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Hypothetical: "Alice Corp"(hereafter "A") rents things(what they are should not matter, as much as possible, e.g. not housing units as those tend to be tightly regulated). "Bob B. Borrower" (hereafter "B") is their customer, who rents items from A with a contract, which specifies that the replacement cost of the rented item, should it not be returned in good condition is $100.

B rents something from A for a specified period of time(say 1000 days), at which point he must return it. B is charged $1 a day rental fee. B has the option to return the object before the end of the rental period, in which case, he will only pay a prorated amount based on the time he actually had the item.

The thing is damaged by a lightning storm, an act caught on video by an indisputable source, on day 500 of 1000; therefore, B owes A $100. B goes to pay A on the 1000th day, at which point there is a disagreement. A and B agree that B owes $100 for the replacement fee, as per contract. B holds that he owes $600, $500 for 500 days of use plus $100 for replacement. A maintains that if B paid on the 500th day, $600 would be the correct figure; however, since B neither returned the item nor paid the replacement fee (nor made arrangements to pay in installments, etc.), the rental was still in effect, and so A says B should pay $1100, $1000 for the 1000 days, and $100 for replacement. The barebones contract says nothing about this

Who is correct?

Note: This is a hypothetical situation, so any law system, etc. is acceptable. An ideal answer would be applicable anywhere, but feel free to answer using a specific one.

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It depends on when A was notified of the object's destruction, and on whether the destruction was complete. If it was complete and B did not notify A until the 1000 days were up, then A is correct. B had a contract to rent and return the object. A failure to return the object for 1000 days means the entire amount due is payable, in addition to the fee for replacement. But if B notified A of complete destruction, then the rental obviously was terminated at that point, so if the notice was prompt then the cost to B would have been $600 plus any agreed-upon interest for late payment.

If the destruction was not complete and there was no notice to A, then B still had an obligation to return the chassis or remains of the item to A and neglected to do so; therefore B owes the full rental amount. However, if the destruction was incomplete and there was notice to A, then depending on A's response you could argue that A waived the remainder of the rent.

This assumes there was no force majeure provision in the contract.

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This is a silly contract that violates some "law" of economics because the price B must pay if the object is destroyed is only $100 while the rental agreement is to pay $1000 and still return the object.
B would be economically better off treating the object as if destroyed (from A's perspective) immediately upon B taking possession, paying the $100, and using it for as long as B wants.

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