When a Leasing Company Unilaterally Decides Who Is the “Breacher” – Consumer Rights in Georgia's Leasing Market

Leasing a vehicle in Georgia has become an increasingly common practice — particularly for those who do not wish to pay a large lump sum upfront. However, recently we have increasingly encountered consumer complaints revolving around the same scenario: the leasing company finds a formal, often groundless reason, repossesses the vehicle, and fails to refund the payments already made.

Factual Circumstances of the Case

One such complaint brought to our attention clearly illustrates this problem. According to the victim, he acquired a 2017 Japanese sedan from a leasing company and had already paid approximately 8,000 GEL under the contract. According to him, just three months after the acquisition, the company first accused him of “improper” use of the vehicle (presumably because it was driven by another person — his spouse), and then reported to the police claiming that the driver was intoxicated. According to the victim, the breathalyzer test returned a 0% result, yet the vehicle was remotely disabled via a GPS device and ultimately towed away.

It is important to note: these facts currently rely solely on the ex parte statements of the victim and have not been confirmed by a court or law enforcement authorities. Therefore, pending a final decision on the case, we are referring not to proven allegations, but to alleged violations requiring verification. Furthermore, if other consumers share similar experiences, it is important that these cases be connected and challenged collectively through legal means — which precisely helps transform individual complaints into a recognized systemic issue and facilitates an effective response.

What the Law Says

1. Nature of the Leasing Agreement

In financial leasing, ownership of the vehicle remains with the leasing company throughout the term of the agreement, while the consumer uses the vehicle and gradually pays its value through regular payments. This does not mean that the leasing company may, on any pretext without proof, unilaterally terminate the agreement and repossess the vehicle — unilateral termination of the contract and repossession of the property are lawful only if there is a material breach that is objectively proven, and provided that the principle of proportionality is respected.

2. Unfair Contractual Terms

According to the Law of Georgia “On Protection of Consumer Rights”, a contractual term that has not been individually negotiated and, contrary to the requirement of good faith, creates a disproportionate imbalance in the parties’ rights and obligations to the detriment of the consumer, is deemed unfair and void. This directly applies to practices where the company effectively determines by itself whether the agreement was “breached”, subsequently restricts appeals, and retains the amounts already paid.

3. Fate of Paid Amounts — Unjust Enrichment

If the contract was terminated groundlessly or without a material breach on the part of the consumer, the retention of paid amounts by the company triggers the doctrine of unjust enrichment under Article 976 of the Civil Code: a person who has transferred something to another in performance of an obligation may demand its return if the legal basis for the obligation is void or no longer exists. In other words, the company has no right to retain both the vehicle and all the funds already paid towards it, unless the basis for terminating the contract is proven and lawful.

4. Criminal Law Aspect

If it is proven that the company systematically and intentionally used fabricated pretexts to collect a significant portion of the vehicle’s value from the consumer, and then artificially created a “breach” in order to repossess and resell the vehicle — such actions may constitute elements of fraud under the Criminal Code. However, this is a factual and evidentiary matter that can only be established within the framework of an investigation or judicial proceedings — not automatically based on an individual complaint.

Reader's Question: Why Is the Risk Unilaterally Shifted to the Consumer?

One of the most logical questions raised regarding this practice is: if a vehicle turns out to have a manufacturing or latent defect — for example, if the gearbox proves defective and breaks down during operation — does the leasing company assume liability and reimburse the consumer for repair costs?

Answer: In principle, it should reimburse — if the defect was latent and existed at the time of delivery.

Under the Civil Code, if an item had a defect at the time of delivery that was not noticeable or known to the buyer/lessee, the seller/lessor is liable for this defect — the buyer may demand both termination of the contract and compensation for damages incurred (Article 491 et seq. of the Civil Code, in reference to general rules — Article 352). This is logical: the consumer could not have known or detected a manufacturing defect at the time of acquisition; therefore, the risk lies with the party that delivered the item.

This is precisely where the inherent contradiction that you rightly highlight emerges:

If the leasing company disclaims liability for technical defects, asserting that this is an “operational risk” entirely shifted to the consumer — then what logical basis exists for the same company to strictly define and restrict specifically who may drive the vehicle (for example, prohibiting driving by a spouse)?

These two positions are logically and legally contradictory:

  • In the first case (technical defect), the company states: “This is your risk; we bear no responsibility.”
  • In the second case (identity of the driver), the company states: “This falls within our realm of control; we ourselves determine who may get behind the wheel.”

If the company indeed assumes no responsibility whatsoever for the technical condition of the vehicle and the risks associated with its use, then it has no legal ground to simultaneously exercise strict control over who sits behind the wheel — because if the risk rests entirely on the consumer, then the right to drive is also entirely for the consumer to decide (naturally within general statutory requirements, such as holding a valid driver’s license). Otherwise, the company cherry-picks only those control levers that are convenient for it — which is precisely the “unfair imbalance” in rights and obligations prohibited by the Law on Protection of Consumer Rights.

Such contractual asymmetry — where one party (the consumer) assumes all risks while the other (the company) retains all rights of control without risk — is precisely the type of clause that a court may declare void as an unfair standard contract term.

Advice for Consumers

  • Before signing the agreement, carefully read the terms, especially clauses concerning unilateral termination, penalties, and driver restrictions.
  • Retain all receipts and bank documents to substantiate the payments made.
  • If your vehicle is repossessed, immediately request written justification and evidence.
  • In the event of an unfair term or groundless repossession, apply to the court and/or the Consumer Rights Protection Agency.
  • If you believe such practice is systemic, individual complaints should be consolidated into collective complaints — this increases the likelihood of an appropriate response to the case.