General Provisions - - CA Commercial Law

Section § 10101

This section states the official name of this division is the 'Uniform Commercial Code—Leases.'

This division shall be known and may be cited as the Uniform Commercial Code—Leases.

Uniform Commercial Code Leases official name division citation commercial leases lease code naming legal citation commercial law lease agreements

(Repealed and added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.)

Section § 10102

This law section explains how lease transactions are treated under certain rules. It applies to any lease, irrespective of its form, including those that combine leasing with other types of transactions, called hybrid leases. For hybrid leases, if the lease part involving goods is not the main focus, only specific parts of the law that cover goods leasing apply. However, if leasing the goods is the main focus, the whole division is applicable. In finance leases within hybrid leases, certain sections apply to the rights and responsibilities related to the goods.

(a) This division applies to any transaction, regardless of form, that creates a lease and, in the case of a hybrid lease, it applies to the extent provided in subdivision (b).

(b) In a hybrid lease, the following rules apply:

(1) If the lease-of-goods aspects do not predominate, the following rules apply:

(A) Only the provisions of this division which relate primarily to the lease-of-goods aspects of the transaction apply, and the provisions that relate primarily to the transaction as a whole do not apply.

(B) Section 10209 applies if the lease is a finance lease.

(C) Section 10407 applies to the promises of the lessee in a finance lease to the extent the promises are consideration for the right to possession and use of the leased goods.

(2) If the lease-of-goods aspects predominate, this division applies to the transaction, but does not preclude application in appropriate circumstances of other law to aspects of the lease which do not relate to the lease of goods.

lease transaction hybrid lease lease-of-goods finance lease lease predominance Section 10209 Section 10407 consideration right to possession lease provisions

(Amended by Stats. 2023, Ch. 210, Sec. 74. (SB 95) Effective January 1, 2024.)

Section § 10103

This law provides definitions for terms related to leasing and buying goods. It explains who is considered a 'buyer in ordinary course of business' and outlines what constitutes a 'commercial unit' of goods. It also clarifies different types of leases, such as 'consumer lease', 'finance lease', and 'installment lease contract', and describes the roles of the 'lessor' and 'lessee'. Additionally, terms like 'conforming goods', 'fault', and 'cancellation' of a lease are defined. It includes concepts related to transactions involving goods, like 'purchase', 'sublease', and 'hybrid lease'. Some definitions from other sections are referenced to apply within this division.

(a) In this division, unless the context otherwise requires:

(1) “Buyer in ordinary course of business” means a person who, in good faith and without knowledge that the sale to it 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 preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(2) “Cancellation” occurs when either party puts an end to the lease contract for default by the other party.

(3) “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.

(4) “Conforming” goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.

(5) “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.

(6) “Fault” means wrongful act, omission, breach, or default.

(7) “Finance lease” means a lease with respect to which (A) the lessor does not select, manufacture, or supply the goods, (B) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease, and (C) one of the following occurs:

(i) 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.

(ii) 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.

(iii) 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.

(iv) The lessor, before the lessee signs the lease contract, informs the lessee in writing (aa) 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, (bb) that the lessee is entitled under this division 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 (cc) 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.

(8) “Goods” means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 10309), 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.

(9) “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.

(10) “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.

(11) “Lease agreement” means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this division. Unless the context clearly indicates otherwise, the term includes a sublease agreement.

(12) “Lease contract” means the total legal obligation that results from the lease agreement as affected by this division and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.

(13) “Leasehold interest” means the interest of the lessor or the lessee under a lease contract.

(14) “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.

(15) “Lessee in ordinary course of business” means a person who, in good faith and without knowledge that the lease to it 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 preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(16) “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.

(17) “Lessor’s residual interest” means the lessor’s interest in the goods after expiration, termination, or cancellation of the lease contract.

(18) “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.

(19) “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.

(20) “Merchant lessee” means a lessee that is a merchant with respect to goods of the kind subject to the lease.

(21) “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

(22) “Purchase” includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods.

(23) “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.

(24) “Supplier” means a person from whom a lessor buys or leases goods to be leased under a finance lease.

(25) “Supply contract” means a contract under which a lessor buys or leases goods to be leased.

(26) “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.

(27) “Hybrid lease” means a single transaction involving a lease of goods and any of the following:

(A) The provision of services.

(B) A sale of other goods.

(b) Other definitions applying to this division and the sections in which they appear are:

“Accessions.” Subdivision (a) of Section 10310.

“Construction mortgage.” Paragraph (4) of subdivision (a) of Section 10309.

“Encumbrance.” Paragraph (5) of subdivision (a) of Section 10309.

“Fixtures.” Paragraph (1) of subdivision (a) of Section 10309.

“Fixture filing.” Paragraph (2) of subdivision (a) of Section 10309.

“Purchase money lease.” Paragraph (3) of subdivision (a) of Section 10309.

“Account.” Paragraph (2) of subdivision (a) of Section 9102.

“Between merchants.” Subdivision (3) of Section 2104.

“Buyer.” Paragraph (a) of subdivision (1) of Section 2103.

“Chattel paper.” Paragraph (11) of subdivision (a) of Section 9102.

“Consumer goods.” Paragraph (23) of subdivision (a) of Section 9102.

“Document.” Paragraph (30) of subdivision (a) of Section 9102.

“Entrusting.” Subdivision (3) of Section 2403.

“General intangible.” Paragraph (42) of subdivision (a) of Section 9102.

“Instrument.” Paragraph (47) of subdivision (a) of Section 9102.

“Merchant.” Subdivision (1) of Section 2104.

“Mortgage.” Paragraph (55) of subdivision (a) of Section 9102.

“Pursuant to commitment.” Paragraph (69) of subdivision (a) of Section 9102.

“Receipt of goods.” Paragraph (c) of subdivision (1) of Section 2103.

“Sale.” Subdivision (1) of Section 2106.

“Sale on approval.” Section 2326.

“Sale or return.” Section 2326.

“Seller.” Paragraph (d) of subdivision (1) of Section 2103.

(d) In addition, Division 1 contains general definitions and principles of construction and interpretation applicable throughout this division.

buyer in ordinary course commercial unit consumer lease finance lease installment lease lessor lessee conforming goods fault cancellation sublease hybrid lease leasehold interest lessor's residual interest supply contract

(Amended by Stats. 2023, Ch. 210, Sec. 75. (SB 95) Effective January 1, 2024.)

Section § 10104

This section explains that if you have a lease, it still needs to follow other specific state and consumer laws. For example, vehicles need to be registered according to vehicle laws, and mobile homes must adhere to certain health codes. If there’s a conflict between this lease law and those other rules, the other rules take precedence. If someone doesn’t follow these rules, the penalties or outcomes are whatever those other laws say they should be.

(a) A lease, although subject to this division, is also subject to any applicable:

(1) Certificate of title statute of this state, including the provisions of the Vehicle Code that require registration of a vehicle or boat and provisions of the Health and Safety Code that require registration of a mobilehome or commercial coach.

(2) Certificate of title statute of another jurisdiction (Section 10105).

(3) Consumer law of this state, both decisional and statutory, including, to the extent that they apply to a consumer lease transaction, Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code, Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code, and Part 4 (commencing with Section 1725) of Division 3 of the Civil Code.

(b) In case of conflict between this division, other than Section 10105, subdivision (c) of Section 10304, and subdivision (c) of Section 10305, and a law referred to in subdivision (a), that law controls.

lease certificate of title vehicle registration mobilehome registration consumer law conflict of laws compliance health and safety code commercial coach consumer lease transaction Business and Professions Code Civil Code registration requirements cross-jurisdiction statute

(Amended by Stats. 1991, Ch. 111, Sec. 4. Effective July 15, 1991.)

Section § 10105

This section states that when goods have a certificate of title, the laws of the place that issued the title will apply. This is true until either the certificate is surrendered or four months after the goods are moved to another location, whichever comes first. After that, the laws of the new place apply once a new certificate is issued.

Subject to the provisions of subdivision (c) of Section 10304 and subdivision (c) of Section 10305, 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 (1) surrender of the certificate, or (2) four months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.

certificate of title jurisdiction laws surrender certificate moving goods title transfer conflict of laws title statute title compliance goods relocation legal jurisdiction effect of compliance noncompliance rules removal time limit new certificate issuance title governing law

(Amended by Stats. 1991, Ch. 111, Sec. 5. Effective July 15, 1991.)

Section § 10106

This law states that if you're entering a consumer lease, any agreement to use a different state's laws or a different county's court than where the lessee (the person leasing) lives, signed the lease, or uses the goods, isn't valid. So, you can't be forced to go out of your way for legal matters related to the lease.

(a) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within 30 days thereafter, in which the goods are to be used, or in which the lease is executed by the lessee, the choice is not enforceable.

(b) If the judicial forum chosen by the parties to a consumer lease is in a county other than the county in which the lessee in fact signed the lease, the county in which the lessee resides at the commencement of the action, the county in which the lessee resided at the time the lease contract became enforceable, or the county in which the goods are permanently stored, the choice is not enforceable.

consumer lease lessee residence jurisdiction choice legal enforceability lease execution judicial forum county lessee rights goods location lease agreement legal jurisdiction enforceable law court location contract enforceability place of signing

(Amended by Stats. 1991, Ch. 111, Sec. 6. Effective July 15, 1991.)

Section § 10107

If someone is upset because a contract was broken or a promise wasn't kept, they can forgive or give up their claim entirely or partially. They don't need anything in return, but they have to sign and deliver a written agreement to do so.

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 waiver or renunciation in a signed record delivered by the aggrieved party.

contract breach warranty breach waiver renunciation signed record claim discharge consideration aggrieved party contract forgiveness legal claim waiver partial discharge

(Amended by Stats. 2023, Ch. 210, Sec. 76. (SB 95) Effective January 1, 2024.)