2007 California Commercial Code Chapter 4. Performance Of Leased Contract: Repudiated, Substituted, And Excused

CA Codes (com:10401-10407)

10401.  (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 he or she 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.


10402.  (a) If either party repudiates a lease contract, other than
a consumer lease, with respect to a performance not yet due under the
lease contract, the loss of which performance will substantially
impair the value of the lease contract to the other, the aggrieved
party may:
   (1) For a commercially reasonable time, await retraction of
repudiation and performance by the repudiating party;
   (2) Make demand pursuant to Section 10401 and await assurance of
future performance adequate under the circumstances of the particular
case; or
   (3) Resort to any right or remedy upon default under the lease
contract or this division, 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 division on the lessor's
right to identify goods to the lease contract notwithstanding default
or to salvage unfinished goods (Section 10524).
   (b) The rights and remedies of the parties to a consumer lease in
connection with a repudiation of that lease shall be determined under
other laws, and this section shall not affect the applicability or
interpretation of those laws.


10403.  (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
10401.
   (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.



10404.  (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.



10405.  Subject to Section 10404 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 paragraphs (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 paragraph (1) affect only part of
the lessor's or the supplier's capacity to perform, he or she shall
allocate production and deliveries among his or her customers but at
his or her option may include regular customers not then under
contract for sale or lease as well as his or her own requirements for
further manufacture.  He or she may so allocate in any manner that
is fair and reasonable.
   (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 paragraph (2), of the estimated
quota thus made available for the lessee.



10406.  (a) If the lessee receives notification of a material or
indefinite delay or an allocation justified under Section 10405, 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 10510):
   (1) Terminate the lease contract (subdivision (b) of Section
10505); or
   (2) Except in a finance lease, modify the lease contract by
accepting the available quota in substitution, with due allowance
from the rent payable for the balance of the lease term for the
deficiency but without further right against the lessor.
   (b) If, after receipt of a notification from the lessor under
Section 10405, the lessee fails so to modify the lease agreement
within a reasonable time not exceeding 30 days, the lease contract
lapses with respect to any deliveries affected.



10407.  (a) In the case of a finance lease that is not a consumer
lease the lessee's promises under the lease contract become
irrevocable and independent upon the lessee's acceptance of the
goods.
   (b) A promise that has become irrevocable and independent under
subdivision (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.
   (c) This section does not affect the validity under any other law
of a covenant in any lease contract making the lessee's promises
irrevocable and independent upon the lessee's acceptance of the
goods.