2025 Session Last amended: 1991 session

§ 336.2A-304 — Subsequent Lease of Goods by Lessor

Plain-Language Summary

This section covers what happens when a lessor leases goods to a second lessee while those goods are already under an existing lease. The new (subsequent) lessee generally takes only the leasehold interest the lessor actually had power to transfer and takes subject to the existing lease. A lessor with voidable title can still pass a good leasehold interest to a good faith lessee for value, even if the goods were obtained through a dishonored check, a fraud, a mistaken identity, or an agreed "cash sale." If the original lessee entrusted the goods to a lessor who is a merchant dealing in goods of that kind, a later lessee in the ordinary course of business takes the goods free of the existing lease, and rights in goods covered by a certificate of title are limited by both this section and the certificate of title law.

336.2A-304 SUBSEQUENT LEASE OF GOODS BY LESSOR.

(1) Subject to section 336.2A-303, 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 in subsection (2) and section 336.2A-527(4), 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:

(a) the lessor’s transferor was deceived as to the identity of the lessor;

(b) the delivery was in exchange for a check which is later dishonored;

(d) the delivery was procured through fraud punishable as larcenous under the criminal law.

(2) If a lessee has entrusted leased goods to the lessee’s lessor who is a merchant dealing in goods of that kind, a subsequent lessee from that lessor under a lease entered into after the entrustment and in the ordinary course of business takes those goods free of the existing lease contract and obtains, to the extent of the leasehold interest transferred, all of the lessor’s and the earlier lessee’s rights to the goods.

(3) 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.

History:

1989 c 232 art 1 s 2A-304; 1991 c 171 art 1 s 4

History: History: 1989 c 232 art 1 s 2A-304; 1991 c 171 art 1 s 4

Practical Notes

If a business already holding leased goods leases them out again, the second lessee usually steps into only the rights the lessor had and remains bound by the first lease. But if the goods were entrusted to a merchant who deals in that kind of goods, someone who then leases them in the ordinary course of business can take them free of the earlier lease.

Source: Minnesota Office of the Revisor of Statutes