§ 336.2A-305 — Sale or Sublease of Goods by Lessee
Plain-Language Summary
This section covers what happens when a lessee sells or subleases goods that the lessee is holding under an existing lease. A buyer or sublessee from the lessee generally takes only the leasehold interest the lessee had power to transfer and takes subject to the existing lease. A lessee with a voidable leasehold interest can still pass a good interest to a good faith buyer or sublessee for value, even if the goods were delivered after a mistaken identity, a dishonored check, or a fraud. If the lessor entrusted the goods to a lessee who is a merchant dealing in goods of that kind, a buyer or sublessee 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-305 SALE OR SUBLEASE OF GOODS BY LESSEE.
(1) Subject to the provisions of section 336.2A-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 in subsection (2) and section 336.2A-511(4), 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:
(a) the lessor was deceived as to the identity of the lessee;
(b) the delivery was in exchange for a check which is later dishonored; or
(c) the delivery was procured through fraud punishable as larcenous under the criminal law.
(2) 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.
(3) 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.
History:
1989 c 232 art 1 s 2A-305
History: History: 1989 c 232 art 1 s 2A-305