Final answer:
The lease contract described is classified as an operating lease because it doesn't satisfy the conditions that would classify it as a capital or finance lease, such as transfer of ownership or a purchase option that is reasonably certain to be exercised.
Step-by-step explanation:
When a lease contract does not transfer title to the lessee, lacks a purchase option that is reasonably certain to be exercised, and the lease term is not for the major part of the asset's remaining economic life, it is classified as an operating lease. This type of leasing arrangement means that the lessor retains substantial risks and rewards of ownership. Lease classifications are important because they determine how the lease is recorded and reported in financial statements. An operating lease is generally treated as a rental expense, whereas a capital or finance lease would be considered similar to an asset purchase and thus capitalized on the balance sheet.