Lemon Law and Its Application to Leased Equipment

Lemon law is a tool that provides for recourse for customers who purchase or lease flawed equipment. To summarize, in the United States, 2013 brought forward much needed legislation that targeted purchases and leases of defective products. Even within the pharmaceutical industry, many assets are in fact leased or rented by the research and development organizations. Pharmaceutical research laboratories are always under the pressure of service continuity and little or no down time. It is important for a researcher in a toxicology laboratory to be able to plan for the replacement of any critical equipment. A lemon law therefore allows a research laboratory to maximize its resources for an uninterrupted continuity of service.

How does toxicology equipment get leased or rented in a pharmaceutical research laboratory? Laboratories are typically budget constrained and therefore choose for a leasing arrangement over a new purchase. The pharmaceutical research laboratory is also under constant pressure of keeping the cost of the study down so that the overall budget is not affected adversely. In such a scenario, leasing equipment allows the research laboratory to have access to state-of-the-art equipment without the huge outlay of funds. Although leasing equipment has its benefits, like in any other lease agreement, there is a possible downside. In the event that the equipment begins to malfunction and causes interference with the studies being conducted in the laboratory, costs will be incurred for repairs and also in terms of costly downtime of the laboratory instrumentation.

How important is the quality of equipment in case of conducting toxicology studies? Toxicology studies are not completed overnight. Sometimes these studies can take years to complete for the results to be meaningful. If there is even a small margin of error, the risk is too great for the pharmaceutical laboratory. An example would be the case of a travelling salesman being called back to the office for checking his car, as the fuel gauge was malfunctioning. It was later found that the salesman’s car did not actually need refueling, but rather the fuel gauge was defective. The most common used laboratory equipment are:

Can Lemon Law Be Applied to the Leasing of Toxicology Equipment?

Lemon laws, although made statutory long ago, are not well known by the general populace. In Canada, the first known Lemon Law was introduced in Ontario in 1975. If we consider the leasing or rental arrangement, it is exactly the same as leasing a car. Rentals are by their very definition equipment being picked up from a location. We will consider whether does lemon law apply to leased vehicles by a toxicology laboratory that leases laboratory equipment such as the one mentioned above. It is altogether possible that a toxicology laboratory in order to maximize the use of its budget may lease equipment. The pharmaceutical industry is an essential service in any economy and is subject to a fair amount of regulation. Therefore, it is highly unlikely that lemon laws may be applied.

Lemon Law and Toxicology

An example of Lemon Law that can be applied to this situation is as follows: “company X has a contract with a vendor to supply a laboratory information management system (LIMS). The company can pay either an annual fee or a one time fee for the software. Each time there is an update or an installation, the company X must pay a fee.” Since this is a contractual relationship, the laws of contract apply. If the contract allows for the lease or payment to be cancelled, then the company X can terminate it without notice. However, if company X had simply purchased the software, it could not be as easily cancelled.

How Does the Toxicology Laboratory Make Leases Work for Them?

The best way to avoid being ‘lemoned’ is to plan ahead. Identifying ‘critical instrumentation’ at the beginning of the fiscal year is a great way to reduce resources wasted during a drug development study. When the quarterly budget arrives, the critical instrumentation will be replaced before the completion of the study. It is important for the laboratory to keep accurate records and to run preventive maintenance checks on all equipment. These records can then be examined and the top 3 ‘critical instruments’ can be identified. Finally, when seeking to renew a lease, it is good practice to obtain quotations from several different vendors. At this point, the current vendor can be informed and given the opportunity to provide a better price.

Past Examples Where Leases Were Found To Be Defective

Apart from issues related to the product, there is always the possibility of litigation over payment for a defective product. In the case of the lease of the laboratory equipment, the product may not be defective yet. In such cases, the toxicology labs usually obtain evidence using laboratory testing procedures. Employees usually make notes of the observed defect in the equipment and then a claim for repairs is made. In other cases, from time to time, a laboratory may shut down the entire lab to ensure that no experiments are compromised. The cost of employees staying overtime or even workers compensation claims may be substantiated by evidence.

Harsh Realities

For the most part, companies benefit from obtaining a lease instead of purchasing laboratory equipment. The biological studies require the equipment to be expensive and up to date. A research laboratory often chooses to acquire the equipment that is unique to their study. Money can therefore be wasted on purchasing the equipment and leasing space to house it. The lease of this equipment can then be avoided. This would mean avoiding costly down time, which is usually expensive.