UNIFORM
COMMERCIAL CODE - ARTICLE 2-A - LEASES
Table of Contents [all chapters of the Uniform Commercial Code]
Part
1. General Provisions
2-A-101.
Short Title
2-A-102. Scope
2-A-103. Definitions and Index of Definitions
2-A-104. Leases Subject to Other Law
2-A-105. Territorial Application of Article to Goods Covered by Certificate
of Title
2-A-106. Limitation on Power of Parties to Consumer Lease to Choose
Applicable Law and Judicial Forum
2-A-107. Waiver or Renunciation of Claim or Right After Default
2-A-108. Unconscionability
2-A-109. Option to Accelerate at Will
Part 2. Formation and Construction of Lease Contract
2-A-201.
Statute of Frauds
2-A-202. Final Written Expression: Parol or Extrinsic Evidence
2-A-203. Seals Inoperative
2-A-204. Formation in General
2-A-205. Firm Offers
2-A-206. Offer and Acceptance in Formation of Lease Contract
2-A-207. Course of Performance or Practical Construction
2-A-208. Modification, Rescission and Waiver
2-A-209. Lessee Under Finance Lease as Beneficiary of Supply Contract
2-A-210. Express Warranties
2-A-211. Warranties Against Interference and Against Infringement; Lessee's
Obligation Against infringement
2-A-212. Implied Warranty of Merchantability
2-A-213. Implied Warranty of Fitness for Particular Purpose
2-A-214. Exclusion or Modification of Warranties
2-A-215. Cumulation and Conflict of Warranties Express or Implied
2-A-216. Third-party Beneficiaries of Express or Implied Warranties
2-A-217. Identification
2-A-218. Insurance and Proceeds
2-A-219. Risk of Loss
2-A-220. Effect of Default on Risk of Loss
2-A-221. Casualty to Identified Goods
Part 3. Effect of Lease Contract
2-A-301.
Enforceability of Lease Contract
2-A-302. Title to and Possession of Goods
2-A-303. Alienability of Party's Interest Under Lease Contract or of
Lessor's Residual Interest in Goods; Delegation of Performance; Transfer
of Rights
2-A-304. Subsequent Lease of Goods by Lessor
2-A-305. Sale or Sublease of Goods by Lessee
2-A-306. Priority of Certain Liens Arising by Operation of Law
2-A-307. Priority of Liens Arising by Attachment or Levy on, Security
Interests in, and Other Claims to Goods
2-A-308. Special Rights of Creditors
2-A-309. Lessor's and Lessee's Rights When Goods Become Fixtures
2-A-310. Lessor's and Lessee's Rights When Goods Become Accessions
2-A-311. Priority Subject to Subordination.
Part 4. Performance of Lease Contract: Repudiated, Substituted and Excused
2-A-401.
Insecurity: Adequate Assurance of Performance
2-A-402. Anticipatory Repudiation
2-A-403. Retraction of Anticipatory Repudiation
2-A-404. Substituted Performance
2-A-405. Excused Performance
2-A-406. Procedure on Excused Performance
2-A-407. Irrevocable Promises: Finance Leases
Part 5. Default
A. In
General
2-A-501.
Default: Procedure
2-A-502. Notice After Default
2-A-503. Modification or Impairment of Rights and Remedies
2-A-504. Liquidation of Damages
2-A-505. Cancellation and Termination and Effect of Cancellation, Termination,
Rescission, or Fraud on Rights and Remedies
2-A-506. Statute of Limitations
2-A-507. Proof of Market Rent: Time and Place
B. Default
by Lessor
2-A-508.
Lessee's Remedies
2-A-509. Lessee's Rights on Improper Delivery: Rightful Rejection
2-A-510. Installment Lease Contracts: Rejection and Default
2-A-511. Merchant Lessee's Duties as to Rightfully Rejected Goods
2-A-512. Lessee's Duties as to Rightfully Rejected Goods
2-A-513. Cure by Lessor of Improper Tender or Delivery; Replacement
2-A-514. Waiver of Lessee's Objections
2-A-515. Acceptance of Goods
2-A-516. Effect of Acceptance of Goods; Notice of Default; Burden of
Establishing Default After Acceptance; Notice of Claim or Litigation
to Person Answerable Over
2-A-517. Revocation of Acceptance of goods
2-A-518. Cover, Substitute Goods
2-A-519. Lessee's Damages for Non-delivery, Repudiation, Default, and
Breach of Warranty in Regard to Accepted Goods
2-A-520. Lessee's Incidental and Consequential Damages
2-A-521. Lessee's Right to Specific Performance or Replevin
2-A-522. Lessee's Right to Goods on Lessor's Insolvency
C. Default
by Lessee
2-A-523.
Lessor's Remedies
2-A-524. Lessor's Right to Identify Goods to Lease Contract
2-A-525. Lessor's Right to Possession of Goods
2-A-526. Lessor's Stoppage of Delivery in Transit or Otherwise
2-A-527. Lessor's Rights to Dispose of Goods
2-A-528. Lessor's Damages for Non-acceptance, Failure to Pay, Repudiation,
or Other Default
2-A-529. Lessor's Action for the Rent
2-A-530. Lessor's Incidental Damages
2-A-531. Standing to Sue Third Parties for Injury to Goods
2-A-532. Lessor's Rights to Residual Interest
PART 1. GENERAL PROVISIONS
2-A-101. SHORT TITLE
This Code
shall be known and may be cited as the Oneida Indian Nation Uniform
Commercial Code - Leases.
2-A-102. SCOPE
This Code
applies to any transaction, regardless of form, that creates a lease.
2-A-103. DEFINITIONS AND INDEX OF DEFINITIONS
(1) In
this Code unless the context otherwise requires:
(a)
"Buyer in ordinary course of business" means a person
who in good faith and without knowledge that the sale to him or
her is in violation of the ownership rights or security interest
or leasehold interest of a third party in the goods, buys in ordinary
course from a person in the business of selling goods of that kind
but does not include a pawnbroker. "Buying" may be for
cash or by exchange of other property or on secured or unsecured
credit and includes receiving goods or documents of title under
a preexisting contract for sale but does not include a transfer
in bulk or as security for or in total or partial satisfaction of
a money debt.
(b)
"Cancellation" occurs when either party puts an end to
the lease contract for default by the other party.
(c)
"Commercial unit" means such a unit of goods as by commercial
usage is a single whole for purposes of lease and division of which
materially impairs its character or value on the market or in use.
A commercial unit may be a single article, as a machine, or a set
of articles, as a suite of furniture, or a line of machinery, or
a quantity, as a gross or carload, or any other unit treated in
use or in the relevant market as a single whole.
(d)
"Conforming goods or performance under a lease contract"
means goods or performance that are in accordance with the obligations
under the lease contract.
(e)
"Consumer lease" means a lease that a lessor regularly
engaged in the business of leasing or selling makes to a lessee
who is an individual and who takes under the lease primarily for
personal, family, or household purposes.
(f)
"Fault" means wrongful act, omission, breach, or default.
(g)
"Finance lease" means a lease with respect to which: (i)
the lessor does not select, manufacture, or supply the goods; (ii)
the lessor acquires the goods or the right to possession and use
of the goods in connection with the lease and (iii) one of the following
occurs: (A) the lessee receives a copy of the contract by which
the lessor acquired the goods or the right to possession and use
of the goods before signing the lease contract; (B) the lessee's
approval of the contract by which the lessor acquired the goods
or the right to possessions a condition to effectiveness of the
lease contract; (C) the lessee, before signing the lease contract,
receives an accurate and complete statement designating the promises
and warranties, and any disclaimers of warranties, limitations or
modifications of remedies, or liquidated damages, including those
of any third party, such as the manufacturer of the goods provided
to the lessor by the person supplying the goods in connection with
or as part of the contract by which the lessor acquired the goods
or the right to possession and use of the goods; or (D) if the lease
is not a consumer lease, the lessor, before the lessee signs the
lease contract, informs the lessee in writing (a) of the identity
of the person supplying the goods to the lessor, unless the lessee
has selected that person and directed the lessor to acquire the
goods or the right to possession and use of the goods from that
person, (b) that the lessee is entitled under this Code to the promises
and warranties, including those of any third party, provided to
the lessor by the person supplying the goods in connection with
or as part of the contract by which the lessor acquired the goods
or the right to possession and use of the goods, and (c) that the
lessee may communicate with the person supplying the goods to the
lessor and receive an accurate and complete statement of those promises
and warranties, including any disclaimers and limitations of them
or of remedies.
(h)
"Goods" means all things that are movable at the time
of identification to the lease contract, or are fixtures (Section
2-A-309), but the term does not include money, documents, instruments,
accounts, chattel paper, general intangibles, or minerals or the
like, including oil and gas, before extraction. The term also includes
the unborn young of animals.
(i)
"Installment lease contract" means a lease contract that
authorizes or requires the delivery of goods in separate lots to
be separately accepted, even though the lease contract contains
a clause "each delivery is a separate lease" or its equivalent.
(j)
"Lease" means a transfer of the right to possession and
use of goods for a term in return for consideration, but a sale,
including a sale on approval or a sale or return, or retention or
creation of a security interest is not a lease. Unless the context
clearly indicates otherwise, the term includes a sublease.
(k)
"Lease agreement" means the bargain, with respect to the
lease, of the lessor and the lessee in fact as found in their language
or by implication from other circumstances including course of dealing
or usage of trade or course of performance as provided in this Code.
Unless the context clearly indicates otherwise, the term includes
a sublease agreement.
(l)
"Lease contract" means the total legal obligation that
results from the lease agreement as affected by this Code and any
other applicable rules of law. Unless the context clearly indicates
otherwise, the term includes a sublease contract.
(m)
"Leasehold interest" means the interest of the lessor
or the lessee under a lease contract.
(n)
"Lessee" means a person who acquires the right to possession
and use of goods under a lease. Unless the context clearly indicates
otherwise, the term includes a sublessee.
(o)
"Lessee in ordinary course of business" means a person
who in good faith and without knowledge that the lease to him or
her is in violation of the ownership rights or security interest
or leasehold interest of a third party in the goods leases in ordinary
course from a person in the business of selling or leasing goods
of that kind but does not include a pawnbroker. "Leasing"
may be for cash or by exchange of other property or on secured or
unsecured credit and includes receiving goods or documents of title
under a preexisting lease contract but does not include a transfer
in bulk or as security for or in total or partial satisfaction of
a money debt.
(p)
"Lessor" means a person who transfers the right to possession
and use of goods under a lease. Unless the context clearly indicates
otherwise, the term includes a sublessor.
(q)
"Lessor's residual interest" means the lessor's interest
in the goods after expiration, termination or cancellation of the
lease contract.
(r)
"Lien" means a charge against or interest in goods to
secure payment of a debt or performance of an obligation, but the
term does not include a security interest.
(s)
"Lot" means a parcel or a single article that is the subject
matter of a separate lease or delivery, whether or not it is sufficient
to perform the lease contract.
(t)
"Merchant lessee" means a lessee that is a merchant with
respect to goods of the kind subject to the lease.
(u)
"Present value" means the amount as of a date certain
of one or more sums payable in the future, discounted to the date
certain. The discount is determined by the interest rate specified
by the parties if the rate was not manifestly unreasonable at the
time the transaction was entered into; otherwise, the discount is
determined by a commercially reasonable rate that takes into account
the facts and circumstances of each case at the time the transaction
was entered into.
(v)
"Purchase" includes taking by sale, lease, mortgage, security
interest, pledge, gift, or any other voluntary transaction creating
an interest in goods.
(w)
"Sublease" means a lease of goods the right to possess
and use of which was acquired by the lessor as a lessee under an
existing lease.
(x)
"Supplier" means a person from whom a lessor buys or leases
goods to be leased under a finance lease.
(y)
"Supply contract" means a contract under which a lessor
buys or leases goods to be leased.
(z)
"Termination" occurs when either party pursuant to a power
created by agreement or law puts an end to the lease contract otherwise
than for default.
(2) Other
definitions applying to this chapter and the sections in which they
appear are:
"Accessions".
Section 2-A-310(1)
"Construction mortgage". Section 2-A-309(1)(d)
"Encumbrances". Section 2-A-309(1)(e)
"Fixtures". Section 2-A-309(1)(a)
"Fixture filing". Section 2-A-309(1)(b)
"Purchase money lease". Section 2-A-309(1)(c)
(3) The
following definitions apply to this chapter:
"Account".
Section 9-106
"Between merchants". Section 2-104(3)
"Buyer". Section 2-103(1)(a)
"Chattel paper". Section 9-105(1)(b)
''Consumer goods". Section 9-109(1)
"Document". Section 9-105(1)(f)
"Entrusting". Section 2-403(3)
"General intangibles". Section 9-106
"Good faith". Section 2-103(1)(b)
"Instrument". Section 9-105(1)(i)
"Merchant". Section 2-104(1)
"Mortgage". Section 9-105(l)(j)
"Pursuant to commitment". Section 9-105(1)(k)
"Receipt". Section 2-103(1)(c)
"Sale" Section 2-106(1)
"Sale on approval". Section 2-326
"Sale or return". Section 2-326
"Seller". Section 2-103(1)(d)
(4) In
addition, Article 1 contains general definitions and principles of
construction and interpretation applicable throughout this chapter.
2-A-104. LEASES SUBJECT TO OTHER LAW
(1) A
lease, although subject to this chapter, is also subject to any applicable:
(a)
certificate of title statute of New York;
(b)
certificate of title statute of another jurisdiction (Section 2-A-105);
or
(c)
consumer protection law of New York state, both decisional and statutory.
(2) In
case of conflict between this chapter, other than Section 2-A-105,
2-A-304(3), and 2-A-305(3), and a statute referred to in subsection
(1), the statute controls. Decisional consumer protection law may
supplement the application of provisions of this chapter.
(3) Failure
to comply with an applicable law has only the effect specified therein.
2-A-105. TERRITORIAL APPLICATION OF CODE TO GOODS COVERED BY CERTIFICATE
OF TITLE
Subject
to the provisions of Sections 2-A-304(3) and 2-A-305(3), with respect
to goods covered by a certificate of title issue under a statute of
New York state or of another jurisdiction, compliance and the effect
of compliance or noncompliance with a certificate of title statute are
governed by the law(including the conflict of laws rules) of the jurisdiction
issuing the certificate until the earlier of (a) surrender of the certificate,
or (b) four months after the goods are removed from that jurisdiction
and thereafter until a new certificate of title is issued by another
jurisdiction.
2-A-106. LIMITATION ON POWER OF PARTIES TO CONSUMER LEASE TO CHOOSE
APPLICABLE LAW AND JUDICIAL FORUM
(1) If
the law chosen by the parties to a consumer lease is that of a jurisdiction
other than a jurisdiction in which the lessee resides at the time
the lease agreement becomes enforceable or within thirty days thereafter
or in which the goods are to be used, the choice is not enforceable.
(2) If
the judicial forum chosen by the parties to a consumer lease is a
forum that would not otherwise have jurisdiction over the lessee,
the choice is not enforceable.
2-A-107. WAIVER OR RENUNCIATION OF CLAIM OR RIGHT AFTER DEFAULT
Any claim
or right arising out of an alleged default or breach of warranty may
be discharged in whole or in part without consideration by a written
waiver or renunciation signed and delivered by the aggrieved party.
2-A-108. UNCONSCIONABILITY
(1) If
the court as a matter of law finds lease contract or any clause of
a lease contract to have been unconscionable at the time it was made
the court may refuse to enforce the lease contract, or it may enforce
the remainder of the lease contract without the unconscionable clause,
or it may so limit the application of any unconscionable clause as
to avoid any unconscionable result.
(2) With
respect to a consumer lease, if the court as a matter of law finds
that a lease contract has been induced by unconscionable conduct or
that unconscionable conduct has occurred in the collection of a claim
arising from a lease contract, the court may grant appropriate relief.
(3) Before
making a finding of unconscionability under subsection (1) or (2),
the court, on its own motion or that of a party, shall afford the
parties a reasonable opportunity to present evidence as to the setting,
purpose, and effect of the lease contract or clause thereof, or of
the conduct.
(4) In
an action in which the lessee claims unconscionability with respect
to a consumer lease:
(a)
if the court finds unconscionability under subsection (1) or (2),
the court shall award reasonable attorney's fees to the lessee.
(b)
in determining attorney's fees, the amount of recovery on behalf
of the claimant under subsection (1) and (2) is not controlling.
2-A-109. OPTION TO ACCELERATE AT WILL
(1) A
term providing that one party or his or her successor in interest
may accelerate payment or performance or require collateral or additional
collateral "at will" or "when he or she deems himself
or herself insecure" or in words of similar import must be construed
to mean that he or she has power to do so only if he or she in good
faith believes that the prospect of payment or performance is impaired.
(2) With
respect to a consumer lease, the burden of establishing good faith
under subsection (1) is on the patty who exercised the power; otherwise
the burden of establishing lack of good faith is on the party against
whom the power has been exercised.
2-A-201. STATUTE OF FRAUDS
(1) A
lease contract is not enforceable by way of action or defense unless:
(a)
the total payments to be made under the lease contract, excluding
payments for operations to renew or buy, are less than $1,000; or
(b)
there is a writing, signed by the party against whom enforcement
is sought or by that party's authorized agent, sufficient to indicate
that a lease contract has been made between the parties and describe
the goods leased and the lease term.
(2) Any
description of leased goods or of the lease term is sufficient and
satisfies subsection (1)(b), whether or not it is specific, if it
reasonably identifies what is described.
(3) A
writing is not insufficient because it omits or incorrectly states
a term agreed upon, but the lease contract is not enforceable under
subsection (1)(b) beyond the lease term and the quantity of goods
shown in the writing.
(4) A
lease contract that does not satisfy the requirements of subsection
(1), but which is valid in other respects, is enforceable:
(a)
if the goods are to be specially manufactured or obtained for the
lessee and are not suitable for lease or sale to others in the ordinary
course of the lessor's business, and the lessor, before notice of
repudiation is received and under circumstances that reasonably
indicate that the goods are for the lessee, has made either a substantial
beginning of their manufacture or commitments for their procurement;
(b)
if the party against whom enforcement is sought admits in that party's
pleading, testimony, or otherwise in court that a lease contract
was made, but the lease contract is not enforceable under this provision
beyond the quantity of goods admitted; or
(c)
with respect to goods that have been received and accepted by the
lessee.
(5) The
lease term under a lease contract referred to in subsection (4) is:
(a)
if there is a writing signed by the party against whom enforcement
is sought or by that party's authorized agent specifying the lease
term, the term so specified;
(b)
if the party against whom enforcement is sought admits in that party's
pleading, testimony, or otherwise in court a lease term, the term
so admitted; or
(c)
a reasonable lease term.
(6) A
lease contract enforceable under this section shall not be rendered
unenforceable by the operation of New York General Obligations Law
Section 5-701.
2-A-202. FINAL WRITTEN EXPRESSION: PAROL OR EXTRINSIC EVIDENCE
Terms with
respect to which the confirmatory memoranda of the parties agree or
which are otherwise set forth in a writing intended by the parties as
a final expression of their agreement with respect to such terms as
are included therein may not be contradicted by evidence of any prior
agreement or of a contemporaneous oral agreement but may be explained
or supplemented:
(a) by
course of dealing or usage of trade or by course of performance; and
(b) by
evidence of consistent additional terms unless the court finds the
writing to have been intended also as a complete and exclusive statement
of the terms of the agreement.
2-A-203. SEALS INOPERATIVE
The affixing
of a seal to a writing evidencing a lease contract or an offer to enter
into a lease contract does not render the writing a sealed instrument
and the law with respect to sealed instruments does not apply to the
lease contract or offer.
2-A-204. FORMATION IN GENERAL
(1) A
lease contract may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of
a lease contract.
(2) An
agreement sufficient to constitute a lease contract may be found although
the moment of its making is undetermined.
(3) Although
one or more terms are left open, a lease contract does not fail for
indefiniteness if the parties have intended to make a lease contract
and there is a reasonably certain basis for giving an appropriate
remedy.
2-A-205. FIRM OFFERS
An offer
by a merchant to lease goods to or from another person in a signed writing
that by its terms gives assurance it will be held open is not revocable
for lack of consideration, during the time stated or, if no time is
stated, for a reasonable time, but in no event may the period of irrevocability
exceed three months. Any such term of assurance on a form supplied by
the offeree must be separately signed by the offeror.
2-A-206. OFFER AND ACCEPTANCE IN FORMATION OF LEASE CONTRACT
(1) Unless
otherwise unambiguously indicated by the language or circumstances,
an offer to make a lease contract must be construed as inviting acceptance
in any manner and by any medium reasonable in the circumstances.
(2) If
the beginning of a required performance is a reasonable mode of acceptance,
an offeror who is not notified of acceptance within a reasonable time
may treat the offer as having lapsed before acceptance.
2-A-209. COURSE OF PERFORMANCE OR PRACTICAL CONSTRUCTION
(1) If
a lease contract involves repeated occasions for performance by either
party with knowledge of the nature of the performance and opportunity
for objection to it by the other, any course of performance accepted
or acquiesced in without objection is relevant to determine the meaning
of the lease agreement.
(2) The
express terms of a lease agreement and any course of performance,
as well as any course of dealing and usage of trade, must be construed
whenever reasonable as consistent with each other; but if that construction
is unreasonable, express terms control course of performance, course
of performance controls both course of dealing and usage of trade,
and course of dealing controls usage of trade.
(3) Subject
to the provisions of Section 2-A-208 on modification and waiver, course
of performance is relevant to show a waiver or modification of any
term inconsistent with the course of performance.
2-A-208. MODIFICATION, RESCISSION AND WAIVER
(1) An
agreement modifying a lease contract needs no consideration to be
binding.
(2) A
signed lease agreement that excludes modification or rescission except
by a signed writing may not be otherwise modified or rescinded, but,
except as between merchants, such a requirement on a form supplied
by a merchant must be separately signed by the other party.
(3) Although
an attempt at modification or rescission does not satisfy the requirements
of subsection (2), it may operate as a waiver.
(4) A
party who has made a waiver affecting an executory portion of a lease
contract may retract the waiver by reasonable notification received
by the other party that strict performance will be required of any
term waived, unless the retraction would be unjust in new of a material
change of position in reliance on the waiver.
2-A-209. LESSEE UNDER FINANCE LEASE AS BENEFICIARY OF SUPPLY CONTRACT
(1) The
benefit of a supplier's promises to the lessor under the supply contract
and of all warranties, whether express or implied, including those
of any third party provided in connection with or as part of the supply
contract extends to the lessee to the extent of the lessee's leasehold
interest under a finance lease related to the supply contract, but
is subject to the terms of the warranty and of the supply contract
and all defenses or claims arising therefrom.
(2) The
extension of the benefit of a supplier's promises and of warranties
to the lessee under subsection (1) does not: (i) modify the rights
and obligations of the parties to the supply contract, whether arising
therefrom or otherwise or (ii) impose any duty or liability under
the supply contract on the lessee.
(3) Any
modification or rescission of the supply contract by the supplier
and lessor is effective between the supplier and the lessee unless,
before the modification or rescission, the supplier has received notice
that the lessee has entered into a finance lease related to the supply
contract. If the modification or rescission is effective between the
supplier and the lessee, the lessor is deemed to have assumed, in
addition to the obligations of the lessor to the lessee under the
lease contract, promises of the supplier to the lessor and warranties
that were so modified or rescinded as they existed and were available
to the lessee before modification or rescission.
(4) In
addition to the extension of the benefit of the supplier's promises
and of warranties to the lessee under subsection (1), the lessee retains
all rights which the lessee may have against the supplier that arise
from any agreement between the lessee and supplier or under other
law.
2-A-210. EXPRESS WARRANTIES
(1) Express
warranties by the lessor are created as follows:
(a)
any affirmation of fact or promise made by the lessor to the lessee
which relates to the goods and becomes part of the basis of the
bargain creates an express warranty that the goods will conform
to the affirmation or promise.
(b)
any description of the goods which is made part of the basis of
the bargain creates an express warranty that the goods will conform
to the description.
(c)
any sample or model that is made part of the basis of the bargain
creates an express warranty that the whole of the goods will conform
to the sample or model.
(2) It
is not necessary to the creation of an express warranty that the lessor
use formal words, such as "warrant" or "guarantee,"
or that the lessor have a specific Intention to make a warranty, but
an affirmation merely of the value of the goods or a statement purporting
to be merely the lessor's opinion or commendation of the goods does
not create a warranty.
2-A-211. WARRANTIES AGAINST INTERFERENCE AND AGAINST INFRINGEMENT;
LESSEE'S OBLIGATION AGAINST INFRINGEMENT
(1) There
is in a lease contract a warranty that for the lease term no person
holds a claim to or interest in the goods that arose from an act or
omission of the lessor, other than a claim by way of infringement
or the like, which will interfere with the lessee's enjoyment of its
leasehold interest.
(2) Except
in a finance lease there is in a lease contract by a lessor who is
a merchant regularly dealing in goods of the kind a warranty that
the goods are delivered free of the rightful claim of any person by
way of infringement or the like.
(3) A
lessee who furnishes specifications to a lessor or a supplier shall
hold the lessor and the supplier harmless against any claim by way
of infringement or the like that arises out of compliance with the
specifications.
2-A-212. IMPLIED WARRANTY OF MERCHANTABILITY
(1) Except
in a finance lease, a warranty that the goods will be merchantable
is implied in a lease contract if the lessor is a merchant with respect
to good of that kind.
(2) Goods
to be merchantable must be at least such as:
(a)
pass without objection in the trade under the description in the
lease agreement;
(b)
in the case of fungible goods, are of fair average quality within
the description;
(c)
are fit for the ordinary purposes for which goods of that type are
used;
(d)
run, within the variation permitted by the lease agreement, of even
kind, quality, and quantity within each unit and among all units
involved;
(e)
are adequately contained, packaged, and labeled as the lease agreement
may require; and
(f)
conform to any promises or affirmations of fact made on the container
or label.
(3) Other
implied warranties may arise from course of dealing or usage of trade.
2-A-213. IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE
Except
in a finance lease, if the lessor at the time the lease contract is
made has reason to know of any particular purpose for which the goods
are required and that the lessee is relying on the lessor's skill or
judgment to select or furnish suitable goods, there is in the lease
contract an implied warranty that the goods will be fit for that purpose.
2-A-214. EXCLUSION OR MODIFICATION OF WARRANTIES
(1) Words
or conduct relevant to the creation of an express warranty and words
or conduct tending to negate or limit a warranty must be construed
wherever reasonable as consistent with each other; but, subject to
the provisions of Section 2-A-202 on parol or extrinsic evidence,
negation or limitation is inoperative to the extent that the construction
is unreasonable.
(2) Subject
to subsection (3), to exclude or modify the implied warranty of merchantability
or any part of it the language must mention "merchantability",
be by a writing, and be conspicuous. Subject to subsection (3), to
exclude or modify any implied warranty of fitness the exclusion must
be by writing and be conspicuous. Language to exclude all implied
warranties of fitness is sufficient if it is in writing, is conspicuous
and states, for example, "there is no warranty that the goods
will be fit for a particular purpose".
(3) Notwithstanding
subsection (2), but subject to subsection (4),
(a)
unless the circumstances indicate otherwise, all implied warranties
are excluded by expressions like "as is," or "with
all faults," or by other language that in common understanding
calls the lessee's attention to the exclusion of warranties and
makes plain that there is no implied warranty, if in writing and
conspicuous;
(b)
if the lessee before entering into the lease contract has examined
the goods or the sample or model as fully as desired or has refused
to examine the goods, there is no implied warranty with regard to
defects that an examination ought in the circumstances to have revealed;
and (c) an implied warranty may also be excluded or modified by
course of dealing, course of performance, or usage of trade.
(4) To
exclude or modify a warranty against interference or against infringement
(Section 2-A-211) or any part of it, the language must be specific,
be by a writing, and be conspicuous, unless the circumstances, including
course or performance, course of dealing, or usage of trade, give
the lessee reason to know that the goods are being leased subject
to a claim or interest of any person.
2-A-215. CUMULATION AND CONFLICT OF WARRANTIES EXPRESS OR IMPLIED
Warranties,
whether express or implied, must be construed as consistent with each
other and as cumulative, but if that construction is unreasonable, the
intention of the parties determines which warranty is dominant. In ascertaining
that intention the following rules apply:
(1) exact
or technical specifications displace an inconsistent sample or model
or general language of description.
(2) a
sample from an existing bulk displaces inconsistent general language
of description.
(3) express
warranties displace inconsistent implied warranties other than an
implied warranty of fitness for a particular purpose.
2-A-216. THIRD-PARTY BENEFICIARIES OF EXPRESS OR IMPLIED WARRANTIES
A warranty
to or for the benefit of a lessee under this Code, whether express or
implied, extends to any natural person if it is reasonable to expect
that such person may use, consume, or be affected by the goods and who
is injured in person by breach of the warranty. This section does not
displace principles of law and equity that extend a warranty to or for
the benefit of a lessee to other persons. The operation of this section
may not be excluded, modified, or limited, but an exclusion, modification,
or limitation of the warranty, including any with respect to rights
and remedies, effective against the lessee is also effective against
the beneficiary designated under this section.
2-A-217. IDENTIFICATION
Identification
of goods as goods to which a lease contract refers may be made at any
time and in any manner explicitly agreed to by the parties. In the absence
of explicit agreement, identification occurs:
(1) when
the lease contract is made if the lease contract is for a lease of
goods that are existing and identified;
(2) when
the goods are shipped, marked, or otherwise designated by the lessor
as goods to which the lease contract refers, if the lease contract
is for a lease of goods that are not existing and identified; or
(3) when
the young are conceived, if the lease contract is for a lease of unborn
young animals.
2-A-218. INSURANCE AND PROCEEDS
(1) A
lessee obtains an insurable interest when existing goods are identified
to the lease contract even though the goods identified are nonconforming
and the lessee has an option to reject them.
(2) If
a lessee has an insurable interest only by reason of the lessor's
identification of the goods, the lessor, until default or insolvency
or notification to the lessee that identification is final, may substitute
other goods for those identified.
(3) Notwithstanding
a lessee's insurable interest under subsections (1) and (2), the lessor
retains an insurable interest until an option to buy has been exercised
by the lessee and risk of loss has passed to the lessee.
(4) Nothing
in this section impairs any insurable interest recognized under any
other statute or rule of law.
(5) The
parties by agreement may determine that one or more parties have an
obligation to obtain and pay for insurance covering the goods and
by agreement may determine the beneficiary of the proceeds of the
insurance.
2-A-219. RISK OF LOSS
(1) Except
in the case of a finance lease, risk of loss is retained by the lessor
and does not pass to the lessee. In the case of a finance lease, risk
of loss passes to the lessee.
(2) Subject
to the provisions of this Code on the effect of default, on risk of
loss (Section 2-A-220), if risk of loss is to pass to the lessee and
the time of passage is not stated, the following rules apply:
(a)
if the lease contract requires or authorizes the goods to be shipped
by carrier:
(i)
and it does not require delivery at a particular destination,
the risk of loss passes to the lessee when the goods are duly
delivered to the carrier, but
(ii)
if it does require delivery at a particular destination and the
goods are there duly tendered while in the possession of the carrier,
the risk of loss passes to the lessee when the goods are there
duly so tendered as to enable the lessee to take delivery.
(b)
if the goods are held by a bailee to be delivered without being
moved the risk of loss passes to the lessee on acknowledgment by
the bailee of the lessee's right to possession of the goods.
(c)
in any case not within paragraph (a) or (b), the risk of loss passes
to the lessee on the lessee's receipt of the goods if the lessor,
or, in the case of a finance lease, the supplier, is a merchant;
otherwise the risk passes to the lessee on tender of delivery.
2-A-220. EFFECT OF DEFAULT ON RISK OF LOSS
(1) Where
risk of loss is to pass to the lessee and the time of passage is not
stated:
(a)
if a tender or delivery of goods so fails to conform to the lease
contract as to give a right of rejection, the risk of their loss
remains with the lessor, or, in the case of a finance lease, the
supplier, until cure or acceptance.
(b)
if the lessee rightfully revokes acceptance, he or she, to the extent
of any deficiency in his or her effective insurance coverage, may
treat the risk of loss as having remained with the lessor from the
beginning.
(2) Whether
or not risk of loss is to pass to the lessee, if the lessee as to
conforming goods already identified to a lease contract repudiates
or is otherwise in default under the lease contract, the lessor, or
in the case of a finance lease, the supplier, to the extent of any
deficiency in his or her effective insurance coverage may treat the
risk of loss as resting on the lessor for a commercially reasonable
time.
2-A-221. CASUALTY TO IDENTIFIED GOODS
If a lease
contract requires goods identified when the lease contract is made and
the goods suffer casualty without fault of the lessee, the lessor or
the supplier before delivery, or the goods suffer casualty before risk
of loss passes to the lessee pursuant to the lease agreement or Section
2-A-219, then:
(1) if
the loss is total, the lease contract is avoided; and
(2) if
the loss is partial or the goods have so deteriorated as to no longer
conform to the lease contact, the lessee may nevertheless demand inspection
and at his or her option either treat the lease contract as avoided
or, except in a finance lease that is not a consumer lease, accept
the goods with due allowance from the rent payable for the balance
of the lease term for the deterioration or the deficiency in quantity
but without further right against the lessor.
2-A-301. ENFORCEABILITY OF LEASE CONTRACT
Except
as otherwise provided in this chapter, a lease contract is effective
and enforceable according to its terms between the parties, against
purchasers of the goods, and against creditors of the parties.
2-A-302. TITLE TO AND POSSESSION OF GOODS
Except
as otherwise provided in this chapter, each provision of this chapter
applies whether the lessor or a third party has title to the goods,
and whether the lessor, the lessee, or a third party has possession
of the goods, notwithstanding any statute or rule of law that possession
or the absence of possession is fraudulent.
2-A-303. ALIENABILITY OF PARTY'S INTEREST UNDER LEASE CONTRACT OR OF
LESSOR'S RESIDUAL INTEREST IN GOODS; DELEGATION OF PERFORMANCE; TRANSFER
OF RIGHTS
(1) As
used in this section, "creation of a security interest"
includes the sale of a lease contract that is subject to Uniform Commercial
Code Article 9, secured transactions, by reason of Section 9-102(1)(b)
of the Uniform Commercial Code.
(2) Except
as provided in subsections (3) and (4), a provision in a lease agreement
which (i) prohibits the voluntary or involuntary transfer, including
transfer by sale, sublease, creation or enforcement of a security
interest, or attachment, levy, or other judicial process, of any interest
of a party under the contract or of the lessor's residual interest
in the goods, or (ii) make such a transfer an event of default, gives
rise to the rights and remedies provided in subsection (5), but a
transfer that is prohibited or is an event of default under the lease
agreement is otherwise effective.
(3) A
provision in a lease agreement which (i) prohibits the creation or
enforcement of a security interest in an interest of party under the
lease contract or in the lessor's residual interest in the goods,
or (ii) makes such a transfer an event of default, is not enforceable
unless, and then only to the possession or use of the goods in violation
of the provision or an actual delegation of a material performance
of either party to the lease contract in violation of the provision.
Neither the granting nor the enforcement of a security interest in
(i) the lessor's interest under the lease contract or (ii) the lessor's
residual interest in the goods is a transfer that materially impairs
the prospect of obtaining return performance by, materially changes
the duty of, or materially increases the burden or risk imposed on,
the lessee within the purview of subsection (5) unless, and then only
to the extent that, there is an actual delegation of a material performance
of the lessor.
(4) A
provision in a lease agreement which (i) prohibits a transfer of a
right damages for default with respect to the whole lease contract
or of a right to payment arising out of the transferor's due performance
of the transferor's entire obligation, or (ii) makes such a transfer
an event of default, is not enforceable, and such a transfer is not
a transfer that materially impairs the prospect of obtaining return
performance by, materially changes the duly of or materially increases
the burden or risk imposed on, the other party to the lease contract
within the purview of subsection (5).
(5) Subject
to subsections (3) and (4):
(a)
if a transfer is made which is made an event of default under the
lease agreement, the party to the lease contract not making the
transfer, unless that party waives the default or otherwise agrees,
has the rights and remedies described in Section 2-A-501(2);
(b)
if paragraph (a) is not applicable and if a transfer is made that
(i) is prohibited under a lease agreement or (ii) materially impairs
the prospect of obtaining return performance by, materially changes
the duly of, or materially increases the burden or risk imposed
on, the other party to the lease contract, unless the party not
making the transfer agrees at any time to the transfer in the lease
contract or otherwise, then, except as limited by contract, (i)
the transferor is liable to the party not making the transfer for
damages caused by the transfer to the extent that the damages could
not reasonably be prevented by the party not making the transfer
and (ii) a court having jurisdiction may grant other appropriate
relief, including cancellation of the lease contract or an injunction
against the transfer.
(6) A
transfer of "the lease" or of "all my rights under
the lease", or a transfer in similar general terms, is a transfer
of rights and, unless the language or the circumstances, as in a transfer
for security, indicate the contrary, the transfer is a delegation
of duties by the transferor to the transferee. Acceptance by the transferee
constitutes a promise by the transferee to perform those duties. The
promise is enforceable by either the transferor or the other party
to the lease contract.
(7) Unless
otherwise agreed by the lessor and the lessee, a delegation of performance
does not relieve the transferor as against the other party of any
duty to perform or of any liability for default.
(8) In
a consumer lease, to prohibit the transfer of an interest of a party
under the lease contract or to make a transfer an event of default,
the language must be specific, by a writing, and conspicuous.
2-A-304. SUBSEQUENT LEASE OF GOODS BY LESSOR
(1) Subject
to Section 2-A-303, a subsequent lessee from a lessor of goods under
an existing lease contract obtains, to the extent of the leasehold
interest transferred, the leasehold interest in the goods the goods
that the lessor had or had power to transfer, and, except as provided
in subsection (2) and Section 2-A-527(4), takes subject to the existing
lease contract. A lessor with voidable title has power to transfer
a good leasehold interest to a good faith subsequent lessee for value,
but only to the extent set forth in the preceding sentence. If goods
have been delivered under a transaction of purchase, the lessor has
that power even though:
(a)
the lessor's transferor was deceived as to the identity of the lessor;
(b)
the delivery was in exchange for a check which is later dishonored;
(c)
it was agreed that the transaction was to be a "cash sale";
or
(d)
the delivery was procured through fraud punishable as larcenous
under the criminal law.
(2) A
subsequent lessee in the ordinary course of business from a lessor
who is a merchant dealing in goods of that kind to whom the goods
were entrusted by a prior lessee before the interest of the subsequent
lessee became enforceable against that lessor obtains to the extent
of the leasehold interest transferred, all of that lessor's and the
prior lessee's rights to the goods and takes free of the existing
lease contract.
(3) A
subsequent lessee from the lessor of goods that are subject to an
existing lease contract and are covered by a certificate of title
issued under a statute of this Nation or of another jurisdiction takes
no greater rights than those provided both by this section and by
the certificate of title statute.
2-A-305. SALE OR SUBLEASE OF GOODS BY LESSEE
(1) Subject
to the provisions of Section 2-A-303, a buyer or sublessee from the
lessee of goods under an existing lease contract obtains to the extent
of the interest transferred, the leasehold interest in the goods that
the lessee had or had power to transfer, and except as provided in
subsection (2) and Section 2-A-511(4), takes subject to the existing
lease contract. A lessee with a voidable leasehold interest has power
to transfer a good leasehold interest to a good faith buyer for value
or a good faith sublessee for value or a good faith sublessee for
value, but only to the extent set forth in the preceding sentence.
When goods have been delivered under a transaction of lease the lessee
has that power even though:
(a)
the lessor was deceived as to the identity of the lessee;
(b)
the delivery was in exchange for a check which is later dishonored;
or
(c)
the delivery was procured through fraud punishable as larcenous
under the criminal law.
(2) A
buyer in the ordinary course of business or a sublessee in the ordinary
course of business from a lessee who is a merchant dealing in goods
of the kind to whom the goods were entrusted by the lessor obtains,
to the extent of the interest transferred, all of the lessor's and
lessee's rights to the goods, and takes free of the existing lease
contract.
(3) A
buyer or sublessee from the lessee of goods that are subject to an
existing lease contract and are covered by a certificate of title
issued under a statutes of this Nation or of another jurisdiction
takes no greater rights than those provided both by this section and
by the certificate of title statute.
2-A-306. PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW
If a person
in the ordinary course of his or her business furnishes services or
materials with respect to goods subject to a lease contract, a lien
upon those goods in the possession of that person given by statute or
rule of law for those materials or services takes priority over any
interest of the lessor or lessee under the lease contract or this Code
unless the lien is created by statute and the statute provides otherwise
or unless the lien is created by rule of law and the rule of law provides
otherwise.
2-A-307. PRIORITY OF LIENS ARISING BY ATTACHMENT OR LEVY ON, SECURITY
INTERESTS IN, AND OTHER CLAIMS TO GOODS
(1) Except
as otherwise provided in Section 2-A-306, a creditor of a lessee takes
subject to the lease contract.
(2) Except
as otherwise provided in subsection (3) and (4) and in Sections 2-A-306
and 2-A-308, a creditor of a lessor takes subject to the lease contract
unless:
(a)
the creditor holds a lien that attached to the goods before the
lease contract became enforceable;
(b)
the creditor holds a security interest in the goods and the lessee
did not give value and receive delivery of the goods without knowledge
of the security interest; or
(c)
the creditor holds a security interest in the goods that was perfected
(Section 9-303) before the lease contract became enforceable.
(3) A
lessee in the ordinary course of business takes the leasehold interest
free of a security interest in the goods created by the lessor even
though security interest is perfected (Section 9-303) and the lessee
knows of its existence.
(4) A
lessee other than a lessee in the ordinary course of business takes
the leasehold interest free of a security interest to the extent that
it secures future advances made after the secured party acquires knowledge
of the lease or which first occurs, unless the future advances are
made pursuant to a commitment entered into without knowledge of the
lease and before the expiration of the forty-five day period.
2-A-308. SPECIAL RIGHTS OF CREDITORS
(1) A
creditor of a lessor in possession of goods subject to a lease contract
may treat the lease contract as void if as against the creditor retention
of possession by the lessor is fraudulent under any statute or rule
of law, but retention of possession in good faith and current course
of trade by the lessor for a commercially reasonable time after the
lease contract becomes enforceable is not fraudulent.
(2) Nothing
in this Code impairs the rights of creditors of a lessor if the lease
contract (a) become enforceable, not in current course of trade but
in satisfaction of or as security for a preexisting claim for money,
security, or the like, and (b) is made under circumstances which under
any statute or rule of law apart from this Code would constitute the
transaction a fraudulent transfer or voidable preference.
(3) A
creditor of a seller may treat a sale or an identification of goods
to a contract for sale as void if as against the creditor retention
of possession by the seller is fraudulent under any statute or rule
of law, but retention of possession of the goods pursuant to a lease
contract entered into by the seller as lessee and the buyer as lessor
in connection with the sale or identification of the goods is not
fraudulent if the buyer bought for value and in good faith.
2-A-309. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME FIXTURES
(1) In
this section:
(a)
Goods are "fixture" when they become so related to particular
real estate that an interest in them arises under real estate law;
(b)
A "fixture filing" is the filing, in the office where
a mortgage on the real estate would be filed or recorded, of a financing
statement covering goods that are art to become fixtures and conforming
to the requirements of the Uniform Commercial Code Section 9-402(5);
(c)
A lease is a "purchase money lease" unless the lessee
has possession or use of the goods or the right to possession or
use of the goods before the lease agreement is enforceable;
(d)
A mortgage is a "construction mortgage" to the extent
it secures an obligation incurred for the construction of an improvement
on land including the acquisition cost of the land, if the recorded
writing so indicates; and
(e)
"Encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that are
not ownership interests.
(2) Under
this chapter a lease may be of goods that are fixtures or may continue
in goods that become fixtures, but no lease exists under this Code
of ordinary building materials incorporated into an improvement on
land.
(3) This
chapter does not prevent creation of a lease of fixtures.
(4) The
perfected interest of a lessor of fixtures has priority over a conflicting
interest of an encumbrancer or owner of the real estate if:
(a)
the lease is a purchase money lease, the conflicting interest of
the encumbrancer or owner arises before the goods become fixtures,
the interest of the lessor is perfected by a fixture filing before
the goods become fixtures or within ten days thereafter, and the
lessee has an interest of record in the real estate or is in possession
of the real estate; or
(b)
the interest of the lessor is perfected by a fixture filing before
the interest of the encumbrancer or owner is of record, the lessor's
interest has priority over any conflicting interest of a predecessor
in title of the encumbrancer or owner, and the lessee has an interest
of record in the real estate or is in possession of the real estate.
(5) The
interest of a lessor of fixtures, whether or not perfected, has priority
over the conflicting interest of an encumbrancer or owner of the real
estate of:
(a)
the fixtures are readily removable factory or office machines, readily
removable equipment that is not primarily used or leased for use
in the operation of the real estate, or readily removable replacement
of domestic appliances that are goods subject to a consumer lease,
and before the goods become fixtures the lease contract is enforceable;
or
(b)
the conflicting interest is a lien on the real estate obtained by
legal or equitable proceedings after the lease contract is enforceable;
or
(c)
the encumbrancer or owner has consented in writing to the lease
or has disclaimed an interest in the goods as fixtures; or
(d)
the lessee has a right to remove the goods as against the encumbrancer
or owner. If the lessee's right to remove terminates the priority
of the interest of the lessor continues for a reasonable time.
(6) Notwithstanding
subsection (4)(a) but otherwise subject to subsection (4) and (5),
the interest of a lessor of fixtures, including the lessor's residual
interest, is subordinate to the conflicting interest of an encumbrancer
of the real estate under a construction mortgage recorded before the
goods become fixtures if the goods become fixtures before the completion
of the construction. To the extent given to refinance a construction
mortgage, the conflicting interest of an encumbrancer of the real
estate under a mortgage has this prior to the same extent as the encumbrancer
of the real estate under the construction mortgage.
(7) In
cases not within the preceding subsections, prior between the interest
of a lessor of fixtures, including the lessor's residual interest,
and the conflicting interest of an encumbrancer or owner of the real
estate who is not the lessee is determined by the priority rules governing
conflicting interests in real estate.
(8) If
the interest of a lessor of fixtures, including the lessor's residual
interest, has priority over all conflicting interests of all owners
and encumbrancer of the real estate, the lessor or the lessee may
(i) on default, expiration, termination, or cancellation of the lease
agreement but subject to the lease agreement and this Code, or (ii)
if necessary to enforce other rights and remedies of the lessor or
the lessee under this Code, remove the goods from the real estate,
free and clear of all conflicting interests of all owners and encumbrancer
of the real estate, but the lessor or the lessee must reimburse any
encumbrancer or owner of the real estate who is not the lessee and
who has not otherwise agreed for the cost of repair of any physical
injury, but not for any diminution in value of the real estate caused
by the absence of the good removed or by any necessity or replacing
them. A person entitled to reimbursement may refuse permission to
remove until the party seeking removal gives adequate security for
the performance of this obligation.
(9) Even
though the lease agreement does not create a security interest, the
interest of a lessor of fixtures, including the lessor's residual
interest, is perfected by filing a financing statement as a fixture
filing for leased goods that are or are to become fixtures in accordance
with the relevant provisions of the Code on secured transactions.
2-A-310. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME ACCESSIONS
(1) Goods
are "accessions" when they are installed in or affixed to
other goods.
(2) The
interest of a lessor or a lessee under a lease contract entered into
before the goods became accessions is superior to all interests in
the whole expect as stated in subsection (4).
(3) The
interest of a lessor or a lessee under a lease contract entered into
at the time or after the goods became accessions is superior to all
subsequently acquired interests in the whole except as stated in subsection
(4) but is subordinate to interests in the whole existing at the time
the lease contract was made unless the holders of such interests in
the whole have in writing consented to the lease or disclaimed an
interest in the goods as part of the whole.
(4) The
interest of a lessor or a lessee under a lease contract described
in subsection (2) or (3) is subordinate to the interest of:
(a)
a buyer in the ordinary course of business or a lessee in the ordinary
course of business of any interest in the whole acquired after the
goods became accessions; or
(b)
a creditor with a security interest in the whole perfected before
the lease contract was made to the extent that the creditor makes
subsequent advances without knowledge of the lease contract.
(5) When
under subsections (2) or (3) and (4) a lessor or a lessee of accessions
holds an interest that is superior to all interests in the whole,
the lessor or the lessee may (a) on default, expiration, termination,
or cancellation of the lease contract by the other party but subject
to the provisions of the lease contract and this Code, or (b) is necessary
to enforce his or her other rights and remedies under this Code, remove
the goods from the whole, free and clear of all interests in the whole,
but he or she must reimburse any holder of an interest in the whole
who is not the lessee and who has not otherwise agreed for the cost
of repair of any physical injury but not for any diminution in value
of the whole caused by the absence of the goods removed or by any
necessity for replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
2-A-311. PRIORITY SUBJECT TO SUBORDINATION
Nothing
in this Code prevents subordination by agreement by any person entitled
to priority.
2-A-401. INSECURITY: ADEQUATE ASSURANCE OF PERFORMANCE
(1) A
lease contract imposes an obligation on each party that the other's
expectation of receiving due performance will not be impaired.
(2) If
reasonable grounds for insecurity arise with respect to the performance
of either party, the insecure party may demand in writing adequate
assurance of due performance. Until the insecure party receives that
assurance, if commercially reasonable the insecure party may suspend
any performance for which he or she has not already received the agreed
return.
(3) A
repudiation of the lease contract occurs if assurance of the due performance
adequate under the circumstances of the particular case is not provided
to the insecure party within a reasonable time, not to exceed thirty
days after receipt of a demand by the other party .
(4) Between
merchants, the reasonableness of ground for insecurity and the adequacy
of any assurance offered must be determined according to commercial
standards.
(5) Acceptance
of any nonconforming delivery or payment does not prejudice the aggrieved
party's right to demand adequate assurance of future performance.
2-A-402. ANTICIPATORY REPUDIATION
If either
party repudiates a lease contract with respect to a performance not
yet due under the lease contract, the loss of which performance will
substantially impair the value of the lease contract to the other, the
aggrieved party may:
(1) for
a commercially reasonable time, await retraction of repudiation and
performance by the repudiating party;
(2) make
demand pursuant to Section 2-A-401 and await assurance of future performance
adequate under the circumstances of the particular case; or
(3) resort
to any right or remedy upon default under the lease contract or this
Code, even though the aggrieved party has notified the repudiating
party that the aggrieved party would await the repudiating party's
performance and assurance and has urged retraction. In addition, whether
or not the aggrieved party is pursuing one of the foregoing remedies,
the aggrieved party may suspend performance or, if the aggrieved party
is the lessor, proceed in accordance with the provisions of this Code
on the lessor's right to identify goods to the lease contract notwithstanding
default or to salvage unfinished goods (2-A-524).
2-A-403. RETRACTION OF ANTICIPATORY REPUDIATION
(1) Until
the repudiating party's next performance is due, the repudiating party
can retract the repudiation unless, since the repudiation, the aggrieved
party has canceled the lease contract or materially changed the aggrieved
party's position or otherwise indicated that the aggrieved party considers
the repudiation final.
(2) Retraction
may be by any method that clearly indicates to the aggrieved party
that the repudiating party intends to perform under the lease contract
and includes any assurance demanded under Section 2-A-401.
(3) Retraction
reinstates a repudiating party's rights under a lease contract with
due excuse and allowance to the aggrieved party for any delay occasioned
by the repudiation.
2-A-404. SUBSTITUTED PERFORMANCE
(1) If
without fault of the lessee, the lessor and the supplier, the agreed
berthing, loading, or unloading facilities fail or the agreed type
of carrier become unavailable or the agreed manner of delivery otherwise
becomes commercially impracticable, but a commercially reasonable
substitute is available, the substitute performance must be tendered
and accepted.
(2) If
the agreed means or manner of payment fails because of domestic or
foreign governmental regulation:
(a)
the lessor may withhold or stop delivery or cause the supplier to
withhold or stop delivery unless the lessee provides a means or
manner of payment that is commercially a substantial equivalent;
and
(b)
if delivery has already been taken, payment by the means or in the
manner provided by the regulation discharges the lessee's obligation
unless the regulation is discriminatory, oppressive, or predatory.
2-A-405. EXCUSED PERFORMANCE
(1) Subject
to Section 2-A-404 on substituted performance, the following rules
apply:
(a)
delay in delivery or nondelivery in whole or in part by a lessor
or a supplier who complies with paragraph (b) and subsection (2)
is not a default under the lease contract if performance as agreed
has been made impracticable by the occurrence of a contingency the
nonoccurrence of which was a basic assumption on which the lease
contract was made or by compliance in good faith with any applicable
foreign or domestic governmental regulation or order, whether or
not the regulation or order later proves to be invalid.
(b)
if the causes mentioned in paragraph (a) affect only part of the
lessor's or the supplier's capacity to perform, he or she shall
allocate production and deliveries among his or her customers but
at his or her option may include her own requirements for further
manufacture. He or she may so allocate in any manner that is fair
and reasonable.
(2) The
lessor seasonably shall notify the lessee and in the case of a finance
lease the supplier seasonably shall notify the lessor and the lessee,
if known, that there will be delay or nondelivery and, if allocation
is required under subsection (1)(b), of the estimated quota thus made
available for the lessee.
2-A-406. PROCEDURE ON EXCUSED PERFORMANCE
(1) If
the lessee receives notification of a material or indefinite delay
or an allocation justified under Section 2-A-405, the lessee may by
written notification to the lessor as to any goods involved, and with
respect to all of the goods if under an installment lease contract
the value of the whole lease contract substantially impaired (Section
2-A-510):
(a)
terminate the lease contract (Section 2-A-505(2)); or
(b)
except in a finance lease that is not a consumer lease, modify the
lease contract by accepting the available quota in substitution,
with due allowance from the rent payable for the balance of the
lease term for the deficiency without further right against the
lessor.
(2) If,
after receipt of a notification from the lessor under Section 2-A-405,
the lessee fails so to modify the lease agreement within a reasonable
time not exceeding thirty days, the lease contract lapses with respect
to any deliveries affected.
2-A-407. IRREVOCABLE PROMISES: FINANCE LEASES
(1) In
the case of a finance lease that is not a consumer lease the lessee's
promises under the lease contract become irrevocable and independent
upon the lessee's acceptance of the goods.
(2) A
promise that has become irrevocable and independent under subsection
(1):
(a)
is effective and enforceable between the parties, and by or against
third parties including assignees of the parties; and
(b)
is not subject to cancellation, termination, modification, repudiation,
excuse, or substitution without the consent of the party to whom
the promise runs.
(3) This
section does not affect the validity under any other law of a covenant
in any lease contract making the lessee's promises irrevocable and
independent upon the lessee's acceptance of the goods.
2-A-501. DEFAULT: PROCEDURE
(1) Whether
the lessor or the lessee is in default under a lease contract is determined
by the lease agreement and this Code.
(2) If
the lessor or the lessee is in default under the lease contract, the
party seeking enforcement has rights and remedies as provided in this
chapter and, except as limited by this Code, as provided in the lease
agreement.
(3) If
the lessor or the lessee is in default under the lease contract, the
party seeking enforcement may reduce the party's claim to judgment,
or otherwise enforce the lease contract by self-help or any available
judicial procedure or nonjudicial procedure, including administrative
proceeding, arbitration, or the like, in accordance with this chapter.
(4) Except
as otherwise provided in Section 1-106(1) or this Code or the lease
agreement, the rights and remedies referred to in subsections (2)
and(3) are cumulative.
(5) If
the lease agreement covers both real property and goods, the party
seeking enforcement may proceed under this part as to the goods, or
under other applicable law as to both the real property and the goods
in accordance with that party's rights and remedies in respect of
the real property, in which case this part does not apply.
2-A-502. NOTICE AFTER DEFAULT
Except
as otherwise provided in this chapter or the lease agreement, the lessor
or lessee in default under the lease contract is not entitled to notice
of default or notice of enforcement from the other party to the lease
agreement.
2-A-503. MODIFICATION OR IMPAIRMENT OF RIGHTS AND REMEDIES
(1) Except
as otherwise provided in this Code, the lease agreement may include
rights and remedies for default in addition to or in substitution
for those provided in this Code and may limit or later the measure
of damages recoverable under this Code.
(2) Resort
to a remedy provided under this Code or in the lease agreement is
optional unless the remedy is expressly agreed to be exclusive. If
circumstances cause an exclusive or limited remedy to fail of its
essential purpose, or provision for an exclusive remedy is unconscionable,
remedy may be had as provided in this Code.
(3) Consequential
damages may be liquidated under Section 2-A-504, or may otherwise
be limited, altered, or excluded unless the limitation, alteration,
or exclusion is unconscionable. Limitation, alteration, or exclusion
of consequential damages for injury to the person in the case of consumer
goods is prima facie unconscionable but limitation, alteration, or
exclusion of damages where the loss is commercial is not prima facie
unconscionable.
(4) Rights
and remedies on default by the lessor or the lessee with respect to
any obligation or promise collateral or ancillary to the lease contract
are not impaired by this Code.
2-A-504. LIQUIDATION OF DAMAGES
(1) Damages
payable by either party for default, or any other act or omission,
including indemnity for loss or diminution of anticipated tax benefits
or loss or damage to lessor's residual interest, may be liquidated
in the lease agreement but only at an amount or by a formula that
is reasonable in light of the then anticipated harm caused by the
default or other act or omission.
(2) If
the lease agreement provides for liquidation of damages, and such
provision does not comply with subsection (1), or such provision is
an exclusive or limited remedy that circumstances cause to fail of
its essential purpose, remedy may be had as provided in this Code.
(3) If
the lessor justifiably withholds or stops delivery of goods because
of the lessee's default or insolvency (Section 2-A-525 or 2-A-526),
the lessee is entitled to restitution of any amount by which the sum
of his or her payment exceeds:
(a)
the amount to which the lessor is entitled by virtue of terms liquidating
the lessor's damages in accordance with subsection (1); or
(b)
in the absence of those terms, 20 percent of the then present value
of the total rent the lessee was obligated to pay for the balance
of the lease term, or, in the case of a consumer lease, the lesser
of such amount or $500.
(4) A
lessee's right to restitution under subsection (3) is subject to offset
to the extent the lessor establishes:
(a)
a right to recover damages under the provisions of this Code other
than subsection (1); and
(b)
the amount or value of any benefits received by the lessee directly
or indirectly by reason of the lease contract.
2-A-505. CANCELLATION AND TERMINATION AND EFFECT OF CANCELLATION,
TERMINATION, RESCISSION, OR FRAUD ON RIGHTS AND REMEDIES
(1) On
cancellation of the lease contract, all obligations that are still
executory on both sides are discharged, but any right based on prior
default or performance survives, and the canceling party also retains
any remedy for default of the whole lease contract or any unperformed
balance.
(2) On
termination of the lease contract, all obligations that are still
executory on both sides are discharged but any right based on prior
default or performance survives.
(3) Unless
the contrary intention clearly appears, expressions of "cancellation,"
"rescission," or the like of the lease contract may not
be construed as a renunciation or discharge of any claim in damages
for an antecedent default.
(4) Rights
and remedies for material misrepresentation or fraud include all rights
and remedies available under this Code for default.
(5) Neither
rescission nor a claim for rescission of the lease contract nor rejection
or return of the goods may bar or be deemed inconsistent with a claim
for damages or other right or remedy.
2-A-506. STATUTE OF LIMITATIONS
(1) An
action for default under a lease contract, including breach of warranty
or indemnity, must be commenced within four years after the cause
of action accrued. In a lease contract that is not a consumer lease,
by the original lease contract the parties may reduce the period of
limitation to not less than one year.
(2) A
cause of action for default accrues when the act or omission on which
the default or breach of warranty is based is or should have been
discovered by the aggrieved party, or when the default occurs, whichever
is later. A cause of action for indemnity accrues when the act or
omission on which the claim for indemnify is based is or should have
been discovered by the indemnified party, whichever is later.
(3) If
an action commenced within the time limited by subsection (1) is so
terminated as to leave available a remedy by another action for the
same default or breach of warranty or indemnity, the other action
may be commenced after the expiration of the time limited and within
six months after the termination of the first action unless the termination
resulted from voluntary discontinuance or from dismissal for failure
or neglect to prosecute.
(4) This
section does not alter the law on tolling of the statute of limitations
nor does it apply to causes of action that have accrued before this
Code becomes effective.
2-A-507. PROOF OF MARKET RENT; TIME AND PLACE
(1) Damages
based on market rent (Section 2-A-519 or 2-A-528) are determined according
to the rent for the use of the goods concerned for a lease term identical
to the remaining lease term of the original lease agreement and prevailing
at the times specified in Sections 2-A-519 and 2-A-528.
(2) If
evidence of rent for the use of the goods concerned for a lease term
identical to the remaining lease term of the original lease agreement
and prevailing at the times of places described in this Chapter is
not readily available, the rent prevailing within any reasonable time
before or after the time described or at any other place or for a
different lease term which in commercial judgment or under usage of
trade would serve as a reasonable substitute for the one described
may be used, making any proper allowance for the difference, including
the cost of transporting the goods to or from the other place.
(3) Evidence
of a relevant rent prevailing at a time or place or for a lease term
other than the one described in this Chapter offered by one party
is not admissible unless and until he or she has given the other party
notice the court finds sufficient to prevent unfair surprise.
(4) If
the prevailing rent of value of any goods regularly leased in any
established market is in issue, reports in official publications of
trade journals or in newspapers of periodicals of general circulation
published as the reports of that market are admissible in evidence.
The circumstances of the preparation of the report may be shown to
affect its weight but not its admissibility.
2-A-508. LESSEE'S REMEDIES
(1) If
a lessor fails to deliver the goods in conformity to the lease contract
(Section 2-A-509) or repudiates the lease contract (Section 2-A-402),
or a lessee rightfully rejects the goods (Section 2-A-509),or justifiably
revokes acceptance of the goods (Section 2-A-5 17), then with respect
to any goods involved, and with respect to all of the goods if under
an installment lease contract the value of the whole lease contract
is substantially impaired (Section 2-A-510), the lessor is in default
under the lease contract and the lessee may:
(a)
cancel the lease contract (Section 2-A-505(1));
(b)
recover so much of the rent and security as has been paid and is
just under circumstance;
(c)
cover and recover damages as to all goods affected whether or not
they have been identified to the lease contract (Section 2-A-518
and 2-A-520), or recover damages for nondelivery (Sections 2-A-519
and 2-A-520);
(d)
exercise any other rights or pursue any other remedies provided
in the lease contract.
(2) If
a lessor fails to deliver the goods in conformity to the lease contract
or repudiates the lease contract, the lessee may also:
(a)
if the goods have been identified, recover them (Section 2-A-522);
or
(b)
in a proper case, obtain specific performance or replevy the goods
(Section 2-A-521).
(3) If
a lessor is otherwise in default under a lease contract, the lessee
may exercise the rights and pursue the remedies provided in the lease
contract, which may include a right to cancel the lease, and in Section
2-A-519(3).
(4) If
a lessor has breached a warranty, whether express or implied, the
lessee may recover damages (Section 2-A-519(4)).
(5) On
rightful rejection or justifiable revocation of acceptance, a lessee
has a security interest in goods in the lessee's possession or control
for any rent and security interest that has been paid and any expenses
reasonably incurred in their inspection, receipt, transportation,
and care and custody and may hold those goods and dispose of them
in good faith and in a commercially reasonable manner, subject to
Section 2-A-527(5).
(6) Subject
to the provisions of Section 2-A-407, a lessee, on notifying the lessor
of the lessee's intention to do so, may deduct all or any part of
the damages resulting from any default under the lease contract from
any part of the rent still due under the same lease contract.
2-A-509. LESSEE'S RIGHTS ON IMPROPER DELIVERY; RIGHTFUL REJECTION
(1) Subject
to the provisions of Section 2-A-510 on default in installment lease
contracts, if the goods or the tender or delivery fail in any respect
to conform to the lease contract, the lessee may reject or accept
the goods or accept any commercial unit or units and reject the rest
of the goods.
(2) Rejection
of goods is ineffective unless it is within an reasonable time after
tender or delivery of the goods and the lessee seasonably notifies
the lessor.