IC 26-1-2.1-101 Short title
Sec. 101. IC 26-1-2.1 shall be known and may be cited as the
Uniform 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 of
form, 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, in
IC 26-1-2.1:
(a) "Buyer in ordinary course of business" means a person who
in good faith and without knowledge that the sale to the person
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 acquiring 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 twenty-five thousand
dollars ($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 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 (1) 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 IC 26-1-2.1 to the
promises and warranties, including those of any third
party, provided to the lessor by the person supplying the
goods in connection with or as part of the contract by
which the lessor acquired the goods or the right to
possession and use of the goods; and (c) that the lessee
may communicate with the person supplying the goods to
the lessor and receive an accurate and complete statement
of those promises and warranties, including any
disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of
identification to the lease contract, or are fixtures (IC
26-1-2.1-309), 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 IC 26-1-2.1. 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 IC 26-1-2.1 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 the person
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 acquiring 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
(1) 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 IC 26-1-2.1 and the sections in
which 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 to
IC 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 and
principles of construction and interpretation applicable throughout
IC 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 also
subject to any applicable:
(a) certificate of title statute of this state;
(b) certificate of title statute of another jurisdiction (IC
26-1-2.1-105); 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 IC 26-1-2.1.
(2) In case of conflict between IC 26-1-2.1, other than
IC 26-1-2.1-105, IC 26-1-2.1-304(3), and IC 26-1-2.1-305(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. 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 of
title
Sec. 105. Subject to the provisions of IC 26-1-2.1-304(3) and
IC 26-1-2.1-305(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 (4) months after the goods are removed from that
jurisdiction and thereafter until a new certificate of title is
issued 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 choose
applicable law and judicial forum
Sec. 106. (1) If the law chosen by the parties to a consumer lease
is that of a jurisdiction other than a jurisdiction in which the lessee
resides at the time the lease agreement becomes enforceable or
within thirty (30) days thereafter or in which the goods are to be
used, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer lease
is a forum that would not otherwise have jurisdiction over the lessee,
the choice is not enforceable. 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 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. 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 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.
(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
the lessee knew to be groundless, the court shall award
reasonable attorney's fees to the party against whom the claim
is made.
(c) In determining attorney's fees, the amount of the recovery on
behalf of the claimant under subsections (1) and (2) is not
controlling. 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's
successor in interest may accelerate payment or performance or
require collateral or additional collateral "at will" or "when the party
deems the party insecure" or in words of similar import must be
construed to mean that the party has power to do so only if the party
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. 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 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
one thousand dollars ($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. 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 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. 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 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. 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 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 (1) 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. 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 from
another person in a signed writing that by its terms gives assurance
it will be held open is not revocable, for lack of consideration, during
the time stated or, if no time is stated, for a reasonable time, but in no
event may the period of irrevocability exceed three (3) months. Any
such term of assurance on a form supplied by the offeree must be
separately 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 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.
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 no
consideration to be binding.
(2) A signed lease agreement that excludes modification or
rescission except by a signed writing may not be otherwise modified
or rescinded, but, except as between merchants, such a requirement
on a form supplied by a merchant must be separately signed by the
other party.
(3) Although an attempt at modification or rescission does not
satisfy the requirements of subsection (2), it may operate as a waiver.
(4) A party who has made a waiver affecting an executory portion
of a lease contract may retract the waiver by reasonable notification
received by the other party that strict performance will be required
of any term waived, unless the retraction would be unjust in view of
a 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 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 (IC 26-1-2.1-209(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 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. 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 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. As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-211 Warranties against interference and against infringement; lessee's
obligation against infringement
Sec. 211. (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. 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 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;
(c) are fit for the ordinary purposes for which goods of that type
are used;
(d) run, within the variation permitted by the lease agreement,
of even kind, quality, and quantity within each unit and among
all units involved;
(e) are adequately contained, packaged, and labeled as the lease
agreement may require; and
(f) conform to any promises or affirmations of fact made on the
container or label.
(3) Other implied warranties may arise from course of dealing or
usage of trade. 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 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. 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 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 IC 26-1-2.1-202 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 (IC 26-1-2.1-211) 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. 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 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.
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 under
IC 26-1-2.1, 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. 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 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. 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 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. 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 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 IC 26-1-2.1 on the effect of
default on risk of loss (IC 26-1-2.1-220), if risk of loss is to pass to
the lessee and the time of passage is not stated, the following rules
apply:
(a) If the lease contract requires or authorizes the goods to be
shipped by carrier:
(i) and it does not require delivery at a particular destination,
the risk of loss passes to the lessee when the goods are duly
delivered to the carrier; but
(ii) if it does require delivery at a particular destination and
the goods are there duly tendered while in the possession of
the carrier, the risk of loss passes to the lessee when the
goods are there duly so tendered as to enable the lessee to
take delivery.
(b) If the goods are held by a bailee to be delivered without
being moved, the risk of loss passes to the lessee on
acknowledgment by the bailee of the lessee's right to possession
of the goods.
(c) In any case not within subdivision (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. 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 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, the lessee, to the
extent of any deficiency in the lessee's 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 the supplier's effective insurance coverage may
treat the risk of loss as resting on the lessee for a commercially
reasonable 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 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 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 to
no longer conform to the lease contract, the lessee may
nevertheless demand inspection and at the lessee's 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. 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 lease
contract is effective and enforceable according to its terms between
the parties, against purchasers of the goods and against creditors of
the 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, each
provision of IC 26-1-2.1 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. As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-303 "Creation of a security interest"; alienability of party's interest
under 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 security
interest" includes the sale of a lease contract that is subject to
IC 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, 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 (4), 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 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 (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 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
IC 26-1-2.1-501(2); or
(b) if subdivision (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.
(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 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.
(6) 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.
(7) 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. 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 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 IC 26-1-2.1-527(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. 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 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 IC 26-1-2.1-511(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. 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's
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 IC 26-1-2.1 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. 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, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and in
IC 26-1-2.1-306 and IC 26-1-2.1-308, a creditor of a lessor takes
subject to the lease contract unless the creditor holds a lien that
attached 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 leasehold
interest 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 subject
to a lease contract may treat the lease contract as void if as against
the creditor retention of possession by the lessor is fraudulent under
any statute or rule of law, but retention of possession in good faith
and current course of trade by the lessor for a commercially
reasonable time after the lease contract becomes enforceable is not
fraudulent.
(2) Nothing in IC 26-1-2.1 impairs the rights of creditors of a
lessor if the lease contract:
(a) becomes enforceable, not in current course of trade but in
satisfaction 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 rule
of law apart from IC 26-1-2.1 would constitute the transaction
a fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification of
goods to a contract for sale as void if as against the creditor retention
of possession by the seller is fraudulent under any statute or rule of
law, but retention of possession of the goods pursuant to a lease
contract entered into by the seller as lessee and the buyer as lessor in
connection with the sale or identification of the goods is not
fraudulent if the buyer bought for value and in good faith. 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 to
particular real estate that an interest in them arises under real
estate law;
(b) a "fixture filing" is the filing, in the office where a mortgage
on the real estate would be filed or recorded, of a financing
statement covering goods that are or are to become fixtures and
conforming to the requirements of IC 26-1-9.1-502(a) and
IC 26-1-9.1-502(b);
(c) a lease is a "purchase money lease" unless the lessee has
possession or use of the goods or the right to possession or use
of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it
secures an obligation incurred for the construction of an
improvement on land including the acquisition cost of the land,
if the recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that are not
ownership interests.
(2) Under IC 26-1-2.1 a lease may be of goods that are fixtures or
may continue in goods that become fixtures, but no lease exists under
IC 26-1-2.1 of ordinary building materials incorporated into an
improvement on land.
(3) IC 26-1-2.1 does not prevent creation of a lease of fixtures
pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over
a conflicting interest of an encumbrancer or owner of the real estate
if:
(a) the lease is a purchase money lease, the conflicting interest
of the encumbrancer or owner arises before the goods become
fixtures, the interest of the lessor is perfected by a fixture filing
before the goods become fixtures or within ten (10) days
thereafter, and the lessee has an interest of record in the real
estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filing
before the interest of the encumbrancer or owner is of record,
the lessor's interest has priority over any conflicting interest of
a predecessor in title of the encumbrancer or owner, and the
lessee has an interest of record in the real estate or is in
possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected,
has priority over the conflicting interest of an encumbrancer or
owner of the real estate if:
(a) the fixtures are readily removable factory or office
machines, readily removable equipment that is not primarily
used or leased for use in the operation of the real estate, or
readily removable replacements of domestic appliances that are
goods subject to a consumer lease, and before the goods
become fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate obtained
by legal or equitable proceedings after the lease contract is
enforceable; or
(c) the encumbrancer or owner has consented in writing to the
lease or has disclaimed an interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the
encumbrancer or owner. If the lessee's right to remove
terminates, the priority of the interest of the lessor continues for
a reasonable time.
(6) Notwithstanding subsection 4(a) but otherwise subject to
subsections (4) and (5), the interest of a lessor of fixtures, including
the lessor's residual interest, is subordinate to the conflicting interest
of an encumbrancer of the real estate under a construction mortgage
recorded before the goods become fixtures if the goods become
fixtures before the completion of the construction. To the extent
given to refinance a construction mortgage, the conflicting interest
of an encumbrancer of the real estate under a mortgage has this
priority to the same extent as the encumbrancer of the real estate
under the construction mortgage.
(7) In cases not within the preceding subsections, priority between
the interest of a lessor of fixtures, including the lessor's residual
interest, and the conflicting interest of an encumbrancer or owner of
the real estate who is not the lessee is determined by the priority
rules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's
residual interest, has priority over all conflicting interests of all
owners and encumbrancers of the real estate, the lessor or the lessee
may (i) on default, expiration, termination, or cancellation of the
lease agreement but subject to the lease agreement and IC 26-1-2.1,
or (ii) if necessary to enforce other rights and remedies of the lessor
or lessee under IC 26-1-2.1, remove the goods from the real estate,
free and clear of all conflicting interests of all owners and
encumbrancers of the real estate, but the lessor or lessee must
reimburse any encumbrancer or owner of the real estate who is not
the lessee and who has not otherwise agreed for the cost of repair of
any physical injury, but not for any diminution in value of the real
estate caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a security
interest, the interest of a lessor of fixtures, including the lessor's
residual interest, is perfected by filing a financing statement as a
fixture filing for leased goods that are or are to become fixtures in
accordance with the relevant provisions of 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 or
affixed to other goods.
(2) The interest of a lessor or a lessee under a lease contract
entered into before the goods became accessions is superior to all
interests in the whole except as stated in subsection (4).
(3) The interest of a lessor or a lessee under a lease contract
entered into at the time or after the goods became accessions is
superior to all subsequently acquired interests in the whole except as
stated in subsection (4) but is subordinate to interests in the whole
existing at the time the lease contract was made unless the holders of
such interests in the whole have in writing consented to the lease or
disclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contract
described in subsection (2) or (3) is subordinate to the interest of:
(a) a buyer in the ordinary course of business or a lessee in the
ordinary course of business of any interest in the whole
acquired after the goods became accessions; or
(b) a creditor with a security interest in the whole perf
IC 26-1-2.1-101 Short title
Sec. 101. IC 26-1-2.1 shall be known and may be cited as the
Uniform 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 of
form, 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, in
IC 26-1-2.1:
(a) "Buyer in ordinary course of business" means a person who
in good faith and without knowledge that the sale to the person
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 acquiring 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 twenty-five thousand
dollars ($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 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 (1) 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 IC 26-1-2.1 to the
promises and warranties, including those of any third
party, provided to the lessor by the person supplying the
goods in connection with or as part of the contract by
which the lessor acquired the goods or the right to
possession and use of the goods; and (c) that the lessee
may communicate with the person supplying the goods to
the lessor and receive an accurate and complete statement
of those promises and warranties, including any
disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of
identification to the lease contract, or are fixtures (IC
26-1-2.1-309), 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 IC 26-1-2.1. 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 IC 26-1-2.1 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 the person
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 acquiring 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
(1) 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 IC 26-1-2.1 and the sections in
which 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 to
IC 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 and
principles of construction and interpretation applicable throughout
IC 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 also
subject to any applicable:
(a) certificate of title statute of this state;
(b) certificate of title statute of another jurisdiction (IC
26-1-2.1-105); 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 IC 26-1-2.1.
(2) In case of conflict between IC 26-1-2.1, other than
IC 26-1-2.1-105, IC 26-1-2.1-304(3), and IC 26-1-2.1-305(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. 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 of
title
Sec. 105. Subject to the provisions of IC 26-1-2.1-304(3) and
IC 26-1-2.1-305(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 (4) months after the goods are removed from that
jurisdiction and thereafter until a new certificate of title is
issued 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 choose
applicable law and judicial forum
Sec. 106. (1) If the law chosen by the parties to a consumer lease
is that of a jurisdiction other than a jurisdiction in which the lessee
resides at the time the lease agreement becomes enforceable or
within thirty (30) days thereafter or in which the goods are to be
used, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer lease
is a forum that would not otherwise have jurisdiction over the lessee,
the choice is not enforceable. 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 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. 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 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.
(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
the lessee knew to be groundless, the court shall award
reasonable attorney's fees to the party against whom the claim
is made.
(c) In determining attorney's fees, the amount of the recovery on
behalf of the claimant under subsections (1) and (2) is not
controlling. 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's
successor in interest may accelerate payment or performance or
require collateral or additional collateral "at will" or "when the party
deems the party insecure" or in words of similar import must be
construed to mean that the party has power to do so only if the party
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. 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 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
one thousand dollars ($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. 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 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. 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 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. 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 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 (1) 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. 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 from
another person in a signed writing that by its terms gives assurance
it will be held open is not revocable, for lack of consideration, during
the time stated or, if no time is stated, for a reasonable time, but in no
event may the period of irrevocability exceed three (3) months. Any
such term of assurance on a form supplied by the offeree must be
separately 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 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.
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 no
consideration to be binding.
(2) A signed lease agreement that excludes modification or
rescission except by a signed writing may not be otherwise modified
or rescinded, but, except as between merchants, such a requirement
on a form supplied by a merchant must be separately signed by the
other party.
(3) Although an attempt at modification or rescission does not
satisfy the requirements of subsection (2), it may operate as a waiver.
(4) A party who has made a waiver affecting an executory portion
of a lease contract may retract the waiver by reasonable notification
received by the other party that strict performance will be required
of any term waived, unless the retraction would be unjust in view of
a 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 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 (IC 26-1-2.1-209(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 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. 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 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. As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-211 Warranties against interference and against infringement; lessee's
obligation against infringement
Sec. 211. (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. 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 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;
(c) are fit for the ordinary purposes for which goods of that type
are used;
(d) run, within the variation permitted by the lease agreement,
of even kind, quality, and quantity within each unit and among
all units involved;
(e) are adequately contained, packaged, and labeled as the lease
agreement may require; and
(f) conform to any promises or affirmations of fact made on the
container or label.
(3) Other implied warranties may arise from course of dealing or
usage of trade. 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 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. 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 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 IC 26-1-2.1-202 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 (IC 26-1-2.1-211) 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. 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 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.
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 under
IC 26-1-2.1, 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. 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 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. 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 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. 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 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 IC 26-1-2.1 on the effect of
default on risk of loss (IC 26-1-2.1-220), if risk of loss is to pass to
the lessee and the time of passage is not stated, the following rules
apply:
(a) If the lease contract requires or authorizes the goods to be
shipped by carrier:
(i) and it does not require delivery at a particular destination,
the risk of loss passes to the lessee when the goods are duly
delivered to the carrier; but
(ii) if it does require delivery at a particular destination and
the goods are there duly tendered while in the possession of
the carrier, the risk of loss passes to the lessee when the
goods are there duly so tendered as to enable the lessee to
take delivery.
(b) If the goods are held by a bailee to be delivered without
being moved, the risk of loss passes to the lessee on
acknowledgment by the bailee of the lessee's right to possession
of the goods.
(c) In any case not within subdivision (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. 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 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, the lessee, to the
extent of any deficiency in the lessee's 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 the supplier's effective insurance coverage may
treat the risk of loss as resting on the lessee for a commercially
reasonable 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 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 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 to
no longer conform to the lease contract, the lessee may
nevertheless demand inspection and at the lessee's 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. 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 lease
contract is effective and enforceable according to its terms between
the parties, against purchasers of the goods and against creditors of
the 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, each
provision of IC 26-1-2.1 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. As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-303 "Creation of a security interest"; alienability of party's interest
under 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 security
interest" includes the sale of a lease contract that is subject to
IC 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, 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 (4), 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 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 (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 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
IC 26-1-2.1-501(2); or
(b) if subdivision (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.
(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 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.
(6) 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.
(7) 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. 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 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 IC 26-1-2.1-527(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. 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 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 IC 26-1-2.1-511(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. 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's
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 IC 26-1-2.1 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. 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, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and in
IC 26-1-2.1-306 and IC 26-1-2.1-308, a creditor of a lessor takes
subject to the lease contract unless the creditor holds a lien that
attached 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 leasehold
interest 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 subject
to a lease contract may treat the lease contract as void if as against
the creditor retention of possession by the lessor is fraudulent under
any statute or rule of law, but retention of possession in good faith
and current course of trade by the lessor for a commercially
reasonable time after the lease contract becomes enforceable is not
fraudulent.
(2) Nothing in IC 26-1-2.1 impairs the rights of creditors of a
lessor if the lease contract:
(a) becomes enforceable, not in current course of trade but in
satisfaction 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 rule
of law apart from IC 26-1-2.1 would constitute the transaction
a fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification of
goods to a contract for sale as void if as against the creditor retention
of possession by the seller is fraudulent under any statute or rule of
law, but retention of possession of the goods pursuant to a lease
contract entered into by the seller as lessee and the buyer as lessor in
connection with the sale or identification of the goods is not
fraudulent if the buyer bought for value and in good faith. 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 to
particular real estate that an interest in them arises under real
estate law;
(b) a "fixture filing" is the filing, in the office where a mortgage
on the real estate would be filed or recorded, of a financing
statement covering goods that are or are to become fixtures and
conforming to the requirements of IC 26-1-9.1-502(a) and
IC 26-1-9.1-502(b);
(c) a lease is a "purchase money lease" unless the lessee has
possession or use of the goods or the right to possession or use
of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it
secures an obligation incurred for the construction of an
improvement on land including the acquisition cost of the land,
if the recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that are not
ownership interests.
(2) Under IC 26-1-2.1 a lease may be of goods that are fixtures or
may continue in goods that become fixtures, but no lease exists under
IC 26-1-2.1 of ordinary building materials incorporated into an
improvement on land.
(3) IC 26-1-2.1 does not prevent creation of a lease of fixtures
pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over
a conflicting interest of an encumbrancer or owner of the real estate
if:
(a) the lease is a purchase money lease, the conflicting interest
of the encumbrancer or owner arises before the goods become
fixtures, the interest of the lessor is perfected by a fixture filing
before the goods become fixtures or within ten (10) days
thereafter, and the lessee has an interest of record in the real
estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filing
before the interest of the encumbrancer or owner is of record,
the lessor's interest has priority over any conflicting interest of
a predecessor in title of the encumbrancer or owner, and the
lessee has an interest of record in the real estate or is in
possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected,
has priority over the conflicting interest of an encumbrancer or
owner of the real estate if:
(a) the fixtures are readily removable factory or office
machines, readily removable equipment that is not primarily
used or leased for use in the operation of the real estate, or
readily removable replacements of domestic appliances that are
goods subject to a consumer lease, and before the goods
become fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate obtained
by legal or equitable proceedings after the lease contract is
enforceable; or
(c) the encumbrancer or owner has consented in writing to the
lease or has disclaimed an interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the
encumbrancer or owner. If the lessee's right to remove
terminates, the priority of the interest of the lessor continues for
a reasonable time.
(6) Notwithstanding subsection 4(a) but otherwise subject to
subsections (4) and (5), the interest of a lessor of fixtures, including
the lessor's residual interest, is subordinate to the conflicting interest
of an encumbrancer of the real estate under a construction mortgage
recorded before the goods become fixtures if the goods become
fixtures before the completion of the construction. To the extent
given to refinance a construction mortgage, the conflicting interest
of an encumbrancer of the real estate under a mortgage has this
priority to the same extent as the encumbrancer of the real estate
under the construction mortgage.
(7) In cases not within the preceding subsections, priority between
the interest of a lessor of fixtures, including the lessor's residual
interest, and the conflicting interest of an encumbrancer or owner of
the real estate who is not the lessee is determined by the priority
rules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's
residual interest, has priority over all conflicting interests of all
owners and encumbrancers of the real estate, the lessor or the lessee
may (i) on default, expiration, termination, or cancellation of the
lease agreement but subject to the lease agreement and IC 26-1-2.1,
or (ii) if necessary to enforce other rights and remedies of the lessor
or lessee under IC 26-1-2.1, remove the goods from the real estate,
free and clear of all conflicting interests of all owners and
encumbrancers of the real estate, but the lessor or lessee must
reimburse any encumbrancer or owner of the real estate who is not
the lessee and who has not otherwise agreed for the cost of repair of
any physical injury, but not for any diminution in value of the real
estate caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a security
interest, the interest of a lessor of fixtures, including the lessor's
residual interest, is perfected by filing a financing statement as a
fixture filing for leased goods that are or are to become fixtures in
accordance with the relevant provisions of 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 or
affixed to other goods.
(2) The interest of a lessor or a lessee under a lease contract
entered into before the goods became accessions is superior to all
interests in the whole except as stated in subsection (4).
(3) The interest of a lessor or a lessee under a lease contract
entered into at the time or after the goods became accessions is
superior to all subsequently acquired interests in the whole except as
stated in subsection (4) but is subordinate to interests in the whole
existing at the time the lease contract was made unless the holders of
such interests in the whole have in writing consented to the lease or
disclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contract
described in subsection (2) or (3) is subordinate to the interest of:
(a) a buyer in the ordinary course of business or a lessee in the
ordinary course of business of any interest in the whole
acquired after the goods became accessions; or
(b) a creditor with a security interest in the whole perf
IC 26-1-2.1-101 Short title
Sec. 101. IC 26-1-2.1 shall be known and may be cited as the
Uniform 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 of
form, 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, in
IC 26-1-2.1:
(a) "Buyer in ordinary course of business" means a person who
in good faith and without knowledge that the sale to the person
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 acquiring 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 twenty-five thousand
dollars ($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 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 (1) 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 IC 26-1-2.1 to the
promises and warranties, including those of any third
party, provided to the lessor by the person supplying the
goods in connection with or as part of the contract by
which the lessor acquired the goods or the right to
possession and use of the goods; and (c) that the lessee
may communicate with the person supplying the goods to
the lessor and receive an accurate and complete statement
of those promises and warranties, including any
disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of
identification to the lease contract, or are fixtures (IC
26-1-2.1-309), 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 IC 26-1-2.1. 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 IC 26-1-2.1 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 the person
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 acquiring 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
(1) 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 IC 26-1-2.1 and the sections in
which 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 to
IC 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 and
principles of construction and interpretation applicable throughout
IC 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 also
subject to any applicable:
(a) certificate of title statute of this state;
(b) certificate of title statute of another jurisdiction (IC
26-1-2.1-105); 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 IC 26-1-2.1.
(2) In case of conflict between IC 26-1-2.1, other than
IC 26-1-2.1-105, IC 26-1-2.1-304(3), and IC 26-1-2.1-305(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. 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 of
title
Sec. 105. Subject to the provisions of IC 26-1-2.1-304(3) and
IC 26-1-2.1-305(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 (4) months after the goods are removed from that
jurisdiction and thereafter until a new certificate of title is
issued 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 choose
applicable law and judicial forum
Sec. 106. (1) If the law chosen by the parties to a consumer lease
is that of a jurisdiction other than a jurisdiction in which the lessee
resides at the time the lease agreement becomes enforceable or
within thirty (30) days thereafter or in which the goods are to be
used, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer lease
is a forum that would not otherwise have jurisdiction over the lessee,
the choice is not enforceable. 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 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. 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 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.
(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
the lessee knew to be groundless, the court shall award
reasonable attorney's fees to the party against whom the claim
is made.
(c) In determining attorney's fees, the amount of the recovery on
behalf of the claimant under subsections (1) and (2) is not
controlling. 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's
successor in interest may accelerate payment or performance or
require collateral or additional collateral "at will" or "when the party
deems the party insecure" or in words of similar import must be
construed to mean that the party has power to do so only if the party
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. 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 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
one thousand dollars ($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. 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 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. 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 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. 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 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 (1) 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. 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 from
another person in a signed writing that by its terms gives assurance
it will be held open is not revocable, for lack of consideration, during
the time stated or, if no time is stated, for a reasonable time, but in no
event may the period of irrevocability exceed three (3) months. Any
such term of assurance on a form supplied by the offeree must be
separately 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 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.
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 no
consideration to be binding.
(2) A signed lease agreement that excludes modification or
rescission except by a signed writing may not be otherwise modified
or rescinded, but, except as between merchants, such a requirement
on a form supplied by a merchant must be separately signed by the
other party.
(3) Although an attempt at modification or rescission does not
satisfy the requirements of subsection (2), it may operate as a waiver.
(4) A party who has made a waiver affecting an executory portion
of a lease contract may retract the waiver by reasonable notification
received by the other party that strict performance will be required
of any term waived, unless the retraction would be unjust in view of
a 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 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 (IC 26-1-2.1-209(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 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. 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 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. As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-211 Warranties against interference and against infringement; lessee's
obligation against infringement
Sec. 211. (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. 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 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;
(c) are fit for the ordinary purposes for which goods of that type
are used;
(d) run, within the variation permitted by the lease agreement,
of even kind, quality, and quantity within each unit and among
all units involved;
(e) are adequately contained, packaged, and labeled as the lease
agreement may require; and
(f) conform to any promises or affirmations of fact made on the
container or label.
(3) Other implied warranties may arise from course of dealing or
usage of trade. 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 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. 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 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 IC 26-1-2.1-202 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 (IC 26-1-2.1-211) 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. 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 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.
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 under
IC 26-1-2.1, 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. 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 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. 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 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. 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 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 IC 26-1-2.1 on the effect of
default on risk of loss (IC 26-1-2.1-220), if risk of loss is to pass to
the lessee and the time of passage is not stated, the following rules
apply:
(a) If the lease contract requires or authorizes the goods to be
shipped by carrier:
(i) and it does not require delivery at a particular destination,
the risk of loss passes to the lessee when the goods are duly
delivered to the carrier; but
(ii) if it does require delivery at a particular destination and
the goods are there duly tendered while in the possession of
the carrier, the risk of loss passes to the lessee when the
goods are there duly so tendered as to enable the lessee to
take delivery.
(b) If the goods are held by a bailee to be delivered without
being moved, the risk of loss passes to the lessee on
acknowledgment by the bailee of the lessee's right to possession
of the goods.
(c) In any case not within subdivision (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. 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 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, the lessee, to the
extent of any deficiency in the lessee's 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 the supplier's effective insurance coverage may
treat the risk of loss as resting on the lessee for a commercially
reasonable 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 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 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 to
no longer conform to the lease contract, the lessee may
nevertheless demand inspection and at the lessee's 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. 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 lease
contract is effective and enforceable according to its terms between
the parties, against purchasers of the goods and against creditors of
the 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, each
provision of IC 26-1-2.1 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. As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-303 "Creation of a security interest"; alienability of party's interest
under 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 security
interest" includes the sale of a lease contract that is subject to
IC 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, 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 (4), 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 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 (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 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
IC 26-1-2.1-501(2); or
(b) if subdivision (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.
(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 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.
(6) 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.
(7) 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. 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 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 IC 26-1-2.1-527(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. 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 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 IC 26-1-2.1-511(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. 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's
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 IC 26-1-2.1 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. 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, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and in
IC 26-1-2.1-306 and IC 26-1-2.1-308, a creditor of a lessor takes
subject to the lease contract unless the creditor holds a lien that
attached 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 leasehold
interest 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 subject
to a lease contract may treat the lease contract as void if as against
the creditor retention of possession by the lessor is fraudulent under
any statute or rule of law, but retention of possession in good faith
and current course of trade by the lessor for a commercially
reasonable time after the lease contract becomes enforceable is not
fraudulent.
(2) Nothing in IC 26-1-2.1 impairs the rights of creditors of a
lessor if the lease contract:
(a) becomes enforceable, not in current course of trade but in
satisfaction 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 rule
of law apart from IC 26-1-2.1 would constitute the transaction
a fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification of
goods to a contract for sale as void if as against the creditor retention
of possession by the seller is fraudulent under any statute or rule of
law, but retention of possession of the goods pursuant to a lease
contract entered into by the seller as lessee and the buyer as lessor in
connection with the sale or identification of the goods is not
fraudulent if the buyer bought for value and in good faith. 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 to
particular real estate that an interest in them arises under real
estate law;
(b) a "fixture filing" is the filing, in the office where a mortgage
on the real estate would be filed or recorded, of a financing
statement covering goods that are or are to become fixtures and
conforming to the requirements of IC 26-1-9.1-502(a) and
IC 26-1-9.1-502(b);
(c) a lease is a "purchase money lease" unless the lessee has
possession or use of the goods or the right to possession or use
of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it
secures an obligation incurred for the construction of an
improvement on land including the acquisition cost of the land,
if the recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that are not
ownership interests.
(2) Under IC 26-1-2.1 a lease may be of goods that are fixtures or
may continue in goods that become fixtures, but no lease exists under
IC 26-1-2.1 of ordinary building materials incorporated into an
improvement on land.
(3) IC 26-1-2.1 does not prevent creation of a lease of fixtures
pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over
a conflicting interest of an encumbrancer or owner of the real estate
if:
(a) the lease is a purchase money lease, the conflicting interest
of the encumbrancer or owner arises before the goods become
fixtures, the interest of the lessor is perfected by a fixture filing
before the goods become fixtures or within ten (10) days
thereafter, and the lessee has an interest of record in the real
estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filing
before the interest of the encumbrancer or owner is of record,
the lessor's interest has priority over any conflicting interest of
a predecessor in title of the encumbrancer or owner, and the
lessee has an interest of record in the real estate or is in
possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected,
has priority over the conflicting interest of an encumbrancer or
owner of the real estate if:
(a) the fixtures are readily removable factory or office
machines, readily removable equipment that is not primarily
used or leased for use in the operation of the real estate, or
readily removable replacements of domestic appliances that are
goods subject to a consumer lease, and before the goods
become fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate obtained
by legal or equitable proceedings after the lease contract is
enforceable; or
(c) the encumbrancer or owner has consented in writing to the
lease or has disclaimed an interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the
encumbrancer or owner. If the lessee's right to remove
terminates, the priority of the interest of the lessor continues for
a reasonable time.
(6) Notwithstanding subsection 4(a) but otherwise subject to
subsections (4) and (5), the interest of a lessor of fixtures, including
the lessor's residual interest, is subordinate to the conflicting interest
of an encumbrancer of the real estate under a construction mortgage
recorded before the goods become fixtures if the goods become
fixtures before the completion of the construction. To the extent
given to refinance a construction mortgage, the conflicting interest
of an encumbrancer of the real estate under a mortgage has this
priority to the same extent as the encumbrancer of the real estate
under the construction mortgage.
(7) In cases not within the preceding subsections, priority between
the interest of a lessor of fixtures, including the lessor's residual
interest, and the conflicting interest of an encumbrancer or owner of
the real estate who is not the lessee is determined by the priority
rules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's
residual interest, has priority over all conflicting interests of all
owners and encumbrancers of the real estate, the lessor or the lessee
may (i) on default, expiration, termination, or cancellation of the
lease agreement but subject to the lease agreement and IC 26-1-2.1,
or (ii) if necessary to enforce other rights and remedies of the lessor
or lessee under IC 26-1-2.1, remove the goods from the real estate,
free and clear of all conflicting interests of all owners and
encumbrancers of the real estate, but the lessor or lessee must
reimburse any encumbrancer or owner of the real estate who is not
the lessee and who has not otherwise agreed for the cost of repair of
any physical injury, but not for any diminution in value of the real
estate caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a security
interest, the interest of a lessor of fixtures, including the lessor's
residual interest, is perfected by filing a financing statement as a
fixture filing for leased goods that are or are to become fixtures in
accordance with the relevant provisions of 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 or
affixed to other goods.
(2) The interest of a lessor or a lessee under a lease contract
entered into before the goods became accessions is superior to all
interests in the whole except as stated in subsection (4).
(3) The interest of a lessor or a lessee under a lease contract
entered into at the time or after the goods became accessions is
superior to all subsequently acquired interests in the whole except as
stated in subsection (4) but is subordinate to interests in the whole
existing at the time the lease contract was made unless the holders of
such interests in the whole have in writing consented to the lease or
disclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contract
described in subsection (2) or (3) is subordinate to the interest of:
(a) a buyer in the ordinary course of business or a lessee in the
ordinary course of business of any interest in the whole
acquired after the goods became accessions; or
(b) a creditor with a security interest in the whole perf
