Tribal Code

Leases of goods

WARM SPRINGS TRIBAL CODE

CHAPTER 721

LEASES OF GOODS

I. GENERAL PROVISIONS
721.110 Short Title
721.120 Legislative History
721.130 Scope
721.140 Definitions – Index of Definitions
721.150 Leases Subject to Other Statutes
721.160 Choice of Applicable Law and Judicial Forum
721.170 Unconscionability

II. FORMATION AND CONSTRUCTION OF LEASE CONTRACT
721.200 Formation in General
721.210 Written Contract Required in Certain Cases (Statute of Frauds)
721.220 Final Written Expression: Parol or Extrinsic Evidence
721.230 Offer and Acceptance in Formation of Lease Contract
721.240 Firm Offers
721.250 Course of Performance or Practical Construction
721.260 Modification and Rescission

III. EFFECT OF LEASE CONTRACT AND OBLIGATIONS OF PARTIES
721.300 Enforceability of Lease Contract
721.310 Identification
721.320 Insurance and Proceeds
721.330 Risk of Loss
721.340 Casualty to Identified Goods
721.350 Express Warranties
721.355 Warranty Against Interference
721.360 Implied Warranty of Merchantability
721.365 Implied Warranty of Fitness for Particular Purpose
721.370 Exclusion or Modification of Warranties
721.375 Cumulation and Conflict of Warranties Express or Implied
721.380 Third Party Beneficiaries of Express and Implied Warranties
721.385 Assignment of Party’s Interest Under Lease Contract or of Lessor’s Residual Interest in Goods; Delegation of Performance

IV. REPUDIATION, SUBSTITUTED PERFORMANCE AND EXCUSE
721.400 Anticipatory Repudiation
721.410 Retraction of Anticipatory Repudiation
721.420 Substituted Performance
721.430 Excused Performance
721.440 Procedure on Excused Performance

V. DEFAULT IN GENERAL
721.500 Default Procedure
721.510 Notice After Default
721.520 Modification or Impairment of Rights and Remedies
721.530 Liquidation of Damages
721.540 Cancellation and Termination and Effect of Cancellation, Termination, Rescission, or Fraud on Rights and Remedies
721.550 Statute of Limitations

VI. DEFAULT BY LESSOR
721.600 Lessee’s Remedies
721.605 Lessee’s Rights on Improper Delivery – Rightful Rejection
721.610 Installment Lease Contracts: Rejection and Default
721.615 Merchant Lessee’s Duties as to Rightfully Rejected Goods
721.620 Lessee’s Duties as to Rightfully Rejected Goods
721.625 Cure by Lessor of Improper Delivery – Replacement
721.630 Acceptance of Goods
721.635 Effect of Acceptance of Goods – Notice of Default – Burden of Establishing Default After Acceptance – Notice of Claim or Litigation to Person Answerable Over
721.640 Revocation of Acceptance of Goods
721.645 Cover – Substitute Goods
721.650 Lessee’s Damages for Nondelivery, Repudiation, Default and Breach of Warranty in Regard to Accepted Goods
721.655 Lessee’s Incidental and Consequential Damages
721.660 Lessee’s Right to Specific Performance or Replevin
721.665 Lessee’s Right to Goods on Lessor’s Insolvency

VII. DEFAULT BY LESSEE
721.700 Lessor’s Rights
721.710 Lessor’s Right to Identify Goods to Lease Contract
721.720 Lessor’s Right to Possession of Goods
721.730 Lessor’s Rights to Dispose of Goods
721.740 Lessor’s Damages for Nonacceptance or Repudiation
721.750 Lessor’s Action for a Rent
721.760 Lessor’s Incidental Damages
721.770 Lessor’s Right to Recover for Damage to Residual Interest

WARM SPRINGS TRIBAL CODE
CHAPTER 721
LEASES OF GOODS

I. GENERAL PROVISIONS

721.110 Short Title. This Chapter shall be known and may be cited as the Warm Springs Tribe Commercial Code – Leases of Goods.

721.120 Legislative History

  1. This Chapter is modeled on the Article 2A of the Uniform Commercial Code (UCC Article 2A) published by the National Commission on Uniform State Laws. In an effort to provide concise and accessible, yet comprehensive rules governing the lease of goods, some provisions UCC Article 2A have been omitted. Any such omissions are not intended and may not be construed as indicating any specific intention or purpose by the drafters or the Tribal Council. In addition, the language of this Chapter has been altered in some areas from that of UCC Article 2A in order to clarify its meaning. Such stylistic changes are not necessarily intended to alter the meaning of those provisions, and each provision of this Chapter must be construed on its own merits. However, the court may look to cases and interpretations of similar provisions from other jurisdictions in construing this Chapter.
  2. This Chapter is adopted as an exercise of the sovereignty of the Tribe for the following purposes: (a) To establish and clarify the rules governing contracts for the lease of goods in the Tribes’ jurisdiction; (b) To support and encourage economic activity and investment on the Reservation; and (c) To make uniform, so far as possible, the law among this and other jurisdictions.
  3. The effect of provisions of this Chapter may be varied by agreement, except as otherwise provided in this Chapter and except that the obligations of good faith, diligence, reasonableness and care prescribed by this Chapter may not be disclaimed by agreement.

721.130 Scope. 

  1. This Chapter applies to any transaction subject to the jurisdiction of the Tribe, regardless of form, that creates a lease of goods.
  2. Note that some provisions in this chapter create special rules with regard to consumer leases, as it is the policy of the Tribe to be highly protective of consumer rights.

721.140 Definitions – Index of Definitions.

  1. In this Chapter unless the context otherwise requires: (a) “Cancellation” occurs when either party puts an end to the lease contract for default by the other party. (b) “Conforming” goods or performance under a lease contract means goods or performance that is in accordance with the obligations under the lease contract. (c) “Consumer lease” means a lease made by a lessor regularly engaged in the business of leasing or selling to a lessee who is a natural person and undertakes the lease primarily for a personal, family, or household purpose. (d) “Goods” means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 721.000), but the term does not include money, documents, instruments, accounts, chattel paper (paper that sets out both a buyer’s obligation to repay and a lender’s or a seller’s security interest in the goods bought, or that contains the provisions of a lease of the goods), general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals. (e) “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. (f) “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. (g) “Lease agreement” means the actual bargain of the parties to a lease as found in their language or by implication from other circumstances. Other circumstances may include course of dealing or usage of trade or course of performance as provided in this Chapter. Unless the context clearly indicates otherwise, this term includes a sublease agreement. (h) “Lease contract” means the total legal obligation that results from the lease agreement as affected by this Chapter and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract. (i) “Leasehold interest” means the interest of the lessor or the lessee under a lease contract. (j) “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. (k) “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. (l) “Lessor’s residual interest” means the lessor’s interest in the goods after expiration, termination or cancellation of the lease contract. (m) “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. (n) “Merchant lessee” means a lessee that is a merchant with respect to goods of the kind subject to the lease. (o) “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. The following definitions apply to this Chapter, unless context requires otherwise: (a) “Course of Performance,” WSTC 720.130; (b) “Course of Dealing,” WSTC 720.130; (c) “Usage of Trade,” WSTC 720.130; (d) “Insolvent,” WSTC 720.130; (e) “Seasonably,” WSTC 720.130; (f) “Commercially Reasonable,” WSTC 720.130; (g) “Specific Performance,” WSTC 720.130; (h) “Replevin,” WSTC 720.130; (i) “Electronic,” WSTC 720.130; (j) “Electronic Agent,” WSTC 720.130; and (k) “Electronic Record,” WSTC 720.130.

721.150 Leases Subject to Other Statutes.

  1. A lease, although subject to this Chapter, is also subject to any applicable: (a) Statute of the United States; (b) Certificate of title statute of another jurisdiction; or (c) Consumer protection statute of this Tribe.
  2. In case of conflict between the provisions of this Chapter and any statute referred to in subsection (1) of this section, the provisions of that statute control.
  3. Failure to comply with any applicable statute has only the effect specified therein.

721.160 Choice of Applicable Law and Judicial Forum.

  1. The parties to a lease, including a consumer lease, may set out in the lease agreement their choice of applicable law and the judicial forum that will resolve disputes, subject to the limitations below.
  2. The choice of applicable law in a consumer lease must be one of the following to be enforceable: (a) the law of the jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within thirty days thereafter; (b) the law of the jurisdiction in which the goods are to be used; or (c) the law of the jurisdiction in which the lease is executed by the lessee.
  3. 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.

721.170 Unconscionability.

  1. If the court as a matter of law finds a lease contract or any clause of a lease contract, including a consumer lease, 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. Before making a finding of unconscionability under subsection (1) or (3) of this section, 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.
  3. 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.
  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 (3) of this section, 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.

II. FORMATION AND CONSTRUCTION OF LEASE CONTRACT

721.200 Formation in General.

  1. A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of a lease contract.
  2. An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.
  3. Although one or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy.

721.210 Written Contract Required in Certain Cases (Statute of Frauds).

  1. Except as otherwise provided in this section, a contract for the lease of goods where the total payments under the lease are five hundred dollars or more is not enforceable in tribal court unless it is in writing and is signed by the party against whom enforcement is sought or by his or her authorized agent. The contract may be written and signed in electronic form, as provided in the federal Electronic Signatures in Global and National Commerce Act, 15 USC 7001 et. seq., (“E- Sign”).
  2. Any written description of leased goods or of the lease term is sufficient and satisfies subsection (1) of this section, whether or not it is specific, if it reasonably identifies what is described.
  3. A lease contract that does not satisfy the requirements of subsection (1) of this section, but which is valid in other respects, is enforceable: (a) 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 (b) With respect to goods that have been received and accepted by the lessee.

721.220 Final Written Expression: Parol or Extrinsic Evidence. Terms included in a written contract may not be contradicted by evidence of any prior written agreement or of any oral agreement, but contract terms may be explained or supplemented:

  1. By course of dealing, usage of trade or by course of performance, as defined in WSTC 720.130; and
  2. By evidence of additional terms that are consistent with the written contract unless the court finds the written contract to have been intended as a complete and exclusive statement of the terms of the agreement.

721.230 Offer and Acceptance in Formation of Lease Contract. 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.

721.240 Firm Offers. A merchant, as defined in WSTC 720.130, may not revoke a written, signed offer to lease goods to or from another person when the offer, by its terms, is held open for a certain time or for a reasonable time, until the stated time has elapsed. In no event may such period of irrevocability exceed three months.

721.250 Course of Performance or Practical Construction.

  1. If a lease contract involves repeated occasions for performance by either party and one party knows about the nature of the other party’s performance and has an opportunity to object to it and fails to object, such course of performance shall be relevant to determine the meaning of the agreement.
  2. The express terms of the agreement and any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other. However, when such construction is unreasonable, express terms shall control course of performance, course of performance shall control both course of dealing and usage of trade, and course of dealing shall control usage of trade in determining the meaning of the agreement.

721.260 Modification and Rescission.

  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 cannot be otherwise modified or rescinded.
  3. The requirements of the statute of frauds section of this Chapter (Section 721.210) must be satisfied if the contract, as modified, is within its provisions.

III. EFFECT OF LEASE CONTRACT AND OBLIGATIONS OF PARTIES.

721.300 Enforceability of Lease Contract. Except as otherwise provided in this Chapter, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods, and against creditors of the parties.

721.310 Identification. Identification of the specific goods that are covered by a lease contract may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification of the goods occurs: (a) When the lease contract is made if the lease contract is for a lease of goods that already exist and are identified; or (b) When the goods are shipped, marked, or otherwise designated by the lessor as the goods covered by the lease contract, if the goods do not exist or are not identified at the time the contract is made; or (c) When the young are conceived, if the lease contract is for a lease of unborn young of animals.

721.320 Insurance and Proceeds.

  1. A lessee obtains an insurable interest when existing goods are identified to the lease contract, even if the goods identified do not conform to the contract and the lessee has an option to reject them.
  2. Notwithstanding a lessee’s insurable interest under subsections (1) and of this section, the lessor retains an insurable interest throughout the duration of the lease.
  3. Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
  4. 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.

721.330 Risk of Loss. In a contract for the lease of goods, the risk of loss is retained by the lessor and does not pass to the lessee at any time during the duration of the lease.

721.340 Casualty to Identified Goods. If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor or the supplier before delivery, then: (a) If the loss is total, the lease contract is avoided; and (b) If the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his or her option either treat the lease contract as avoided or 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.

721.350 Express Warranties.

The following create an express warranty by the lessor: (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.

An express warranty is still created under subsection (1) even if the lessor does not use formal words such as “warrant” or “guarantee,” and even though the lessor does not have a specific intention to make a warranty.

However, the lessor’s estimate or 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.

721.355 Warranty Against Interference. In every lease contract there is an implied warranty that no other person holds a claim or interest in the goods arising from any act or omission of the lessor that will interfere with the lessee’s enjoyment of its leasehold interest.

721.360 Implied Warranty of Merchantability.

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.

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 (goods that are regarded as commercially interchangeable with other goods of the same kind), 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.

Other implied warranties may arise from course of dealing or usage of trade.

721.365 Implied Warranty of Fitness for Particular Purpose. Where 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.

721.370 Exclusion or Modification of Warranties.

Subject to subsection (2) of this section, 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) of this section, 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.”

Notwithstanding subsection (1) of this section, but subject to subsection (3) of this section, (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; and (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.

To exclude or modify a warranty against interference or against infringement pursuant to Section 721.370, or any part of it, the language must be specific, be by a writing, and be conspicuous.

721.375 Cumulation and Conflict of Warranties Express or Implied. Warranties, whether express or implied, must be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply: (a) Exact or technical specifications displace an inconsistent sample or model or general language of description. (b) A sample displaces inconsistent general language of description. (c) Express warranties displace inconsistent implied warranties except for an implied warranty of fitness for a particular purpose.

721.380 Third Party Beneficiaries of Express and Implied Warranties. A warranty to or for the benefit of a lessee under this Chapter, 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. However, any exclusion, modification, or limitation of the warranty effective against the lessee is also effective against any beneficiary designated under this section.

721.385 Assignment of Party’s Interest Under Lease Contract or of Lessor’s Residual Interest in Goods; Delegation of Performance.

Any interest of a party under a lease contract and the lessor’s residual interest in the goods may be transferred or assigned unless: (a) The transfer is voluntary and the lease contract prohibits the transfer; or (b) The transfer materially changes the duty of or materially increases the burden or risk imposed on the other party to the lease contract.

An assignment of “the lease” or of “all my rights under the lease” or an assignment in similar general terms is a transfer of rights, and unless the language or the circumstances indicate the contrary (as in an assignment for security), the assignment is a delegation of duties by the assignor to the assignee and acceptance by the assignee constitutes a promise by him or her to perform those duties. This promise is enforceable by either the assignor or the other party to the lease contract.

Unless otherwise agreed by the lessor and the lessee, no delegation of performance relieves the assignor as against the other party of any duty to perform or any liability for default.

To prohibit the transfer or assignment of a party’s interest under a lease contract, the language of prohibition must be specific, by a writing, and conspicuous.

IV. REPUDIATION, SUBSTITUTED PERFORMANCE AND EXCUSE

721.400 Anticipatory Repudiation.

If either party repudiates a lease contract, other than a consumer lease, with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may: (a) For a commercially reasonable time, await retraction of repudiation and performance by the repudiating party; (b) Resort to any right or remedy upon default under the lease contract or this Chapter, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party’s performance and assurance and has urged retraction. In addition, whether or not the aggrieved party is pursuing one of the foregoing remedies, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed in accordance with the provisions of this Chapter on the lessor’s right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods pursuant to Section 721.710.

The rights and remedies of the parties to a consumer lease in connection with a repudiation of that lease shall be determined under other laws, and this section shall not affect the applicability or interpretation of those laws.

721.410 Retraction of Anticipatory Repudiation.

Until the repudiating party’s next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has canceled the lease contract or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final.

Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance reasonably demanded by the aggrieved party.

Retraction reinstates a repudiating party’s rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

721.420 Substituted Performance.

If without fault of the lessee, the lessor and the supplier, the agreed manner of delivery becomes impossible or commercially impracticable, but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted.

If the agreed means or manner of payment fails because of domestic or foreign governmental regulation: (a) The lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent; and (b) If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee’s obligation unless the regulation is discriminatory, oppressive or predatory.

721.430 Excused Performance. Subject to Section 721.420 on substituted performance, the following rules apply: (a) Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with subsections (b) and (c) of this section is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid. (b) If the causes mentioned in subsection (a) of this section affect only part of the lessor’s or the supplier’s capacity to perform, he or she shall allocate production and deliveries among his or her customers but at his or her option may include regular customers not then under contract for sale or lease as well as his or her own requirements for further manufacture. he or she may so allocate in any manner that is fair and reasonable. (c) The lessor seasonably shall notify the lessee and in the case of a finance lease, the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under subsection (b) of this section, of the estimated quota thus made available for the lessee.

721.440 Procedure on Excused Performance.

If the lessee receives notification of a material or indefinite delay or an allocation justified under Section 721.430, the lessee may by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired as in Section 721.610: (a) Terminate the lease contract pursuant to Section 721.540; or (b) Except in a finance lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor.

If, after receipt of a notification from the lessor under Section 721.430, the lessee fails so to modify the lease agreement within a reasonable time not exceeding thirty days, the lease contract lapses with respect to any deliveries affected.

V. DEFAULT IN GENERAL

721.500 Default Procedure.

Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this Chapter.

If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this Chapter and, except as limited by this Chapter, as provided in the lease agreement.

If the lease agreement covers both real property and goods, the party seeking enforcement may elect to either: (a) proceed under this Chapter as to the goods; (b) or proceed under other applicable law that applies to both the real property and the goods, in which case this Chapter will not apply.

721.510 Notice After Default. Except as otherwise provided in this Chapter or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement.

721.520 Modification or Impairment of Rights and Remedies.

Except as otherwise provided in this Chapter, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this Chapter and may limit or alter the measure of damages recoverable under this Chapter.

Resort to a remedy provided under this Chapter or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive, or the only remedy available. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, another remedy may be had as provided in this Chapter.

Consequential damages may be liquidated under Section 721.530, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. In any case, limitation of consequential damages for an injury to a person in the case of consumer goods shall be construed by the court as unconscionable.

721.530 Liquidation of Damages.

Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.

If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (1) of this section, or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, another remedy may be had as provided in this Chapter.

If the lessor justifiably withholds or stops delivery of goods because of the lessee’s default or insolvency (Section 721.720), the lessee is entitled to restitution of any amount by which the sum of his or her payments exceeds: (a) The amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages in accordance with subsection (1) of this section; or (b) In the absence of those terms, twenty percent of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or five hundred dollars.

A lessee’s right to restitution under subsection (3) of this section is subject to offset to the extent the lessor establishes: (a) A right to recover damages under the provisions of this Chapter other than subsection (1) of this section; and (b) The amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

721.540 Cancellation and Termination and Effect of Cancellation, Termination, Rescission, or Fraud on Rights and Remedies.

On cancellation of the lease contract, all obligations that are still to be completed on both sides are discharged, but any right based on prior default or performance survives, and the canceling party also retains any remedy for default of the whole lease contract or any unperformed balance.

On termination of the lease contract, all obligations that are still to be completed on both sides are discharged but any right based on prior default or performance survives.

Unless the contrary intention clearly appears, expressions of “cancellation,” “rescission,” or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for a prior default.

Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this Chapter for default.

Neither rescission nor a claim for rescission of the lease contract nor rejection or return of the goods may bar or be deemed inconsistent with a claim for damages or other right or remedy.

721.550 Statute of Limitations.

An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four years after the cause of action accrued. In a lease contract that is not a consumer lease, the parties may reduce the period of limitation to not less than one year in the language of the original lease contract.

A cause of action for default accrues when the act or omission on which the default or breach of warranty is based is or should have been discovered by the

aggrieved party, or when the default occurs, whichever is later. A cause of action for indemnity accrues when the act or omission on which the claim for indemnity is based is or should have been discovered by the indemnified party, whichever is later.

If an action commenced within the time limited by subsection (1) of this section is so terminated as to leave available a remedy by another action for the same default or breach of warranty or indemnity, the other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.

This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action that have accrued before this Chapter becomes effective.

VI. DEFAULT BY LESSOR 721.600 Lessee’s Remedies.

If a lessor fails to deliver the goods in conformity to the lease contract (Section 721.605) or repudiates the lease contract (Section 721.400), or a lessee rightfully rejects the goods (Section 721.605) or justifiably revokes acceptance of the goods (Section 721.640), then with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 721.610), the lessor is in default under the lease contract and the lessee may: (a) Cancel the lease contract (Section 721.540(1)); (b) Recover so much of the rent and security as has been paid, but in the case of an installment lease contract the recovery is that which is just under the circumstances; (c) Cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (Section 721.645 and Section 721.655), or recover damages for nondelivery (Section 721.650 and Section 721.655).

If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also: (a) If the goods have been identified, recover them (Section 721.665); or (b) In a proper case as described in Section 721.660, obtain specific performance or replevy the goods.

If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and remedies provided in this Chapter except to the extent that this Chapter makes the right or remedy available only upon the occurrence of a default described in subsection (1) or (2).

If a lessor has breached a warranty, whether express or implied, the lessee may recover damages (Section 721.650(4)).

On rightful rejection or justifiable revocation of acceptance, a lessee has a security interest in goods in the lessee’s possession or control for any rent and security that has been paid and any expenses reasonably incurred in their inspection, receipt, transportation and care and custody and may hold those goods and dispose of them in good faith and in a commercially reasonable manner, subject to the provisions of Section 721.730(5).

721.605 Lessee’s Rights on Improper Delivery – Rightful Rejection.

Subject to the provisions of Section 721.610 on default in installment lease contracts, if the goods or the tender or delivery fail in any respect to conform to the lease contract, the lessee may reject or accept the goods or accept any commercial unit or units and reject the rest of the goods.

Rejection of goods is ineffective unless it is within a reasonable time after tender or delivery of the goods and the lessee seasonably notifies the lessor.

721.610 Installment Lease Contracts: Rejection and Default.

Under an installment lease contract a lessee may reject any delivery that is nonconforming if the nonconformity substantially impairs the value of that delivery and cannot be cured or the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (2) of this section and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.

Whenever nonconformity or default with respect to one or more deliveries substantially impairs the value of the installment lease contract as a whole there is a default with respect to the whole. But, the aggrieved party reinstates the installment lease contract as a whole if the aggrieved party accepts a nonconforming delivery without seasonably notifying of cancellation or brings an action with respect only to past deliveries or demands performance as to future deliveries.

721.615 Merchant Lessee’s Duties as to Rightfully Rejected Goods.

Subject to any security interest of a lessee (Section 721.600(5)), if a lessor or a supplier has no agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in his or her possession or control, shall follow any

reasonable instructions received from the lessor or the supplier with respect to the goods. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

In the absence of instructions from the lessor, a merchant lessee shall make reasonable efforts to sell, lease or otherwise dispose of the goods for the lessor’s account only if the goods threaten to decline in value speedily. A lessee who is not a merchant does not have any obligation to make reasonable efforts to dispose of such goods.

If a merchant lessee (subsection (1)) or any other lessee (Section 721.620) disposes of goods, he or she is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses include no disposition commission, to such commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding ten percent of the gross proceeds.

In complying with this section or Section 721.620, the lessee is held only to good faith. Good faith conduct hereunder is neither acceptance or conversion nor the basis of an action for damages.

A purchaser who purchases in good faith from a lessee pursuant to this section or Section 721.620 takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one or more of the requirements of this Chapter.

721.620 Lessee’s Duties as to Rightfully Rejected Goods.

Except as otherwise provided with respect to goods that threaten to decline in value speedily (Section 721.615) and subject to any security interest of a lessee (Section 721.600(5)): (a) The lessee, after rejection of goods in the lessee’s possession, shall hold them with reasonable care at the lessor’s or supplier’s disposition for a reasonable time after the lessee’s reasonable notification of rejection; (b) If the lessor or the supplier gives no instructions within a reasonable time after notification of rejection, the lessee may store the rejected goods for the lessor’s or the supplier’s account or ship them to the lessor or the supplier or dispose of them for the lessor’s or the supplier’s account with reimbursement in the manner provided in Section 721.615; but (c) The lessee has no further obligations with regard to goods rightfully rejected.

Action by the lessee pursuant to subsection (1) of this section is not acceptance or conversion.

721.625 Cure by Lessor of Improper Delivery – Replacement.

If any tender or delivery by the lessor is rejected because it is nonconforming and the time for performance has not yet expired, the lessor may seasonably notify the lessee of the lessor’s intention to cure and may then make a conforming delivery within the time provided in the lease contract.

If the lessee rejects a nonconforming tender that the lessor had reasonable grounds to believe would be acceptable with or without money allowance, the lessor may have a further reasonable time to substitute a conforming tender if he or she timely notifies the lessee.

721.630 Acceptance of Goods. Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and:

The lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or

The lessee fails to make an effective rejection of the goods (Section 721.605(2)).

721.635 Effect of Acceptance of Goods – Notice of Default – Burden of Establishing Default After Acceptance – Notice of Claim or Litigation to Person Answerable Over.

A lessee must pay rent for any goods accepted in accordance with the lease contract, with due allowance for goods rightfully rejected or not delivered;

A lessee’s acceptance of goods precludes rejection of the goods accepted. If acceptance was made with knowledge of a nonconformity, acceptance may not later be revoked because of the nonconformity unless the acceptance was on the reasonable assumption that the nonconformity would be timely cured by the lessor. Acceptance does not of itself impair any other remedy provided by this Chapter or the lease agreement for nonconformity

If a tender has been accepted, within a reasonable time after the lessee discovers or should have discovered any default the lessee shall notify the lessor, or be barred from any remedy against the lessor. The burden is on the lessee to establish any default.

If a lessee is sued for breach of a warranty or other obligation for which a lessor is answerable over: (a) The lessee may give the lessor written notice of the litigation. If the notice states that the lessor may come in and defend and that if the lessor does not do so he or she will be bound in any action against him or her by the lessee by any determination of fact common to the two litigations, then unless the lessor after seasonable receipt of the notice does come in and defend he or she is so bound. (b) The lessor may demand in writing that the lessee turn over control of the litigation including settlement or else be barred from any remedy. If the demand states that the lessor agrees to bear all expense and to satisfy any adverse judgment, then unless the lessee after seasonable receipt of the demand does turn over control the lessee is so barred.

Subsection (3) shall not apply to a consumer lease.

721.640 Revocation of Acceptance of Goods.

A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if he or she has accepted it: (a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or (b) Without discovery of the nonconformity if the lessee’s acceptance was reasonably induced either by the lessor’s assurances or by the difficulty of discovery before acceptance.

Revocation of acceptance must occur within a reasonable time after the lessee discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by the nonconformity. Revocation is not effective until the lessee notifies the lessor.

A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.

721.645 Cover – Substitute Goods.

After default by a lessor under the lease contract (Section 721.600(1)), the lessee may cover by making any purchase or lease of or contract to purchase or lease goods in substitution for those due from the lessor.

Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 721.530) or determined by agreement of the parties (Section 721.520), if a lessee’s cover is by lease agreement substantially similar to the original lease agreement and the lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages (a) the present value, as of the date of the commencement of the new lease agreement, of the difference between the total rent for the lease term of the new lease agreement and the total rent for the then remaining lease term of the original lease agreement and (b) any incidental or consequential damages less expenses saved in consequence of the lessor’s default.

If the lessee’s cover is by lease agreement that qualifies for treatment under subsection (2) of this section, the lessee may elect to proceed under subsection (2) of this section or Section 721.650. If a lessee’s cover is by lease agreement that for any reason does not qualify for treatment under subsection (2) of this section, or is by purchase or otherwise, the lessee may recover from the lessor under Section 721.650 as if the lessee had elected not to cover.

721.650 Lessee’s Damages for Nondelivery, Repudiation, Default and Breach of Warranty in Regard to Accepted Goods.

Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 721.530) or determined by agreement of the parties, if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement, whether or not the lease agreement qualifies for treatment under Section 721.645(2), or is by purchase or otherwise, the measure of damages for default by the lessor (Section 721.600(1)) is the present value as of the date of the default of the difference between the then market rent and the original rent, computed for the remaining lease term of the original lease agreement together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.

Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

If the lessee has accepted goods and given notification (Section 721.635(3)), the measure of damages for nonconforming tender or delivery by a lessor is the loss resulting in the ordinary course of events from the lessor’s default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.

The measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default or breach of warranty.

721.655 Lessee’s Incidental and Consequential Damages.

Incidental damages resulting from a lessor’s default include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the default.

Consequential damages resulting from a lessor’s default include: (a) Any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) Injury to person or property proximately resulting from any breach of warranty.

721.660 Lessee’s Right to Specific Performance or Replevin.

Specific performance may be decreed if the goods are unique or in other proper circumstances. In a contract other than a consumer lease, specific performance may be decreed if the parties have agreed to that remedy.

A decree for specific performance may include any terms and conditions as to payment of the rent, damages or other relief that the court deems just.

A lessee has a right of replevin or similar remedy for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing.

721.665 Lessee’s Right to Goods on Lessor’s Insolvency.

Subject to subsection (2) of this section and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract (Section 721.310) on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within ten days after receipt of the first installment of rent and security.

A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.

VII. DEFAULT BY LESSEE

721.700 Lessor’s Rights.

If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 721.610), the lessee is in default under the lease contract and the lessor may: (a) Cancel the lease contract (Section 721.540(1)); (b) Proceed respecting goods not identified to the lease contract (Section 721.710); (c) Withhold delivery of the goods and seek an order of the court to take possession of goods previously delivered (Section 721.720); (d) Stop delivery of the goods by any bailee; (e) Dispose of the goods and recover damages (Section 721.730), or retain the goods and recover damages (Section 721.740), or in a proper case recover rent (Section 721.750).

If a lessee is otherwise in default under a lease contract, the lessor may exercise any right or remedy provided in this Chapter except to the extent that this Chapter makes the right or remedy available only upon the occurrence of a default in subsection (1) of this section.

721.710 Lessor’s Right to Identify Goods to Lease Contract.

A lessor aggrieved under Section 721.700(1) may: (a) Identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor’s or the supplier’s possession or control; and (b) Dispose of goods (Section 721.730(1)) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.

If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell or otherwise dispose of the goods for scrap or salvage value or proceed in any other reasonable manner.

721.720 Lessor’s Right to Possession of Goods.

If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.

The lessor has on default by the lessee under the lease contract the right seek an order of the court to take possession of the goods.

721.730 Lessor’s Rights to Dispose of Goods.

After a default by a lessee under the lease contract (Section 721.700(1)) or after the lessor refuses to deliver or takes possession of goods (Section 721.720), the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale or otherwise.

Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 721.530) or determined by agreement of the parties (Section 721.520), if the disposition is by lease agreement substantially similar to the original lease agreement and the lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages (a) accrued and unpaid rent as of the date of commencement of the term of the new lease agreement, (b) the present value as of the date of commencement of the term of the new lease agreement of the difference between the total rent of the then remaining lease term of the original lease agreement and the total rent for the lease term of the new lease agreement, and (c) any incidental damages allowed under Section 721.760, less expenses saved in consequence of the lessee’s default.

If the lessor’s disposition is by lease agreement that qualifies for treatment under subsection (2) of this section, the lessor may elect to proceed under subsection (2) or Section 721.740. If the lessor’s disposition is by lease agreement that for any reason does not qualify for treatment under subsection (2) of this section, or is by sale or otherwise, the lessor may recover from the lessee under Section 721.740 as if the lessor had elected not to dispose of the goods.

A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one or more of the requirements of this Chapter.

The lessor is not accountable to the lessee for any profit made on any disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee’s security interest (Section 721.600(5)).

721.740 Lessor’s Damages for Nonacceptance or Repudiation.

Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 721.530) or determined by agreement of the parties (Section 721.520), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and disposition is by lease agreement, whether or not the lease agreement qualifies for treatment under Section 721.730(2), or is by sale or otherwise, the lessor may recover from the lessee as damages for default by the lessee (Section 721.700(1)) (a) accrued and unpaid rent as of the date the lessor obtained possession of the goods or such earlier date as the lessee has made an effective tender of possession of the goods back to the lessor, (b) the present value as of the date determined under paragraph (a) of the difference between the total rent for the then remaining lease term of the original lease agreement and the market rent at the time determined under paragraph (a) and at the place where the goods were located on that date computed for the same lease term, and (c) any incidental

damages allowed under Section 721.760, less expenses saved in consequence of the lessee’s default.

If the measure of damages provided in subsection (1) of this section is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under Section 721.760, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition.

721.750 Lessor’s Action for a Rent.

After default by the lessee under the lease contract (Section 721.700(1)), if the lessor complies with subsection (2) of this section, the lessor may recover from the lessee as damages: (a) For goods accepted by the lessee and not effectively tendered back to the lessor: (i) Accrued and unpaid rent as of the date of entry of judgment in favor of lessor, (ii) The present value as of the date determined under subparagraph (i) of the rent for the then remaining lease term of the lease agreement, and (iii) Any incidental damages allowed under Section 721.760, less expenses saved in consequence of the lessee’s default; and (b) For goods identified to the lease contract where the lessor has never delivered the goods or has taken possession of them or the lessee has effectively tendered them back to the lessor, if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that such an effort will be unavailing, (i) Accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (ii) The present value as of the date determined under subparagraph (i) of the rent for the then remaining lease term of the lease agreement, and (iii) Any incidental damages allowed under Section 721.760, less expenses saved in consequence of the lessee’s default.

Except as provided in subsection (3) of this section, the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor’s control.

The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to subsection (1) of this section. If the disposition is before the end of the remaining lease term of the lease agreement, the lessor’s recovery against the lessee for damages will be governed by Section 721.730 or Section 721.740, and the lessor will cause an appropriate credit to be provided against any judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to Section 721.730 or Section 721.740.

Payment of the judgment for damages obtained pursuant to subsection (1) of this section entitles the lessee to use and possession of the goods not then disposed of for the remaining lease term of the lease agreement, provided that the lessee complies with all other terms and conditions of the lease agreement.

After a lessee has wrongfully rejected or revoked acceptance of goods, has failed to pay rent then due, or has repudiated (Section 721.400), a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for nonacceptance under Section 721.730 and Section 721.740.

721.760 Lessor’s Incidental Damages. Incidental damages to an aggrieved lessor include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the lessee’s default, in connection with return or disposition of the goods, or otherwise resulting from the default.

721.770 Lessor’s Right to Recover for Damage to Residual Interest. In addition to any other recovery permitted by this Chapter, the lessor shall be entitled to recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor’s residual interest in the goods caused by the default of the lessee.