DefaultDefault by Lessor

Section § 10508

Explanation

If a lessor (the person leasing out goods) fails to meet the terms of a lease, the person leasing the goods (lessee) has several options. They can cancel the lease and get back any rent or security deposit that was fair to return. They can also seek damages for goods not delivered or choose other remedies mentioned in the lease. If the lessor breaks a promise about the quality or condition of the goods, the lessee can claim damages. If the lessee rejects or returns the goods for good reason, they can keep the goods until they recover their costs. Additionally, the lessee may deduct any damages from remaining rent after informing the lessor.

(a)CA Commercial Law Code § 10508(a) If a lessor fails to deliver the goods in conformity to the lease contract (Section 10509) or repudiates the lease contract (Section 10402), or a lessee rightfully rejects the goods (Section 10509) or justifiably revokes acceptance of the goods (Section 10517), 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 10510), the lessor is in default under the lease contract and the lessee may:
(1)CA Commercial Law Code § 10508(a)(1) Cancel the lease contract (subdivision (a) of Section 10505);
(2)CA Commercial Law Code § 10508(a)(2) Recover so much of the rent and security as has been paid and is just under the circumstances;
(3)CA Commercial Law Code § 10508(a)(3) Cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (Sections 10518 and 10520), or recover damages for nondelivery (Sections 10519 and 10520);
(4)CA Commercial Law Code § 10508(a)(4) Exercise any other rights or pursue any other remedies provided in the lease contract.
(b)CA Commercial Law Code § 10508(b) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also:
(1)CA Commercial Law Code § 10508(b)(1) If the goods have been identified, recover them (Section 10522); or
(2)CA Commercial Law Code § 10508(b)(2) In a proper case, obtain specific performance or replevy the goods (Section 10521).
(c)CA Commercial Law Code § 10508(c) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease, and in subdivision (c) of Section 10519.
(d)CA Commercial Law Code § 10508(d) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages(subdivision (d) of Section 10519).
(e)CA Commercial Law Code § 10508(e) 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 subdivision (e) of Section 10527.
(f)CA Commercial Law Code § 10508(f) Subject to the provisions of Section 10407, a lessee, on notifying the lessor of the lessee’s intention to do so, may deduct all or any part of the damages resulting from any default under the lease contract from any part of the rent still due under the same lease contract.
lessor default lessee rights cancel lease contract ...

Section § 10509

Explanation

If you rent something and it doesn't match what you agreed to in the lease, you can either keep it, send it back, or keep some of it and send the rest back. However, if you want to send something back, you need to do it within a reasonable time after it's delivered and let the person you rented it from know in a timely manner.

(a)CA Commercial Law Code § 10509(a) Subject to the provisions of Section 10510 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.
(b)CA Commercial Law Code § 10509(b) 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.
lease contract non-conforming goods reject goods ...

Section § 10510

Explanation

This law says that if you're leasing something in installments and a delivery is faulty in a way that significantly reduces its value or has document issues, you can reject it unless the person leasing it to you promises to fix the problem. If one or more faulty deliveries make the entire lease worthless, that's considered a full default. However, if you accept a problematic delivery without quickly saying you want to end the lease, you keep the lease going based on past deliveries and your future expectations.

(a)CA Commercial Law Code § 10510(a) 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 subdivision (b) and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.
(b)CA Commercial Law Code § 10510(b) 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.
installment lease contract lessee nonconforming delivery ...

Section § 10511

Explanation

If you're leasing goods and have to reject them, but there's no agent or company office nearby, you need to follow any reasonable instructions from the owner or supplier on what to do with the goods. If there are no instructions, and the goods are losing value quickly, you should try to sell or lease them for the owner. You should get covered for any reasonable costs you incur in taking care of and disposing of the goods, and if selling is involved, you can also get a commission, usually up to 10% if there's no standard rate. As long as you act honestly and in good faith, you won't be held liable. Lastly, if someone buys these goods from you in good faith, they own them free of any ties to the original owner or supplier.

(a)CA Commercial Law Code § 10511(a) Subject to any security interest of a lessee (subdivision (e) of Section 10508), 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. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor’s account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
(b)CA Commercial Law Code § 10511(b) If a merchant lessee (subdivision (a)) or any other lessee (Section 10512) 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 10 percent of the gross proceeds.
(c)CA Commercial Law Code § 10511(c) In complying with this section or Section 10512, 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.
(d)CA Commercial Law Code § 10511(d) A purchaser who purchases in good faith from a lessee pursuant to this section or Section 10512 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 division.
merchant lessee rejection of goods reasonable instructions ...

Section § 10512

Explanation

This law states that if someone renting goods (the lessee) decides not to accept them because they’re not suitable, they must take care of the goods for a reasonable period while waiting for instructions from the owner or supplier. If no instructions are given, the lessee can store, return, or get rid of the goods, and may seek reimbursement. Importantly, dealing with these goods doesn't mean the lessee accepts or takes ownership of them.

(a)CA Commercial Law Code § 10512(a) Except as otherwise provided with respect to goods that threaten to decline in value speedily (Section 10511) and subject to any security interest of a lessee (subdivision (e) of Section 10508):
(1)CA Commercial Law Code § 10512(a)(1) The lessee, after rejection of goods in the lessee’s possession, shall hold them with reasonable care at the lessor’s or the supplier’s disposition for a reasonable time after the lessee’s seasonable notification of rejection;
(2)CA Commercial Law Code § 10512(a)(2) 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 10511; but
(3)CA Commercial Law Code § 10512(a)(3) The lessee has no further obligations with regard to goods rightfully rejected.
(b)CA Commercial Law Code § 10512(b) Action by the lessee pursuant to subdivision (a) is not acceptance or conversion.
rejection of goods reasonable care lessee responsibilities ...

Section § 10513

Explanation

If a lessor or supplier sends goods that don't match the lease agreement and the deadline hasn't passed yet, they can inform the lessee of their plan to fix it and deliver the correct goods on time. If the lessee rejects these goods but the lessor or supplier thought they might be accepted, they can be given extra time to send the correct goods, as long as they let the lessee know promptly.

(a)CA Commercial Law Code § 10513(a) If any tender or delivery by the lessor or the supplier is rejected because it is nonconforming and the time for performance has not yet expired, the lessor or the supplier may seasonably notify the lessee of the lessor’s or the supplier’s intention to cure and may then make a conforming delivery within the time provided in the lease contract.
(b)CA Commercial Law Code § 10513(b) If the lessee rejects a nonconforming tender that the lessor or the supplier had reasonable grounds to believe would be acceptable with or without money allowance, the lessor or the supplier may have a further reasonable time to substitute a conforming tender if he or she seasonably notifies the lessee.
nonconforming tender rejection seasonably notify ...

Section § 10514

Explanation

When someone renting goods (the lessee) wants to reject them because they are defective, they must specifically mention the defect if it could have been easily noticed during a reasonable inspection. If they don't mention it, they can't use that defect later to justify the rejection or claim the goods are defective, especially if the defect could have been fixed or if the supplier asks for a written list of defects. Also, if a lessee pays the agreed amount without mentioning any issues, they can't later claim back that payment because of obvious document errors.

(a)CA Commercial Law Code § 10514(a) In rejecting goods, a lessee’s failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default:
(1)CA Commercial Law Code § 10514(a)(1) If, stated seasonably, the lessor or the supplier could have cured it (Section 10513); or
(2)CA Commercial Law Code § 10514(a)(2) Between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely.
(b)CA Commercial Law Code § 10514(b) A lessee’s failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents.
lessee rejection of goods defective goods ...

Section § 10515

Explanation

This law explains how a person renting goods (the lessee) shows they accept those goods. First, after having a reasonable chance to look over the goods, if they indicate that they are okay with them, even if they're not perfect, it's considered an acceptance. Also, if they don't properly reject the goods, it's assumed they've accepted them. Lastly, if they accept part of a set, they must accept the whole set.

(a)CA Commercial Law Code § 10515(a) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and
(1)CA Commercial Law Code § 10515(a)(1) 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
(2)CA Commercial Law Code § 10515(a)(2) The lessee fails to make an effective rejection of the goods (subdivision (b) of Section 10509).
(b)CA Commercial Law Code § 10515(b) Acceptance of a part of any commercial unit is acceptance of that entire unit.
acceptance of goods lessee reasonable opportunity to inspect ...

Section § 10516

Explanation
This section explains the responsibilities of a lessee in a lease agreement for goods. The lessee must pay rent for accepted goods, even if some goods were rightfully rejected or not delivered. Once goods are accepted, they can't be rejected later. If a lessee accepts goods knowing they don't meet contract terms, they usually can't revoke acceptance unless they expected the problem would be fixed. Even after accepting goods, any issues must be communicated to the lessor or supplier within a reasonable time, or the lessee may lose the right to claim a remedy. If a lessee is sued over defects in the goods, they can notify the lessor or supplier to defend the case. Both lessors and suppliers can demand control over legal actions related to leased goods under certain conditions. Some parts of this law don't apply to consumer leases.
(a)CA Commercial Law Code § 10516(a) 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.
(b)CA Commercial Law Code § 10516(b) A lessee’s acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, other than a consumer lease in which the supplier assisted in the preparation of the lease contract or participated in negotiating the terms of the lease contract with the lessor, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it. In any other case, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair any other remedy provided by this division or the lease agreement for nonconformity.
(c)CA Commercial Law Code § 10516(c) If a tender has been accepted:
(1)CA Commercial Law Code § 10516(c)(1) Within a reasonable time after the lessee discovers or should have discovered any default, the lessee shall notify the lessor and the supplier, if any, or be barred from any remedy against the party not notified;
(2)CA Commercial Law Code § 10516(c)(2) Within a reasonable time after the lessee receives notice of litigation for infringement or the like (Section 10211) the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and
(3)CA Commercial Law Code § 10516(c)(3) The burden is on the lessee to establish any default.
(d)CA Commercial Law Code § 10516(d) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over the following apply:
(1)CA Commercial Law Code § 10516(d)(1) The lessee may give the lessor or the supplier, or both, written notice of the litigation. If the notice states that the person notified may come in and defend and that if the person notified does not do so that person will be bound in any action against that person by the lessee by any determination of fact common to the two litigations, then unless the person notified after seasonable receipt of the notice does come in and defend that person is so bound.
(2)CA Commercial Law Code § 10516(d)(2) The lessor or the supplier may demand in writing that the lessee turn over control of the litigation including settlement if the claim is one for infringement or the like (Section 10211) or else be barred from any remedy over. If the demand states that the lessor or the supplier 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.
(e)CA Commercial Law Code § 10516(e) Subdivisions (c) and (d) apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (Section 10211).
(f)CA Commercial Law Code § 10516(f) Subdivision (c) shall not apply to a consumer lease.
lessee obligations goods acceptance rent payment ...

Section § 10517

Explanation

This law allows a lessee, or person renting goods, to return accepted goods if they have significant issues that reduce their value. They can do so if they assumed any issues would be fixed and they weren't, or if they didn't know about the issues due to the lessor's promises or the difficulty of spotting the issues. The lessee can also return goods if the lessor breaks the lease in a way that significantly harms the good's value. The lessee must inform the lessor and do this within a reasonable time before the goods change in a way not due to the issue. After returning the goods, the lessee has the same rights as if they never accepted them.

(a)CA Commercial Law Code § 10517(a) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if the lessee has accepted it:
(1)CA Commercial Law Code § 10517(a)(1) Except in the case of a finance lease, on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
(2)CA Commercial Law Code § 10517(a)(2) Without discovery of the nonconformity if the lessee’s acceptance was reasonably induced either by the lessor’s assurances or, except in the case of a finance lease, by the difficulty of discovery before acceptance.
(b)CA Commercial Law Code § 10517(b) A lessee may revoke acceptance of a lot or commercial unit if the lessor defaults under the lease contract and the default substantially impairs the value of that lot or commercial unit to the lessee.
(c)CA Commercial Law Code § 10517(c) If the lease agreement so provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor.
(d)CA Commercial Law Code § 10517(d) 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.
(e)CA Commercial Law Code § 10517(e) A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.
lessee revocation nonconformity value impairment ...

Section § 10518

Explanation

This section deals with what a lessee can do if the lessor defaults on a lease agreement. If the lessor fails to uphold their end of the lease, the lessee can find a replacement lease or purchase goods to substitute for what was promised. If the new lease is similar to the original and made in good faith, the lessee may recover damages from the lessor, including the difference in rent and any additional costs. If the new lease does not meet these conditions, the lessee can seek damages as described in a related section, Section 10519.

(a)CA Commercial Law Code § 10518(a) After a default by a lessor under the lease contract of the type described in subdivision (a) of Section 10508, or, if agreed, after other default by the lessor, 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.
(b)CA Commercial Law Code § 10518(b) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 10504) or otherwise determined pursuant to agreement of the parties (Sections 1302 and 10503), if a lessee’s cover is by a lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages (1) the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement, and (2) any incidental or consequential damages, less expenses saved in consequence of the lessor’s default.
(c)CA Commercial Law Code § 10518(c) If a lessee’s cover is by lease agreement that for any reason does not qualify for treatment under subdivision (b), or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and Section 10519 governs.
lessor default lessee rights cover by purchase ...

Section § 10519

Explanation

This law section deals with how damages are calculated if a lessor does not fulfill their lease obligations. If a lessee decides not to find a replacement or gets a replacement that doesn't meet specific criteria, damages are based on the difference between the market rent and the original rent. Market rent is determined based on the location at the time of default. If the lessee accepts faulty goods, damages are calculated based on the losses due to the goods not meeting the agreed standard, including extra costs caused by the lessor's default. Damages from a warranty breach are based on the difference in value between what was promised and what was delivered, adjusted by any expenses saved as a result of the lessor's default.

(a)CA Commercial Law Code § 10519(a) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 10504) or otherwise determined pursuant to agreement of the parties (Sections 1302 and 10503), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under subdivision (b) of Section 10518, or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of 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.
(b)CA Commercial Law Code § 10519(b) 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.
(c)CA Commercial Law Code § 10519(c) Except as otherwise agreed, if the lessee has accepted goods and given notification (subdivision (c) of Section 10516), the measure of damages for nonconforming tender or delivery or other default 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.
(d)CA Commercial Law Code § 10519(d) Except as otherwise agreed, 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.
lessee rights lessor obligations nondelivery damages ...

Section § 10520

Explanation

This section explains the types of damages a lessee can recover if the lessor defaults on a lease. Incidental damages are costs like inspection, care, and transportation of rejected goods, as well as any reasonable charges related to finding a replacement (cover). Consequential damages cover specific losses that the lessor knew about when the contract was made but couldn't be avoided, as well as any personal or property injuries due to a breach of warranty.

(a)CA Commercial Law Code § 10520(a) 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.
(b)CA Commercial Law Code § 10520(b) Consequential damages resulting from a lessor’s default include:
(1)CA Commercial Law Code § 10520(b)(1) 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
(2)CA Commercial Law Code § 10520(b)(2) Injury to person or property proximately resulting from any breach of warranty.
incidental damages lessor default inspection costs ...

Section § 10521

Explanation

This section explains that a court can order specific performance, which is when a party must do something, typically if the goods involved are unique or special. The court can also decide on other details, like how payments are made or any damages owed. Additionally, if a person leasing goods can't find replacements after trying, they have specific rights to reclaim or recover those goods.

(a)CA Commercial Law Code § 10521(a) Specific performance may be decreed if the goods are unique or in other proper circumstances.
(b)CA Commercial Law Code § 10521(b) 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.
(c)CA Commercial Law Code § 10521(c) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like 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.
specific performance unique goods lessee rights ...

Section § 10522

Explanation

If you've leased goods and paid rent or security on them, you might be able to get them back from the lessor (the person leasing them to you) if they go bankrupt within 10 days after receiving your first rent payment. However, this only applies if you've paid everything you owe up to that point and the goods match what's in the lease agreement.

(a)CA Commercial Law Code § 10522(a) Subject to subdivision (b) 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 10217) 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 10 days after receipt of the first installment of rent and security.
(b)CA Commercial Law Code § 10522(b) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.
lessee rights recover goods lease contract ...