/* In recognition of the importance of lease transactions, a Uniform law on leasing has been drafted. The new law combines elements of article 9 and article 2 on sales. It is also important as an independent source of consumer protection laws. */

ARTICLE 2A LEASES

PART 1. GENERAL PROVISIONS

Section

2A-101. Short Title.

2A-102. Scope.

2A-103. Definitions and Index of Definitions.

2A-104. leases Subject to Other Law.

2A-105. Territorial Application of Article to Goods Covered by

Certificate of Title.

2A-106. Limitation on Power of Parties to Consumer lease to

Choose Applicable Law and Judicial Forum.

2A-107. Waiver or Renunciation of Claim or Right After Default.

2A-108. Unconscionability.

2A-109. Option to Accelerate at Will.

PART 2. FORMATION AND CONSTRUCTION OF LEASE CONTRACT

2A-201. Statute of Frauds.

2A-202. Final Written Expression: Parol or Extrinsic Evidence.

2A-203. Seals Inoperative.

2A-204. Formation in General.

2A-205. Firm Offers.

2A-206. Offer and Acceptance in Formation of lease Contract.

2A-207. Course of Performance or Practical Construction.

2A-208. Modification, Rescission and Waiver.

2A-209. lessee Under Finance lease as Beneficiary of Supply

Contract.

2A-210. Express Warranties.

2A-211. Warranties Against Interference and Against

Infringement; lessee's Obligation Against Infringement.

2A-212. Implied Warranty of Merchantability.

2A-213. Implied Warranty of Fitness for Particular Purpose.

2A-214. Exclusion or Modification of Warranties.

2A-215. Cumulation and Conflict of Warranties Express or Implied.

2A-216. Third-Party Beneficiaries of Express and Implied

Warranties.

2A-217. Identification.

2A-218. Insurance and Proceeds.

2A-219. Risk of Loss.

2A-220. Effect of Default on Risk of Loss.

2A-221. Casualty to Identified Goods.

PART 3. EFFECT OF LEASE CONTRACT

2A-301. Enforceability of lease Contract.

2A-302. Title to and Possession of Goods.

2A-303. Alienability of Party's Interest Under lease Contract or

of Lessor's Residual Interest in Goods; Delegation of Performance; Transfer of Rights.

2A-304. Subsequent lease of Goods by lessor.

2A-305. Sale or Sublease of Goods by lessee.

2A-306. Priority of Certain Liens Arising by Operation of Law.

2A-307. Priority of Liens Arising by Attachment or levy on,

Security Interests in, and Other Claims to Goods.

2A-308. Special Rights of Creditors.

2A-309. Lessor's and Lessee's Rights When Goods Become Fixtures.

2A-310. Lessor's and Lessee's Rights When Goods Become

Accessions.

2A-311. Priority Subject to Subordination.

PART 4. PERFORMANCE OF LEASE CONTRACT: REPUDIATED SUBSTITUTED AND EXCUSED

2A-401. Insecurity: Adequate Assurance of Performance.

2A-402. Anticipatory Repudiation.

2A-403. Retraction of Anticipatory Repudiation.

2A-404. Substituted Performance.

2A-405. Excused Performance.

2A-406. Procedure on Excused Performance.

2A-407. Irrevocable Promises: Finance leases.

Part 5. DEFAULT

A. IN GENERAL

2A-501. Default: Procedure.

2A-502. Notice After Default.

2A-503. Modification or Impairment of Rights and Remedies.

2A-504. Liquidation of Damages.

2A-505. Cancellation and Termination and Effect of

Cancellation, Termination, Rescission, or Fraud on Rights and

Remedies.

2A-506. Statute of Limitations.

2A-507. Proof of Market Rent: Time and Place.

B. DEFAULT By Lessor

2A-508. Lessee's Remedies.

2A-509. Lessee's Rights on Improper Delivery; Rightful

Rejection.

2A-510. Installment lease Contracts: Rejection and Default.

2A-511. Merchant lessee's Duties as to Rightfully Rejected

Goods.

2A-512. Lessee's Duties as to Rightfully Rejected Goods.

2A-513. Cure by lessor of Improper Tender or Delivery;

Replacement.

2A-514. Waiver of lessee's Objections.

2A-515. Acceptance of Goods.

2A-516. Effect of Acceptance of Goods; Notice of Default; Burden

of Establishing Default After Acceptance; Notice of Claim or

Litigation to Person Answerable Over.

2A-517. Revocation of Acceptance of Goods.

2A-518. Cover; Substitute Goods.

2A-519. Lessee's Damages for Non-delivery, Repudiation, Default

and Breach of Warranty in Regard to Accepted Goods.

2A-520. Lessee's Incidental and Consequential Damages.

2A-521. Lessee's Right to Specific Performance or Replevin.

2A-522. Lessee's Right to Goods on Lessor's Insolvency.

C. DEFAULT BY LESSEE

2A-523. Lessor's Remedies.

2A-524. Lessor's Right to Identify Goods to lease Contract.

2A-525. Lessor's Right to Possession of Goods.

2A-526. Lessor's Stoppage of Delivery in Transit or Otherwise.

2A-527. Lessor's Rights to Dispose of Goods.

2A-528. Lessor's Damages for Non-acceptance, Failure to Pay,

Repudiation, or Other Default.

2A-529. lessor's Action for the Rent.

2A-530. Lessor's Incidental Damages.

2A-531. Standing to Sue Third Parties for Injury to Goods.

2A-532. Lessor's Rights to Residual Interest.

ARTICLE 2A

LEASES

PART 1

GENERAL PROVISIONS

2A-101. Short Title

This Article shall be known and may be cited as the Uniform

Commercial Code - Leases.

2A-102. Scope.

This Article applies to any transaction, regardless of form, that

creates a lease.

2A-103. Definitions and Index of Definitions.

(1) In this Article 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

pre-existing 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

a personal, family, or household purpose if the total payments

to be made under the lease contract, excluding payments for

options to renew or buy, do not exceed $_______

(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 possession and use of

the goods is 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 a 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 Article 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.

/* An effort to simplify the problem of a breach in the quality of goods which are noimnally purchased by a leasing company but are really financing accomodations. This fixes a standard for performance inhering in the contract as a whole. */

(h) "Goods" means all things that are movable at the time

of identification to the lease contract, or are fixtures (Section

2A-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 Article. 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 Article 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 pre-existing 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

possession 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 Article and the

sections in which they appear are:

"Accessions". Section 2A-310(1).

"Construction mortgage". Section 2A-309( 1) (d).

"Encumbrance . Section 2A-309( 1) (e).

"Fixtures". Section 2A-309(1)(a).

"Fixture filing". Section 2A-309(1)(b).

"Purchase money lease". Section 2A-309(1)(c).

(3) The following definitions in other Articles apply to

this Article:

"Account". Section 9-106.

"Between merchants". Section 2-104(3).

"Buyer". Section 2-l03(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(1)(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 Article.

2A-104. Leases Subject to Other Statutes.

(1) A lease, although subject to this Article, is also

subject to any applicable:

(a) certificate of title statute of this State: (list any

certificate of title statutes covering automobiles, trailers,

mobile homes, boats, farm tractors, and the like);

(b) certificate of title statute of another jurisdiction

(Section 2A-105); or

(c) consumer protection statute of this State, or final

consumer protection decision of a court of this State existing on

the effective date of this Article.

(2) In case of conflict between this Article, other than

Sections 2A-105, 2A- 304(3), and 2A-305(3), and a statute or

decision referred to in subsection (1), the statute or decision

controls.

(3) Failure to comply with an applicable law has only the

effect specified therein.

/* Thus binding lessors to whatever standards the state has imposed in regards to their performance. */

2A-105. Territorial Application of Article to Goods Covered by

Certificate of Title.

Subject to the provisions of Sections 2A-304(3) and 2A-

305(3), with respect to goods covered by a certificate of title

issued under a statute of this 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.

/* Quite similar to the provisions of the UCC in Article 9 regarding perfection of security interests. */

2A-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 30 days thereafter or in which the goods

are to be used, the choice is not enforceable.

/* This is similar to FTC rules which require that any collection lawsuits be brought where the debtor resides.*/

(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.

2A-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.

2A-108. Unconscionability.

(1) If the court as a matter of law finds a 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 or any clause of 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.

/* An additional source of defense for unfair collection tactics to the Fair Debt Collection Act. This matter is set as one to be tried to the court, not a jury*/

(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) If the court does not find unconscionability and the

lessee claiming unconscionability has brought or maintained an

action he [or she] knew to be groundless, the court shall award

reasonable attorney's fees to the patty against whom the claim is

made.

In determining attorney's fees, the amount of the recovery

on behalf of the claimant under subsections (1) and (2) is not

controlling.

/* Similar to the policy of federal fee shifting statutes. */

2A- 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

for she] deems himself for 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 for 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 party who

exercised the power; otherwise the burden of establishing lack of

good faith is on the party against whom the power has been

exercised.

PART 2

FORMATION AND CONSTRUCTION OF LEASE CONTRACT

2A-20l. 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 options 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 to 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.

2A-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.

2A-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.

2A-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.

2A-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 3

months. Any such term of assurance on a form supplied by the

offeree must be separately signed by the offeror.

2A-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 requested 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.

2A-207. 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 2A-20g on

modification and waiver, course of performance is relevant to

show a waiver or modification of any term inconsistent with the

course of performance.

2A-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.

/* In the ongoing "battle of the forms" a separate signature is required for a written modification requirement. */

(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 view of a material change of position in reliance on

the waiver.

2A-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 (Section 2A-209(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 the 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 that the lessee may

have against the supplier which arise from an agreement between

the lessee and the supplier or under other law.

2A-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.

2A-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.

2A-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 goods 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;

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;

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.

2A-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.

2A-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 2A-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 a 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 2A-21 1) or any part of it, the

language must be specific, be by a writing, and be conspicuous,

unless the circumstances, including course of 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.

2A-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:

(a) Exact or technical specifications displace an

inconsistent sample or model or general language of description.

(b) A sample from an existing bulk displaces inconsistent

general language of description.

(c) Express warranties displace inconsistent implied

warranties other than an implied warranty of fitness for a

particular purpose.

2A-216. Third-Party Beneficiaries of Express and Implied

Warranties.

Alternative A

A warranty to or for the benefit of a lessee under this

Article, whether express or implied, extends to any natural

person who is in the family or household of the lessee or who is

a guest in the lessee's home 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 any beneficiary designated under

this section.

/* A codification of general law of product's liability. */

Alternative B

A warranty to or for the benefit of a lessee under this

Article, whether express or implied, extends to any natural

person who may reasonably be expected to 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.

Alternative C

A warranty to or for the benefit of a lessee under this

Article, whether express or implied, extends to any person who

may reasonably be expected to use, consume, or be affected by the

goods and who is injured by breach of the warranty. The operation

of this section may not be excluded, modified, or limited with

respect to injury to the person of an individual to whom the

warranty extends, 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.

2A-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:

(a) when the lease contract is made if the lease contract

is for a lease of goods that are existing and identified;

(b) 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

(c) when the young are conceived, if the lease contract is

for a lease of unborn young of animals.

2A-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.

2A-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 Article on the effect

of default on risk of loss (Section 2A-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 rendered 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 subsection (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.

2A-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 lessee for a commercially reasonable time.

2A-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 2A-2 19, then:

(a) if the loss is total, the lease contract is avoided;

and

(b) if the loss is partial or the goods have so

deteriorated as to no longer conform to the lease contract, 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.

PART 3

EFFECT OF LEASE CONTRACT

2A-301. Enforceability of Lease Contract.

Except as otherwise provided in this Article, 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.

2A-302. Title to and Possession of Goods.

Except as otherwise provided in this Article, each provision

of this Article 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.

2A-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 Article 9, Secured Transactions, by reason of Section 9-

102(1)(b).

(2) Except as provided in subsections (3) and (4), a provision in a lease agreement which

(i) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor's residual interest in the goods, or

(ii) makes 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 a 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 extent that, there is an actual transfer by the lessee of the lessee's right of 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 to 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 duty 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 a 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 2A-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 duty 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.

2A-304. Subsequent Lease of Goods by Lessor.

(1) Subject to Section 2A-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 that the lessor had or had power to

transfer, and except as provided in subsection (2) and Section 2A-

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 the existing lessee of that

lessor 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

existing 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 State or of

another jurisdiction takes no greater rights than those provided

both by this section and by the certificate of title statute.

2A-305. Sale or Sublease of Goods by Lessee.

(1) Subject to the provisions of Section 2A-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

2A-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, 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 that 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 statute of this State or of

another jurisdiction takes no greater rights than those provided

both by this section and by the certificate of title statute.

2A-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 Article 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.

/* Similar to secured transactions, liens to preserve the property go first. */