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Publication Date

5-1992

Document Type

Article

Abstract

The Uniform Commercial Code ("U.C.C.") now has an article that directly covers equipment leases-Article 2A-although many states have not enacted it yet. Article 2A's scope extends to leases of "goods" (e.g., equipment and vehicle leases, but not leases of real estate, intangibles, or other nongoods).

Article 2A compiles and codifies the best of the common law of leases, and reduces the uncertainty created by inconsistent decisions under pre- 2A law. Pre-2A leasing law was hampered by uncertainties in the following areas in particular: (1) definitional (distinguishing a lease from a secured sale or loan), (2) applicability of U.C.C. Article 2 (e.g., implied warranties, parol evidence, unconscionability), and (3) nonbankruptcy enforcement and remedies. Article 2A and the related amendment to U.C.C. section 1-201(37), which address these uncertainties and others, were approved by the American Law Institute in May 1987. They have since been adopted in about twenty states, and have been proposed in about half the other state legislatures. Considering that an estimated thirty percent of capital equipment in the United States is acquired through leasing, it is surprising that this aspect of commercial finance had not previously been covered in the U.C.C.

California and some of the other states that have adopted Article 2A modified the 1987 Official Text when they adopted it. In response to those changes, the Standby Committee of the National Conference of Commissioners on Uniform State Laws for Article 2A proposed amendments to the 1987 Official Text that the American Law Institute approved. Those changes were incorporated into the Official Text in December 1990. All references in this article are to the 1990 Official Text unless otherwise specified. Of course, the changed text will become effective only to the extent it is adopted by the states.

This article analyzes the "competing" versions of Article 2A, and suggests how practitioners in Article 2A jurisdictions should change their forms and procedures from their pre-2A practices. The discussion in this article applies only to commercial (nonconsumer) leases.

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