form leasingas agreement. Incase of alteration of leasingthe terms its inwith accordance agreement leasing had the lesseeperformed would been the have equipment; such and (b)recover as damages place will lessor inthe in it position the which the of possession (a) recover termination: such andafter agreement leasing the terminate payment of the value of the future rentals, where the leasing agreement so provides, or may http://www.unidroit.org/english/conventions/1988leasing/1988leasing-e.htm 80 UNIDROIT Convention on International Financial Leasing. It is said there that: and withdrawal of propertythe in case of non-performanceis regulated by Article 13.2 of time specifiedin the contract. contract immediately and claim damages if leasingthe subjectis not transferred tohim at the lessee’s same The control. states Articlethat 691 lessee the leasingterminate the hasaright to contract; the property becomes unusable because of circumstancesthe which are not under lessorismaking not capital the repair property,the of ifsuch condition mentionedwas in the the property; the transferred property has defects which prevents lessee touseitnormally; the UNIDROIT ConventiononInternational Financial Leasing (Ottawa,28 May 1988) - ” 80 The agreement on termination or alteration of the leasing contract is done by the parties’ the by isdone contract leasing the of alteration or termination on agreement The In case of In case of international leasing, problem the terminationof the of leasingthe contract “ Where the lessee's default is substantial, the lessor may also require accelerated may require also lessor the is substantial, default lessee's Where the 29 - last visited on 29 March, 2009. CEU eTD Collection 2003). 2003 (Khuduoglu S.,“AzerbaiyjanRespublikasininMulki Mejellesine Sherhler”, 84 83 2003). 2003 (Khuduoglu S.,“AzerbaiyjanRespublikasininMulki Mejellesine Sherhler”, 82 2003). 2003 (Khuduoglu S.,“AzerbaiyjanRespublikasininMulki Mejellesine Sherhler”, agreement can use any type of leasing which is known worldwide prohibitions on other types of leasing, it can be assumed that the parties of the leasing 81 leasing international and domestic into leasing separates legislation ofleasing Types move tothe part dedicated tothe types leasing.of legislation. At this step Iwant to finish with the topic of legal regulation of leasing contract and realized). violated right) and damagesthe areconsideredlost both real harm (the costs which party willhas have or restore the to profit (the profitalteration or rescission.According Article tothe Civil 18of the ofAzerbaijanCode Republic, which the party violations, thecould other party has a right toclaim damages which have occurred asa result of gain if the contract would be receive response in time (usually 30 days) receives the refusal from other party to do it based on mutual agreement or, if he does not Khuduoglu S., “The commentaries on the Civil Code of Azerbaijan Republic”, Azerbaijan of Code Civil the on commentaries “The S., Khuduoglu Articles 747-3 of the Civil Code of Azerbaijan Republic. Khuduoglu S., “The commentaries on the Civil Code of Azerbaijan Republic”, Azerbaijan of Code Civil the on commentaries “The S., Khuduoglu Khuduoglu S., “The commentaries on the Civil Code of Azerbaijan Republic”, Azerbaijan of Code Civil the on commentaries “The S., Khuduoglu There isyetexactclassification no of leasingtypes of in Azerbaijani literature. The Thisis how procedurethe of alteration and rescission is in regulated Azerbaijani parties’ the was oneof contractbasis alterationforthe rescission the or of If the 82 81 . 30 84 . 83 . As there are no kinds of Legal Literature Legal Literature Legal Literature Huquq Huquq Huquq Edebiyyati Edebiyyati Edebiyyati , p.77, Baku, , p.74, Baku, , p.72, Baku, , Baki, , Baki, , Baki, CEU eTD Collection pravovoye regulirovaniye,praktika”, Moskva,1998). 89 (Allakhverdiyev NiyazovS., “AzerbayjanS., Respublikasinin Mulki Huququ”, 87 86 85 describedin Civilthe Code) leasing canbe divided in: domestic andinternational leasing Depending sector on of marketthe where leasingthe transactions areexecuted (orasitis 88 - last visited on 29 March, 2009. another country and transfers it to the lessee to the thirdcountry. is possiblein such cases when lessorfrom countryone purchases property from sellerthe in leasing, all operations aremade between theparties from differenttwo countries. Transitleasing lessor purchasesproperty from selleroverseas itand grants tothedomesticlessee. Instraight national seller,and then givesitabroad to foreignthe lessee. In importthe international leasing, the from property leasing purchases lessor leasing, international export the In leasing. transit domesticleasing, lessor and lessee areboth residents of Azerbaijan Republic UNIDROIT Convention). UNIDROIT person, is not the resident Azerbaijan of Republic,is that the subject of leasingthe theis byforeign owned contractresident of Azerbaijan Republicis regulated by Civil Code of Azerbaijan Republic. If lessorthe isAzerbaijan Republic, in other words subjectthe of leasingthe is under the ownership of the regulated ofAzerbaijan residents Republic” by non- of both them) are orlessee (or lessor Republic. leasing either international “Under the standards wholethe complex leasing of transactions isimplemented on the territory of Azerbaijan of international law (particularly by Kabatova E.V., “Leasing – legal regulation and practice”, p.14, Moscow, 1998 (Kabatova E.V., “Lizing E.V., (Kabatova 1998 Moscow, p.14, practice”, and regulation – legal “Leasing E.V., Kabatova Citied from the Civil Code of Azerbaijan Republic,Republic. Article 747-3.3 ofAzerbaijan Code at - < Civil http://www.azerbaijanleasing.comof the 747-3.2 Articles Republic. ofAzerbaijan Code Civil of the 747-3.1 Articles Allakhverdiyev S., Niyazov S., “Civil Law of AzerbaijanRepublic”, By By summarizinglegal literature and legislation, the leasing can be dividedinto these types. International leasing itself can be divided into several types 88 87 . Theinternational leasing lessor wherethe is resident the of 31 Digesta 89 : export; import, straight; import, export; : Digesta , Baki, 2001). , p.648, Baku, 2001 86 . Inother words, 85 . In > CEU eTD Collection vidi”, Moskva,1999). 92 vidi”, Moskva,1999). 91 pravovoye regulirovaniye,praktika”, Moskva,1998). 90 lessee and seller sameat the time),such leasing iscalled returning leasing.It turns out that the cases when only two parties are presented in the leasing contract (when one person acts as a only by the parties without mediators. If there are mediators, then it is considered as indirect. In full cover of expenditures andleasing partial with cover of expenditures participants for less than one and a half years. – shortterm years or three half to anda one – from medium-term more years; or three for term – property. this of amortization compensate his investments, has to lease the property repeatedly during the term fullof the transfer of rightthe of ownershiphim. to In such type leasing of lessor, in order to contract, the leased property is returned lessorto the and lesseehave doesnot aright toclaim lessorcan compensate his leasingon the costs contract. By end the of term the of leasingthe the which by term, the lesser is which period the for lessee the to it transfers then and risk own In leasingthe contract). partial with of cover expenditures, lessor purchases propertythe hisat payments provided by (of if contract the course conditionother isspecified not by the leasing all andfull of coverage ofleasingcontract term the of lesseeend the to the upon leasing, leasedof transfers In rightoverthe amortization. this ownership type property the of leasing is transferred full of to itsterm lesseethe eventhan more or is commensurable cover of expenditures is most the widespread leasing.type of term The for which thesubject of Vitranskiy V.V., “Leasing contract and its types”, p.92, Moscow, 1999 (Vitranskiy V.V., Dogvor lizinqa i ego Vitranskiy V.V., “Leasing contract and its types”, p.87, Moscow, 1999 (Vitranskiy V.V., Dogvor lizinqa i ego “Lizing E.V., (Kabatova 1998 Moscow, p.16, practice”, and regulation – legal “Leasing E.V., Kabatova The nextclassification leasing of is by level the cover of of expenditures: leasing with Depending on the period for which leasing contract is concluded leasing can be can leasing is concluded contract leasing which for period the on Depending Next classification of leasing transactions is separation of leasing by composition of composition by leasing of separation is transactions leasing of classification Next 92 : direct; indirect; returning; group. In directleasing leasing the is contract realized 32 90 . Leasing with full 91 : long- CEU eTD Collection to the leasing payments. The leasing is considered as wet leasing, when the lessor takes all costs allon costs related to use, repair andinsurance leasing of subject. These costs are not included 1997 (Gazman V.D., “Kak pravlno zakluchat dogovori finansovogo lizinga”, 93 on Division by capacity the of provided services is alsoanother basis classification for leasingleasing. of small to related are things non-industrial other and stations telephone systems, security Computers, equipment. technological and bakeries plants, small like objects contains small.Plains and vessels areconsidered to be the subjects of largethe leasing.Standard leasing different types equipment.of property can be described asleasing for: production purposes; construction purposes; lease of warehouses and other placements; leasing of aircrafts, boats and etc. Leasing immovable of industrial leasing of enterprises; industrial leasing of buildings and constructions; leasing of movable andimmovable property in a group for the large leasing contract, is described as group leasing. lessorthe is represented by several persons, for example when several leasing companies merge where case The obligations. of guarantee the but financing, isnot goal main the pledge of case to the agreed schedule. It is also somehowtype of leasing isvery close to loan operation, where the leasing paymentssimilar are made according to the pledge.this view, of point afinancial From loan. bank the with The than expenditure less with onlyinvestments difference is that capital inrefinance to opportunity gives leasing Returning contract. leasing by the possession lessee sells the property to the lessor, who then gives him this property for the use and 1997 (Gazman V.D., “Kak pravlno zakluchat dogovori finansovogo lizinga”, 94 1997 (Gazman V.D., “Kak pravlno zakluchat dogovori finansovogo lizinga”, 95 Gazman V.D., “How to conclude financial leasing comtracts in the right way”, Gazman V.D., “How to conclude financial leasing comtracts in the right way”, Gazman V.D., “How to conclude financial leasing comtracts in the right way”, 95 : netleasing;leasing; wet generalleasing. In leasing, netthe lessee is taking responsibility One of nextthe classifications isby thevalue of the leased property Another classification leasingof contracts is bythe type ofleasing subject:lease of 93 . The types ofleasing immovable of property are divided to: 33 Xozyaystvo i Pravo Xozyaystvo i Pravo Xozyaystvo i Pravo Law Law and Economy, #3, Law Law and Economy, #3, Law Law and Economy, #3, 94 : large; standard; , #3, 1997). , #3, 1997). , #3, 1997). p.194, p.201, p.204, CEU eTD Collection payments they are divided to:monetary; compensatory; mixed 99 98 vidi”, Moskva,1999). 97 96 leasingimplemented canbe inAzerbaijan.movenext I wantto chapterNow to by giving and are the parties of leasingthe and contract whatare theirrightsand obligations andwhattypes of readersmain the idea how on leasingthe contract isconcluded,changed and terminated; who Azerbaijan Republic. These are mainthe types leasingof which are known worldwide and which can be usedin leasing. bemixed to isconsidered payments andcompensatory monetary payments are defined by partiesthe leasing payments are made in monetarythe form. amount, The form and periodicity leasingof providence leasingof the subject for use the and possession each time without concluding new leasing contract. agreementfor providence of leasingthe line by whichlessee the can additionaltake equipment case of permanentand stable cooperation between lessor andlessee. Here the parties make an on himself and as a resultincreases the amount of lease payments. General leasing is possible in determined by parties’ mutual agreementand should be fixed in the contract payments are made in theform of produced goods (in-kind payments), price for the goods are leasing the when cases the In payments. of form barter the meabout reminds what involved, not madein formthe of goods which are produced by leasedthe equipment. In this casemoney is Article 748-10.2 of the Civil Code of Azerbaijan Republic. Article 748-10.2 of the Civil Code of Azerbaijan Republic. Vitranskiy V.V., “Leasing contract and its types”, p.96, Moscow, 1999 (Vitranskiy V.V., Dogvor lizinqa i ego Article 748-10 of the Civil Code of AzerbaijanRepublic. This chapter has analyzed current the legal status of leasingin Azerbaijan and gavethe Aswas it already mentioned in this work, lessee makesleasing payments to lessor for 98 . Compensatory leasing - is when the leasing payments are 34 96 . Depending on the type of these of type the on Depending . 97 . Monetary leasingis all – . Monetary when 99 . Combination of CEU eTD Collection chapters make comparison analysis on situation with leasing in US and Azerbaijan. and in US leasing with situation on analysis comparison make chapters previous in the described was what on based andthen States in United leasing of information 35 CEU eTD Collection Moskva,1999). 100 development valuedhighly thisphenomenonandhas preparedandimplemented program its for USgovernment planes. machines,vessels, andincludedmoreequipment, technological and consumptionin beginningof Rightafter USatthe this, was leasedmoreequipment1950s. billion in revolution of happened fifty The real renttransactions the vehicles dollars. exceeded from leasing the coming fifty profit years, After the rent. for the carsavailable the customers beginningthe century. In1940s trade of agentnamedeighteenth Frank Zolly was suggesting The first rent contract on personal property was registered in North-American United States at States United in development leasing of Stages inUnitedStatesLeasing leasingof advancement active by intensively grow to togoing is tendency this like seems It theworld. markets of the developingand has as appeared. term leasing” a resultnew “international countries. very States quickly border of United the over havemoved operations The leasingappeared. More than Leasingis Corporation become United howthe and that States to perspectives very profitable 9/10 of leasing has business Later hehasthe realizedthat forexactcontract. company one only whole Northin 1952 in San-Francisco. At the beginning, founder of USLC Henry Shonfeldhas created the Leasing created wasUntied Corporation, States onleasing transactions, activity was focused Gazman V.D., Gazman “Market services”, of leasing Moscow, p.48, 1999(GazmanV.D “Rinok Lizingovix Uslug”, Financing of different types of rent transactions was always widely implemented in USA. implemented widely always was transactions rent of types different of Financing In 2006 UShad leasing 34.7%of from transactions wholethe in leasingturnover the As itwas already mentioned in thefirst work, this joint stock company main which’s 100 . 36 CEU eTD Collection Vol1999 at - last visited on 29 > - last visited on 29 > - last visited on Leasing Review, Leasing Review, CEU eTD Collection 107 - last visited on 29 March 2009. Business Credit, Expert Online, > - last visited on 29 March 2009. 1 February 1994. > - last visited on 29 March 31 March2008 at 105 . Banks gota . 106 104 . . - < 107 . CEU eTD Collection - last visited on 29 March 2009. > - last visited on 29 March 2009. 31 March2008 at 31 March2008 at 108 . CEU eTD Collection - last visited on 29 March 2009. . 31 March2008 at 112 . CEU eTD Collection - last visited on 29 March 2009. > - last visited on 29 March 2009. 114 . 31 March2008 at 31 March2008 at CEU eTD Collection 117 116 advantageous right on purchase of the vehicle after the end of the leasing contract endof the after the vehicle purchaseof the right on advantageous obliged topay leaseall paymentsin by time end the leasingof lessee contract; doesnot have lessee is of vehicle; the andmaintenance on repair responsibility lessee takes beneficiary; asa the lessor indicate vehicle and the insure lessee hasto acceptance, before the lessee; on loss is four of thirty or therisk periodthe property damage of the six months; from to twenty types: open and closed leasing. Openleasing features: hasthese leasing isimplemented for typeis of leasing used usually by banks Thereare main wherethey aslessors. are acting two implemented via open leasing open via implemented are engines combustion internal on the contracts leasing Many risk. this accepts lessor the residual value of the between difference inopen andleased close leasingis thatlessee guarantee leasing,not close does vehicle at the end wholesaleof orif price vehicleisthe much depreciated, transferit again leasing. Themainto the period of the leasingfrom whom itis purchased.contract If the dealer refuses to buy it, bank can sale it another to dealer by and isperson who mentionedAnother option byhim. is vehicleto suggestthe deductible to dealer the to or him, to is transferred vehicle case, this In himself. by value residual the off pay contract in States. contract United leasing of regulation legal the regarding information the give will chapter next The States. yearstime.two holding company possess can property the after the endof leasingthe is contract limited by Belakov O.A., “Leasing”, p.36, 1999 (Belakov O.A., “Lizinq”,1999). Belakov O.A., “Leasing”, p.34, 1999 (Belakov O.A., “Lizinq”,1999). One of One of famous mostthe types of leasing in USA is equipment andvehicleleasing. This Despite the fact that lessee does not have the privilege on purchase of the vehicle, hecan vehicle, of the purchase on have privilege the not lessee does that fact the Despite This of leasingwas thegeneral overview onthehistory and development in United The term of the leasing cannot exceed forty years, while the time during which bank which the during time while years,exceedthe forty cannot leasing The term the of 117 . 42 116 . CEU eTD Collection from the lease agreement as affected by this Article and any other applicable rules of law” agreement” for acquisition and manufacturing of objectthe leasing of specified in leasingthe according pay is Lesseeisobliged agreedterms.a rent agreement. to the Lessor responsible to term and other conditions (including the right of the lessee to buy-out the asset) stated in the lessee” the and lessor for consideration” separately: law. in of leasing contract US legal nature the the define can one which by descriptions relevant other and contract leasing the of rescission definitionits oftheleasing contract, formation, andparties modification subject, and 120 last visited 29 March 2009. 119 visited 29March2009. 118 there it seems like parties are not limited to set their rights and obligations. (UCC) Code Commercial Uniform of 2A Article States United in contract leasing of regulation Legal 122 last visited on29 March 2009. 121 last visited on29 March 2009. visited on 29March2009. Citiedfrom UCC Article § 2A-103.1 (k) at - last > - last 121 > - > - > - . CEU eTD Collection 123 extraction.includes The term young also the unborn of animals” chattel paper, general intangibles, or minerals or the like, including oil and gas, before (Section but2A-309), the notterm includedoes money,instruments, accounts, documents, “all things that are movable at the time of identification to the lease contract, or are fixtures leasing contract. In UCC itis given under the “Goods’ name where it is said that: inUCC. than manner detailed more in given are difnitions Azerbaijani legislation. The only difference is that in Civil Code of Azerbaijan Republic, the agreement” individual alegalor selling entity leasinglessor of object on to basisthe of purchase agreement for specified fee, specified term and other conditions”. “Seller (supplier) is an use leasingfor object or on leasingownership temporary the of basisaccepting the the of of leasing agreement for temporary ownership oruse”. “Lessee is an individual or legal entity and other conditions (including transfer of ownership title tolessee or otherwise) on the basis whichlessee is funds, acquiredasset for tothe transferred thespecified the term fee,specified aredifnitions in given more detailed manner. Azerbaijani legislation. The only difference is that in Civil Code of Azerbaijan Republic, the under alease” lease” and “Lessee means a person who acquires the right to possession and use of goods way: last last visited on29 March 2009. - last visited on 29March2009. 124 . 44 126 . > - > - > CEU eTD Collection 127 lease leased term” describe andthe goods the andto parties hasthe been madebetween lease a indicate contract that sufficient to agent, authorized party's unless: is enforcable not leasingUCC contract the Accordingto contract. inshowed a general aspect. withoutgoods free civil orgoodswithturnover limited civil whatisturnover”, notclear andis presented. In the Civil Code of Azerbaijan Republic it os only said that “with exception of here is that under UCC the lisf of the subjects which cannot be subject of leasing contract is to Section 2A-309, you see that the real estate is also mentioned there. The real difference suject of the leasing agreement, while in Azerbaijan law both are possible. But when you go From the first point of view it seem like in US interpretation only movable property can be the orgoodsturnover with limited civil turnover” with classification set upby legislationappropriate with without exception of freegoods civil “Object leasing immovable of ismovable or tofixed inrelated property assets accordance that: states Republic Azerbaijan The CivilCodeof 129 last visited on29 March 2009. 128 visited on 29March2009. presented in the contract and that it is defined by the parties’mutual agreement. As it was be should term the is that expressed thing only law.The Azerbaijan in question term contract and term of should contractthe be mentioned. Thereisadditional not information given to the contract shouldthe inbe concludedform information andthatthe written the subject about that and totheform with terms leasing general mention of the the regards content agreement: and shall state the information about the object and period ofleasing contract Citied from Article 747-2 of the Civil Code of Azerbajan Republic at -last > - CEU eTD Collection determine that one or more parties have an obligation ormore parties one determine that for haveanobligation to obtain and pay insurancecovering place in US legislation. UCC Article 2A-218 says that “The parties by agreementmay like is similarlysubleasing in regulated Azerbaijan and United States. parties are the same to those in the leasing and it is formed by subleasing contract it inis formedleasing and bysubleasing sametothose arethe the parties Articles of the Civil Code of Azerbaijan Repubic state that in subleasing the actions of the subleasingbe should tothe also contract. leasing applied related all to the contract terms 101 130 includes asubleasecontract” the term clearly otherwise, indicates context of UCC related to the leasing there is and additional sentence which states that “Unless the lease” asalessee lessor anexisting the under “Sublease means a lease of goods the right to possession and use of which was acquired by are similar. hteyboth that can be stated the parties or is equal to the reasonable time of the lease. If to compare two interpretations it leasea term” andadmitted” “areasonable lease term in courtso term, the against whom enforcement is sought admits in that party's pleading, testimony, orotherwise party'sthat authorizedspecifying agent thelease term, theterm so specified”, “if party the is defined thatleasing contract it the of is term the leasing stated of the contract term tothe related In UCCArticles leased property. ofthe offull ammortization period to the mentionedin before this period work,the leasingof contractin Azerbaijan is usuallyequal set - last visited on 29 March 2009. The allocation of risks and inusrance in the leasing contract is animportan contract in inusrance alsotakes The allocation leasing of and the risks There are also several provisions of UCC aimed to the subleasing which state that It can be stated It canbe according USlegislationthat stated the to leasingistemrby of defined the “if is awritingthere signed by party the against whom isenforcement by sought or 131 46 . It is also needed to mention that in provisions > - last visited on 29 March 2009. 130 132 . . In . words, other 133 . It seems > - > CEU eTD Collection risks in contract. leasing the So it comes out then that both legislation have similar regu;ations regarding the allocation of widely used in Azerbaijan itcan be assumed thisthat is provision aimed tothe financial lease. operation, unless otherwise isoperation, unlessotherwise specified in leasingthe agreement” deterioration, malfunctioning before endthe life, of mistakesuseful duringinstallation and insurance of the object of lease against all kinds of damage to property, destruction,loss, for in where“Lesseeisresponsible Republic CivilCode is Azerbaijan the of presented the lessee. In the case of a finance lease, risk of loss lessee” passestothe caseof In the financelease, risk lessee.the of a “Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to provision is similar to US one. Article 2A-219 of UCC dedicated to the risk of loss states that insurance fees, the beneficiary of the insurance, as well as duration of insurance” isinsurance amandatory condition, “Leasing agreementshall specify party which shall pay unlessin agreement, prescribed otherwise leasingthe agreements” damage risks,from starting dateof the provision of property the through endthe leasing of Republicleasing “Objectof shallbe insuredagainstloss deterioration or (destruction), of Civil of Azerbaijan the 748.6 Article Code to whereaccording versa isvice Azerbaijan contract in isUS not mnadatory and canbe executed by parties’wish. in The cituation visited on 29March2009. 137 visited on 29March2009. 136 visited on 29March2009. 134 insurance” the goods and by agreement may determine the beneficiary of the proceeds of the 138 visited on 29March2009. 135 visited on 29March2009. Citiedfrom UCC Article§2A-219.1 at -last > -last > - last > - last > - last > - CEU eTD Collection 139 141 visited on 29March2009. 140 visited on 29March2009. in remedies lease contract” the any provided other orpursue rights orrecoverdamages to thelease any nondelivery; contract for exercise other not identified been they have whetheror affected toall damages as goods andrecover cover circumstances; and somuchunder the is just rentandsecurity as hasbeenpaid recover the of the leaseimpaired contract; may:cancel lessee andthe isleasethe contract lessor the inunder default is substantially contract lease whole the of value the contract lease installment goods then with any involved,respect to goods andwith allrespect to of if goods the an under the of acceptance justifiably goodsor revokes the alesseerejects or rightfully lease contract alteration and rescission of the leasing contract. Accoding to Article 2A-508 of UCC, lessee may recover damages” may lessee recover implied, the or express a warranty, cancel whether a rightlease; lessor hasbreached toIf a the exercise rights and the in provided pursuetheremedies which leasethe may contract, include may thelessee in underalease is If contract, lessordefault a otherwise replevy goods; the havegoods been identified, in recover them; a propercase,obtain performance or specific if also: lessee the the may lease contract, the repudiates or leasecontract tothe conformity this issuefor leasingthe provisions of the Civil Code dedicated to the rent, because there are no seperate provisions on and even claim for damages. In Azerbaijan law, such case is regulated by the relevant lessee hasmany ways for back-up such as: terminate contract,the require performance the non-performance or violation lessor’s of in case because default, lessor’s in of lessee the case contract andcontract may: lessor the lease notidentified cancel proceed respecting contract; goods the lessee the is inlease under the impaired, default issubstantially of wholethe leasecontract involved, and with respecttoall if goods the of aninstallmentleaseunder contract value the when with dueorrepudiates respect toapart or whole,the any with respect then, to goods providesleasing or lesseewith damagedthe property. of subject useof for the obstacles creates ishis executing obligations, not cases whenlessor Citiedfrom UCC Article§2A-508.1 at -last > -last CEU eTD Collection 142 in expenses of saved lessee's default” consequence the defaultas determined inmanner, withany reasonable incidental together lessdamages, lessee's from in of lossthe maycourse events resulting lessor ordinary the the the recover fully exercise a right or obtain a remedy whichto the lessor is entitled under subsection (1), in lease contract” the provided remedies pursueany or other rights or retain the goods and recover damages, or in a proper case recover rent; exercise any other delivered; deliverystop goodsby the of any bailee; of dispose goodsandthe recover damages to theleasewithhold previously contract; and possession goods the delivery of take of goods 144 visited on 29March2009 143 visited on 29March2009 manner” in timely agreement leasing on of payment worsens its productive qualities; If lessee has failed more than two consecutive times to make consent of lessor; If lessee has notbeen maintaining the object of lease in operation, which agreements orpurpose of objectleasing; of lesseeIf subleased the objectleasing of without agreement: conditions of use of object of lease are not compliant of the date expiration before leasing agreement the andby doingleasing so terminate with conditions of leasing Azerbaijan Republic which states that visited on 29March2009. I thoughtis relevantto discuss. in leasing performance contract. the systems highly protect the interests of the parties in the cases of the violations or non- Citiedfrom UCC Article§2A-523.1 atcase law,748-1.12 InAzerbaijan of the Civil Code of This is thewhole information related legalot the regulation of leasingthe which contract If to compare tthis case both from lessor’s and lessee’s point of views I can state that both 49 144 143 . . 142 . “If a lessor does not > -last > -last > - last CEU eTD Collection property; heitbuysproperty; lessee. itlessorto transfer leasing tothe period the During of contract, financial aim in Lessor leasingthe contract. as owner of leasingthe subjectnotdoes need this of the parties of the leasingresult). and through Theserights discovery become obligations the apparent characteristics of contract: lessor,lessor), mutual (based onintentions of both parties) and onerous (each party gets something in lessee and seller. Lessor first of all chases contract. by sale-purchase equipment the purchase hehas to beginning atthe factthe that the transfer of the property specialto use and featurespossession, proper butis anindependenttype which contract, should bedifferentiated from contract usual the by rent lessor’s to it. Asobligations in the traditional opinion inappropriate whichshould is Azerbaijan bevaluedleasing one are asright contract that complicated rent with contract, Themost rent contract. or variety is it the saythat others contract; independent as leasing leasing contractpresented implies in thethis work. There is no single opinion on this question. Some of them consider CONCLUSION purchased from the seller selected by lessee. leasingis lessor’s financing provided to lessee by transferring him propertythe which was in main process The relationships. rent and financial of is proportion but rent, traditional point that out leasing contract, which by its nature is referred to the rent contract, is not a situation in United States. the itto compare inAzerbaijan and then contract leasing of reveal themainfeatures to study an legal thisaim leasing from researchtriedthe out coming to contract, relationships By making conclusion to my research on leasing contractin Azerbaijan, Iwouldlike to Leasing is multilateral complex of legal, economic and financial relationships. Having relationships. financial and economic legal, of complex multilateral is Leasing Leasing contractis considered to be entrepreneurial (based financingon tolessee by ofleasing were nature legal regardingauthors Opinions contract of different the 50 CEU eTD Collection existence of the separate law regulating leasing relationships is a needed necessity. Despite isaneeded relationships leasing law regulating existence of separate the Azerbaijan is by legal and regulated Civil Code of Azerbaijan other Republic.acts The imperfectionas a result, of legislation the Leasing leasing transactions. regulating in Republic. Azerbaijan Besides UCCisthis, more detailed andits is scope much than wider Civil the Code of Azerbaijan. in than earlier much appeared has in US leasing as improved more is system legal US leasing. Sure of and types contract theleasing of rescission or alteration of incase results partiesform andtheir and and of groundsandcontent rights leasingthe obligations, contract, Among mark these Azerbaijan legalRepublic. I can upthe leasing of contract, definitions of Code Civil in the represented is also in UCC mentioned are which terms general important Commercial Code of United States of America. The comparison of systems showed than most legal countries in regulated by Civil two instruments: Azerbaijantwo and Code of Uniform regulation leasingsystems.of intwo Asitmentioned before was leasing in work, this is level.very on are there strict regulations state the factthat the despite dynamically very is developing really leasing States inUnited of leasing development, historical from Asitpart beseen in the regulation UnitedStates. can also described in work. this is subleasing of possibility The lessee. the of in front is performing seller which to according lessorits own character, has concludedspecific and between seller purchase contract contrary,higher carriesis responsibility The obliged insure and he leasingthe sale- subject. to does not carry liability on risks of damage or destruction of the leasing subject. Lessee on the One of the facts that holds the development of leasing in Azerbaijan is its novelty and novelty its is Azerbaijan in leasing of development the holds that facts the of One legal of comparison the to dedicated was analysis comparison of part main The was leasingThe second to this work dedicated partof of developmentthe andits legal 51 CEU eTD Collection 4. 3. 2. 1. other civil-law economic institutions which with are: comparison in advantages many has Leasing enormous. is potential its enough, small yet “weight” of leasingthe in whole the amountfinancing of made the economy to Azerbaijanof is economy Azerbaijan.of Despite thefact in that comparison developedthe to countries the In the final part of my research I wouldlike tolay stress again bigon importance of leasingin involved in parties more leasinglegal subject the relationships. subject parties in leasingthe agreement.Ithink this makes sense as in reality canbethere contract. Another provision which I think should be leasing parties the of the to which benefits widenedare provided consideration possible intothe taking or at least set open right as isbe considered not theshould list provision Such of contract. rental sub of interpretation the Code Azerbaijan in of it tosubleasing,Republic) related seems Civil the Code matches likeit of Civil the 34 (Chapter provision is appropriate an there fact that the Despite of contracts. such types of of conclusion used experience notmatch asitformulatedthe very does well not interpreted in more précised way. For example, I think that definition of subleasing contract is beneeds developed to and of detailed. Thoughsome legislation provisionsthe be of should the fact that provisions of the Civil Code describe the main parts of the leasing contract, it still period when it is needed. Leasing gives an opportunity to test the equipment till its full payment oruseit only for the Leasing gives an opportunity to upgrade productionthe without attraction of debt capital; large financial assets; Leasing gives an opportunity establishto new production withoutmobilization of required full payment; Leasing gives an opportunity to obtain equipmentthe for useand possession withoutits 52 CEU eTD Collection the the economic growth of the country. renewal mainof the andassets material technical base enterprisesof the and asaresult, to levelthe of successfullythe developing countries.a finalat What willstage bring tothe year andfinally unitthe weight leasing of in total the capacity investments,of will reach for sure that theleasing contracts concluded by Azerbaijani business people will rise each bestated It can viaitrent. buying taking traditional than rather or equipment the purchasing leasing companies, producers and consumers. Leasing ismore profitable way of That leasing makes it possible to conform in the best way the interests of banks and banks of interests the way best inthe conform to possible it makes leasing That 53 CEU eTD Collection Sherhler”, Literature Khuduoglu S.,“The commentaries on the Civil Code of Azerbaijan Republic”, (Kharitonova U.S “Ponatiye finasovoy arendi (lizinga)”, arendi finasovoy “Ponatiye U.S (Kharitonova Kharitonova. U. S., “The essence of financial rent (leasing)”, “Lizing pravovoye regulirovaniye, praktika”, Moskva, 1998). Kabatova E.V., “Leasing – legal regulation and practice”, Moscow, 1998 (Kabatova E.V., Uslug”, Moskva, 1999). Gazman V.D.,“Market ofleasing 1999 services”, Moscow, (Gazman V.D “Rinok Lizingovix Xozyaystvo iPravo #3, Economy, Gazman V.D., “How to conclude financial leasing comtracts in the right way”, regulirovaniyalizinga”, dogovora Lawyer Magazine Egorova P.V., Kurilo. V.V., “Some aspects of the legal regulation of the leasing contract”, peredache imushestva”,vtoraya: Dogovori o Moskva, 2000). property”, Moscow, 2000 (Braginskiy M.I., Vitranskiy V.V., “Dogovornoye pravo. Kniga Braginskiy M.I., Vitranskiy V.V., “Contractlaw. Second book. Contracts on transfer of N. A., Komarova S.V, “Ponatiye kontrakta lizinqa”, 2000). Borovinskaya N. A., Komarova S.V, “Concept of the leasing contract”, 2000 (Borovinskaya Black. H.C., “Black’sLawDictionary”, H.C., Black. Belakov O.A., “Leasing”, 1999 (Belakov O.A., “Lizinq”,1999). 2001). 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