Background
BND Rentals rented an excavator to Coy Gayhart beginning in August 2020 at a rate of $426/day or $3,378 every four weeks. Gayhart made some rental payments but stopped paying entirely for seven months between July 2022 and January 2023. During this period, BND offered two purchase quotes (December 2022 and January 2023) that would have credited a portion of prior rental payments toward the purchase price. Gayhart claimed he intended to buy the equipment but never formally accepted either offer. BND sold the equipment to a third party in January 2023 and sued for $15,559.25 in unpaid rent plus interest. Gayhart defended by arguing BND breached the implied duty of good faith and fair dealing, invoked estoppel and unclean hands doctrines, and sought recoupment. The trial court granted summary judgment to BND and awarded $5,280 in attorney’s fees.
The Court’s Holding
The Ohio Court of Appeals affirmed the trial court entirely. On the breach of contract claim, the court held that BND proved all required elements: a valid rental agreement, BND’s performance, Gayhart’s failure to pay as required, and resulting damages. Gayhart’s contractual obligations to pay rent did not suspend merely because he was considering a purchase option. The rental agreement remained in full force; an unaccepted offer to purchase does not modify or waive contractual obligations. The court emphasized that BND’s conduct in making two revocable offers and then selling the equipment before acceptance did not breach the implied covenant of good faith and fair dealing, because “a party to a contract does not breach the implied duty by seeking to enforce the agreement as written or by acting in accordance with its express terms.”
On Gayhart’s defenses: promissory estoppel failed because there was no evidence BND promised to waive rental payments or that Gayhart reasonably relied on such a promise; unclean hands failed because offering revocable purchase quotes and then selling to a third party did not rise to “reprehensible conduct”; and recoupment failed because Gayhart presented no evidence that BND breached the contract or damaged him thereby. Regarding attorney’s fees, the court held the rental contract was not a “contract of indebtedness” under R.C. 1319.02 (which would have required the contract to exceed $100,000). The contract was a simple lease of tangible personal property with no specified principal sum or maturity date—the hallmarks of indebtedness. Because R.C. 1319.02 did not apply, its monetary threshold was irrelevant, and BND’s fee-shifting provision in the contract was fully enforceable.
Key Takeaways
- An equipment rental agreement is breach of contract (not “action on account”), and unpaid rent claims proceed under ordinary contract principles.
- The implied duty of good faith and fair dealing does not prohibit a party from enforcing the contract’s express terms or from revoking an unaccepted offer to modify the contract.
- A renter’s expectation to purchase equipment does not suspend or reduce the renter’s obligation to pay rent under the lease unless both parties agree to an alternative arrangement in writing.
- R.C. 1319.02’s $100,000 threshold for attorney’s fees applies only to true “contracts of indebtedness” (notes, bonds, mortgages, etc.), not to simple leases of tangible personal property.
- A contractual fee-shifting provision is enforceable when properly invoked, even if not explicitly reserved at the summary judgment stage, provided the plaintiff sought fees in its original pleading.
Why It Matters
This decision clarifies the boundary between rental agreements and financing arrangements under Ohio law. Commercial parties often attempt to blur lines—characterizing a lease as a path to ownership or claiming a right to suspend payment obligations while negotiating a purchase—but courts will enforce the contract’s plain language. The holding protects lessors’ ability to recover unpaid rent and attorney’s fees without satisfying a $100,000 threshold meant for debt instruments.
For landlords and equipment lessors, the decision validates fee-shifting clauses in standard lease agreements and confirms that making revocable offers to sell does not trap the lessor into keeping equipment off market or waiving rent obligations. For lessees, it reinforces that verbal promises or unaccepted purchase quotes do not modify written lease terms—only a signed amendment or new agreement changes contractual duties.