2009 California Commercial Code - Section 10201-10221 :: Chapter 2. Formation And Construction Of Lease Contract

10201.  (a) A lease contract is not enforceable by way of action or
defense unless:
   (1) In a lease contract that is not a consumer lease, the total
payments to be made under the lease contract, excluding payments for
options to renew or buy, are less than one thousand dollars ($1,000);
or
   (2) There is a 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 paragraph (2) of subdivision (a), 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 paragraph (2) of subdivision (a) beyond the lease term and the
quantity of goods shown in the writing.
   (d) A lease contract that does not satisfy the requirements of
subdivision (a), but which is valid in other respects, is
enforceable:
   (1) If the goods are to be specially manufactured or obtained for
the lessee and are not suitable for lease or sale to others in the
ordinary course of the lessor's business, and the lessor, before
notice of repudiation is received and under circumstances that
reasonably indicate that the goods are for the lessee, has made
either a substantial beginning of their manufacture or commitments
for their procurement;
   (2) If the party against whom enforcement is sought admits in that
party's pleading, testimony, or otherwise in court that a lease
contract was made, but the lease contract is not enforceable under
this provision beyond the quantity of goods admitted; or
   (3) With respect to goods that have been received and accepted by
the lessee.
   (e) The lease term under a lease contract referred to in
subdivision (d) is:
   (1) If there is a 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.

10202.  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 any prior agreement or of a
contemporaneous oral agreement but may be explained or supplemented:
   (a) By course of dealing or usage of trade or by course of
performance; and
   (b) By evidence of consistent additional terms unless the court
finds the writing to have been intended also as a complete and
exclusive statement of the terms of the agreement.

10204.  (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.

10205.  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.

10206.  (a) Unless otherwise unambiguously indicated by the language
or circumstances, an offer to make a lease contract must be
construed as inviting acceptance in any manner and by any medium
reasonable in the circumstances.
   (b) If the beginning of a requested performance is a reasonable
mode of acceptance, an offeror who is not notified of acceptance
within a reasonable time may treat the offer as having lapsed before
acceptance.

10208.  (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 subdivision (b), it may operate as a
waiver.
   (d) A party who has made a waiver affecting an executory portion
of a lease contract may retract the waiver by reasonable notification
received by the other party that strict performance will be required
of any term waived, unless the retraction would be unjust in view of
a material change of position in reliance on the waiver.

10209.  (a) The benefit of a supplier's promises to the lessor under
the supply contract and of all warranties, whether express or
implied, including those of any third party provided in connection
with or as part of the supply contract, extends to the lessee to the
extent of the lessee's leasehold interest under a finance lease
related to the supply contract, but is subject to the terms of the
warranty and of the supply contract and all defenses or claims
arising therefrom.
   (b) The extension of the benefit of a supplier's promises and of
warranties to the lessee (subdivision (a) of Section 10209) does not:
(1) modify the rights and obligations of the parties to the supply
contract, whether arising therefrom or otherwise, or (2) impose any
duty or liability under the supply contract on the lessee.
   (c) Any modification or rescission of the supply contract by the
supplier and the lessor is effective between the supplier and the
lessee unless, before the modification or rescission, the supplier
has received notice that the lessee has entered into a finance lease
related to the supply contract. If the modification or rescission is
effective between the supplier and the lessee, the lessor is deemed
to have assumed, in addition to the obligations of the lessor to the
lessee under the lease contract, promises of the supplier to the
lessor and warranties that were so modified or rescinded as they
existed and were available to the lessee before modification or
rescission.
   (d) In addition to the extension of the benefit of the supplier's
promises and of warranties to the lessee under subdivision (a), the
lessee retains all rights that the lessee may have against the
supplier which arise from an agreement between the lessee and the
supplier or under other law.

10210.  (a) Express warranties by the lessor are created as follows:
   (1) Any affirmation of fact or promise made by the lessor to the
lessee which relates to the goods and becomes part of the basis of
the bargain creates an express warranty that the goods will conform
to the affirmation or promise.
   (2) Any description of the goods which is made part of the basis
of the bargain creates an express warranty that the goods will
conform to the description.
   (3) Any sample or model that is made part of the basis of the
bargain creates an express warranty that the whole of the goods will
conform to the sample or model.
   (b) It is not necessary to the creation of an express warranty
that the lessor use formal words, such as "warrant" or "guarantee,"
or that the lessor have a specific intention to make a warranty, but
an affirmation merely of the value of the goods or a statement
purporting to be merely the lessor's opinion or commendation of the
goods does not create a warranty.

10211.  (a) There is in a lease contract a warranty that for the
lease term no person holds a claim to or interest in the goods that
arose from an act or omission of the lessor, other than a claim by
way of infringement or the like, which will interfere with the lessee'
s enjoyment of its leasehold interest.
   (b) Except in a finance lease there is in a lease contract by a
lessor who is a merchant regularly dealing in goods of the kind a
warranty that the goods are delivered free of the rightful claim of
any person by way of infringement or the like.
   (c) A lessee who furnishes specifications to a lessor or a
supplier shall hold the lessor and the supplier harmless against any
claim by way of infringement or the like that arises out of
compliance with the specifications.

10212.  (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.

10213.  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.

10214.  (a) Words or conduct relevant to the creation of an express
warranty and words or conduct tending to negate or limit a warranty
must be construed wherever reasonable as consistent with each other;
but, subject to the provisions of Section 10202 on parol or extrinsic
evidence, negation or limitation is inoperative to the extent that
the construction is unreasonable.
   (b) Subject to subdivision (c), to exclude or modify the implied
warranty of merchantability or any part of it the language must
mention "merchantability," be by a writing, and be conspicuous.
Subject to subdivision (c), to exclude or modify any implied warranty
of fitness the exclusion must be by a writing and be conspicuous.
Language to exclude all implied warranties of fitness is sufficient
if it is in writing, is conspicuous and states, for example, "There
is no warranty that the goods will be fit for a particular purpose."
   (c) Notwithstanding subdivision (b), but subject to subdivision
(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 may also be excluded or modified by course
of dealing, course of performance, or usage of trade.
   (d) To exclude or modify a warranty against interference or
against infringement (Section 10211) or any part of it, the language
must be specific, be by a writing, and be conspicuous, unless the
circumstances, including course of performance, course of dealing, or
usage of trade, give the lessee reason to know that the goods are
being leased subject to a claim or interest of any person.

10215.  Warranties, whether express or implied, must be construed as
consistent with each other and as cumulative, but if that
construction is unreasonable, the intention of the parties determines
which warranty is dominant. In ascertaining that intention the
following rules apply:
   (1) Exact or technical specifications displace an inconsistent
sample or model or general language of description.
   (2) A sample from an existing bulk displaces inconsistent general
language of description.
   (3) Express warranties displace inconsistent implied warranties
other than an implied warranty of fitness for a particular purpose.

10217.  Identification of goods as goods to which a lease contract
refers may be made at any time and in any manner explicitly agreed to
by the parties. In the absence of explicit agreement, identification
occurs:
   (1) When the lease contract is made, if the lease contract is for
a lease of goods that are existing and identified;
   (2) When the goods are shipped, marked, or otherwise designated by
the lessor as goods to which the lease contract refers, if the lease
contract is for a lease of goods that are not existing and
identified; or
   (3) When the young are conceived, if the lease contract is for a
lease of unborn young of animals.

10218.  (a) A lessee obtains an insurable interest when existing
goods are identified to the lease contract even though the goods
identified are nonconforming and the lessee has an option to reject
them.
   (b) If a lessee has an insurable interest only by reason of the
lessor's identification of the goods, the lessor, until default or
insolvency or notification to the lessee that identification is
final, may substitute other goods for those identified.
   (c) Notwithstanding a lessee's insurable interest under
subdivisions (a) and (b), the lessor retains an insurable interest
until an option to buy has been exercised by the lessee and risk of
loss has passed to the lessee.
   (d) Nothing in this section impairs any insurable interest
recognized under any other statute or rule of law.
   (e) The parties by agreement may determine that one or more
parties have an obligation to obtain and pay for insurance covering
the goods and by agreement may determine the beneficiary of the
proceeds of the insurance.

10219.  (a) Except in the case of a finance lease, risk of loss is
retained by the lessor and does not pass to the lessee. In the case
of a finance lease, risk of loss passes to the lessee.
   (b) Subject to the provisions of this division on the effect of
default on risk of loss (Section 10220), if risk of loss is to pass
to the lessee and the time of passage is not stated, the following
rules apply:
   (1) If the lease contract requires or authorizes the goods to be
shipped by carrier
   (A) And it does not require delivery at a particular destination,
the risk of loss passes to the lessee when the goods are duly
delivered to the carrier; but
   (B) If it does require delivery at a particular destination and
the goods are there duly tendered while in the possession of the
carrier, the risk of loss passes to the lessee when the goods are
there duly so tendered as to enable the lessee to take delivery.
   (2) If the goods are held by a bailee to be delivered without
being moved, the risk of loss passes to the lessee on acknowledgment
by the bailee of the lessee's right to possession of the goods.
   (3) In any case not within paragraph (1) or (2), the risk of loss
passes to the lessee on the lessee's receipt of the goods if the
lessor, or, in the case of a finance lease, the supplier, is a
merchant; otherwise the risk passes to the lessee on tender of
delivery.

10220.  (a) Where risk of loss is to pass to the lessee and the time
of passage is not stated:
   (1) If a tender or delivery of goods so fails to conform to the
lease contract as to give a right of rejection, the risk of their
loss remains with the lessor, or, in the case of a finance lease, the
supplier, until cure or acceptance.
   (2) If the lessee rightfully revokes acceptance, he or she, to the
extent of any deficiency in his or her effective insurance coverage,
may treat the risk of loss as having remained with the lessor from
the beginning.
   (b) Whether or not risk of loss is to pass to the lessee, if the
lessee as to conforming goods already identified to a lease contract
repudiates or is otherwise in default under the lease contract, the
lessor, or, in the case of a finance lease, the supplier, to the
extent of any deficiency in his or her effective insurance coverage
may treat the risk of loss as resting on the lessee for a
commercially reasonable time.

10221.  If a lease contract requires goods identified when the lease
contract is made, and the goods suffer casualty without fault of the
lessee, the lessor, or the supplier before delivery, or the goods
suffer casualty before risk of loss passes to the lessee pursuant to
the lease agreement or Section 10219, then:
   (1) If the loss is total, the lease contract is avoided; and
   (2) If the loss is partial or the goods have so deteriorated as to
no longer conform to the lease contract, the lessee may nevertheless
demand inspection and at his or her option either treat the lease
contract as avoided or, except in a finance lease, accept the goods
with due allowance from the rent payable for the balance of the lease
term for the deterioration or the deficiency in quantity but without
further right against the lessor.