BUSINESS & COMMERCE CODE
CHAPTER 2A. LEASES
SUBCHAPTER A. GENERAL PROVISIONS
§ 2A.101. SHORT TITLE. This chapter shall be known and
may be cited as the Uniform Commercial Code--Leases.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.102. SCOPE. This chapter applies to any
transaction, regardless of form, that creates a lease of goods.
This chapter does not apply to a transaction that creates an
interest in or lease of real estate, except to the extent that
provision is made for leases of fixtures by Section 2A.309.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.103. DEFINITIONS AND INDEX OF
DEFINITIONS. (a) In this chapter unless the context otherwise
requires:
(1) "Buyer in the ordinary course of business" means a
person who in good faith and without knowledge that the sale to him
or her is in violation of the ownership rights or security interest
or leasehold interest of a third party in the goods buys in the
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 receiving 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 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 performance or goods 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, if the total payments
to be made under the lease contract, excluding payments for options
to renew or buy, do not exceed $25,000.
(6) "Fault" means a 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;
or
(iv) if the lease is not a consumer lease,
the lessor, before the lessee signs the lease contract, informs the
lessee in writing (a) of the identity of the person supplying the
goods to the lessor, unless the lessee has selected that person and
directed the lessor to acquire the goods or the right to possession
and use of the goods from that person, (b) that the lessee is
entitled under this chapter to the promises and warranties,
including those of any third party, provided to the lessor by the
person supplying the goods in connection with or as part of the
contract by which the lessor acquired the goods or the right to
possession and use of the goods, and (c) that the lessee may
communicate with the person supplying the goods to the lessor and
receive an accurate and complete statement of those promises and
warranties, including any disclaimers and limitations of them or of
remedies.
(8) "Goods" means all things that are moveable at the
time of identification to the lease contract, or are fixtures
(Section 2A.309), but the term does not include money, documents,
instruments, accounts, chattel paper, general intangibles, or
minerals or the like, including oil and gas, before extraction. The
term also includes the unborn young of animals.
(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 the 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 by this chapter. 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 chapter
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 him
or her 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 receiving 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 the 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.
(b) Other definitions applying to this chapter and the
sections in which they appear are:
"Accessions". Section 2A.310(a).
"Construction mortgage". Section 2A.309(a)(4).
"Encumbrance". Section 2A.309(a)(5).
"Fixtures". Section 2A.309(a)(1).
"Fixture filing". Section 2A.309(a)(2).
"Purchase money lease". Section 2A.309(a)(3).
(c) The following definitions in other chapters apply to
this chapter:
"Account". Section 9.102(a)(2).
"Between merchants". Section 2.104(c).
"Buyer". Section 2.103(a)(1).
"Chattel paper". Section 9.102(a)(11).
"Consumer goods". Section 9.102(a)(23).
"Document". Section 9.102(a)(30).
"Entrusting". Section 2.403(c).
"General intangible". Section 9.102(a)(42).
"Instrument". Section 9.102(a)(47).
"Merchant". Section 2.104(a).
"Mortgage". Section 9.102(a)(55).
"Pursuant to commitment". Section 9.102(a)(69).
"Receipt". Section 2.103(a)(3).
"Sale". Section 2.106(a).
"Sale on approval". Section 2.326.
"Sale or return". Section 2.326.
"Seller". Section 2.103(a)(4).
(d) In addition Chapter 1 contains general definitions and
principles of construction and interpretation applicable
throughout this chapter.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 414, § 2.19, eff. July 1,
2001; Acts 2003, 78th Leg., ch. 542, § 4, eff. Sept. 1, 2003.
§ 2A.104. LEASES SUBJECT TO OTHER LAWS. (a) A lease,
although subject to this chapter, is also subject to any
applicable:
(1) certificate of title statute of this state,
including Chapter 501, Transportation Code, Chapter 31, Parks and
Wildlife Code, and Subchapter E, Chapter 1201, Occupations Code;
(2) certificate of title statute of another
jurisdiction (Section 2A.105); or
(3) consumer law of this state, both decisional and
statutory, including, to the extent that they apply to a lease
transaction, Chapters 17 and 35 of this code and Chapter 1201,
Occupations Code.
(b) In case of conflict between this chapter, other than
Sections 2A.105, 2A.304(c) and 2A.305(c), and any statute or law
referred to in Subsection (a), the statute or law controls.
(c) Failure to comply with any applicable statute has only
the effect specified therein.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 165, § 30.176, eff. Sept. 1,
1997; Acts 2003, 78th Leg., ch. 1276, § 14A.753, eff. Sept. 1,
2003.
§ 2A.105. TERRITORIAL APPLICATION OF CHAPTER TO GOODS
COVERED BY CERTIFICATE OF TITLE. Subject to the provisions of
Sections 2A.304(c) and 2A.305(c), 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.106. LIMITATION ON POWER OF PARTIES TO CONSUMER
LEASE TO CHOOSE APPLICABLE LAW AND JUDICIAL FORUM. (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 or in which the goods are to be used, the choice is not
enforceable.
(b) If the judicial forum chosen by the parties to a
consumer lease is a forum located in a jurisdiction other than the
jurisdiction in which the lessee in fact signed the lease
agreement, resides at the commencement of the action, or resided at
the time the lease contract became enforceable or in which the goods
are in fact used by the lessee, the choice is not enforceable.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.107. WAIVER OR RENUNCIATION OF CLAIM OR RIGHT AFTER
DEFAULT. A claim or right arising out of an alleged default or
breach of warranty may be discharged in whole or in part without
consideration by a written waiver or renunciation signed and
delivered by the aggrieved party.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.108. UNCONSCIONABILITY. (a) If the court as a
matter of law finds a lease contract or any clause of a lease
contract to have been unconscionable at the time it was made, the
court may refuse to enforce the lease contract, or it may enforce
the remainder of the lease contract without the unconscionable
clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result.
(b) 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.
(c) Before making a finding of unconscionability under
Subsection (a) or (b), 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.
(d) In an action in which the lessee claims
unconscionability with respect to a consumer lease:
(1) if the court finds unconscionability under
Subsection (a) or (b), the court shall award reasonable attorney's
fees to the lessee;
(2) if the court does not find unconscionability and
the lessee claiming unconscionability has brought or maintained an
action he or she knew to be groundless, the court shall award
reasonable attorney's fees to the party against whom the claim is
made; and
(3) in determining attorney's fees, the amount of the
recovery on behalf of the claimant under Subsections (a) and (b) is
not controlling.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.109. OPTION TO ACCELERATE AT WILL. (a) A term
providing that one party or the party's successor in interest may
accelerate payment or performance or require collateral or
additional collateral "at will" or "when the party deems himself or
herself insecure" or in words of similar import must be construed to
mean that the party has power to do so only if the party in good
faith believes that the prospect of payment or performance is
impaired.
(b) With respect to a consumer lease, the burden of
establishing good faith under Subsection (a) is on the party who
exercises the power; otherwise the burden of establishing lack of
good faith is on the party against whom the power has been
exercised.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
SUBCHAPTER B. FORMATION AND CONSTRUCTION OF LEASE CONTRACT
§ 2A.201. STATUTE OF FRAUDS. (a) A lease contract is
not enforceable by way of action or defense unless:
(1) the total payments to be made under the lease
contract, excluding payments for options to renew or buy, are less
than $1,000; or
(2) there is a writing, signed by the party against
whom enforcement is sought or by that party's authorized agent,
sufficient to indicate that a lease contract has been made between
the parties and to describe the goods leased and the lease term.
(b) Any description of leased goods or of the lease term is
sufficient and satisfies Subsection (a)(2), whether or not it is
specific, if it reasonably identifies what is described.
(c) A writing is not insufficient because it omits or
incorrectly states a term agreed upon, but the lease contract is not
enforceable under Subsection (a)(2) beyond the lease term and the
quantity of goods shown in the writing.
(d) A lease contract that does not satisfy the requirements
of Subsection (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;
(3) with respect to goods that have been received and
accepted by the lessee; or
(4) if the lease contract would otherwise be
enforceable under general principles of equitable estoppel,
detrimental reliance or unjust enrichment.
(e) The lease term under a lease contract referred to in
Subsection (d) is:
(1) if there is a writing signed by the party against
whom enforcement is sought or by that party's authorized agent
specifying the lease term, the term so specified;
(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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.202. FINAL WRITTEN EXPRESSION; PAROL OR EXTRINSIC
EVIDENCE. Terms with respect to which the confirmatory memoranda
of the parties agree or which are otherwise set forth in a writing
intended by the parties as a final expression of their agreement
with respect to such terms as are included therein may not be
contradicted by evidence of a prior agreement or of a
contemporaneous oral agreement but may be explained or
supplemented:
(1) by course of dealing or usage of trade or by course
of performance; and
(2) by evidence of consistent additional terms unless
the court finds the writing to have been intended also as a complete
and exclusive statement of the terms of the agreement.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.203. SEALS INOPERATIVE. The affixing of a seal to
a writing evidencing a lease contract or an offer to enter into a
lease contract does not render the writing a sealed instrument and
the law with respect to sealed instruments does not apply to the
lease contract or offer.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.204. FORMATION IN GENERAL. (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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.205. FIRM OFFERS. An offer by a merchant to lease
goods to or from another person in a signed writing that by its
terms gives assurance it will be held open is not revocable, for
lack of consideration, during the time stated or, if no time is
stated, for a reasonable time, but in no event may the period of
irrevocability exceed three months. Any such term of assurance on a
form supplied by the offeree must be separately signed by the
offeror.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.206. OFFER AND ACCEPTANCE IN FORMATION OF LEASE
CONTRACT. (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 method of acceptance, an offeror who is not notified of
acceptance within a reasonable time may treat the offer as having
lapsed before acceptance.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.208. MODIFICATION, RESCISSION AND 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 writing may not be otherwise modified
or rescinded, but, except as between merchants, such a requirement
on a form supplied by a merchant must be separately signed by the
other party.
(c) Although an attempt at modification or rescission does
not satisfy the requirements of Subsection (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 a retraction would be
unjust in view of a material change of position in reliance on the
waiver.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.209. LESSEE UNDER FINANCE LEASE AS BENEFICIARY OF
SUPPLY CONTRACT. (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 (Section 2A.209(a)) 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
Subsection (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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.210. EXPRESS WARRANTIES. (a) Express warranties
by the lessor are created as follows:
(1) Any affirmation of fact or promise made by the
lessor to the lessee that 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.211. WARRANTIES AGAINST INTERFERENCE AND AGAINST
INFRINGEMENT; LESSEE'S OBLIGATION AGAINST
INFRINGEMENT. (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 a
claim by way of infringement or the like that arises out of
compliance with the specifications.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.212. IMPLIED WARRANTY OF
MERCHANTABILITY. (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.
(c) Other implied warranties may arise from course of
dealing or usage of trade.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.213. IMPLIED WARRANTY OF FITNESS FOR PARTICULAR
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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.214. EXCLUSION OR MODIFICATION OF
WARRANTIES. (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 whenever reasonable, as consistent with
each other; but, subject to the provisions of Section 2A.202 on
parol or extrinsic evidence, negation or limitation is inoperative
to the extent that the construction is unreasonable.
(b) Subject to Subsection (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 Subsection (c), to exclude or modify an
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."
(c) Notwithstanding Subsection (b), but subject to
Subsection (d):
(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 also may 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 2A.211) or any part of it, the
language must be specific, be by a writing, and be conspicuous,
unless the circumstances, including course of performance, course
of dealing, or usage of trade, give the lessee reason to know that
the goods are being leased subject to a claim or interest of any
person.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.215. ACCUMULATION 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:
(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; and
(3) express warranties displace inconsistent implied
warranties other than an implied warranty of fitness for a
particular purpose.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.216. THIRD-PARTY BENEFICIARIES OF EXPRESS AND
IMPLIED WARRANTIES. This chapter does not provide whether anyone
other than a lessee may take advantage of an express or implied
warranty of quality made to the lessee or whether the lessee or
anyone entitled to take advantage of a warranty made to the lessee
may sue a third party other than the immediate lessor, or the
supplier in a finance lease, for deficiencies in the quality of the
goods. These matters are left to the courts for their
determination.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.217. IDENTIFICATION. 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 the unborn young of animals.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.218. INSURANCE AND PROCEEDS. (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
Subsections (a) and (b), the lessor retains an insurable interest
during the existence of the lease contract.
(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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.219. RISK OF LOSS. (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 chapter on the effect
of default on risk of loss (Section 2A.220), 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
acknowledgement by the bailee of the lessee's right to possession
of the goods.
(3) In any case not within Subdivision (1) or (2), the
risk of loss passes to the lessee on tender of delivery if the
lessee is a merchant; otherwise the risk of loss passes to the
lessee on the lessee's receipt of the goods.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.220. EFFECT OF DEFAULT ON RISK OF LOSS. (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; or
(2) if the lessee rightfully revokes acceptance, the
lessee, to the extent of any deficiency in the lessee's effective
insurance coverage, may treat the risk of loss as having remained
with the lessor from the beginning.
(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 the lessor's or the
supplier's effective insurance coverage may treat the risk of loss
as resting on the lessee for a commercially reasonable time.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.221. 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, or the goods suffer
casualty before risk of loss passes to the lessee under the lease
agreement or Section 2A.219:
(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 the lessee's
option either treat the lease contract as avoided or, except in a
finance lease that is not a consumer lease, accept the goods with
due allowance from the rent payable for the balance of the lease
term for the deterioration or the deficiency in quantity but
without further right against the lessor.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
SUBCHAPTER C. EFFECT OF LEASE CONTRACT
§ 2A.301. ENFORCEABILITY OF LEASE CONTRACT. Except as
otherwise provided in this title, 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1. 1993.
§ 2A.302. TITLE TO AND POSSESSION OF GOODS. Except as
otherwise provided in this title, each provision of this chapter
applies whether the lessor or a third party has title to the goods,
and whether the lessor, the lessee, or a third party has possession
of the goods, notwithstanding any statute or rule of law that
possession or the absence of possession is fraudulent.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.303. ALIENABILITY OF PARTY'S INTEREST UNDER LEASE
CONTRACT OR OF LESSOR'S RESIDUAL INTEREST IN GOODS; DELEGATION OF
PERFORMANCE; TRANSFER OF RIGHTS. (a) As used in this section,
"creation of a security interest" includes the sale of a lease
contract that is subject to Chapter 9 of this code, Secured
Transactions, by reason of Section 9.109(a)(3).
(b) Except as provided in Section 9.407(c), a provision in a
lease agreement which (1) prohibits the voluntary or involuntary
transfer, including a transfer by sale, sublease, creation or
enforcement of a security interest, or attachment, levy, or other
judicial process, of an interest of a party under the lease contract
or of the lessor's residual interest in the goods, or (2) makes such
a transfer an event of default, gives rise to the rights and
remedies provided in Subsection (d), but a transfer that is
prohibited or is an event of default under the lease agreement is
otherwise effective.
(c) A provision in a lease agreement which (1) prohibits a
transfer of a right to damages for default with respect to the whole
lease contract or of a right to payment arising out of the
transferor's due performance of the transferor's entire obligation,
or (2) makes such a transfer an event of default, is not
enforceable, and such a transfer is not a transfer that materially
impairs the prospect of obtaining return performance by, materially
changes the duty of, or materially increases the burden or risk
imposed on, the other party to the lease contract within the purview
of Subsection (d).
(d) Subject to Section 9.407(c):
(1) if a transfer is made which is made an event of
default under a lease agreement, the party to the lease contract not
making the transfer, unless that party waives the default or
otherwise agrees, has the rights and remedies described in Section
2A.501(b); and
(2) if Subdivision (1) is not applicable and if a
transfer is made that (A) is prohibited under a lease agreement or
(B) materially impairs the prospect of obtaining return performance
by, materially changes the duty of, or materially increases the
burden of risk imposed on, the other party to the lease contract,
unless the party not making the transfer agrees at any time to the
transfer in the lease contract or otherwise, then, except as
limited by contract, (i) the transferor is liable to the party not
making the transfer for damages caused by the transfer to the extent
that the damages could not reasonably be prevented by the party not
making the transfer and (ii) a court having jurisdiction may grant
other appropriate relief, including cancellation of the lease
contract or an injunction against the transfer.
(e) A transfer of "the lease" or of "all my rights under the
lease," or a transfer in similar general terms, is a transfer of
rights and, unless the language or the circumstances, as in a
transfer for security, indicate the contrary, the transfer is a
delegation of duties by the transferor to the transferee.
Acceptance by the transferee constitutes a promise by the
transferee to perform those duties. This promise is enforceable by
either the transferor or the other party to the lease contract.
(f) Unless otherwise agreed by the lessor and the lessee, a
delegation of performance does not relieve the transferor as
against the other party of any duty to perform or of any liability
for default.
(g) In a consumer lease, to prohibit the transfer of an
interest of a party under the lease contract or to make a transfer
an event of default, the language must be specific, by a writing,
and conspicuous.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 414, § 2.20, eff. July 1,
2001.
§ 2A.304. SUBSEQUENT LEASE OF GOODS BY
LESSOR. (a) Subject to Section 2A.303 of this chapter, a
subsequent lessee from a lessor of goods under an existing lease
contract obtains, to the extent of the leasehold interest
transferred, the leasehold interest in the goods that the lessor
had or had power to transfer, and except as provided by Subsection
(b) or Section 2A.527(d) takes subject to the existing lease
contract. A lessor with voidable title has power to transfer a good
leasehold interest to a good faith subsequent lessee for value, but
only to the extent set forth in the preceding sentence. If goods
have been delivered under a transaction of purchase, the lessor has
that power even though:
(1) the lessor's transferor was deceived as to the
identity of the lessor;
(2) the delivery was in exchange for a check which is
later dishonored;
(3) it was agreed that the transaction was to be a
"cash sale"; or
(4) the delivery was procured through fraud punishable
as larcenous under the criminal law.
(b) A subsequent lessee in the ordinary course of business
from a lessor who is a merchant dealing in goods of that kind to whom
the goods were entrusted by the existing lessee of that lessor
before the interest of the subsequent lessee became enforceable
against that lessor obtains, to the extent of the leasehold
interest transferred, all of that lessor's and the existing
lessee's rights to the goods, and takes free of the existing lease
contract.
(c) A subsequent lessee from the lessor of goods that are
subject to an existing lease contract and are covered by a
certificate of title issued under a statute of this state or of
another jurisdiction takes no greater rights than those provided
both by this section and by the certificate of title statute.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.305. SALE OR SUBLEASE OF GOODS BY
LESSEE. (a) Subject to the provisions of Section 2A.303, a buyer
or sublessee from the lessee of goods under an existing lease
contract obtains, to the extent of the interest transferred, the
leasehold interest in the goods that the lessee had or had power to
transfer, and except as provided by Subsection (b) and Section
2A.511, takes subject to the existing lease contract. A lessee with
a voidable leasehold interest has power to transfer a good
leasehold interest to a good faith buyer for value or a good faith
sublessee for value, but only to the extent set forth in the
preceding sentence. When goods have been delivered under a
transaction of lease the lessee has that power even though:
(1) the lessor was deceived as to the identity of the
lessee;
(2) the delivery was in exchange for a check which is
later dishonored; or
(3) the delivery was procured through fraud punishable
as larcenous under the criminal law.
(b) A buyer in the ordinary course of business or a
sublessee in the ordinary course of business from a lessee who is a
merchant dealing in goods of that kind to whom the goods were
entrusted by the lessor obtains, to the extent of the interest
transferred, all of the lessor's and lessee's rights to the goods,
and takes free of the existing lease contract.
(c) A buyer or sublessee from the lessee of goods that are
subject to an existing lease contract and are covered by a
certificate of title issued under a statute of this state or of
another jurisdiction takes no greater rights than those provided
both by this section and by the certificate of title statute.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.306. PRIORITY OF CERTAIN LIENS ARISING BY OPERATION
OF LAW. If a person in the ordinary course of the person's business
furnishes services or materials with respect to goods subject to a
lease contract, a lien upon those goods in the possession of that
person given by statute or rule of law for those materials or
services takes priority over any interest of the lessor or lessee
under the lease contract or this chapter unless the lien is created
by statute and the statute provides otherwise or unless the lien is
created by rule of law and the rule of law provides otherwise.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.307. PRIORITY OF LIENS ARISING BY ATTACHMENT OR
LEVY ON, SECURITY INTERESTS IN, AND OTHER CLAIMS TO
GOODS. (a) Except as otherwise provided in Section 2A.306, a
creditor of a lessee takes subject to the lease contract.
(b) Except as otherwise provided in Subsection (c) and
Sections 2A.306 and 2A.308, a creditor of a lessor takes subject to
the lease contract unless the creditor holds a lien that attached to
the goods before the lease contract became enforceable.
(c) Except as otherwise provided in Sections 9.317, 9.321,
and 9.323, a lessee takes a leasehold interest subject to a security
interest held by a creditor of the lessor.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 414, § 2.21, eff. July 1,
2001.
§ 2A.308. SPECIAL RIGHTS OF CREDITORS. (a) A creditor
of a lessor in possession of goods subject to a lease contract may
treat the lease contract as void if as against the creditor
retention of possession by the lessor is fraudulent or voids the
lease contract under any statute or rule of law, but retention of
possession in good faith and current course of trade by the lessor
for a commercially reasonable time after the lease contract becomes
enforceable is not fraudulent and does not void the lease contract.
(b) Nothing in this chapter impairs the rights of creditors
of a lessor if the lease contract is made under circumstances which
under any statute or rule of law apart from this chapter would
constitute the transaction a fraudulent transfer or voidable
preference.
(c) A creditor of a seller may treat a sale or an
identification of goods to a contract for sale as void if as against
the creditor retention of possession by the seller is fraudulent
under any statute or rule of law, but retention of possession of the
goods pursuant to a lease contract entered into by the seller as
lessee and the buyer as lessor in connection with the sale or
identification of the goods is not fraudulent if the buyer bought
for value and in good faith.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.309. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME
FIXTURES. (a) In this section:
(1) goods are "fixtures" when they become so related
to particular real estate that an interest in them arises under real
estate law;
(2) a "fixture filing" is the filing, in the office
where a record of a mortgage on the real estate would be filed or
recorded, of a financing statement covering goods that are or are to
become fixtures and conforming to the requirements of Sections
9.502(a) and (b);
(3) a lease is a "purchase money lease" unless the
lessee has possession or use of the goods or the right to possession
or use of the goods before the lease agreement is enforceable;
(4) a mortgage is a "construction mortgage" to the
extent it secures an obligation incurred for the construction of an
improvement on land including the acquisition cost of the land, if
the recorded writing so indicates; and
(5) "encumbrance" includes real estate mortgages and
other liens on real estate and all other rights in real estate that
are not ownership interests.
(b) Under this chapter a lease may be of goods that are
fixtures or may continue in goods that become fixtures, but no lease
exists under this chapter of ordinary building materials
incorporated into an improvement on land.
(c) This chapter does not prevent the creation of a lease of
fixtures pursuant to real estate law.
(d) The perfected interest of a lessor of fixtures has
priority over a conflicting interest of an encumbrancer or owner of
the real estate if:
(1) the lease is a purchase money lease, the
conflicting interest of the encumbrancer or owner arises before the
goods become fixtures, a fixture filing covering the fixtures is
filed or recorded before the goods become fixtures or within 10 days
thereafter, and the lessee has an interest of record in the real
estate or is in possession of the real estate; or
(2) the interest of the lessor is perfected by a
fixture filing before the interest of the encumbrancer or owner is
of record, the lessor's interest has priority over any conflicting
interest of a predecessor in title of the encumbrancer or owner, and
the lessee has an interest of record in the real estate or is in
possession of the real estate.
(e) The interest of a lessor of fixtures, whether or not
perfected, has priority over the conflicting interest of an
encumbrancer or owner of the real estate if:
(1) the fixtures are readily removable factory or
office machines, readily removable equipment that is not primarily
used or leased for use in the operation of the real estate, or
readily removable replacements of domestic appliances that are
goods subject to a consumer lease, and before the goods become
fixtures the lease contract is enforceable; or
(2) the conflicting interest is a lien on the real
estate obtained by legal or equitable proceedings after the lease
contract is enforceable; or
(3) the encumbrancer or owner has consented in writing
to the lease or has disclaimed an interest in the goods as fixtures;
or
(4) the lessee has a right to remove the goods as
against the encumbrancer or owner. If the lessee's right to remove
terminates, the priority of the interest of the lessor continues
for a reasonable time.
(f) Notwithstanding Subsection (d)(1) but otherwise subject
to Subsections (d) and (e), the interest of a lessor of fixtures,
including the lessor's residual interest, is subordinate to the
conflicting interest of an encumbrancer of the real estate under a
construction mortgage recorded before the goods become fixtures if
the goods become fixtures before the completion of the
construction. To the extent given to refinance a construction
mortgage, the conflicting interest of an encumbrancer of the real
estate under a mortgage has this priority to the same extent as the
encumbrancer of the real estate under the construction mortgage.
(g) In cases not within the preceding subsections, priority
between the interest of a lessor of fixtures, including the
lessor's residual interest, and the conflicting interest of an
encumbrancer or owner of the real estate who is not the lessee is
determined by the priority rules governing conflicting interests in
real estate.
(h) If the interest of a lessor of fixtures, including the
lessor's residual interest, has priority over all conflicting
interests of all owners and encumbrancers of the real estate, the
lessor or the lessee may (1) on default, expiration, termination,
or cancellation of the lease agreement but subject to the lease
agreement and this chapter, or (2) if necessary to enforce other
rights and remedies of the lessor or lessee under this chapter,
remove the goods from the real estate, free and clear of all
conflicting interests of all owners and encumbrancers of the real
estate, but the lessor or lessee must reimburse any encumbrancer or
owner of the real estate who is not the lessee and who has not
otherwise agreed for the cost of repair of any physical injury, but
not for any diminution in value of the real estate caused by the
absence of the goods removed or by any necessity of replacing them.
A person entitled to reimbursement may refuse permission to remove
until the party seeking removal gives adequate security for the
performance of this obligation.
(i) Even though the lease agreement does not create a
security interest, the interest of a lessor of fixtures, including
the lessor's residual interest, is perfected by filing a financing
statement as a fixture filing for leased goods that are or are to
become fixtures in accordance with the relevant provisions of
Chapter 9.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 414, § 2.22, eff. July 1,
2001.
§ 2A.310. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME
ACCESSIONS. (a) Goods are "accessions" when they are installed
in or affixed to other goods.
(b) The lessor's residual interest in the accessions and the
interest of a lessor or a lessee under a lease contract entered into
before the goods became accessions are superior to all interests in
the whole except as stated in Subsection (d).
(c) The lessor's residual interest in the accessions and the
interest of a lessor or a lessee under a lease contract entered into
at the time or after the goods became accessions are superior to all
subsequently acquired interests in the whole except as stated in
Subsection (d) but are subordinate to interests in the whole
existing at the time the lease contract was made unless the holders
of such interests in the whole have in writing consented to the
lease or disclaimed an interest in the goods as part of the whole.
(d) The lessor's residual interest in the accessions and the
interest of a lessor or a lessee under a lease contract described by
Subsection (b) or (c) are subordinate to the interest of:
(1) a buyer in the ordinary course of business or a
lessee in the ordinary course of business of any interest in the
whole acquired after the goods became accessions; or
(2) a creditor with a security interest in the whole
perfected before the lease contract was made to the extent that the
creditor makes subsequent advances without knowledge of the lease
contract.
(e) When under Subsections (b) or (c) and (d) a lessor or a
lessee of accessions holds an interest that is superior to all
interests in the whole, the lessor or the lessee may (1) on default,
expiration, termination, or cancellation of the lease contract by
the other party but subject to the provisions of the lease contract
and this chapter, or (2) if necessary to enforce the lessor's or
lessee's other rights and remedies under this chapter, remove the
goods from the whole, free and clear of all interests in the whole,
but the party must reimburse any holder of an interest in the whole
who is not the lessee and who has not otherwise agreed for the cost
of repair of any physical injury but not for any diminution in value
of the whole caused by the absence of the goods removed or by any
necessity for replacing them. A person entitled to reimbursement
may refuse permission to remove until the party seeking removal
gives adequate security for the performance of this obligation.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
SUBCHAPTER D. PERFORMANCE OF LEASE CONTRACT: REPUDIATED,
SUBSTITUTED AND EXCUSED
§ 2A.401. INSECURITY: ADEQUATE ASSURANCE OF
PERFORMANCE. (a) A lease contract imposes an obligation on each
party that the other's expectation of receiving due performance
will not be impaired.
(b) If reasonable grounds for insecurity arise with respect
to the performance of either party, the insecure party may demand in
writing adequate assurance of due performance. Until the insecure
party receives that assurance, if commercially reasonable, the
insecure party may suspend any performance for which the party has
not already received the agreed return.
(c) A repudiation of the lease contract occurs if assurance
of due performance adequate under the circumstances of the
particular case is not provided to the insecure party within a
reasonable time, not to exceed 30 days after receipt of a demand by
the other party.
(d) Between merchants, the reasonableness of grounds for
insecurity and the adequacy of any assurance offered must be
determined according to commercial standards.
(e) Acceptance of any nonconforming delivery or payment
does not prejudice the aggrieved party's right to demand adequate
assurance of future performance.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.402. ANTICIPATORY REPUDIATION. If either party
repudiates a lease contract 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:
(1) for a commercially reasonable time, await
retraction of repudiation and performance by the repudiating party;
(2) make demand pursuant to Section 2A.401 and await
assurance of future performance adequate under the circumstances of
the particular case; or
(3) resort to any right or remedy on 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 (Section
2A.524).
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.403. RETRACTION OF ANTICIPATORY
REPUDIATION. (a) 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.
(b) 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
demanded under Section 2A.401.
(c) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.404. SUBSTITUTED PERFORMANCE. (a) If without
fault of the lessee, the lessor and the supplier, the agreed
berthing, loading, or unloading facilities fail or the agreed type
of carrier becomes unavailable or the agreed manner of delivery
otherwise becomes commercially impracticable, but a commercially
reasonable substitute is available, the substitute performance
must be tendered and accepted.
(b) If the agreed means or manner of payment fails because
of domestic or foreign governmental regulation:
(1) 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
(2) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.405. EXCUSED PERFORMANCE. Subject to Section
2A.404 on substituted performance, the following rules apply:
(1) Delay in delivery or nondelivery in whole or in
part by a lessor or a supplier who complies with Subdivisions (2)
and (3) 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.
(2) If the causes mentioned in Subdivision (1) affect
only part of the lessor's or the supplier's capacity to perform, the
lessor or supplier shall allocate production and deliveries among
the lessor's or supplier's customers but at the lessor's or
supplier's option may include regular customers not then under
contract for sale or lease as well as the lessor's or supplier's own
requirements for further manufacture. The lessor or supplier may
so allocate in any manner that is fair and reasonable.
(3) 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 Subdivision (2),
of the estimated quota made available for the lessee.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.406. PROCEDURE ON EXCUSED PERFORMANCE. (a) If
the lessee receives notification of a material or indefinite delay
or an allocation justified under Section 2A.405, 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 (Section 2A.510):
(1) terminate the lease contract (Section 2A.505(b));
or
(2) except in a finance lease that is not a consumer
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.
(b) If, after receipt of a notification from the lessor
under Section 2A.405, the lessee fails to modify the lease
agreement within a reasonable time not exceeding 30 days, the lease
contract lapses with respect to any deliveries affected.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.407. IRREVOCABLE PROMISES: FINANCE
LEASES. (a) In the case of a finance lease that is not a consumer
lease, a term in the lease agreement that provides that the lessee's
promises under the lease contract become irrevocable and
independent upon the lessee's acceptance of the goods is
enforceable.
(b) A promise that has become irrevocable and independent
under Subsection (a):
(1) is effective and enforceable between the parties,
and by or against third parties including assignees of the parties;
and
(2) is not subject to cancellation, termination,
modification, repudiation, excuse, or substitution without the
consent of the party to whom the promise runs.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
SUBCHAPTER E. DEFAULT
§ 2A.501. DEFAULT: PROCEDURE. (a) Whether the lessor
or the lessee is in default under a lease contract is determined by
the lease agreement and this chapter.
(b) 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.
(c) If the lessor or the lessee is in default under the lease
contract, the party seeking enforcement may reduce the party's
claim to judgment or otherwise enforce the lease contract by
self-help or any available judicial procedure or nonjudicial
procedure, including administrative proceeding, arbitration, or
the like, in accordance with this chapter.
(d) Except as otherwise provided by Section 1.305(a) or this
chapter or the lease agreement, the rights and remedies referred to
in Subsections (b) and (c) are cumulative.
(e) If the lease agreement covers both real property and
goods, the party seeking enforcement may proceed under this
subchapter as to the goods, or under other applicable law as to both
the real property and the goods in accordance with that party's
rights and remedies in respect of the real property, in which case
this subchapter does not apply.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 5, eff. Sept. 1,
2003.
§ 2A.502. NOTICE AFTER DEFAULT. Except as provided by
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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.503. MODIFICATION OR IMPAIRMENT OF RIGHTS AND
REMEDIES. (a) 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 by this chapter
and may limit or alter the measure of damages recoverable under this
chapter.
(b) Resort to a remedy provided under this chapter or in the
lease agreement is optional unless the remedy is expressly agreed
to be exclusive. If circumstances cause an exclusive or limited
remedy to fail its essential purpose, or provision for an exclusive
remedy is unconscionable, remedy may be had as provided by this
chapter.
(c) Consequential damages may be liquidated under Section
2A.504 or otherwise be limited, altered, or excluded unless the
limitation, alteration, or exclusion is unconscionable.
Liquidation, limitation, alteration, or exclusion of consequential
damages for injury to the person in the case of consumer goods is
prima facie unconscionable, but liquidation, limitation,
alteration, or exclusion of damages where the loss is commercial is
not prima facie unconscionable.
(d) Rights and remedies on default by the lessor or the
lessee with respect to an obligation or promise collateral or
ancillary to the lease contract are not impaired by this chapter.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.504. LIQUIDATION OF DAMAGES. (a) 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. In a consumer lease, a term
fixing liquidated damages that are unreasonably large in light of
the actual harm is unenforceable as a penalty.
(b) If the lease agreement provides for liquidation of
damages, and such provision does not comply with Subsection (a) or
such provision is an exclusive or limited remedy that circumstances
cause to fail of its essential purpose, remedy may be had as
provided in this chapter.
(c) If the lessor justifiably withholds or stops delivery of
goods because of the lessee's default or insolvency (Section 2A.525
or 2A.526), the lessee is entitled to restitution of any amount by
which the sum of the lessee's payments exceeds:
(1) the amount to which the lessor is entitled by
virtue of terms liquidating the lessor's damages in accordance with
Subsection (a); or
(2) in the absence of those terms, 20 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 $500.
(d) A lessee's right to restitution under Subsection (c) is
subject to offset to the extent the lessor establishes:
(1) a right to recover damages under the provisions of
this chapter other than Subsection (a); and
(2) the amount of value of any benefits received by the
lessee directly or indirectly by reason of the lease contract.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.505. CANCELLATION AND TERMINATION AND EFFECT OF
CANCELLATION, TERMINATION, RESCISSION, OR FRAUD ON RIGHTS AND
REMEDIES. (a) On cancellation of the lease contract, all
obligations that are still executory 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.
(b) On termination of the lease contract, all obligations
that are still executory on both sides are discharged but any right
based on a prior default or performance survives.
(c) 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 an antecedent default.
(d) Rights and remedies for material misrepresentation or
fraud include all rights and remedies available under this chapter
for default.
(e) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.506. STATUTE OF LIMITATIONS. (a) 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. By the original lease contract the parties may not
expand such period of limitation but, except in the case of a
consumer lease, may reduce the period of limitation to not less than
one year.
(b) 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. A cause of
action for indemnity accrues:
(1) in the case of an indemnity against liability,
when the act or omission on which the claim for indemnity is based
is or should have been discovered by the indemnified party; or
(2) in the case of an indemnity against loss or damage,
when the person indemnified makes payment thereof.
(c) If an action commenced within the time limited by
Subsection (a) 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.
(d) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.507. PROOF OF MARKET RENT. (a) Damages based on
market rent (Section 2A.519 or 2A.528) are determined according to
the rent for the use of the goods concerned for a lease term
identical to the remaining lease term of the original lease
agreement and prevailing at the times specified in Sections 2A.519
and 2A.528.
(b) If evidence of rent for the use of the goods concerned
for a lease term identical to the remaining lease term of the
original lease agreement and prevailing at the times or places
described in this chapter is not readily available, the rent
prevailing within any reasonable time before or after the time
described or at any other place or for a different lease term which
in commercial judgment or under usage of trade would serve as a
reasonable substitute for the one described may be used, making any
proper allowance for the difference, including the cost of
transporting the goods to or from the other place.
(c) Evidence of a relevant rent prevailing at a time or
place or for a lease term other than the one described in this
chapter offered by one party is not admissible unless and until the
party has given the other party notice the court finds sufficient to
prevent unfair surprise.
(d) If the prevailing rent or value of any goods regularly
leased in any established market is in issue, reports in official
publications or trade journals or in newspapers or periodicals of
general circulation published as the reports of that market are
admissible in evidence. The circumstances of the preparation of
the report may be shown to affect its weight but not its
admissibility.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.508. LESSEE'S REMEDIES. (a) If a lessor fails to
deliver the goods in conformity to the lease contract (Section
2A.509) or repudiates the lease contract (Section 2A.402), or a
lessee rightfully rejects the goods (Section 2A.509) or justifiably
revokes acceptance of the goods (Section 2A.517), then with respect
to any goods involved, and with respect to all of the goods if under
an installment lease contract and the value of the whole lease
contract is substantially impaired (Section 2A.510), the lessor is
in default under the lease contract and the lessee may:
(1) cancel the lease contract (Section 2A.505(a));
(2) recover so much of the rent and security as has
been paid and is just under the circumstances;
(3) cover and recover damages as to all goods affected
whether or not they have been identified to the lease contract
(Sections 2A.518 and 2A.520), or recover damages for nondelivery
(Sections 2A.519 and 2A.520); or
(4) exercise any other rights or pursue any other
remedies provided in the lease contract.
(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) if the goods have been identified, recover them
(Section 2A.522); or
(2) in a proper case, obtain specific performance,
replevin, detinue, sequestration, claim and delivery, or the like
for the goods (Section 2A.521).
(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 Section 2A.519(c).
(d) If a lessor has breached a warranty, whether express or
implied, the lessee may recover damages (Section 2A.519(d)).
(e) On rightful rejection or justifiable revocation or
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 Section 2A.527(e).
(f) Subject to the provisions of Section 2A.407, a lessee,
on notifying the lessor of the lessee's intention to do so, may
deduct all or 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.509. LESSEE'S RIGHTS ON IMPROPER DELIVERY;
RIGHTFUL REJECTION. (a) Subject to the provisions of Section
2A.510 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) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.510. INSTALLMENT LEASE CONTRACTS: REJECTION AND
DEFAULT. (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 Subsection (b) and the
lessor or the supplier gives adequate assurance of its cure, the
lessee must accept the delivery.
(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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.511. MERCHANT LESSEE'S DUTIES AS TO RIGHTFULLY
REJECTED GOODS. Subject to any security interest of a lessee
(Section 2A.508(e)), 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 the lessee's 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.512. LESSEE'S DUTIES AS TO RIGHTFULLY REJECTED
GOODS. (a) Except as otherwise provided with respect to goods
that threaten to decline in value speedily (Section 2A.511) and
subject to any security interest of a lessee (Section 2A.508(e)):
(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) 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 by Subsection (d); but
(3) the lessee has no further obligations with regard
to goods rightfully rejected.
(b) Action by the lessee pursuant to Subsection (a) is not
acceptance or conversion.
(c) If a merchant lessee (Section 2A.511) or any other
lessee disposes of goods, the lessee 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.
(d) In complying with this section or Section 2A.511, 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.
(e) A purchaser who purchases in good faith from a lessee
pursuant to this section or Section 2A.511 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.513. CURE BY LESSOR OF IMPROPER TENDER OR DELIVERY;
REPLACEMENT. (a) If any tender or delivery by the lessor or the
supplier is rejected because 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 by the lease contract.
(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 the lessor or supplier seasonably notifies the
lessee.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.514. WAIVER OF LESSEE'S OBJECTIONS. (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) if, stated seasonably, the lessor or the supplier
could have cured it (Section 2A.513); or
(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) A lessee's failure to reserve rights when paying rent or
other consideration against documents precludes recovery of the
payment for defects apparent on the face of the documents.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.515. ACCEPTANCE OF GOODS. (a) Acceptance of
goods occurs after the lessee has had a reasonable opportunity to
inspect the goods and:
(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) the lessee fails to make an effective rejection of
the goods (Section 2A.509(b)).
(b) Acceptance of a part of any commercial unit is
acceptance of that entire unit.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.516. EFFECT OF ACCEPTANCE OF GOODS; NOTICE OF
DEFAULT; BURDEN OF ESTABLISHING DEFAULT AFTER ACCEPTANCE; NOTICE
OF CLAIM OR LITIGATION TO PERSON ANSWERABLE OVER. (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) A lessee's acceptance of goods precludes rejection of
the goods accepted. In the case of a finance lease that is not a
consumer lease, 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 chapter or the lease agreement for nonconformity.
(c) If a tender has been accepted:
(1) within a reasonable time after the lessee
discovers or should have discovered any default, the lessee shall
notify the lessor and supplier, if any, or be barred from any remedy
against the party not notified;
(2) within a reasonable time after the lessee receives
notice of litigation for infringement or the like (Section 2A.211)
the lessee shall notify the lessor or be barred from any remedy over
for liability established by the litigation; and
(3) the burden is on the lessee to establish any
default.
(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) 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 both litigations, then unless the person notified after
seasonable receipt of the notice does come in and defend that person
is so bound.
(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
2A.211) 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) Subsections (c) and (d) apply to any obligation of a
lessee to hold the lessor or the supplier harmless against
infringement or the like (Section 2A.211).
(f) Subsection (c) shall not apply to a consumer lease.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.517. REVOCATION OF ACCEPTANCE OF GOODS. (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) except in the case of a finance lease that is not a
consumer lease, on the reasonable assumption that its nonconformity
would be cured and it has not been seasonably cured; or
(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 that is not a
consumer lease, by the difficulty of discovery before acceptance.
(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) 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) 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) A lessee who so revokes has the same rights and duties
with regard to the goods involved as if the lessee had rejected
them.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.518. COVER; SUBSTITUTE GOODS. (a) After default
by a lessor under the lease contract of the type described by
Section 2A.508(a), 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) Except as otherwise provided with respect to damages
liquidated in the lease agreement (Section 2A.504) or otherwise
determined pursuant to agreement of the parties (Sections 1.302 and
2A.503), 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 as a consequence of
the lessor's default.
(c) If the lessee's cover is by lease agreement that for any
reason does not qualify for treatment under Subsection (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 2A.519 governs.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 6, eff. Sept. 1,
2003.
§ 2A.519. LESSEE'S DAMAGES FOR NONDELIVERY,
REPUDIATION, DEFAULT, AND BREACH OF WARRANTY IN REGARD TO ACCEPTED
GOODS. (a) Except as otherwise provided with respect to damages
liquidated in the lease agreement (Section 2A.504) or otherwise
determined pursuant to agreement of the parties (Sections 1.302 and
2A.503), 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 Section 2A.518(b) 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) 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) Except as otherwise agreed, if the lessee has accepted
goods and given notification (Section 2A.516(c)), 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) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 7, eff. Sept. 1,
2003.
§ 2A.520. LESSEE'S INCIDENTAL AND CONSEQUENTIAL
DAMAGES. (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) Consequential damages resulting from a lessor's default
include:
(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) injury to person or property proximately resulting
from any breach of warranty.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.521. LESSEE'S RIGHT TO SPECIFIC PERFORMANCE,
REPLEVIN, AND OTHER REMEDIES. (a) Specific performance may be
decreed if the goods are unique or in other proper circumstances.
(b) A decree for specific performance may include the terms
and conditions as to payment of the rent, damages, or other relief
that the court deems just.
(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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.522. LESSEE'S RIGHT TO GOODS ON LESSOR'S
INSOLVENCY. (a) Subject to Subsection (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 2A.217) 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) A lessee acquires the right to recover goods identified
to a lease contract only if they conform to the lease contract.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.523. LESSOR'S REMEDIES. (a) 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 2A.510),
the lessee is in default under the lease contract and the lessor
may:
(1) cancel the lease contract (Section 2A.505(a));
(2) proceed respecting goods not identified to the
lease contract (Section 2A.524);
(3) withhold delivery of the goods and take possession
of goods previously delivered (Section 2A.525);
(4) stop delivery of the goods by any bailee (Section
2A.526);
(5) dispose of the goods and recover damages (Section
2A.527), or retain the goods and recover damages (Section 2A.528),
or in a proper case recover rent (Section 2A.529); or
(6) exercise any other rights or pursue any other
remedies provided in the lease contract.
(b) If a lessor does not fully exercise a right or obtain a
remedy to which the lessor is entitled under Subsection (a), the
lessor may recover the loss resulting in the ordinary course of
events from the lessee's default as determined in any reasonable
manner, together with incidental damages, less expenses saved in
consequence of the lessee's default.
(c) If a lessee is otherwise in default under a lease
contract, the lessor may exercise the rights and pursue the
remedies provided in the lease contract, which may include a right
to cancel the lease. In addition, unless otherwise provided in the
lease contract:
(1) if the default substantially impairs the value of
the lease contract to the lessor, the lessor may exercise the rights
and pursue the remedies provided by Subsection (a) or (b); or
(2) if the default does not substantially impair the
value of the lease contract to the lessor, the lessor may recover as
provided by Subsection (b).
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.524. LESSOR'S RIGHT TO IDENTIFY GOODS TO LEASE
CONTRACT. (a) A lessor aggrieved under Section 2A.523(a) may:
(1) 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
(2) dispose of goods (Section 2A.527(a)) that
demonstrably have been intended for the particular lease contract
even though those goods are unfinished.
(b) 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 or the supplier
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.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.525. LESSOR'S RIGHT TO POSSESSION OF
GOODS. (a) If a lessor discovers the lessee to be insolvent, the
lessor may refuse to deliver the goods.
(b) After a default by the lessee under the lease contract
of the type described by Section 2A.523(a) or (c)(1) or, if agreed,
after other default by the lessee, the lessor has the right to take
possession of the goods. If the lease contract so provides, the
lessor may require the lessee to assemble the goods and make them
available to the lessor at a place to be designated by the lessor
which is reasonably convenient to both parties. Without removal,
the lessor may render unusable any goods employed in trade or
business, and may dispose of goods on the lessee's premises
(Section 2A.527).
(c) The lessor may proceed under Subsection (b) without
judicial process if that can be done without breach of the peace or
the lessor may proceed by action.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.526. LESSOR'S STOPPAGE OF DELIVERY IN TRANSIT OR
OTHERWISE. (a) A lessor may stop delivery of goods in the
possession of a carrier or other bailee if the lessor discovers the
lessee to be insolvent and may stop delivery of carload, truckload,
planeload, or larger shipments of express or freight if the lessee
repudiates or fails to make a payment due before delivery, whether
for rent, security or otherwise under the lease contract, or for any
other reason the lessor has a right to withhold or take possession
of the goods.
(b) In pursuing its remedies under Subsection (a), the
lessor may stop delivery until:
(1) receipt of the goods by the lessee;
(2) acknowledgement to the lessee by any bailee of the
goods, except a carrier, that the bailee holds the goods for the
lessee; or
(3) such an acknowledgement to the lessee by a carrier
via reshipment or as warehouseman.
(c)(1) To stop delivery, a lessor shall so notify as to enable
the bailee by reasonable diligence to prevent delivery of the
goods.
(2) After notification, the bailee shall hold and
deliver the goods according to the directions of the lessor, but the
lessor is liable to the bailee for any ensuing charges or damages.
(3) A carrier who has issued a nonnegotiable bill of
lading is not obligated to obey a notification to stop received from
a person other than the consignor.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
§ 2A.527. LESSOR'S RIGHTS TO DISPOSE OF
GOODS. (a) After a default by a lessee under the lease contract
of the type described in Section 2A.523(a) or (c)(1) or after the
lessor refuses to deliver or takes possession of goods (Section
2A.525 or 2A.526), or, if agreed, after other default by a lessee,
the lessor may dispose of the goods concerned or the undelivered
balance thereof by lease, sale or otherwise.
(b) Except as otherwise provided with respect to damages
liquidated in the lease agreement (Section 2A.504) or otherwise
determined pursuant to agreement of the parties (Sections 1.302 and
2A.503), if the disposition is by 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
lessor may recover from the lessee as damages (1) accrued and unpaid
rent as of the date of the commencement of the term of the new lease
agreement, (2) the present value, as of the same date, of the total
rent for the then remaining lease term of the original lease
agreement minus the present value, as of the same date, 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, and (3) any incidental damages allowed
under Section 2A.530, less expenses saved in consequence of the
lessee's default.
(c) If the lessor's disposition is by lease agreement that
for any reason does not qualify for treatment under Subsection (b),
or is by sale or otherwise, the lessor may recover from the lessee
as if the lessor had elected not to dispose of the goods and Section
2A.528 governs.
(d) 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.
(e) 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 2A.508(e)).
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 8, eff. Sept. 1,
2003.
§ 2A.528. LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO
PAY, REPUDIATION, OR OTHER DEFAULT. (a) Except as otherwise
provided with respect to damages liquidated in the lease agreement
(Section 2A.504) or otherwise determined pursuant to agreement of
the parties (Sections 1.302 and 2A.503), if a lessor elects to
retain the goods or a lessor elects to dispose of the goods and the
disposition is by lease agreement that for any reason does not
qualify for treatment under Section 2A.527(b) or is by sale or
otherwise, the lessor may recover from the lessee as damages for a
default of the type described in Section 2A.523(a) or (c)(1), or, if
agreed, for other default of the lessee, (i) accrued and unpaid rent
as of the date of default if the lessee has never taken possession
of the goods, or, if the lessee has taken possession of the goods,
as of the date the lessor repossesses the goods or an earlier date
on which the lessee makes a tender of the goods to the lessor, (ii)
the present value as of the date determined under clause (i) of the
total rent for the then remaining lease term of the original lease
agreement minus the present value as of the same date of the market
rent at the place where the goods are located computed for the same
lease term, and (iii) any incidental damages allowed under Section
2A.530, less expenses saved in consequence of the lessee's default.
(b) If the measure of damages provided in Subsection (a) 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 2A.530, due allowance for costs
reasonably incurred and due credit for payments or proceeds of
disposition.
Added by Acts 1993, 73rd Leg., ch. 570, § 1, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 9, eff. Sept. 1,
2003.
§ 2A.529. LESSOR'S ACTION FOR THE RENT. (a) After
default by the lessee under the lease contract of the type described
in Section 2A.523(a) or (c)(1), or, if agreed, after other default
by the lessee, if the lessor complies with Subsection (b), the
lessor may recover from the lessee as damages:
(1) for goods accepted by the lessee and not
repossessed by or tendered to the lessor, and for conforming goods
lost or damaged within a commercially reasonable time after risk of
loss passes to the lessee (Section 2A.219), (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 same date
