CHAPTER 2.1. LEASES
IC 26-1-2.1
Chapter 2.1. Leases
IC 26-1-2.1-101
Short title
Sec. 101. IC 26-1-2.1 shall be known and may be cited as theUniform Commercial Code-Leases.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-102
Scope
Sec. 102. IC 26-1-2.1 applies to any transaction, regardless ofform, that creates a lease.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-103
Definitions and index of definitions
Sec. 103. (1) Unless the context otherwise requires, inIC 26-1-2.1:
(a) "Buyer in ordinary course of business" means a person whoin good faith and without knowledge that the sale to the personis in violation of the ownership rights or security interest orleasehold interest of a third party in the goods, buys in ordinarycourse from a person in the business of selling goods of thatkind but does not include a pawnbroker. "Buying" may be forcash or by exchange of other property or on secured orunsecured credit and includes acquiring goods or documents oftitle under a pre-existing contract for sale but does not includea transfer in bulk or as security for or in total or partialsatisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an end to thelease contract for default by the other party.
(c) "Commercial unit" means such a unit of goods as bycommercial usage is a single whole for purposes of lease anddivision of which materially impairs its character or value onthe 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 lineof machinery, or a quantity, as a gross or carload, or any otherunit treated in use or in the relevant market as a single whole.
(d) "Conforming" goods or performance under a lease contractmeans goods or performance that are in accordance with theobligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularlyengaged in the business of leasing or selling makes to a lesseewho is an individual and who takes under the lease primarily for
a personal, family, or household purpose if the total paymentsto be made under the lease contract, excluding payments foroptions to renew or buy, do not exceed twenty-five thousanddollars ($25,000).
(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 thegoods;
(ii) the lessor acquires the goods or the right to possessionand use of the goods in connection with the lease; and
(iii) one (1) of the following occurs:
(A) the lessee receives a copy of the contract by which thelessor acquired the goods or the right to possession anduse of the goods before signing the lease contract;
(B) the lessee's approval of the contract by which thelessor acquired the goods or the right to possession anduse of the goods is a condition to effectiveness of the leasecontract;
(C) the lessee, before signing the lease contract, receivesan accurate and complete statement designating thepromises and warranties, and any disclaimers ofwarranties, limitations, or modifications of remedies, orliquidated damages, including those of a third party, suchas the manufacturer of the goods, provided to the lessor bythe person supplying the goods in connection with or aspart of the contract by which the lessor acquired the goodsor the right to possession and use of the goods; or
(D) if the lease is not a consumer lease, the lessor, beforethe lessee signs the lease contract, informs the lessee inwriting: (a) of the identity of the person supplying thegoods to the lessor, unless the lessee has selected thatperson and directed the lessor to acquire the goods or theright to possession and use of the goods from that person;(b) that the lessee is entitled under IC 26-1-2.1 to thepromises and warranties, including those of any thirdparty, provided to the lessor by the person supplying thegoods in connection with or as part of the contract bywhich the lessor acquired the goods or the right topossession and use of the goods; and (c) that the lesseemay communicate with the person supplying the goods tothe lessor and receive an accurate and complete statementof those promises and warranties, including anydisclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time ofidentification to the lease contract, or are fixtures (IC
26-1-2.1-309), but the term does not include money, documents,instruments, accounts, chattel paper, general intangibles, orminerals 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 thatauthorizes or requires the delivery of goods in separate lots tobe separately accepted, even though the lease contract containsa clause "each delivery is a separate lease" or its equivalent.
(j) "Lease" means a transfer of the right to possession and useof goods for a term in return for consideration, but a sale,including a sale on approval or a sale or return, or retention orcreation of a security interest is not a lease. Unless the contextclearly indicates otherwise, the term includes a sublease.
(k) "Lease agreement" means the bargain, with respect to thelease, of the lessor and the lessee in fact as found in theirlanguage or by implication from other circumstances includingcourse of dealing or usage of trade or course of performance asprovided in IC 26-1-2.1. Unless the context clearly indicatesotherwise, the term includes a sublease agreement.
(l) "Lease contract" means the total legal obligation that resultsfrom the lease agreement as affected by IC 26-1-2.1 and anyother applicable rules of law. Unless the context clearlyindicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor or thelessee under a lease contract.
(n) "Lessee" means a person who acquires the right topossession and use of goods under a lease. Unless the contextclearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person whoin good faith and without knowledge that the lease to the personis in violation of the ownership rights or security interest orleasehold interest of a third party in the goods leases in ordinarycourse from a person in the business of selling or leasing goodsof that kind but does not include a pawnbroker. "Leasing" maybe for cash or by exchange of other property or on secured orunsecured credit and includes acquiring goods or documents oftitle under a pre-existing lease contract but does not include atransfer in bulk or as security for or in total or partialsatisfaction of a money debt.
(p) "Lessor" means a person who transfers the right topossession and use of goods under a lease. Unless the contextclearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's interest in thegoods after expiration, termination, or cancellation of the leasecontract. (r) "Lien" means a charge against or interest in goods to securepayment of a debt or performance of an obligation, but the termdoes not include a security interest.
(s) "Lot" means a parcel or a single article that is the subjectmatter of a separate lease or delivery, whether or not it issufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant withrespect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date certain of one(1) or more sums payable in the future, discounted to the datecertain. The discount is determined by the interest rate specifiedby the parties if the rate was not manifestly unreasonable at thetime the transaction was entered into; otherwise, the discount isdetermined by a commercially reasonable rate that takes intoaccount the facts and circumstances of each case at the time thetransaction was entered into.
(v) "Purchase" includes taking by sale, lease, mortgage, securityinterest, pledge, gift, or any other voluntary transaction creatingan interest in goods.
(w) "Sublease" means a lease of goods the right to possessionand use of which was acquired by the lessor as a lessee underan existing lease.
(x) "Supplier" means a person from whom a lessor buys orleases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a lessorbuys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to a powercreated by agreement or law puts an end to the lease contractotherwise than for default.
(2) Other definitions applying to IC 26-1-2.1 and the sections inwhich they appear are:
"Accessions". IC 26-1-2.1-310(1).
"Construction mortgage". IC 26-1-2.1-309(1)(d).
"Encumbrance". IC 26-1-2.1-309(1)(e).
"Fixtures". IC 26-1-2.1-309(1)(a).
"Fixture filing". IC 26-1-2.1-309(1)(b).
"Purchase money lease". IC 26-1-2.1-309(1)(c).
(3) The following definitions in other chapters apply toIC 26-1-2.1:
"Account". IC 26-1-9.1-102(a)(2).
"Between merchants". IC 26-1-2-104(3).
"Buyer". IC 26-1-2-103(1)(a).
"Chattel paper". IC 26-1-9.1-102(a)(11).
"Consumer goods". IC 26-1-9.1-102(a)(23).
"Document". IC 26-1-9.1-102(a)(30). "Entrusting". IC 26-1-2-403(3).
"General intangibles". IC 26-1-9.1-102(a)(42).
"Good faith". IC 26-1-2-103(1)(b).
"Instrument". IC 26-1-9.1-102(a)(47).
"Merchant". IC 26-1-2-104(1).
"Mortgage". IC 26-1-9.1-102(a)(55).
"Pursuant to commitment". IC 26-1-9.1-102(a)(68).
"Receipt". IC 26-1-2-103(1)(c).
"Sale". IC 26-1-2-106(1).
"Sale on approval". IC 26-1-2-326.
"Sale or return". IC 26-1-2-326.
"Seller". IC 26-1-2-103(1)(d).
(4) In addition, IC 26-1-1 contains general definitions andprinciples of construction and interpretation applicable throughoutIC 26-1-2.1.
As added by P.L.189-1991, SEC.3. Amended by P.L.57-2000,SEC.23; P.L.143-2007, SEC.19.
IC 26-1-2.1-104
Leases subject to other statutes
Sec. 104. (1) A lease, although subject to IC 26-1-2.1, is alsosubject to any applicable:
(a) certificate of title statute of this state;
(b) certificate of title statute of another jurisdiction (IC26-1-2.1-105); or
(c) consumer protection statute of this state, or final consumerprotection decision of a court of this state existing on theeffective date of IC 26-1-2.1.
(2) In case of conflict between IC 26-1-2.1, other thanIC 26-1-2.1-105, IC 26-1-2.1-304(3), and IC 26-1-2.1-305(3), and astatute or decision referred to in subsection (1), the statute ordecision controls.
(3) Failure to comply with an applicable law has only the effectspecified therein.
As added by P.L.189-1991, SEC.3. Amended by P.L.1-1992,SEC.134.
IC 26-1-2.1-105
Territorial application of article to goods covered by certificate oftitle
Sec. 105. Subject to the provisions of IC 26-1-2.1-304(3) andIC 26-1-2.1-305(3), with respect to goods covered by a certificate oftitle issued under a statute of this state or of another jurisdiction,compliance and the effect of compliance or noncompliance with acertificate of title statute are governed by the law (including the
conflict of laws rules) of the jurisdiction issuing the certificate untilthe earlier of:
(a) surrender of the certificate; or
(b) four (4) months after the goods are removed from thatjurisdiction and thereafter until a new certificate of title isissued by another jurisdiction.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-106
Limitation on power of parties to consumer lease to chooseapplicable law and judicial forum
Sec. 106. (1) If the law chosen by the parties to a consumer leaseis that of a jurisdiction other than a jurisdiction in which the lesseeresides at the time the lease agreement becomes enforceable orwithin thirty (30) days thereafter or in which the goods are to beused, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer leaseis a forum that would not otherwise have jurisdiction over the lessee,the choice is not enforceable.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-107
Waiver or renunciation of claim or right after default
Sec. 107. Any claim or right arising out of an alleged default orbreach of warranty may be discharged in whole or in part withoutconsideration by a written waiver or renunciation signed anddelivered by the aggrieved party.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-108
Unconscionability
Sec. 108. (1) If the court as a matter of law finds a lease contractor any clause of a lease contract to have been unconscionable at thetime it was made the court may refuse to enforce the lease contract,or it may enforce the remainder of the lease contract without theunconscionable clause, or it may so limit the application of anyunconscionable clause as to avoid any unconscionable result.
(2) With respect to a consumer lease, if the court as a matter oflaw finds that a lease contract or any clause of a lease contract hasbeen induced by unconscionable conduct or that unconscionableconduct has occurred in the collection of a claim arising from a leasecontract, 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 affordthe parties a reasonable opportunity to present evidence as to the
setting, purpose, and effect of the lease contract or clause thereof, orof the conduct.
(4) In an action in which the lessee claims unconscionability withrespect to a consumer lease:
(a) If the court finds unconscionability under subsection (1) or(2), the court shall award reasonable attorney's fees to thelessee.
(b) If the court does not find unconscionability and the lesseeclaiming unconscionability has brought or maintained an actionthe lessee knew to be groundless, the court shall awardreasonable attorney's fees to the party against whom the claimis made.
(c) In determining attorney's fees, the amount of the recovery onbehalf of the claimant under subsections (1) and (2) is notcontrolling.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-109
Option to accelerate at will
Sec. 109. (1) A term providing that one party or that party'ssuccessor in interest may accelerate payment or performance orrequire collateral or additional collateral "at will" or "when the partydeems the party insecure" or in words of similar import must beconstrued to mean that the party has power to do so only if the partyin good faith believes that the prospect of payment or performanceis impaired.
(2) With respect to a consumer lease, the burden of establishinggood faith under subsection (1) is on the party who exercised thepower; otherwise the burden of establishing lack of good faith is onthe party against whom the power has been exercised.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-201
Statute of frauds
Sec. 201. (1) A lease contract is not enforceable by way of actionor defense unless:
(a) the total payments to be made under the lease contract,excluding payments for options to renew or buy, are less thanone thousand dollars ($1,000); or
(b) there is a writing, signed by the party against whomenforcement is sought or by that party's authorized agent,sufficient to indicate that a lease contract has been madebetween the parties and to describe the goods leased and thelease 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 incorrectlystates a term agreed upon, but the lease contract is not enforceableunder subsection (1)(b) beyond the lease term and the quantity ofgoods shown in the writing.
(4) A lease contract that does not satisfy the requirements ofsubsection (1), but which is valid in other respects, is enforceable:
(a) if the goods are to be specially manufactured or obtained forthe lessee and are not suitable for lease or sale to others in theordinary course of the lessor's business, and the lessor, beforenotice of repudiation is received and under circumstances thatreasonably indicate that the goods are for the lessee, has madeeither a substantial beginning of their manufacture orcommitments for their procurement;
(b) if the party against whom enforcement is sought admits inthat party's pleading, testimony or otherwise in court that a leasecontract was made, but the lease contract is not enforceableunder this provision beyond the quantity of goods admitted; or
(c) with respect to goods that have been received and acceptedby 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 whomenforcement is sought or by that party's authorized agentspecifying the lease term, the term so specified;
(b) if the party against whom enforcement is sought admits inthat party's pleading, testimony, or otherwise in court a leaseterm, the term so admitted; or
(c) a reasonable lease term.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-202
Final written expression; parol or extrinsic evidence
Sec. 202. Terms with respect to which the confirmatorymemoranda of the parties agree or which are otherwise set forth ina writing intended by the parties as a final expression of theiragreement with respect to such terms as are included therein may notbe contradicted by evidence of any prior agreement or of acontemporaneous oral agreement but may be explained orsupplemented:
(a) by course of dealing or usage of trade or by course ofperformance; and
(b) by evidence of consistent additional terms unless the courtfinds the writing to have been intended also as a complete and
exclusive statement of the terms of the agreement.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-203
Seals inoperative
Sec. 203. The affixing of a seal to a writing evidencing a leasecontract or an offer to enter into a lease contract does not render thewriting a sealed instrument and the law with respect to sealedinstruments does not apply to the lease contract or offer.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-204
Formation in general
Sec. 204. (1) A lease contract may be made in any mannersufficient to show agreement, including conduct by both partieswhich recognizes the existence of a lease contract.
(2) An agreement sufficient to constitute a lease contract may befound although the moment of its making is undetermined.
(3) Although one (1) or more terms are left open, a lease contractdoes not fail for indefiniteness if the parties have intended to makea lease contract and there is a reasonably certain basis for giving anappropriate remedy.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-205
Firm offers
Sec. 205. An offer by a merchant to lease goods to or fromanother person in a signed writing that by its terms gives assuranceit will be held open is not revocable, for lack of consideration, duringthe time stated or, if no time is stated, for a reasonable time, but in noevent may the period of irrevocability exceed three (3) months. Anysuch term of assurance on a form supplied by the offeree must beseparately signed by the offeror.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-206
Offer and acceptance in formation of lease contract
Sec. 206. (1) Unless otherwise unambiguously indicated by thelanguage or circumstances, an offer to make a lease contract must beconstrued as inviting acceptance in any manner and by any mediumreasonable in the circumstances.
(2) If the beginning of a requested performance is a reasonablemode of acceptance, an offeror who is not notified of acceptancewithin a reasonable time may treat the offer as having lapsed beforeacceptance.As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-207
Repealed
(Repealed by P.L.143-2007, SEC.78.)
IC 26-1-2.1-208
Modification, rescission, and waiver
Sec. 208. (1) An agreement modifying a lease contract needs noconsideration to be binding.
(2) A signed lease agreement that excludes modification orrescission except by a signed writing may not be otherwise modifiedor rescinded, but, except as between merchants, such a requirementon a form supplied by a merchant must be separately signed by theother party.
(3) Although an attempt at modification or rescission does notsatisfy the requirements of subsection (2), it may operate as a waiver.
(4) A party who has made a waiver affecting an executory portionof a lease contract may retract the waiver by reasonable notificationreceived by the other party that strict performance will be requiredof any term waived, unless the retraction would be unjust in view ofa material change of position in reliance on the waiver.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-209
Lessee under finance lease as beneficiary of supply contract
Sec. 209. (1) The benefit of a supplier's promises to the lessorunder the supply contract and of all warranties, whether express orimplied, including those of any third party provided in connectionwith or as part of the supply contract, extends to the lessee to theextent of the lessee's leasehold interest under a finance lease relatedto the supply contract, but is subject to the terms of the warranty andof the supply contract and all defenses or claims arising therefrom.
(2) The extension of the benefit of a supplier's promises and ofwarranties to the lessee (IC 26-1-2.1-209(1)) does not: (i) modify therights and obligations of the parties to the supply contract, whetherarising therefrom or otherwise; or (ii) impose any duty or liabilityunder the supply contract on the lessee.
(3) Any modification or rescission of the supply contract by thesupplier and the lessor is effective between the supplier and lesseeunless, before the modification or rescission, the supplier hasreceived notice that the lessee has entered into a finance lease relatedto the supply contract. If the modification or rescission is effectivebetween the supplier and the lessee, the lessor is deemed to haveassumed, in addition to the obligations of the lessor to the lessee
under the lease contract, promises of the supplier to the lessor andwarranties that were so modified or rescinded as they existed andwere available to the lessee before modification or rescission.
(4) In addition to the extension of the benefit of the supplier'spromises and of warranties to the lessee under subsection (1), thelessee retains all rights that the lessee may have against the supplierwhich arise from an agreement between the lessee and the supplieror under other law.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-210
Express warranties
Sec. 210. (1) Express warranties by the lessor are created asfollows:
(a) Any affirmation of fact or promise made by the lessor to thelessee which relates to the goods and becomes part of the basisof the bargain creates an express warranty that the goods willconform to the affirmation or promise.
(b) Any description of the goods which is made part of the basisof the bargain creates an express warranty that the goods willconform to the description.
(c) Any sample or model that is made part of the basis of thebargain creates an express warranty that the whole of the goodswill conform to the sample or model.
(2) It is not necessary to the creation of an express warranty thatthe lessor use formal words, such as "warrant" or "guarantee," or thatthe lessor have a specific intention to make a warranty, but anaffirmation merely of the value of the goods or a statementpurporting to be merely the lessor's opinion or commendation of thegoods does not create a warranty.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-211
Warranties against interference and against infringement; lessee'sobligation against infringement
Sec. 211. (1) There is in a lease contract a warranty that for thelease term no person holds a claim to or interest in the goods thatarose from an act or omission of the lessor, other than a claim by wayof infringement or the like, which will interfere with the lessee'senjoyment of its leasehold interest.
(2) Except in a finance lease there is in a lease contract by a lessorwho is a merchant regularly dealing in goods of the kind a warrantythat the goods are delivered free of the rightful claim of any personby 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 byway of infringement or the like that arises out of compliance with thespecifications.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-212
Implied warranty of merchantability
Sec. 212. (1) Except in a finance lease, a warranty that the goodswill be merchantable is implied in a lease contract if the lessor is amerchant 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 inthe lease agreement;
(b) in the case of fungible goods, are of fair average qualitywithin the description;
(c) are fit for the ordinary purposes for which goods of that typeare used;
(d) run, within the variation permitted by the lease agreement,of even kind, quality, and quantity within each unit and amongall units involved;
(e) are adequately contained, packaged, and labeled as the leaseagreement may require; and
(f) conform to any promises or affirmations of fact made on thecontainer or label.
(3) Other implied warranties may arise from course of dealing orusage of trade.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-213
Implied warranty of fitness for particular purpose
Sec. 213. Except in a finance lease, if the lessor at the time thelease contract is made has reason to know of any particular purposefor which the goods are required and that the lessee is relying on thelessor's skill or judgment to select or furnish suitable goods, there isin the lease contract an implied warranty that the goods will be fit forthat purpose.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-214
Exclusion or modification of warranties
Sec. 214. (1) Words or conduct relevant to the creation of anexpress warranty and words or conduct tending to negate or limit awarranty must be construed wherever reasonable as consistent witheach other; but, subject to the provisions of IC 26-1-2.1-202 on parolor 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 impliedwarranty of merchantability or any part of it the language mustmention "merchantability", be by a writing, and be conspicuous.Subject to subsection (3), to exclude or modify any implied warrantyof fitness the exclusion must be by a writing and be conspicuous.Language to exclude all implied warranties of fitness is sufficient ifit is in writing, is conspicuous and states, for example, "There is nowarranty 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 impliedwarranties are excluded by expressions like "as is," or "with allfaults," or by other language that in common understandingcalls the lessee's attention to the exclusion of warranties andmakes plain that there is no implied warranty, if in writing andconspicuous;
(b) if the lessee before entering into the lease contract hasexamined the goods or the sample or model as fully as desiredor has refused to examine the goods, there is no impliedwarranty with regard to defects that an examination ought in thecircumstances to have revealed; and
(c) an implied warranty may also be excluded or modified bycourse of dealing, course of performance, or usage of trade.
(4) To exclude or modify a warranty against interference oragainst infringement (IC 26-1-2.1-211) or any part of it, the languagemust be specific, be by a writing, and be conspicuous, unless thecircumstances, including course of performance, course of dealing,or usage of trade, give the lessee reason to know that the goods arebeing leased subject to a claim or interest of any person.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-215
Cumulation and conflict of warranties express or implied
Sec. 215. Warranties, whether express or implied, must beconstrued as consistent with each other and as cumulative, but if thatconstruction is unreasonable, the intention of the parties determineswhich warranty is dominant. In ascertaining that intention thefollowing rules apply:
(a) Exact or technical specifications displace an inconsistentsample or model or general language of description.
(b) A sample from an existing bulk displaces inconsistentgeneral language of description.
(c) Express warranties displace inconsistent implied warrantiesother than an implied warranty of fitness for a particularpurpose.As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-216
Third-party beneficiaries of express and implied warranties
Sec. 216. A warranty to or for the benefit of a lessee underIC 26-1-2.1, whether express or implied, extends to any naturalperson who is in the family or household of the lessee or who is aguest in the lessee's home if it is reasonable to expect that suchperson may use, consume, or be affected by the goods and who isinjured in person by breach of the warranty. This section does notdisplace principles of law and equity that extend a warranty to or forthe benefit of a lessee to other persons. The operation of this sectionmay not be excluded, modified, or limited, but an exclusion,modification, or limitation of the warranty, including any withrespect to rights and remedies, effective against the lessee is alsoeffective against any beneficiary designated under this section.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-217
Identification
Sec. 217. Identification of goods as goods to which a leasecontract refers may be made at any time and in any manner explicitlyagreed 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 alease of goods that are existing and identified;
(b) when the goods are shipped, marked, or otherwisedesignated by the lessor as goods to which the lease contractrefers, if the lease contract is for a lease of goods that are notexisting and identified; or
(c) when the young are conceived, if the lease contract is for alease of unborn young of animals.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-218
Insurance and proceeds
Sec. 218. (1) A lessee obtains an insurable interest when existinggoods are identified to the lease contract even though the goodsidentified are nonconforming and the lessee has an option to rejectthem.
(2) If a lessee has an insurable interest only by reason of thelessor's identification of the goods, the lessor, until default orinsolvency 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 tobuy has been exercised by the lessee and risk of loss has passed tothe lessee.
(4) Nothing in this section impairs any insurable interestrecognized under any other statute or rule of law.
(5) The parties by agreement may determine that one or moreparties have an obligation to obtain and pay for insurance coveringthe goods and by agreement may determine the beneficiary of theproceeds of the insurance.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-219
Risk of loss
Sec. 219. (1) Except in the case of a finance lease, risk of loss isretained by the lessor and does not pass to the lessee. In the case ofa finance lease, risk of loss passes to the lessee.
(2) Subject to the provisions of IC 26-1-2.1 on the effect ofdefault on risk of loss (IC 26-1-2.1-220), if risk of loss is to pass tothe lessee and the time of passage is not stated, the following rulesapply:
(a) If the lease contract requires or authorizes the goods to beshipped 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 dulydelivered to the carrier; but
(ii) if it does require delivery at a particular destination andthe goods are there duly tendered while in the possession ofthe carrier, the risk of loss passes to the lessee when thegoods are there duly so tendered as to enable the lessee totake delivery.
(b) If the goods are held by a bailee to be delivered withoutbeing moved, the risk of loss passes to the lessee onacknowledgment by the bailee of the lessee's right to possessionof the goods.
(c) In any case not within subdivision (a) or (b), the risk of losspasses to the lessee on the lessee's receipt of the goods if thelessor, or, in the case of a finance lease, the supplier, is amerchant; otherwise the risk passes to the lessee on tender ofdelivery.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-220
Effect of default on risk of loss
Sec. 220. (1) Where risk of loss is to pass to the lessee and thetime of passage is not stated: (a) If a tender or delivery of goods so fails to conform to thelease contract as to give a right of rejection, the risk of their lossremains with the lessor, or, in the case of a finance lease, thesupplier, until cure or acceptance.
(b) If the lessee rightfully revokes acceptance, the lessee, to theextent of any deficiency in the lessee's effective insurancecoverage, may treat the risk of loss as having remained with thelessor from the beginning.
(2) Whether or not risk of loss is to pass to the lessee, if the lesseeas to conforming goods already identified to a lease contractrepudiates or is otherwise in default under the lease contract, thelessor, or, in the case of a finance lease, the supplier, to the extent ofany deficiency in the supplier's effective insurance coverage maytreat the risk of loss as resting on the lessee for a commerciallyreasonable time.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-221
Casualty to identified goods
Sec. 221. If a lease contract requires goods identified when thelease contract is made, and the goods suffer casualty without fault ofthe lessee, the lessor or the supplier before delivery, or the goodssuffer casualty before risk of loss passes to the lessee pursuant to thelease agreement or IC 26-1-2.1-219, 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 tono longer conform to the lease contract, the lessee maynevertheless demand inspection and at the lessee's option eithertreat the lease contract as avoided or, except in a finance leasethat is not a consumer lease, accept the goods with dueallowance from the rent payable for the balance of the leaseterm for the deterioration or the deficiency in quantity butwithout further right against the lessor.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-301
Enforceability of lease contract
Sec. 301. Except as otherwise provided in IC 26-1-2.1, a leasecontract is effective and enforceable according to its terms betweenthe parties, against purchasers of the goods and against creditors ofthe parties.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-302
Title to and possession of goods Sec. 302. Except as otherwise provided in IC 26-1-2.1, eachprovision of IC 26-1-2.1 applies whether the lessor or a third partyhas title to the goods, and whether the lessor, the lessee, or a thirdparty has possession of the goods, notwithstanding any statute or ruleof law that possession or the absence of possession is fraudulent.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-303
"Creation of a security interest"; alienability of party's interestunder lease contract or of lessor's residual interest in goods;delegation of performance; assignment of rights
Sec. 303. (1) As used in this section, "creation of a securityinterest" includes the sale of a lease contract that is subject toIC 26-1-9.1, by reason of IC 26-1-9.1-109(a)(3).
(2) Except as provided in subsection (3) and IC 26-1-9.1-407, aprovision in a lease agreement which (i) prohibits the voluntary orinvoluntary transfer, including a transfer by sale, sublease, creationor enforcement of a security interest, or attachment, levy, or otherjudicial process, of an interest of a party under the lease contract orof the lessor's residual interest in the goods, or (ii) makes such atransfer an event of default, gives rise to the rights and remediesprovided in subsection (4), but a transfer that is prohibited or is anevent of default under the lease agreement is otherwise effective.
(3) A provision in a lease agreement which (i) prohibits a transferof a right to damages for default with respect to the whole leasecontract or of a right to payment arising out of the transferor's dueperformance of the transferor's entire obligation, or (ii) makes sucha transfer an event of default, is not enforceable, and such a transferis not a transfer that materially impairs the prospect of obtainingreturn performance by, materially changes the duty of, or materiallyincreases the burden or risk imposed on, the other party to the leasecontract within the purview of subsection (4).
(4) Subject to subsection (3) and IC 26-1-9.1-407:
(a) if a transfer is made which is made an event of default undera lease agreement, the party to the lease contract not making thetransfer, unless that party waives the default or otherwiseagrees, has the rights and remedies described inIC 26-1-2.1-501(2); or
(b) if subdivision (a) is not applicable and if a transfer is madethat (i) is prohibited under a lease agreement or (ii) materiallyimpairs the prospect of obtaining return performance by,materially changes the duty of, or materially increases theburden or risk imposed on, the other party to the lease contract,unless the party not making the transfer agrees at any time tothe transfer in the lease contract or otherwise, then, except as
limited by contract, (i) the transferor is liable to the party notmaking the transfer for damages caused by the transfer to theextent that the damages could not reasonably be prevented bythe party not making the transfer and (ii) a court havingjurisdiction may grant other appropriate relief, includingcancellation of the lease contract or an injunction against thetransfer.
(5) 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 thetransferor to the transferee. Acceptance by the transferee constitutesa promise by the transferee to perform those duties. The promise isenforceable by either the transferor or the other party to the leasecontract.
(6) Unless otherwise agreed by the lessor and the lessee, adelegation of performance does not relieve the transferor as againstthe other party of any duty to perform or of any liability for default.
(7) In a consumer lease, to prohibit the transfer of an interest ofa party under the lease contract or to make a transfer an event ofdefault, the language must be specific, by a writing, and conspicuous.
As added by P.L.189-1991, SEC.3. Amended by P.L.57-2000,SEC.24; P.L.1-2002, SEC.99.
IC 26-1-2.1-304
Subsequent lease of goods by lessor
Sec. 304. (1) Subject to IC 26-1-2.1-303, a subsequent lessee froma lessor of goods under an existing lease contract obtains, to theextent of the leasehold interest transferred, the leasehold interest inthe goods that the lessor had or had power to transfer, and except asprovided in subsection (2) and IC 26-1-2.1-527(4), takes subject tothe existing lease contract. A lessor with voidable title has power totransfer a good leasehold interest to a good faith subsequent lesseefor value, but only to the extent set forth in the preceding sentence.If goods have been delivered under a transaction of purchase, thelessor has that power even though:
(a) the lessor's transferor was deceived as to the identity of thelessor;
(b) the delivery was in exchange for a check which is laterdishonored;
(c) it was agreed that the transaction was to be a "cash sale"; or
(d) the delivery was procured through fraud punishable aslarcenous under the criminal law.
(2) A subsequent lessee in the ordinary course of business froma 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 theinterest of the subsequent lessee became enforceable against thatlessor obtains, to the extent of the leasehold interest transferred, allof that lessor's and the existing lessee's rights to the goods, and takesfree of the existing lease contract.
(3) A subsequent lessee from the lessor of goods that are subjectto an existing lease contract and are covered by a certificate of titleissued under a statute of this state or of another jurisdiction takes nogreater rights than those provided both by this section and by thecertificate of title statute.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-305
Sale or sublease of goods by lessee
Sec. 305. (1) Subject to the provisions of IC 26-1-2.1-303, a buyeror sublessee from the lessee of goods under an existing lease contractobtains, to the extent of the interest transferred, the leasehold interestin the goods that the lessee had or had power to transfer, and exceptas provided in subsection (2) and IC 26-1-2.1-511(4), takes subjectto the existing lease contract. A lessee with a voidable leaseholdinterest has power to transfer a good leasehold interest to a goodfaith buyer for value or a good faith sublessee for value, but only tothe extent set forth in the preceding sentence. When goods have beendelivered under a transaction of lease the lessee has that power eventhough:
(a) the lessor was deceived as to the identity of the lessee;
(b) the delivery was in exchange for a check which is laterdishonored; or
(c) the delivery was procured through fraud punishable aslarcenous under the criminal law.
(2) A buyer in the ordinary course of business or a sublessee inthe ordinary course of business from a lessee who is a merchantdealing in goods of that kind to whom the goods were entrusted bythe lessor obtains, to the extent of the interest transferred, all of thelessor's and lessee's rights to the goods, and takes free of the existinglease contract.
(3) A buyer or sublessee from the lessee of goods that are subjectto an existing lease contract and are covered by a certificate of titleissued under a statute of this state or of another jurisdiction takes nogreater rights than those provided both by this section and by thecertificate of title statute.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-306
Priority of certain liens arising by operation of law Sec. 306. If a person in the ordinary course of the person'sbusiness furnishes services or materials with respect to goods subjectto a lease contract, a lien upon those goods in the possession of thatperson given by statute or rule of law for those materials or servicestakes priority over any interest of the lessor or lessee under the leasecontract or IC 26-1-2.1 unless the lien is created by statute and thestatute provides otherwise or unless the lien is created by rule of lawand the rule of law provides otherwise.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-307
Priority of liens related to lease contract
Sec. 307. (1) Except as otherwise provided in IC 26-1-2.1-306, acreditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and inIC 26-1-2.1-306 and IC 26-1-2.1-308, a creditor of a lessor takessubject to the lease contract unless the creditor holds a lien thatattached to the goods before the lease contract became enforceable.
(3) Except as otherwise provided in IC 26-1-9.1-317,IC 26-1-9.1-321, and IC 26-1-9.1-323, a lessee takes a leaseholdinterest subject to a security interest held by a creditor of the lessor.
As added by P.L.189-1991, SEC.3. Amended by P.L.57-2000,SEC.25.
IC 26-1-2.1-308
Special rights of creditors
Sec. 308. (1) A creditor of a lessor in possession of goods subjectto a lease contract may treat the lease contract as void if as againstthe creditor retention of possession by the lessor is fraudulent underany statute or rule of law, but retention of possession in good faithand current course of trade by the lessor for a commerciallyreasonable time after the lease contract becomes enforceable is notfraudulent.
(2) Nothing in IC 26-1-2.1 impairs the rights of creditors of alessor if the lease contract:
(a) becomes enforceable, not in current course of trade but insatisfaction of or as security for a pre-existing claim for money,security, or the like; and
(b) is made under circumstances which under any statute or ruleof law apart from IC 26-1-2.1 would constitute the transactiona fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification ofgoods to a contract for sale as void if as against the creditor retentionof possession by the seller is fraudulent under any statute or rule oflaw, but retention of possession of the goods pursuant to a lease
contract entered into by the seller as lessee and the buyer as lessor inconnection with the sale or identification of the goods is notfraudulent if the buyer bought for value and in good faith.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-309
Lessor's and lessee's rights when goods become fixtures
Sec. 309. (1) In this section:
(a) goods are "fixtures" when they become so related toparticular real estate that an interest in them arises under realestate law;
(b) a "fixture filing" is the filing, in the office where a mortgageon the real estate would be filed or recorded, of a financingstatement covering goods that are or are to become fixtures andconforming to the requirements of IC 26-1-9.1-502(a) andIC 26-1-9.1-502(b);
(c) a lease is a "purchase money lease" unless the lessee haspossession or use of the goods or the right to possession or useof the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent itsecures an obligation incurred for the construction of animprovement on land including the acquisition cost of the land,if the recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and otherliens on real estate and all other rights in real estate that are notownership interests.
(2) Under IC 26-1-2.1 a lease may be of goods that are fixtures ormay continue in goods that become fixtures, but no lease exists underIC 26-1-2.1 of ordinary building materials incorporated into animprovement on land.
(3) IC 26-1-2.1 does not prevent creation of a lease of fixturespursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority overa conflicting interest of an encumbrancer or owner of the real estateif:
(a) the lease is a purchase money lease, the conflicting interestof the encumbrancer or owner arises before the goods becomefixtures, the interest of the lessor is perfected by a fixture filingbefore the goods become fixtures or within ten (10) daysthereafter, and the lessee has an interest of record in the realestate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filingbefore the interest of the encumbrancer or owner is of record,the lessor's interest has priority over any conflicting interest ofa predecessor in title of the encumbrancer or owner, and the
lessee has an interest of record in the real estate or is inpossession 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 orowner of the real estate if:
(a) the fixtures are readily removable factory or officemachines, readily removable equipment that is not primarilyused or leased for use in the operation of the real estate, orreadily removable replacements of domestic appliances that aregoods subject to a consumer lease, and before the goodsbecome fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate obtainedby legal or equitable proceedings after the lease contract isenforceable; or
(c) the encumbrancer or owner has consented in writing to thelease or has disclaimed an interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against theencumbrancer or owner. If the lessee's right to removeterminates, the priority of the interest of the lessor continues fora reasonable time.
(6) Notwithstanding subsection 4(a) but otherwise subject tosubsections (4) and (5), the interest of a lessor of fixtures, includingthe lessor's residual interest, is subordinate to the conflicting interestof an encumbrancer of the real estate under a construction mortgagerecorded before the goods become fixtures if the goods becomefixtures before the completion of the construction. To the extentgiven to refinance a construction mortgage, the conflicting interestof an encumbrancer of the real estate under a mortgage has thispriority to the same extent as the encumbrancer of the real estateunder the construction mortgage.
(7) In cases not within the preceding subsections, priority betweenthe interest of a lessor of fixtures, including the lessor's residualinterest, and the conflicting interest of an encumbrancer or owner ofthe real estate who is not the lessee is determined by the priorityrules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor'sresidual interest, has priority over all conflicting interests of allowners and encumbrancers of the real estate, the lessor or the lesseemay (i) on default, expiration, termination, or cancellation of thelease agreement but subject to the lease agreement and IC 26-1-2.1,or (ii) if necessary to enforce other rights and remedies of the lessoror lessee under IC 26-1-2.1, remove the goods from the real estate,free and clear of all conflicting interests of all owners andencumbrancers of the real estate, but the lessor or lessee mustreimburse any encumbrancer or owner of the real estate who is not
the lessee and who has not otherwise agreed for the cost of repair ofany physical injury, but not for any diminution in value of the realestate caused by the absence of the goods removed or by anynecessity of replacing them. A person entitled to reimbursement mayrefuse permission to remove until the party seeking removal givesadequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a securityinterest, the interest of a lessor of fixtures, including the lessor'sresidual interest, is perfected by filing a financing statement as afixture filing for leased goods that are or are to become fixtures inaccordance with the relevant provisions of IC 26-1-9.1.
As added by P.L.189-1991, SEC.3. Amended by P.L.34-1997,SEC.17; P.L.57-2000, SEC.26.
IC 26-1-2.1-310
Lessor's and lessee's rights when goods become accessions
Sec. 310. (1) Goods are "accessions" when they are installed in oraffixed to other goods.
(2) The interest of a lessor or a lessee under a lease contractentered into before the goods became accessions is superior to allinterests in the whole except as stated in subsection (4).
(3) The interest of a lessor or a lessee under a lease contractentered into at the time or after the goods became accessions issuperior to all subsequently acquired interests in the whole except asstated in subsection (4) but is subordinate to interests in the wholeexisting at the time the lease contract was made unless the holders ofsuch interests in the whole have in writing consented to the lease ordisclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contractdescribed in subsection (2) or (3) is subordinate to the interest of:
(a) a buyer in the ordinary course of business or a lessee in theordinary course of business of any interest in the wholeacquired after the goods became accessions; or
(b) a creditor with a security interest in the whole perf