Is the Confusion Statute Constitutional? A Discussion



Is the Confusion Statute Constitutional? A Discussion

I think that confusion statute is constitutional because we see that in municipal leasing, lessees are state or local governments-creatures of constitutions and statutes instead of private corporations. Binding municipal lessees is much more difficult than binding commercial lessees (Leaming, 2008). To protect taxpayers, apparent authority, estoppel, unjust enrichment, ratification and such other theories to bind the lessee are not available or if available, very limited in application. Constitutions and statutes establish debt limitations and procedures for entering into the obligations, and often include voter approval. Should one fail to follow the legal requirements to bind the lessee, the result is harsh-a voided contract.

In the case of lease-purchase agreements, the asset is not usually subject to personal property taxes due to the fact that the tax owner is the municipal lessee, and is therefore usually exempt from property taxes. Because of this, rather than fair market value leases, lease-purchase agreements are predominately employed. However, where municipal lessees desire to upgrade equipment at the end of the lease term, the occasional fair market value leases does occur for technology equipment.

To be valid and binding on lessees, municipal leases normally require a nonappropriation clause allowing for lessees to terminate the lease if the governing body of the lessee does not appropriate funds for rental payments in the upcoming fiscal year (Leaming, 2008). This ability of the lessee to annually terminate the lease on the grounds of appropriation failure makes the lease a one-year obligation, not a debt that would require voter approval-this being one of the major financing advantages of municipal leasing. The ability of the municipal lessee to terminate annually needs to be absolute and not subject to limitations that hinder such a right to terminate. For example, having ...