Formation And Construction Of Lease Contract - - CA Commercial Law

Section § 10201

This law explains when a lease contract can be legally enforced. First, if it's not a consumer lease and the total payments are under $1,000, then it might not need documentation. Otherwise, you need a signed document that shows the lease was agreed upon and describes the leased items and the lease length. Even if certain details are missing or incorrect, the contract could still be valid for the lease length and quantity of items mentioned. Also, if the items are made specifically for the lessee and aren't easily sellable to others, or the person against whom it's enforced admits the lease exists, the contract could be upheld. Lastly, if the lessee has already received and accepted the goods, it could be enforceable, and any documented lease term applies, or it defaults to what's considered reasonable.

(a) A lease contract is not enforceable by way of action or defense unless:

(1) In a lease contract that is not a consumer lease, 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

(2) There is a record, 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.

(b) Any description of leased goods or of the lease term is sufficient and satisfies paragraph (2) of subdivision (a), whether or not it is specific, if it reasonably identifies what is described.

(c) A record is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under paragraph (2) of subdivision (a) beyond the lease term and the quantity of goods shown in the record.

(d) A lease contract that does not satisfy the requirements of subdivision (a), but which is valid in other respects, is enforceable:

(1) 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;

(2) 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

(3) With respect to goods that have been received and accepted by the lessee.

(e) The lease term under a lease contract referred to in subdivision (d) is:

(1) If there is a record signed by the party against whom enforcement is sought or by that party’s authorized agent specifying the lease term, the term so specified;

(2) 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

(3) A reasonable lease term.

lease contract enforceability consumer lease exceptions signed lease record lease goods description missing lease details special manufacture lease lessee acceptance admitted lease existence reasonable lease term non-consumer lease lessor business suitability repudiation notice lease term specification quantity of goods substantial beginning of manufacture

(Amended by Stats. 2023, Ch. 210, Sec. 77. (SB 95) Effective January 1, 2024.)

Section § 10202

This law says that if parties agree on certain terms in a written document they consider final, those terms can't be contradicted by previous agreements or spoken agreements made at the same time. However, the agreement can be explained or expanded with details based on the parties' previous dealings, trade practices, or how they acted in executing the agreement. Additional terms that fit well and don't contradict the main agreement can also be considered unless the court decides the original document was meant to be the absolute and only version.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record 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 record to have been intended also as a complete and exclusive statement of the terms of the agreement.

confirmatory memoranda final expression course of dealing usage of trade course of performance consistent additional terms complete and exclusive statement prior agreement contemporaneous oral agreement supplementary evidence parties' agreement record interpretation contract terms explanation

(Amended by Stats. 2023, Ch. 210, Sec. 78. (SB 95) Effective January 1, 2024.)

Section § 10204

This law explains how a lease contract can be formed. It states that a lease agreement is valid if there's enough evidence showing both sides agree, even if they didn't specify the exact moment the contract was formed. A lease is still legitimate, even if some terms are missing, as long as it's clear that both parties intended to make a lease and there's a clear way to address any issues that come up.

(a) 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.

(b) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.

(c) 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.

lease contract agreement conduct moment of making terms open intended to make reasonably certain appropriate remedy existence of a lease lease formation

(Amended by Stats. 1991, Ch. 111, Sec. 8. Effective July 15, 1991.)

Section § 10205

If a merchant makes a signed offer to lease goods that promises to stay open, it can't be withdrawn just because there's no payment involved, for the time promised or for a reasonable period if no time is specified. However, this period can't be more than three months. If the offeree provides the form, the offeror must sign the part that promises this assurance.

An offer by a merchant to lease goods to or from another person in a signed record 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 months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

merchant offer lease goods signed record irrevocable offer lack of consideration reasonable time three months offer assurance offeree form separately signed offeror signature

(Amended by Stats. 2023, Ch. 210, Sec. 79. (SB 95) Effective January 1, 2024.)

Section § 10206

This law section outlines how offers for lease contracts should be accepted. Generally, when someone offers to lease something to you, they expect you to accept in a way that's sensible given the situation. If starting to perform what was asked for in the lease seems like a logical way to accept the offer, and the person making the offer doesn't hear back from you in a reasonable amount of time, they can consider their offer to no longer be valid.

(a) 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.

(b) 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.

lease contract offer acceptance method reasonable circumstances offer lapse requested performance lease contract acceptance reasonable time offeror notification manner of acceptance beginning performance reasonable medium

(Amended by Stats. 1991, Ch. 111, Sec. 10. Effective July 15, 1991.)

Section § 10208

If you want to change an existing lease contract, you don’t need anything in return to make it legally binding. If the lease says changes need to be in writing and signed, then they can't be changed otherwise, unless both sides agree to this in writing, especially if one party is a business providing the form. Even if you try to change or cancel the lease without following these rules, that change might still be allowed as a waiver, meaning you’re giving up a right. If you waived a right for something that hasn’t happened yet, you can take it back if you tell the other party and it wouldn’t be unfair because they changed their position based on your original waiver.

(a) An agreement modifying a lease contract needs no consideration to be binding.

(b) A signed lease agreement that excludes modification or rescission except by a signed record 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.

(c) Although an attempt at modification or rescission does not satisfy the requirements of subdivision (b), it may operate as a waiver.

(d) 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.

lease modification consideration waiver executory portion retraction signed record merchant form lease rescission strict performance material change of position

(Amended by Stats. 2023, Ch. 210, Sec. 80. (SB 95) Effective January 1, 2024.)

Section § 10209

If you're leasing something through a finance lease, the promises and warranties made by the supplier to the owner (lessor) of the item also protect you, the lessee, to the extent you hold interest in the lease. However, this protection is only what the warranty and contract allow and any issues that come up. This doesn't change the original contract terms or give the lessee any new obligations. If the supplier and lessor change or cancel their contract, it affects you unless they've been informed of your lease first. But the lessor then carries the supplier's original promises and warranties. Also, you, the lessee, keep any other rights against the supplier from any other agreement or law.

(a) 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.

(b) The extension of the benefit of a supplier’s promises and of warranties to the lessee (subdivision (a) of Section 10209) does not: (1) modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or (2) impose any duty or liability under the supply contract on the lessee.

(c) Any modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.

(d) In addition to the extension of the benefit of the supplier’s promises and of warranties to the lessee under subdivision (a), 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.

supplier promises finance lease lessee protection warranty terms contract modification rescission effect leasehold interest lessor obligations supplier obligations third-party warranties contract defenses lessee rights supply contract terms lease contract legal agreement effects

(Amended by Stats. 1991, Ch. 111, Sec. 13. Effective July 15, 1991.)

Section § 10210

This section explains how express warranties are made by someone leasing out goods. Basically, if the person leasing the goods makes a promise or makes a factual statement about the goods that is part of the deal, there's an express warranty that the goods will match that promise or description. Likewise, if the goods are described or shown via a sample or model as part of the deal, they must match those descriptions or examples. The law also says you don't need to use specific words like 'warranty' or 'guarantee' for a warranty to exist, but just saying what you think the goods are worth isn't enough to create one.

(a) Express warranties by the lessor are created as follows:

(1) 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.

(2) 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.

(3) 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.

(b) 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.

express warranties lessor lessee affirmation of fact promise basis of the bargain description of goods sample model conform to description warranty creation value of goods opinion commendation lease agreement

(Amended by Stats. 1991, Ch. 111, Sec. 14. Effective July 15, 1991.)

Section § 10211

This law section from California Commercial Code talks about warranties in lease contracts. It ensures that during the lease term, there shouldn't be any claims or interests in the leased goods due to the actions or inactions of the lessor that could interfere with the lessee’s use, except in cases like patent infringement claims. For leases where the lessor is a merchant dealing regularly with such goods, there's a promise that the goods are delivered without rightful infringement claims from others. Additionally, if a lessee provides specifications to a lessor or supplier, the lessee must protect them against any infringement claims that result from those specifications.

(a) 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.

(b) 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.

(c) 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.

lease contract warranties lessee enjoyment lessor claims merchant lessor goods infringement finance lease regularly dealing in goods lessee specifications infringement protection leasehold interest lessor responsibility supplier claims warranty exclusion rightful claim specification compliance

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

Section § 10212

This law explains the conditions under which goods leased by a merchant must meet certain quality standards, known as being "merchantable." Generally, if you're leasing goods from someone whose business is trading goods of that type, the goods should be good enough to meet the lease's description without complaints, be of average quality if they're interchangeable items, be suitable for their usual use, be consistent in quality and quantity, and be properly packaged and labeled. These expectations are implied, meaning they are assumed to be part of the lease even if not stated outright. Also, other implied warranties might come from past business dealings or industry standards.

(a) 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.

(b) Goods to be merchantable must be at least such as:

(1) Pass without objection in the trade under the description in the lease agreement;

(2) In the case of fungible goods, are of fair average quality within the description;

(3) Are fit for the ordinary purposes for which goods of that type are used;

(4) Run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;

(5) Are adequately contained, packaged, and labeled as the lease agreement may require; and

(6) Conform to any promises or affirmations of fact made on the container or label.

merchantable warranty lease contract finance lease merchant lessor fungible goods ordinary purposes packaged and labeled course of dealing usage of trade implied warranties quality standards lease agreement goods description average quality ordinary use

(Amended by Stats. 1991, Ch. 111, Sec. 16. Effective July 15, 1991.)

Section § 10213

This law says that when you lease something (except in a finance lease) and the person leasing it to you knows how you plan to use it and that you're depending on them to choose something appropriate, there's an unwritten promise, called an implied warranty, that what you're leasing will be good enough for that specific purpose.

Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.

finance lease lessor lessee implied warranty suitable goods lease contract particular purpose reliance on judgment fitness for purpose selecting goods furnishing goods unwritten promise

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

Section § 10214

This law explains how warranties work in leasing agreements. It says that any statements or actions to create or limit a promise about the quality of leased goods should generally align with each other. To cancel or change implied promises that goods are of good quality or fit for a specific use, it must be clearly stated in writing where it's noticeable. Terms like "as is" or "with all faults" can cancel these implied promises if they are clear and obvious. If a lessee inspects goods before leasing, any apparent flaws they should have noticed are not covered by warranties. Ways established between the parties or common practices in the trade can also modify warranties. Any promise about protection against claims from others must be clearly written and noticeable unless it's understood that the leased goods might have such claims.

(a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty must be construed wherever reasonable as consistent with each other; but, subject to the provisions of Section 10202 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable.

(b) Subject to subdivision (c), 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 subdivision (c), 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.”

(1) 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;

(2) 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

(3) An implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade.

(d) To exclude or modify a warranty against interference or against infringement (Section 10211) 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.

express warranty implied warranty of merchantability implied warranty of fitness negation conspicuous writing exclude or modify as is with all faults lessee inspection course of dealing course of performance usage of trade warranty against interference warranty against infringement lease agreements

(Amended by Stats. 1991, Ch. 111, Sec. 17. Effective July 15, 1991.)

Section § 10215

This section deals with how warranties should be interpreted. Warranties, whether they are clearly stated (express) or assumed (implied), should be seen as adding to each other unless it doesn't make sense to do so. If there is a conflict, the parties' intentions decide which warranty takes precedence. Here are some guidelines: Precise details override a conflicting sample or vague description; a sample from existing goods overrides a conflicting general description; and express warranties override conflicting implied warranties, except for those about a product being suitable for a specific use.

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:

(1) Exact or technical specifications displace an inconsistent sample or model or general language of description.

(2) A sample from an existing bulk displaces inconsistent general language of description.

(3) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

warranty interpretation express warranties implied warranties technical specifications sample and model general language of description cumulative warranties dominant warranty intent of parties inconsistent warranties implied warranty of fitness conflicting warranties warranty hierarchy particular purpose commercial contracts

(Amended by Stats. 1991, Ch. 111, Sec. 18. Effective July 15, 1991.)

Section § 10217

This section is about identifying which goods a lease agreement applies to. If the parties have not specifically agreed on how to identify the goods, then identification happens in one of three ways: when the lease is made for goods that are ready and clearly identified, when the goods are marked or otherwise shown by the lessor for goods that aren't ready, or when offspring are conceived if the lease involves unborn animals.

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:

(1) When the lease contract is made, if the lease contract is for a lease of goods that are existing and identified;

(2) 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

(3) When the young are conceived, if the lease contract is for a lease of unborn young of animals.

lease contract identification of goods existing goods non-existing goods unborn animals shipment marking designation by lessor explicit agreement lease of goods conception of young unborn young of animals lease identification process

(Amended by Stats. 1991, Ch. 111, Sec. 19. Effective July 15, 1991.)

Section § 10218

This law says that someone leasing goods can have an insurable interest, meaning they can insure the items, once those items are identified in a lease, even if they don't meet contract standards and the lessee can reject them. The lessor, or person leasing out the goods, can switch the goods identified until certain conditions occur like default or insolvency. The lessor keeps an insurable interest too until the lessee buys the goods or the risk of loss transfers. In any case, if another law gives insurable interest, that still stands. Additionally, people involved in the lease can agree among themselves on who should get insurance and who benefits from any claims.

(a) 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.

(b) 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.

(c) Notwithstanding a lessee’s insurable interest under subdivisions (a) and (b), 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.

(d) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.

(e) 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.

lessee insurable interest identified goods nonconforming goods lessee rejection option lessor substitution rights risk of loss option to buy beneficiary insurance proceeds lessee insurance obligations goods coverage agreement

(Amended by Stats. 1991, Ch. 111, Sec. 20. Effective July 15, 1991.)

Section § 10219

This law section explains who is responsible if goods are lost or damaged in a lease. For most leases, the lessor (the one leasing out the goods) keeps this risk. However, in a finance lease, the lessee (the one leasing the goods) takes on this risk. The timing of when this risk shifts depends on how the goods are delivered. If goods are shipped, the lessee takes the risk once the goods are handed to the shipping carrier unless there's a specific delivery location. If the goods are with a bailee (someone holding them), the lessee gets the risk when the bailee acknowledges the lessee's right to the goods. In other situations, the risk passes to the lessee when they receive the goods, especially if the lessor or supplier is a merchant.

(a) 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.

(b) Subject to the provisions of this division on the effect of default on risk of loss (Section 10220), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:

(1) If the lease contract requires or authorizes the goods to be shipped by carrier

(A) 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

(B) 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.

(2) 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.

(3) In any case not within paragraph (1) or (2), 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.

finance lease risk of loss lessor lessee carrier delivery goods shipment bailee merchant tender of delivery acknowledgment possession goods receipt default effect delivery destination supplier responsibility

(Amended by Stats. 1991, Ch. 111, Sec. 21. Effective July 15, 1991.)

Section § 10220

This section explains who is responsible for the loss of goods in a lease situation. If goods are delivered but don't meet the terms of the lease, the lessor or supplier is responsible for the loss until the issue is fixed or accepted. If the lessee rejects accepted goods, they can treat the loss as the lessor's responsibility if their insurance doesn't cover it. However, if the lessee backs out or defaults on the lease for compliant goods, the lessor or supplier can hold the lessee responsible for the loss for a period that's considered reasonable.

(a) Where risk of loss is to pass to the lessee and the time of passage is not stated:

(1) 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.

(2) If the lessee rightfully revokes acceptance, he or she, to the extent of any deficiency in his or her effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.

(b) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of any deficiency in his or her effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time.

risk of loss lessee responsibility lessor responsibility conforming goods lease contract default delivery failure right of rejection revoked acceptance finance lease insurance coverage deficiency commercially reasonable time goods identification lease repudiation default consequences supplier responsibility

(Amended by Stats. 1991, Ch. 111, Sec. 22. Effective July 15, 1991.)

Section § 10221

If you lease goods and they get damaged due to no one's fault before they are delivered to you, here's what happens: If they are completely destroyed, the lease is canceled. But if they are only partially damaged or deteriorated, you can choose to inspect them and either cancel the lease or keep them, but you could get a rent discount for the damage, unless it's a finance lease.

If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor, or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee pursuant to the lease agreement or Section 10219, then:

(1) If the loss is total, the lease contract is avoided; and

(2) If the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his or her option either treat the lease contract as avoided or, except in a finance lease, 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.

lease contract goods damage risk of loss lessee rights lessor obligations total loss partial loss deterioration rent allowance finance lease casualty before delivery inspection rights lease cancellation

(Amended by Stats. 1991, Ch. 111, Sec. 23. Effective July 15, 1991.)

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Chapter 2Formation and Construction of Lease Contract