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IC 26-1-2.1-102
Scope
Sec. 102. IC 26-1-2.1 applies to any transaction, regardless of
form, that creates a lease.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-103
Definitions and index of definitions
Sec. 103. (1) Unless the context otherwise requires, in
IC 26-1-2.1:
(a) "Buyer in ordinary course of business" means a person who
in good faith and without knowledge that the sale to the person
is in violation of the ownership rights or security interest or
leasehold interest of a third party in the goods, buys in ordinary
course from a person in the business of selling goods of that
kind but does not include a pawnbroker. "Buying" may be for
cash or by exchange of other property or on secured or
unsecured credit and includes acquiring goods or documents of
title under a pre-existing contract for sale but does not include
a transfer in bulk or as security for or in total or partial
satisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an end to the
lease contract for default by the other party.
(c) "Commercial unit" means such a unit of goods as by
commercial usage is a single whole for purposes of lease and
division of which materially impairs its character or value on
the market or in use. A commercial unit may be a single article,
as a machine, or a set of articles, as a suite of furniture or a line
of machinery, or a quantity, as a gross or carload, or any other
unit treated in use or in the relevant market as a single whole.
(d) "Conforming" goods or performance under a lease contract
means goods or performance that are in accordance with the
obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularly
engaged in the business of leasing or selling makes to a lessee
who is an individual and who takes under the lease primarily for
a personal, family, or household purpose if the total payments
to be made under the lease contract, excluding payments for
options to renew or buy, do not exceed twenty-five thousand
dollars ($25,000).
(f) "Fault" means wrongful act, omission, breach, or default.
(g) "Finance lease" means a lease with respect to which:
(i) the lessor does not select, manufacture, or supply the
goods;
(ii) the lessor acquires the goods or the right to possession
and use of the goods in connection with the lease; and
(iii) one (1) of the following occurs:
(A) the lessee receives a copy of the contract by which the
lessor acquired the goods or the right to possession and
use of the goods before signing the lease contract;
(B) the lessee's approval of the contract by which the
lessor acquired the goods or the right to possession and
use of the goods is a condition to effectiveness of the lease
contract;
(C) the lessee, before signing the lease contract, receives
an accurate and complete statement designating the
promises and warranties, and any disclaimers of
warranties, limitations, or modifications of remedies, or
liquidated damages, including those of a third party, such
as the manufacturer of the goods, provided to the lessor by
the person supplying the goods in connection with or as
part of the contract by which the lessor acquired the goods
or the right to possession and use of the goods; or
(D) if the lease is not a consumer lease, the lessor, before
the lessee signs the lease contract, informs the lessee in
writing: (a) of the identity of the person supplying the
goods to the lessor, unless the lessee has selected that
person and directed the lessor to acquire the goods or the
right to possession and use of the goods from that person;
(b) that the lessee is entitled under IC 26-1-2.1 to the
promises and warranties, including those of any third
party, provided to the lessor by the person supplying the
goods in connection with or as part of the contract by
which the lessor acquired the goods or the right to
possession and use of the goods; and (c) that the lessee
may communicate with the person supplying the goods to
the lessor and receive an accurate and complete statement
of those promises and warranties, including any
disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of
identification to the lease contract, or are fixtures (IC
26-1-2.1-309), but the term does not include money, documents,
instruments, accounts, chattel paper, general intangibles, or
minerals or the like, including oil and gas, before extraction.
The term also includes the unborn young of animals.
(i) "Installment lease contract" means a lease contract that
authorizes or requires the delivery of goods in separate lots to
be separately accepted, even though the lease contract contains
a clause "each delivery is a separate lease" or its equivalent.
(j) "Lease" means a transfer of the right to possession and use
of goods for a term in return for consideration, but a sale,
including a sale on approval or a sale or return, or retention or
creation of a security interest is not a lease. Unless the context
clearly indicates otherwise, the term includes a sublease.
(k) "Lease agreement" means the bargain, with respect to the
lease, of the lessor and the lessee in fact as found in their
language or by implication from other circumstances including
course of dealing or usage of trade or course of performance as
provided in IC 26-1-2.1. Unless the context clearly indicates
otherwise, the term includes a sublease agreement.
(l) "Lease contract" means the total legal obligation that results
from the lease agreement as affected by IC 26-1-2.1 and any
other applicable rules of law. Unless the context clearly
indicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor or the
lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person who
in good faith and without knowledge that the lease to the person
is in violation of the ownership rights or security interest or
leasehold interest of a third party in the goods leases in ordinary
course from a person in the business of selling or leasing goods
of that kind but does not include a pawnbroker. "Leasing" may
be for cash or by exchange of other property or on secured or
unsecured credit and includes acquiring goods or documents of
title under a pre-existing lease contract but does not include a
transfer in bulk or as security for or in total or partial
satisfaction of a money debt.
(p) "Lessor" means a person who transfers the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's interest in the
goods after expiration, termination, or cancellation of the lease
contract.
IC 26-1-2.1-104
Leases subject to other statutes
Sec. 104. (1) A lease, although subject to IC 26-1-2.1, is also
subject to any applicable:
(a) certificate of title statute of this state;
(b) certificate of title statute of another jurisdiction (IC
26-1-2.1-105); or
(c) consumer protection statute of this state, or final consumer
protection decision of a court of this state existing on the
effective date of IC 26-1-2.1.
(2) In case of conflict between IC 26-1-2.1, other than
IC 26-1-2.1-105, IC 26-1-2.1-304(3), and IC 26-1-2.1-305(3), and a
statute or decision referred to in subsection (1), the statute or
decision controls.
(3) Failure to comply with an applicable law has only the effect
specified therein.
As added by P.L.189-1991, SEC.3. Amended by P.L.1-1992,
SEC.134.
IC 26-1-2.1-105
Territorial application of article to goods covered by certificate of
title
Sec. 105. Subject to the provisions of IC 26-1-2.1-304(3) and
IC 26-1-2.1-305(3), with respect to goods covered by a certificate of
title issued under a statute of this state or of another jurisdiction,
compliance and the effect of compliance or noncompliance with a
certificate of title statute are governed by the law (including the
conflict of laws rules) of the jurisdiction issuing the certificate until
the earlier of:
(a) surrender of the certificate; or
(b) four (4) months after the goods are removed from that
jurisdiction and thereafter until a new certificate of title is
issued by another jurisdiction.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-106
Limitation on power of parties to consumer lease to choose
applicable law and judicial forum
Sec. 106. (1) If the law chosen by the parties to a consumer lease
is that of a jurisdiction other than a jurisdiction in which the lessee
resides at the time the lease agreement becomes enforceable or
within thirty (30) days thereafter or in which the goods are to be
used, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer lease
is a forum that would not otherwise have jurisdiction over the lessee,
the choice is not enforceable.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-107
Waiver or renunciation of claim or right after default
Sec. 107. Any claim or right arising out of an alleged default or
breach of warranty may be discharged in whole or in part without
consideration by a written waiver or renunciation signed and
delivered by the aggrieved party.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-108
Unconscionability
Sec. 108. (1) If the court as a matter of law finds a lease contract
or any clause of a lease contract to have been unconscionable at the
time it was made the court may refuse to enforce the lease contract,
or it may enforce the remainder of the lease contract without the
unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.
(2) With respect to a consumer lease, if the court as a matter of
law finds that a lease contract or any clause of a lease contract has
been induced by unconscionable conduct or that unconscionable
conduct has occurred in the collection of a claim arising from a lease
contract, the court may grant appropriate relief.
(3) Before making a finding of unconscionability under subsection
(1) or (2), the court, on its own motion or that of a party, shall afford
the parties a reasonable opportunity to present evidence as to the
setting, purpose, and effect of the lease contract or clause thereof, or
of the conduct.
(4) In an action in which the lessee claims unconscionability with
respect to a consumer lease:
(a) If the court finds unconscionability under subsection (1) or
(2), the court shall award reasonable attorney's fees to the
lessee.
(b) If the court does not find unconscionability and the lessee
claiming unconscionability has brought or maintained an action
the lessee knew to be groundless, the court shall award
reasonable attorney's fees to the party against whom the claim
is made.
(c) In determining attorney's fees, the amount of the recovery on
behalf of the claimant under subsections (1) and (2) is not
controlling.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-109
Option to accelerate at will
Sec. 109. (1) A term providing that one party or that party's
successor in interest may accelerate payment or performance or
require collateral or additional collateral "at will" or "when the party
deems the party insecure" or in words of similar import must be
construed to mean that the party has power to do so only if the party
in good faith believes that the prospect of payment or performance
is impaired.
(2) With respect to a consumer lease, the burden of establishing
good faith under subsection (1) is on the party who exercised the
power; otherwise the burden of establishing lack of good faith is on
the party against whom the power has been exercised.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-201
Statute of frauds
Sec. 201. (1) A lease contract is not enforceable by way of action
or defense unless:
(a) 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
(b) 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.
(2) Any description of leased goods or of the lease term is
sufficient and satisfies subsection (1)(b), whether or not it is specific,
if it reasonably identifies what is described.
(3) A writing is not insufficient because it omits or incorrectly
states a term agreed upon, but the lease contract is not enforceable
under subsection (1)(b) beyond the lease term and the quantity of
goods shown in the writing.
(4) A lease contract that does not satisfy the requirements of
subsection (1), but which is valid in other respects, is enforceable:
(a) 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;
(b) 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
(c) with respect to goods that have been received and accepted
by the lessee.
(5) The lease term under a lease contract referred to in subsection
(4) is:
(a) 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;
(b) 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
(c) a reasonable lease term.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-202
Final written expression; parol or extrinsic evidence
Sec. 202. 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.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-203
Seals inoperative
Sec. 203. The affixing of a seal to a writing evidencing a lease
contract or an offer to enter into a lease contract does not render the
writing a sealed instrument and the law with respect to sealed
instruments does not apply to the lease contract or offer.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-204
Formation in general
Sec. 204. (1) 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.
(2) An agreement sufficient to constitute a lease contract may be
found although the moment of its making is undetermined.
(3) Although one (1) 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.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-205
Firm offers
Sec. 205. 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 (3) months. Any
such term of assurance on a form supplied by the offeree must be
separately signed by the offeror.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-206
Offer and acceptance in formation of lease contract
Sec. 206. (1) 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.
(2) 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.
IC 26-1-2.1-207
Repealed
(Repealed by P.L.143-2007, SEC.78.)
IC 26-1-2.1-208
Modification, rescission, and waiver
Sec. 208. (1) An agreement modifying a lease contract needs no
consideration to be binding.
(2) 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.
(3) Although an attempt at modification or rescission does not
satisfy the requirements of subsection (2), it may operate as a waiver.
(4) 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.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-209
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.
IC 26-1-2.1-210
IC 26-1-2.1-211
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.
IC 26-1-2.1-212
IC 26-1-2.1-213
IC 26-1-2.1-214
extent that the construction is unreasonable.
IC 26-1-2.1-215
IC 26-1-2.1-217
IC 26-1-2.1-218
(1) and (2), 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.
IC 26-1-2.1-219
IC 26-1-2.1-220
IC 26-1-2.1-221
IC 26-1-2.1-301
IC 26-1-2.1-302
IC 26-1-2.1-303
limited by contract, (i) the transferor is liable to the party not
making the transfer for damages caused by the transfer to the
extent that the damages could not reasonably be prevented by
the party not making the transfer and (ii) a court having
jurisdiction may grant other appropriate relief, including
cancellation of the lease contract or an injunction against the
transfer.
IC 26-1-2.1-304
goods were entrusted by the existing lessee of that lessor before the
interest of the subsequent lessee became enforceable against that
lessor obtains, to the extent of the leasehold interest transferred, all
of that lessor's and the existing lessee's rights to the goods, and takes
free of the existing lease contract.
IC 26-1-2.1-305
IC 26-1-2.1-306
IC 26-1-2.1-307
IC 26-1-2.1-308
contract entered into by the seller as lessee and the buyer as lessor in
connection with the sale or identification of the goods is not
fraudulent if the buyer bought for value and in good faith.
IC 26-1-2.1-309
lessee has an interest of record in the real estate or is in
possession of the real estate.
the lessee and who has not otherwise agreed for the cost of repair of
any physical injury, but not for any diminution in value of the real
estate caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
IC 26-1-2.1-310
IC 26-1-2.1-311
IC 26-1-2.1-401
IC 26-1-2.1-402
to the other, the aggrieved party may:
IC 26-1-2.1-403
IC 26-1-2.1-404
IC 26-1-2.1-405
IC 26-1-2.1-406
impaired (IC 26-1-2.1-510):
IC 26-1-2.1-407
IC 26-1-2.1-501
administrative proceeding, arbitration, or the like, in accordance with
IC 26-1-2.1.
IC 26-1-2.1-502
IC 26-1-2.1-503
IC 26-1-2.1-505
be construed as a renunciation or discharge of any claim in damages
for an antecedent default.
IC 26-1-2.1-506
IC 26-1-2.1-507
agreement and prevailing at the times or places described in
IC 26-1-2.1 is not readily available, the rent prevailing within any
reasonable time before or after the time described or at any other
place or for a different lease term which in commercial judgment or
under usage of trade would serve as a reasonable substitute for the
one described may be used, making any proper allowance for the
difference, including the cost of transporting the goods to or from the
other place.
IC 26-1-2.1-508
goods (IC 26-1-2.1-521).
IC 26-1-2.1-509
IC 26-1-2.1-510
lease contract as a whole there is a default with respect to the whole.
But, the aggrieved party reinstates the installment lease contract as
a whole if the aggrieved party accepts a nonconforming delivery
without seasonably notifying of cancellation or brings an action with
respect only to past deliveries or demands performance as to future
deliveries.
IC 26-1-2.1-511
IC 26-1-2.1-512
seasonable notification of rejection;
IC 26-1-2.1-513
IC 26-1-2.1-514
IC 26-1-2.1-516
person notified may come in and defend and that if the person
notified does not do so that person will be bound in any action
against that person by the lessee by any determination of fact
common to the two (2) litigations, then unless the person
notified after seasonable receipt of the notice does come in and
defend that person is so bound.
IC 26-1-2.1-517
regard to the goods involved as if the lessee had rejected them.
IC 26-1-2.1-518
IC 26-1-2.1-519
lease term of the original lease agreement, together with incidental
and consequential damages, less expenses saved in consequence of
the lessor's default.
IC 26-1-2.1-520
IC 26-1-2.1-521
are unique or in other proper circumstances.
IC 26-1-2.1-522
IC 26-1-2.1-523
IC 26-1-2.1-524
IC 26-1-2.1-525
agreed, after other default by the lessee, the lessor has the right to
take possession of the goods. If the lease contract so provides, the
lessor may require the lessee to assemble the goods and make them
available to the lessor at a place to be designated by the lessor which
is reasonably convenient to both parties. Without removal, the lessor
may render unusable any goods employed in trade or business, and
may dispose of goods on the lessee's premises (IC 26-1-2.1-527).
IC 26-1-2.1-526
IC 26-1-2.1-527
or after the lessor refuses to deliver or takes possession of goods (IC
26-1-2.1-525 or IC 26-1-2.1-526), or, if agreed, after other default by
the lessee, the lessor may dispose of the goods concerned or the
undelivered balance thereof by lease, sale, or otherwise.
IC 26-1-2.1-528
treatment under IC 26-1-2.1-527(2), or is by sale or otherwise, the
lessor may recover from the lessee as damages for a default of the
type described in IC 26-1-2.1-523(1) or IC 26-1-2.1-523(3)(a), or, if
agreed, for other default of the lease, (i) accrued and unpaid rent as
of the date of default if the lessee has never taken possession of the
goods, or, if the lessee has taken possession of the goods, as of the
date the lessor repossesses the goods or an earlier date on which the
lessee makes a tender of the goods to the lessor, (ii) the present value
as of the date determined under clause (i) of the total rent for the then
remaining lease term of the original lease agreement minus the
present value as of the same date of the market rent at the place
where the goods are located computed for the same lease term, and
(iii) any incidental damages allowed under IC 26-1-2.1-530, less
expenses saved in consequence of the lessee's default.
IC 26-1-2.1-529
IC 26-1-2.1-530
IC 26-1-2.1-531
third party, and (b) the lessee also has a right of action against the
third party if the lessee:
IC 26-1-2.1-532
Lessee under finance lease as beneficiary of supply contract
Sec. 209. (1) 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.
(2) The extension of the benefit of a supplier's promises and of
warranties to the lessee (IC 26-1-2.1-209(1)) does not: (i) modify the
rights and obligations of the parties to the supply contract, whether
arising therefrom or otherwise; or (ii) impose any duty or liability
under the supply contract on the lessee.
(3) Any modification or rescission of the supply contract by the
supplier and the lessor is effective between the supplier and 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
(4) In addition to the extension of the benefit of the supplier's
promises and of warranties to the lessee under subsection (1), 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.
As added by P.L.189-1991, SEC.3.
Express warranties
Sec. 210. (1) Express warranties by the lessor are created as
follows:
(a) 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.
(b) 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.
(c) 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.
(2) 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.
As added by P.L.189-1991, SEC.3.
Warranties against interference and against infringement; lessee's
obligation against infringement
Sec. 211. (1) 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.
(2) 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.
(3) A lessee who furnishes specifications to a lessor or a supplier
As added by P.L.189-1991, SEC.3.
Implied warranty of merchantability
Sec. 212. (1) 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.
(2) Goods to be merchantable must be at least such as:
(a) pass without objection in the trade under the description in
the lease agreement;
(b) in the case of fungible goods, are of fair average quality
within the description;
(c) are fit for the ordinary purposes for which goods of that type
are used;
(d) run, within the variation permitted by the lease agreement,
of even kind, quality, and quantity within each unit and among
all units involved;
(e) are adequately contained, packaged, and labeled as the lease
agreement may require; and
(f) conform to any promises or affirmations of fact made on the
container or label.
(3) Other implied warranties may arise from course of dealing or
usage of trade.
As added by P.L.189-1991, SEC.3.
Implied warranty of fitness for particular purpose
Sec. 213. 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.
As added by P.L.189-1991, SEC.3.
Exclusion or modification of warranties
Sec. 214. (1) 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 IC 26-1-2.1-202 on parol
or extrinsic evidence, negation or limitation is inoperative to the
(2) Subject to subsection (3), 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 subsection (3), 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".
(3) Notwithstanding subsection (2), but subject to subsection (4):
(a) 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;
(b) 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
(c) an implied warranty may also be excluded or modified by
course of dealing, course of performance, or usage of trade.
(4) To exclude or modify a warranty against interference or
against infringement (IC 26-1-2.1-211) 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.
As added by P.L.189-1991, SEC.3.
Cumulation and conflict of warranties express or implied
Sec. 215. 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:
(a) Exact or technical specifications displace an inconsistent
sample or model or general language of description.
(b) A sample from an existing bulk displaces inconsistent
general language of description.
(c) Express warranties displace inconsistent implied warranties
other than an implied warranty of fitness for a particular
purpose.
As added by P.L.189-1991, SEC.3.
IC 26-1-2.1-216
Third-party beneficiaries of express and implied warranties
Sec. 216. A warranty to or for the benefit of a lessee under
IC 26-1-2.1, whether express or implied, extends to any natural
person who is in the family or household of the lessee or who is a
guest in the lessee's home if it is reasonable to expect that such
person may use, consume, or be affected by the goods and who is
injured in person by breach of the warranty. This section does not
displace principles of law and equity that extend a warranty to or for
the benefit of a lessee to other persons. The operation of this section
may not be excluded, modified, or limited, but an exclusion,
modification, or limitation of the warranty, including any with
respect to rights and remedies, effective against the lessee is also
effective against any beneficiary designated under this section.
As added by P.L.189-1991, SEC.3.
Identification
Sec. 217. 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:
(a) when the lease contract is made if the lease contract is for a
lease of goods that are existing and identified;
(b) 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
(c) when the young are conceived, if the lease contract is for a
lease of unborn young of animals.
As added by P.L.189-1991, SEC.3.
Insurance and proceeds
Sec. 218. (1) 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.
(2) 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.
(3) Notwithstanding a lessee's insurable interest under subsections
(4) Nothing in this section impairs any insurable interest
recognized under any other statute or rule of law.
(5) 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.
As added by P.L.189-1991, SEC.3.
Risk of loss
Sec. 219. (1) 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.
(2) Subject to the provisions of IC 26-1-2.1 on the effect of
default on risk of loss (IC 26-1-2.1-220), if risk of loss is to pass to
the lessee and the time of passage is not stated, the following rules
apply:
(a) If the lease contract requires or authorizes the goods to be
shipped by carrier:
(i) 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
(ii) 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.
(b) 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.
(c) In any case not within subdivision (a) or (b), 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.
As added by P.L.189-1991, SEC.3.
Effect of default on risk of loss
Sec. 220. (1) Where risk of loss is to pass to the lessee and the
time of passage is not stated:
(a) 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.
(b) If the lessee rightfully revokes acceptance, the lessee, to the
extent of any deficiency in the lessee's effective insurance
coverage, may treat the risk of loss as having remained with the
lessor from the beginning.
(2) 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 the supplier's effective insurance coverage may
treat the risk of loss as resting on the lessee for a commercially
reasonable time.
As added by P.L.189-1991, SEC.3.
Casualty to identified goods
Sec. 221. 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 IC 26-1-2.1-219, then:
(a) if the loss is total, the lease contract is avoided; and
(b) 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 the lessee's option either
treat the lease contract as avoided or, except in a finance lease
that is not a consumer 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.
As added by P.L.189-1991, SEC.3.
Enforceability of lease contract
Sec. 301. Except as otherwise provided in IC 26-1-2.1, a lease
contract is effective and enforceable according to its terms between
the parties, against purchasers of the goods and against creditors of
the parties.
As added by P.L.189-1991, SEC.3.
Title to and possession of goods
Sec. 302. Except as otherwise provided in IC 26-1-2.1, each
provision of IC 26-1-2.1 applies whether the lessor or a third party
has title to the goods, and whether the lessor, the lessee, or a third
party has possession of the goods, notwithstanding any statute or rule
of law that possession or the absence of possession is fraudulent.
As added by P.L.189-1991, SEC.3.
"Creation of a security interest"; alienability of party's interest
under lease contract or of lessor's residual interest in goods;
delegation of performance; assignment of rights
Sec. 303. (1) As used in this section, "creation of a security
interest" includes the sale of a lease contract that is subject to
IC 26-1-9.1, by reason of IC 26-1-9.1-109(a)(3).
(2) Except as provided in subsection (3) and IC 26-1-9.1-407, a
provision in a lease agreement which (i) prohibits the voluntary or
involuntary transfer, including a transfer by sale, sublease, creation
or enforcement of a security interest, or attachment, levy, or other
judicial process, of an interest of a party under the lease contract or
of the lessor's residual interest in the goods, or (ii) makes such a
transfer an event of default, gives rise to the rights and remedies
provided in subsection (4), but a transfer that is prohibited or is an
event of default under the lease agreement is otherwise effective.
(3) A provision in a lease agreement which (i) prohibits a transfer
of a right to damages for default with respect to the whole lease
contract or of a right to payment arising out of the transferor's due
performance of the transferor's entire obligation, or (ii) makes such
a transfer an event of default, is not enforceable, and such a transfer
is not a transfer that materially impairs the prospect of obtaining
return performance by, materially changes the duty of, or materially
increases the burden or risk imposed on, the other party to the lease
contract within the purview of subsection (4).
(4) Subject to subsection (3) and IC 26-1-9.1-407:
(a) if a transfer is made which is made an event of default under
a lease agreement, the party to the lease contract not making the
transfer, unless that party waives the default or otherwise
agrees, has the rights and remedies described in
IC 26-1-2.1-501(2); or
(b) if subdivision (a) is not applicable and if a transfer is made
that (i) is prohibited under a lease agreement or (ii) materially
impairs the prospect of obtaining return performance by,
materially changes the duty of, or materially increases the
burden or risk imposed on, the other party to the lease contract,
unless the party not making the transfer agrees at any time to
the transfer in the lease contract or otherwise, then, except as
(5) A transfer of "the lease" or of "all my rights under the lease",
or a transfer in similar general terms, is a transfer of rights and,
unless the language or the circumstances, as in a transfer for security,
indicate the contrary, the transfer is a delegation of duties by the
transferor to the transferee. Acceptance by the transferee constitutes
a promise by the transferee to perform those duties. The promise is
enforceable by either the transferor or the other party to the lease
contract.
(6) Unless otherwise agreed by the lessor and the lessee, a
delegation of performance does not relieve the transferor as against
the other party of any duty to perform or of any liability for default.
(7) In a consumer lease, to prohibit the transfer of an interest of
a party under the lease contract or to make a transfer an event of
default, the language must be specific, by a writing, and conspicuous.
As added by P.L.189-1991, SEC.3. Amended by P.L.57-2000,
SEC.24; P.L.1-2002, SEC.99.
Subsequent lease of goods by lessor
Sec. 304. (1) Subject to IC 26-1-2.1-303, 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 IC 26-1-2.1-527(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;
(c) it was agreed that the transaction was to be a "cash sale"; or
(d) the delivery was procured through fraud punishable as
larcenous under the criminal law.
(2) A subsequent lessee in the ordinary course of business from
a lessor who is a merchant dealing in goods of that kind to whom the
(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.
As added by P.L.189-1991, SEC.3.
Sale or sublease of goods by lessee
Sec. 305. (1) Subject to the provisions of IC 26-1-2.1-303, 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 IC 26-1-2.1-511(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.
As added by P.L.189-1991, SEC.3.
Priority of certain liens arising by operation of law
Sec. 306. If a person in the ordinary course of the person's
business furnishes services or materials with respect to goods subject
to a lease contract, a lien upon those goods in the possession of that
person given by statute or rule of law for those materials or services
takes priority over any interest of the lessor or lessee under the lease
contract or IC 26-1-2.1 unless the lien is created by statute and the
statute provides otherwise or unless the lien is created by rule of law
and the rule of law provides otherwise.
As added by P.L.189-1991, SEC.3.
Priority of liens related to lease contract
Sec. 307. (1) Except as otherwise provided in IC 26-1-2.1-306, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and in
IC 26-1-2.1-306 and IC 26-1-2.1-308, a creditor of a lessor takes
subject to the lease contract unless the creditor holds a lien that
attached to the goods before the lease contract became enforceable.
(3) Except as otherwise provided in IC 26-1-9.1-317,
IC 26-1-9.1-321, and IC 26-1-9.1-323, a lessee takes a leasehold
interest subject to a security interest held by a creditor of the lessor.
As added by P.L.189-1991, SEC.3. Amended by P.L.57-2000,
SEC.25.
Special rights of creditors
Sec. 308. (1) A creditor of a lessor in possession of goods subject
to a lease contract may treat the lease contract as void if as against
the creditor retention of possession by the lessor is fraudulent under
any statute or rule of law, but retention of possession in good faith
and current course of trade by the lessor for a commercially
reasonable time after the lease contract becomes enforceable is not
fraudulent.
(2) Nothing in IC 26-1-2.1 impairs the rights of creditors of a
lessor if the lease contract:
(a) becomes enforceable, not in current course of trade but in
satisfaction of or as security for a pre-existing claim for money,
security, or the like; and
(b) is made under circumstances which under any statute or rule
of law apart from IC 26-1-2.1 would constitute the transaction
a fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification of
goods to a contract for sale as void if as against the creditor retention
of possession by the seller is fraudulent under any statute or rule of
law, but retention of possession of the goods pursuant to a lease
As added by P.L.189-1991, SEC.3.
Lessor's and lessee's rights when goods become fixtures
Sec. 309. (1) In this section:
(a) goods are "fixtures" when they become so related to
particular real estate that an interest in them arises under real
estate law;
(b) a "fixture filing" is the filing, in the office where a mortgage
on the real estate would be filed or recorded, of a financing
statement covering goods that are or are to become fixtures and
conforming to the requirements of IC 26-1-9.1-502(a) and
IC 26-1-9.1-502(b);
(c) a lease is a "purchase money lease" unless the lessee has
possession or use of the goods or the right to possession or use
of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it
secures an obligation incurred for the construction of an
improvement on land including the acquisition cost of the land,
if the recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that are not
ownership interests.
(2) Under IC 26-1-2.1 a lease may be of goods that are fixtures or
may continue in goods that become fixtures, but no lease exists under
IC 26-1-2.1 of ordinary building materials incorporated into an
improvement on land.
(3) IC 26-1-2.1 does not prevent creation of a lease of fixtures
pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over
a conflicting interest of an encumbrancer or owner of the real estate
if:
(a) the lease is a purchase money lease, the conflicting interest
of the encumbrancer or owner arises before the goods become
fixtures, the interest of the lessor is perfected by a fixture filing
before the goods become fixtures or within ten (10) days
thereafter, and the lessee has an interest of record in the real
estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filing
before the interest of the encumbrancer or owner is of record,
the lessor's interest has priority over any conflicting interest of
a predecessor in title of the encumbrancer or owner, and the
(5) The interest of a lessor of fixtures, whether or not perfected,
has priority over the conflicting interest of an encumbrancer or
owner of the real estate if:
(a) the fixtures are readily removable factory or office
machines, readily removable equipment that is not primarily
used or leased for use in the operation of the real estate, or
readily removable replacements of domestic appliances that are
goods subject to a consumer lease, and before the goods
become fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate obtained
by legal or equitable proceedings after the lease contract is
enforceable; or
(c) the encumbrancer or owner has consented in writing to the
lease or has disclaimed an interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the
encumbrancer or owner. If the lessee's right to remove
terminates, the priority of the interest of the lessor continues for
a reasonable time.
(6) Notwithstanding subsection 4(a) but otherwise subject to
subsections (4) and (5), the interest of a lessor of fixtures, including
the lessor's residual interest, is subordinate to the conflicting interest
of an encumbrancer of the real estate under a construction mortgage
recorded before the goods become fixtures if the goods become
fixtures before the completion of the construction. To the extent
given to refinance a construction mortgage, the conflicting interest
of an encumbrancer of the real estate under a mortgage has this
priority to the same extent as the encumbrancer of the real estate
under the construction mortgage.
(7) In cases not within the preceding subsections, priority between
the interest of a lessor of fixtures, including the lessor's residual
interest, and the conflicting interest of an encumbrancer or owner of
the real estate who is not the lessee is determined by the priority
rules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's
residual interest, has priority over all conflicting interests of all
owners and encumbrancers of the real estate, the lessor or the lessee
may (i) on default, expiration, termination, or cancellation of the
lease agreement but subject to the lease agreement and IC 26-1-2.1,
or (ii) if necessary to enforce other rights and remedies of the lessor
or lessee under IC 26-1-2.1, remove the goods from the real estate,
free and clear of all conflicting interests of all owners and
encumbrancers of the real estate, but the lessor or lessee must
reimburse any encumbrancer or owner of the real estate who is not
(9) Even though the lease agreement does not create a security
interest, the interest of a lessor of fixtures, including the lessor's
residual interest, is perfected by filing a financing statement as a
fixture filing for leased goods that are or are to become fixtures in
accordance with the relevant provisions of IC 26-1-9.1.
As added by P.L.189-1991, SEC.3. Amended by P.L.34-1997,
SEC.17; P.L.57-2000, SEC.26.
Lessor's and lessee's rights when goods become accessions
Sec. 310. (1) Goods are "accessions" when they are installed in or
affixed to other goods.
(2) The interest of a lessor or a lessee under a lease contract
entered into before the goods became accessions is superior to all
interests in the whole except as stated in subsection (4).
(3) The interest of a lessor or a lessee under a lease contract
entered into at the time or after the goods became accessions is
superior to all subsequently acquired interests in the whole except as
stated in subsection (4) but is subordinate to interests in the whole
existing at the time the lease contract was made unless the holders of
such interests in the whole have in writing consented to the lease or
disclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contract
described in subsection (2) or (3) is subordinate to the interest of:
(a) a buyer in the ordinary course of business or a lessee in the
ordinary course of business of any interest in the whole
acquired after the goods became accessions; or
(b) a creditor with a security interest in the whole perfected
before the lease contract was made to the extent that the
creditor makes subsequent advances without knowledge of the
lease contract.
(5) When under subsections (2) or (3) and (4) a lessor or a lessee
of accessions holds an interest that is superior to all interests in the
whole, the lessor or the lessee may:
(a) on default, expiration, termination, or cancellation of the
lease contract by the other party but subject to the provisions of
the lease contract and IC 26-1-2.1; or
(b) if necessary to enforce the lessor's or the lessee's other rights
and remedies under IC 26-1-2.1;
remove the goods from the whole, free and clear of all interests in the
whole, but the lessor or lessee must reimburse any holder of an
interest in the whole who is not the lessee and who has not otherwise
agreed for the cost of repair of any physical injury but not for any
diminution in value of the whole caused by the absence of the goods
removed or by any necessity for replacing them. A person entitled to
reimbursement may refuse permission to remove until the party
seeking removal gives adequate security for the performance of this
obligation.
As added by P.L.189-1991, SEC.3.
Subordination by agreement; persons entitled to priority
Sec. 311. Nothing in IC 26-1-2.1 prevents subordination by
agreement by any person entitled to priority.
As added by P.L.189-1991, SEC.3.
Insecurity; adequate assurance of performance
Sec. 401. (1) A lease contract imposes an obligation on each party
that the other's expectation of receiving due performance will not be
impaired.
(2) 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 the insecure
party has not already received the agreed return.
(3) 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 thirty (30) days after receipt of a demand by the other party.
(4) Between merchants, the reasonableness of grounds for
insecurity and the adequacy of any assurance offered must be
determined according to commercial standards.
(5) Acceptance of any nonconforming delivery or payment does
not prejudice the aggrieved party's right to demand adequate
assurance of future performance.
As added by P.L.189-1991, SEC.3.
Anticipatory repudiation
Sec. 402. If either party repudiates a lease contract 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
(a) for a commercially reasonable time, await retraction of
repudiation and performance by the repudiating party;
(b) make demand pursuant to IC 26-1-2.1-401 and await
assurance of future performance adequate under the
circumstances of the particular case; or
(c) resort to any right or remedy upon default under the lease
contract or IC 26-1-2.1, 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 IC 26-1-2.1
on the lessor's right to identify goods to the lease contract
notwithstanding default or to salvage unfinished goods (IC
26-1-2.1-524).
As added by P.L.189-1991, SEC.3.
Retraction of anticipatory repudiation
Sec. 403. (1) 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.
(2) 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
IC 26-1-2.1-401.
(3) 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.
As added by P.L.189-1991, SEC.3.
Substituted performance
Sec. 404. (1) 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.
(2) If the agreed means or manner of payment fails because of
domestic or foreign governmental regulation:
(a) 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
(b) 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.
As added by P.L.189-1991, SEC.3.
Excused performance
Sec. 405. Subject to IC 26-1-2.1-404 on substituted performance,
the following rules apply:
(a) Delay in delivery or nondelivery in whole or in part by a
lessor or a supplier who complies with subdivisions (b) and (c)
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.
(b) If the causes mentioned in subdivision (a) affect only part of
the lessor's or the supplier's capacity to perform, the lessor or
supplier shall allocate production and deliveries among the
lessor's or supplier's customers but at the lessor's or supplier's
option may include regular customers not then under contract
for sale or lease as well as the lessor's or supplier's own
requirements for further manufacture. The lessor or supplier
may so allocate in any manner that is fair and reasonable.
(c) 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 subdivision (b), of the
estimated quota thus made available for the lessee.
As added by P.L.189-1991, SEC.3.
Procedure on excused performance
Sec. 406. (1) If the lessee receives notification of a material or
indefinite delay or an allocation justified under IC 26-1-2.1-405, 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
(a) terminate the lease contract (IC 26-1-2.1-505(2)); or
(b) except in a finance lease that is not a consumer 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.
(2) If, after receipt of a notification from the lessor under
IC 26-1-2.1-405, the lessee fails so to modify the lease agreement
within a reasonable time not exceeding thirty (30) days, the lease
contract lapses with respect to any deliveries affected.
As added by P.L.189-1991, SEC.3.
Irrevocable promises; finance leases
Sec. 407. (1) 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.
(2) A promise that has become irrevocable and independent under
subsection (1):
(a) is effective and enforceable between the parties, and by or
against third parties including assignees of the parties; and
(b) is not subject to cancellation, termination, modification,
repudiation, excuse, or substitution without the consent of the
party to whom the promise runs.
(3) 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.
As added by P.L.189-1991, SEC.3.
Default; procedure
Sec. 501. (1) Whether the lessor or the lessee is in default under
a lease contract is determined by the lease agreement and
IC 26-1-2.1.
(2) If the lessor or the lessee is in default under the lease contract,
the party seeking enforcement has rights and remedies as provided
in IC 26-1-2.1 and, except as limited by IC 26-1-2.1, as provided in
the lease agreement.
(3) If the lessor or the lessee is in default under the lease contract,
the party seeking enforcement may reduce the party's claim to
judgment, or otherwise enforce the lease contract by self-help or any
available judicial procedure or nonjudicial procedure, including
(4) Except as otherwise provided in IC 26-1-2.1-106(1) or
IC 26-1-2.1 or the lease agreement, the rights and remedies referred
to in subsections (2) and (3) are cumulative.
(5) If the lease agreement covers both real property and goods, the
party seeking enforcement may proceed under this part as to the
goods, or under other applicable law as to both the real property and
the goods in accordance with that party's rights and remedies in
respect of the real property, in which case this part does not apply.
As added by P.L.189-1991, SEC.3.
Notice after default
Sec. 502. Except as otherwise provided in IC 26-1-2.1 or the lease
agreement, the lessor or lessee in default under the lease contract is
not entitled to notice of default or notice of enforcement from the
other party to the lease agreement.
As added by P.L.189-1991, SEC.3.
Modification or impairment of rights and remedies
Sec. 503. (1) Except as otherwise provided in IC 26-1-2.1, the
lease agreement may include rights and remedies for default in
addition to or in substitution for those provided in IC 26-1-2.1 and
may limit or alter the measure of damages recoverable under
IC 26-1-2.1.
(2) Resort to a remedy provided under IC 26-1-2.1 or in the lease
agreement is optional unless the remedy is expressly agreed to be
exclusive. If circumstances cause an exclusive or limited remedy to
fail of its essential purpose, or provision for an exclusive remedy is
unconscionable, remedy may be had as provided in IC 26-1-2.1.
(3) Consequential damages may be liquidated under
IC 26-1-2.1-504, or may otherwise be limited, altered, or excluded
unless the limitation, alteration, or exclusion is unconscionable.
Limitation, alteration, or exclusion of consequential damages for
injury to the person in the case of consumer goods is prima facie
unconscionable but limitation, alteration, or exclusion of damages
where the loss is commercial is not prima facie unconscionable.
(4) Rights and remedies on default by the lessor or the lessee with
respect to any obligation or promise collateral or ancillary to the
lease contract are not impaired by IC 26-1-2.1.
As added by P.L.189-1991, SEC.3.
Liquidation of damages
Sec. 504. (1) Damages payable by either party for default, or any
other act or omission, including indemnity for loss or diminution of
anticipated tax benefits or loss or damage to lessor's residual interest,
may be liquidated in the lease agreement but only at an amount or by
a formula that is reasonable in light of the then anticipated harm
caused by the default or other act or omission.
(2) If the lease agreement provides for liquidation of damages, and
such provision does not comply with subsection (1), or such
provision is an exclusive or limited remedy that circumstances cause
to fail of its essential purpose, remedy may be had as provided in
IC 26-1-2.1.
(3) If the lessor justifiably withholds or stops delivery of goods
because of the lessee's default or insolvency (IC 26-1-2.1-525 or
IC 26-1-2.1-526), the lessee is entitled to restitution of any amount
by which the sum of the lessee's payments exceeds:
(a) the amount to which the lessor is entitled by virtue of terms
liquidating the lessor's damages in accordance with subsection
(1); or
(b) in the absence of those terms, twenty percent (20%) of the
then present value of the total rent the lessee was obligated to
pay for the balance of the lease term, or, in the case of a
consumer lease, the lesser of such amount or five hundred
dollars ($500).
(4) A lessee's right to restitution under subsection (3) is subject to
offset to the extent the lessor establishes:
(a) a right to recover damages under the provisions of
IC 26-1-2.1 other than subsection (1); and
(b) the amount or value of any benefits received by the lessee
directly or indirectly by reason of the lease contract.
As added by P.L.189-1991, SEC.3.
Cancellation and termination and effect of cancellation,
termination, rescission, or fraud on rights and remedies
Sec. 505. (1) On cancellation of the lease contract, all obligations
that are still executory on both sides are discharged, but any right
based on prior default or performance survives, and the canceling
party also retains any remedy for default of the whole lease contract
or any unperformed balance.
(2) On termination of the lease contract, all obligations that are
still executory on both sides are discharged but any right based on
prior default or performance survives.
(3) Unless the contrary intention clearly appears, expressions of
"cancellation," "rescission," or the like of the lease contract may not
(4) Rights and remedies for material misrepresentation or fraud
include all rights and remedies available under IC 26-1-2.1 for
default.
(5) Neither rescission nor a claim for rescission of the lease
contract nor rejection or return of the goods may bar or be deemed
inconsistent with a claim for damages or other right or remedy.
As added by P.L.189-1991, SEC.3.
Statute of limitations
Sec. 506. (1) An action for default under a lease contract,
including breach of warranty or indemnity, must be commenced
within four (4) years after the cause of action accrued. By the
original lease contract the parties may reduce the period of limitation
to not less than one (1) year.
(2) A cause of action for default accrues when the act or omission
on which the default or breach of warranty is based is or should have
been discovered by the aggrieved party, or when the default occurs,
whichever is later. A cause of action for indemnity accrues when the
act or omission on which the claim for indemnity is based is or
should have been discovered by the indemnified party, whichever is
later.
(3) If an action commenced within the time limited by subsection
(1) is so terminated as to leave available a remedy by another action
for the same default or breach of warranty or indemnity, the other
action may be commenced after the expiration of the time limited
and within six (6) months after the termination of the first action
unless the termination resulted from voluntary discontinuance or
from dismissal for failure or neglect to prosecute.
(4) This section does not alter the law on tolling of the statute of
limitations nor does it apply to causes of action that have accrued
before IC 26-1-2.1 becomes effective.
As added by P.L.189-1991, SEC.3.
Proof of market rent; time and place
Sec. 507. (1) Damages based on market rent (IC 26-1-2.1-519 or
IC 26-1-2.1-528) are determined according to the rent for the use of
the goods concerned for a lease term identical to the remaining lease
term of the original lease agreement and prevailing at the time of the
default.
(2) If evidence of rent for the use of the goods concerned for a
lease term identical to the remaining lease term of the original lease
(3) Evidence of a relevant rent prevailing at a time or place or for
a lease term other than the one described in IC 26-1-2.1 offered by
one party is not admissible unless and until the party has given the
other party notice the court finds sufficient to prevent unfair surprise.
(4) If the prevailing rent or value of any goods regularly leased in
any established market is in issue, reports in official publications or
trade journals or in newspapers or periodicals of general circulation
published as the reports of that market are admissible in evidence.
The circumstances of the preparation of the report may be shown to
affect its weight but not its admissibility.
As added by P.L.189-1991, SEC.3.
Lessee's remedies
Sec. 508. (1) If a lessor fails to deliver the goods in conformity to
the lease contract (IC 26-1-2.1-509) or repudiates the lease contract
(IC 26-1-2.1-402), or a lessee rightfully rejects the goods (IC
26-1-2.1-509) or justifiably revokes acceptance of the goods (IC
26-1-2.1-517), then with respect 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 (IC
26-1-2.1-510), the lessor is in default under the lease contract and the
lessee may:
(a) cancel the lease contract (IC 26-1-2.1-505(1));
(b) recover so much of the rent and security as has been paid
and is just under the circumstances;
(c) cover and recover damages as to all goods affected whether
or not they have been identified to the lease contract (IC
26-1-2.1-518 and IC 26-1-2.1-520), or recover damages for
nondelivery (IC 26-1-2.1-519 and IC 26-1-2.1-520); and
(d) exercise any other rights or pursue any other remedies
provided in the lease contract.
(2) If a lessor fails to deliver the goods in conformity to the lease
contract or repudiates the lease contract, the lessee may also:
(a) if the goods have been identified, recover them (IC
26-1-2.1-522); or
(b) in a proper case, obtain specific performance or replevy the
(3) If a lessor is otherwise in default under a lease contract, the
lessee may exercise the rights and pursue the remedies provided in
the lease contract, which may include a right to cancel the lease, and
in IC 26-1-2.1-519(3).
(4) If a lessor has breached a warranty, whether express or
implied, the lessee may recover damages (IC 26-1-2.1-519(4)).
(5) On rightful rejection or justifiable revocation of acceptance,
a lessee has a security interest in goods in the lessee's possession or
control for any rent and security that has been paid and any expenses
reasonably incurred in their inspection, receipt, transportation, and
care and custody and may hold those goods and dispose of them in
good faith and in a commercially reasonable manner, subject to
IC 26-1-2.1-527(5).
(6) Subject to the provisions of IC 26-1-2.1-407, a lessee, on
notifying the lessor of the lessee's intention to do so, may deduct all
or any part of the damages resulting from any default under the lease
contract from any part of the rent still due under the same lease
contract.
As added by P.L.189-1991, SEC.3. Amended by P.L.1-1992,
SEC.135.
Lessee's rights on improper delivery; rightful rejection
Sec. 509. (1) Subject to the provisions of IC 26-1-2.1-510 on
default in installment lease contracts, if the goods or the tender or
delivery fail in any respect to conform to the lease contract, the
lessee may reject or accept the goods or accept any commercial unit
or units and reject the rest of the goods.
(2) Rejection of goods is ineffective unless it is within a
reasonable time after tender or delivery of the goods and the lessee
seasonably notifies the lessor.
As added by P.L.189-1991, SEC.3.
Installment lease contracts; rejection and default
Sec. 510. (1) Under an installment lease contract a lessee may
reject any delivery that is nonconforming if the nonconformity
substantially impairs the value of that delivery and cannot be cured
or the nonconformity is a defect in the required documents; but if the
nonconformity does not fall within subsection (2) and the lessor or
the supplier gives adequate assurance of its cure, the lessee must
accept that delivery.
(2) Whenever nonconformity or default with respect to one or
more deliveries substantially impairs the value of the installment
As added by P.L.189-1991, SEC.3.
Merchant lessee's duties as to rightfully rejected goods
Sec. 511. (1) Subject to any security interest of a lessee (IC
26-1-2.1-508(5)), if a lessor or a supplier has no agent or place of
business at the market of rejection, a merchant lessee, after rejection
of goods in the merchant lessee's possession or control, shall follow
any reasonable instructions received from the lessor or the supplier
with respect to the goods. In the absence of those instructions, a
merchant lessee shall make reasonable efforts to sell, lease, or
otherwise dispose of the goods for the lessor's account if they
threaten to decline in value speedily. Instructions are not reasonable
if on demand indemnity for expenses is not forthcoming.
(2) If a merchant lessee (subsection (1)) or any other lessee (IC
26-1-2.1-512) disposes of goods, the merchant lessee is entitled to
reimbursement either from the lessor or the supplier or out of the
proceeds for reasonable expenses of caring for and disposing of the
goods and, if the expenses include no disposition commission, to
such commission as is usual in the trade, or if there is none, to a
reasonable sum not exceeding ten percent (10%) of the gross
proceeds.
(3) In complying with this section or IC 26-1-2.1-512, the lessee
is held only to good faith. Good faith conduct hereunder is neither
acceptance or conversion nor the basis of an action for damages.
(4) A purchaser who purchases in good faith from a lessee
pursuant to this section or IC 26-1-2.1-512 takes the goods free of
any rights of the lessor and the supplier even though the lessee fails
to comply with one or more of the requirements of IC 26-1-2.1.
As added by P.L.189-1991, SEC.3.
Lessee's duties as to rightfully rejected goods
Sec. 512. (1) Except as otherwise provided with respect to goods
that threaten to decline in value speedily (IC 26-1-2.1-511) and
subject to any security interest of a lessee (IC 26-1-2.1-508(5)):
(a) the lessee, after rejection of goods in the lessee's possession,
shall hold them with reasonable care at the lessor's or the
supplier's disposition for a reasonable time after the lessee's
(b) if the lessor or the supplier gives no instructions within a
reasonable time after notification of rejection, the lessee may
store the rejected goods for the lessor's or the supplier's account
or ship them to the lessor or the supplier or dispose of them for
the lessor's or the supplier's account with reimbursement in the
manner provided in IC 26-1-2.1-511; but
(c) the lessee has no further obligations with regard to goods
rightfully rejected.
(2) Action by the lessee pursuant to subsection (1) is not
acceptance or conversion.
As added by P.L.189-1991, SEC.3.
Cure by lessor of improper tender or delivery; replacement
Sec. 513. (1) If any tender or delivery by the lessor or the supplier
is rejected because nonconforming and the time for performance has
not yet expired, the lessor or the supplier may seasonably notify the
lessee of the lessor's or the supplier's intention to cure and may then
make a conforming delivery within the time provided in the lease
contract.
(2) If the lessee rejects a nonconforming tender that the lessor or
the supplier had reasonable grounds to believe would be acceptable
with or without money allowance, the lessor or the supplier may have
a further reasonable time to substitute a conforming tender if the
lessor or the supplier seasonably notifies the lessee.
As added by P.L.189-1991, SEC.3.
Waiver of lessee's objections
Sec. 514. (1) In rejecting goods, a lessee's failure to state a
particular defect that is ascertainable by reasonable inspection
precludes the lessee from relying on the defect to justify rejection or
to establish default:
(a) if, stated seasonably, the lessor or the supplier could have
cured it (IC 26-1-2.1-513); or
(b) between merchants if the lessor or the supplier after
rejection has made a request in writing for a full and final
written statement of all defects on which the lessee proposes to
rely.
(2) A lessee's failure to reserve rights when paying rent or other
consideration against documents precludes recovery of the payment
for defects apparent in the documents.
As added by P.L.189-1991, SEC.3. Amended by P.L.143-2007,
SEC.20.
IC 26-1-2.1-515
Acceptance of goods
Sec. 515. (1) Acceptance of goods occurs after the lessee has had
a reasonable opportunity to inspect the goods and:
(a) the lessee signifies or acts with respect to the goods in a
manner that signifies to the lessor or the supplier that the goods
are conforming or that the lessee will take or retain them in
spite of their nonconformity; or
(b) the lessee fails to make an effective rejection of the goods
(IC 26-1-2.1-509(2)).
(2) Acceptance of a part of any commercial unit is acceptance of
that entire unit.
As added by P.L.189-1991, SEC.3.
Effect of acceptance of goods; notice of default; burden of
establishing
Sec. 516. (1) A lessee must pay rent for any goods accepted in
accordance with the lease contract, with due allowance for goods
rightfully rejected or not delivered.
(2) A lessee's acceptance of goods precludes rejection of the
goods accepted. In the case of a finance lease, if made with
knowledge of a nonconformity, acceptance cannot be revoked
because of it. In any other case, if made with knowledge of a
nonconformity, acceptance cannot be revoked because of it unless
the acceptance was on the reasonable assumption that the
nonconformity would be seasonably cured. Acceptance does not of
itself impair any other remedy provided by IC 26-1-2.1 or the lease
agreement for nonconformity.
(3) If a tender has been accepted:
(a) within a reasonable time after the lessee discovers or should
have discovered any default, the lessee shall notify the lessor
and the supplier, if any, or be barred from any remedy against
the party not notified;
(b) except in the case of a consumer lease, within a reasonable
time after the lessee receives notice of litigation for
infringement or the like (IC 26-1-2.1-211) the lessee shall notify
the lessor or be barred from any remedy over for liability
established by the litigation; and
(c) the burden is on the lessee to establish any default.
(4) If a lessee is sued for breach of a warranty or other obligation
for which a lessor or a supplier is answerable over the following
apply:
(a) The lessee may give the lessor or the supplier, or both,
written notice of the litigation. If the notice states that the
(b) The lessor or the supplier may demand in writing that the
lessee turn over control of the litigation including settlement if
the claim is one for infringement or the like (IC 26-1-2.1-211)
or else be barred from any remedy over. If the demand states
that the lessor or the supplier agrees to bear all expense and to
satisfy any adverse judgment, then unless the lessee after
seasonable receipt of the demand does turn over control the
lessee is so barred.
(5) Subsections (3) and (4) apply to any obligation of a lessee to
hold the lessor or the supplier harmless against infringement or the
like (IC 26-1-2.1-211).
As added by P.L.189-1991, SEC.3.
Revocation of acceptance of goods
Sec. 517. (1) A lessee may revoke acceptance of a lot or
commercial unit whose nonconformity substantially impairs its value
to the lessee if the lessee has accepted it:
(a) except in the case of a finance lease, on the reasonable
assumption that its nonconformity would be cured and it has not
been seasonably cured; or
(b) without discovery of the nonconformity if the lessee's
acceptance was reasonably induced either by the lessor's
assurances or, except in the case of a finance lease, by the
difficulty of discovery before acceptance.
(2) Except in the case of a finance lease that is not a consumer
lease, a lessee may revoke acceptance of a lot or commercial unit if
the lessor defaults under the lease contract and the default
substantially impairs the value of that lot or commercial unit to the
lessee.
(3) If the lease agreement so provides, the lessee may revoke
acceptance of a lot or commercial unit because of other defaults by
the lessor.
(4) Revocation of acceptance must occur within a reasonable time
after the lessee discovers or should have discovered the ground for
it and before any substantial change in condition of the goods which
is not caused by the nonconformity. Revocation is not effective until
the lessee notifies the lessor.
(5) A lessee who so revokes has the same rights and duties with
As added by P.L.189-1991, SEC.3.
Cover; substitute goods
Sec. 518. (1) After a default by a lessor under the lease contract
of the type described in IC 26-1-2.1-508(1), or, if agreed, after other
default by the lessor, the lessee may cover by making any purchase
or lease of or contract to purchase or lease goods in substitution for
those due from the lessor.
(2) Except as otherwise provided with respect to damages
liquidated in the lease agreement (IC 26-1-2.1-504) or otherwise
determined pursuant to agreement of the parties (IC 26-1-1-102(3)
and IC 26-1-2.1-503), if a lessee's cover is by lease agreement
substantially similar to the original lease agreement and the new
lease agreement is made in good faith and in a commercially
reasonable manner, the lessee may recover from the lessor as
damages (i) the present value, as of the date of the commencement
of the term of the new lease agreement of the rent under the new
lease agreement applicable to that period of the new lease term which
is comparable to the then remaining term of the original lease
agreement minus the present value as of the same date of the total
rent for the then remaining lease term of the original lease
agreement, and (ii) any incidental or consequential damages, less
expenses saved in consequence of the lessor's default.
(3) If a lessee's cover is by lease agreement that for any reason
does not qualify for treatment under subsection (2), or is by purchase
or otherwise, the lessee may recover from the lessor as if the lessee
had elected not to cover and IC 26-1-2.1-519 governs.
As added by P.L.189-1991, SEC.3.
Lessee's damages for nondelivery, repudiation, default, and breach
of warranty in regard to accepted goods
Sec. 519. (1) Except as otherwise provided with respect to
damages liquidated in the lease agreement (IC 26-1-2.1-504) or
otherwise determined pursuant to agreement of the parties (IC
26-1-1-102(3) and IC 26-1-2.1-503), if a lessee elects not to cover or
a lessee elects to cover and the cover is by lease agreement that for
any reason does not qualify for treatment under IC 26-1-2.1-518(2),
or is by purchase or otherwise, the measure of damages for
non-delivery or repudiation by the lessor or for rejection or
revocation of acceptance by the lessee is the present value, as of the
date of the default, of the then market rent minus the present value
as of the same date of the original rent, computed for the remaining
(2) Market rent is to be determined as of the place for tender or,
in cases of rejection after arrival or revocation of acceptance, as of
the place of arrival.
(3) Except as otherwise agreed, if the lessee has accepted goods
and given notification (IC 26-1-2.1-516(3)), the measure of damages
for nonconforming tender or delivery or other default by a lessor is
the loss resulting in the ordinary course of events from the lessor's
default as determined in any manner that is reasonable together with
incidental and consequential damages, less expenses saved in
consequence of the lessor's default.
(4) Except as otherwise agreed, the measure of damages for
breach of warranty is the present value at the time and place of
acceptance of the difference between the value of the use of the
goods accepted and the value if they had been as warranted for the
lease term, unless special circumstances show proximate damages of
a different amount, together with incidental and consequential
damages, less expenses saved in consequence of the lessor's default
or breach of warranty.
As added by P.L.189-1991, SEC.3.
Lessee's incidental and consequential damages
Sec. 520. (1) Incidental damages resulting from a lessor's default
include expenses reasonably incurred in inspection, receipt,
transportation, and care and custody of goods rightfully rejected or
goods the acceptance of which is justifiably revoked, any
commercially reasonable charges, expenses or commissions in
connection with effecting cover, and any other reasonable expense
incident to the default.
(2) Consequential damages resulting from a lessor's default
include:
(a) any loss resulting from general or particular requirements
and needs of which the lessor at the time of contracting had
reason to know and which could not reasonably be prevented by
cover or otherwise; and
(b) injury to person or property proximately resulting from any
breach of warranty.
As added by P.L.189-1991, SEC.3.
Lessee's right to specific performance or replevin
Sec. 521. (1) Specific performance may be decreed if the goods
(2) A decree for specific performance may include any terms and
conditions as to payment of the rent, damages, or other relief that the
court deems just.
(3) A lessee has a right of replevin, detinue, sequestration, claim
and delivery, or the like for goods identified to the lease contract if
after reasonable effort the lessee is unable to effect cover for those
goods or the circumstances reasonably indicate that the effort will be
unavailing.
As added by P.L.189-1991, SEC.3.
Lessee's right to goods on lessor's insolvency
Sec. 522. (1) Subject to subsection (2) and even though the goods
have not been shipped, a lessee who has paid a part or all of the rent
and security for goods identified to a lease contract (IC 26-1-2.1-217)
on making and keeping good a tender of any unpaid portion of the
rent and security due under the lease contract may recover the goods
identified from the lessor if the lessor becomes insolvent within ten
(10) days after receipt of the first installment of rent and security.
(2) A lessee acquires the right to recover goods identified to a
lease contract only if they conform to the lease contract.
As added by P.L.189-1991, SEC.3.
Lessor's remedies
Sec. 523. (1) If a lessee wrongfully rejects or revokes acceptance
of goods or fails to make a payment when due or repudiates with
respect to a part or the whole, then, with respect 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 (IC 26-1-2.1-510), the lessee is in default under the lease
contract and the lessor may:
(a) cancel the lease contract (IC 26-1-2.1-505(1));
(b) proceed respecting goods not identified to the lease contract
(IC 26-1-2.1-524);
(c) withhold delivery of the goods and take possession of goods
previously delivered (IC 26-1-2.1-525);
(d) stop delivery of the goods by any bailee (IC 26-1-2.1-526);
(e) dispose of the goods and recover damages (IC
26-1-2.1-527), or retain the goods and recover damages (IC
26-1-2.1-528), or in a proper case recover rent (IC
26-1-2.1-529); and
(f) exercise any other rights or pursue any other remedies
provided in the lease contract.
(2) If a lessor does not fully exercise a right or obtain a remedy to
which the lessor is entitled under subsection (1), the lessor may
recover the loss resulting in the ordinary course of events from the
lessee's default as determined in any reasonable manner, together
with incidental damages, less expenses saved in consequence of the
lessee's default.
(3) If a lessee is otherwise in default under a lease contract, the
lessor may exercise the rights and pursue the remedies provided in
the lease contract, which may include a right to cancel the lease. In
addition, unless otherwise provided in the lease contract:
(a) if the default substantially impairs the value of the lease
contract to the lessor, the lessor may exercise the rights and
pursue the remedies provided in subsection (1) or (2); or
(b) if the default does not substantially impair the value of the
lease contract to the lessor, the lessor may recover as provided
in subsection (2).
As added by P.L.189-1991, SEC.3. Amended by P.L.1-1992,
SEC.136.
Lessor's right to identify goods to lease contract
Sec. 524. (1) After default by the lessee under the lease contract
of the type described in IC 26-1-2.1-523(1) or IC 26-1-2.1-523(3)(a)
or, if agreed, after other default by the lessee, the lessor may:
(a) identify to the lease contract conforming goods not already
identified if at the time the lessor learned of the default they
were in the lessor's or the supplier's possession or control; and
(b) dispose of goods (IC 26-1-2.1-527(1)) that demonstrably
have been intended for the particular lease contract even though
those goods are unfinished.
(2) If the goods are unfinished, in the exercise of reasonable
commercial judgment for the purposes of avoiding loss and of
effective realization, an aggrieved lessor or the supplier may either
complete manufacture and wholly identify the goods to the lease
contract or cease manufacture and lease, sell, or otherwise dispose of
the goods for scrap or salvage value or proceed in any other
reasonable manner.
As added by P.L.189-1991, SEC.3.
Lessor's right to possession of goods
Sec. 525. (1) If a lessor discovers the lessee to be insolvent, the
lessor may refuse to deliver the goods.
(2) After a default by the lessee under the lease contract of the
type described in IC 26-1-2.1-523(1) or IC 26-1-2.1-523(3)(a) or, if
(3) The lessor may proceed under subsection (2) without judicial
process if that can be done without breach of the peace or the lessor
may proceed by action.
As added by P.L.189-1991, SEC.3.
Lessor's stoppage of delivery
Sec. 526. (1) A lessor may stop delivery of goods in the
possession of a carrier or other bailee if the lessor discovers the
lessee to be insolvent and may stop delivery of carload, truckload,
planeload, or larger shipments of express or freight if the lessee
repudiates or fails to make a payment due before delivery, whether
for rent, security, or otherwise under the lease contract, or for any
other reason the lessor has a right to withhold or take possession of
the goods.
(2) In pursuing its remedies under subsection (1), the lessor may
stop delivery until:
(a) receipt of the goods by the lessee;
(b) acknowledgment to the lessee by any bailee of the goods,
except a carrier, that the bailee holds the goods for the lessee;
or
(c) such an acknowledgment to the lessee by a carrier via
reshipment or as a warehouse.
(3)(a) To stop delivery, a lessor shall so notify as to enable the
bailee by reasonable diligence to prevent delivery of the goods.
(b) After notification, the bailee shall hold and deliver the
goods according to the directions of the lessor, but the lessor is
liable to the bailee for any ensuing charges or damages.
(c) A carrier who has issued a nonnegotiable bill of lading is not
obliged to obey a notification to stop received from a person
other than the consignor.
As added by P.L.189-1991, SEC.3. Amended by P.L.143-2007,
SEC.21.
Lessor's rights to dispose of goods
Sec. 527. (1) After a default by a lessee under the lease contract
of the type described in IC 26-1-2.1-523(1) or IC 26-1-2.1-523(3)(a)
(2) Except as otherwise provided with respect to damages
liquidated in the lease agreement (IC 26-1-2.1-504) or otherwise
determined pursuant to agreement of the parties (IC 26-1-1-102(3)
and IC 26-1-2.1-503), if the disposition is by lease agreement
substantially similar to the original lease agreement and the new
lease agreement is made in good faith and in a commercially
reasonable manner, the lessor may recover from the lessee as
damages (i) accrued and unpaid rent as of the date of the
commencement of the term of the new lease agreement, (ii) the
present value, as of the same date, of the total rent for the then
remaining lease term of the original lease agreement minus the
present value, as of the same date, of the rent under the new lease
agreement applicable to that period of the new lease term which is
comparable to the then remaining term of the original lease
agreement, and (iii) any incidental damages allowed under
IC 26-1-2.1-530, less expenses saved in consequence of the lessee's
default.
(3) If the lessor's disposition is by lease agreement that for any
reason does not qualify for treatment under subsection (2), or is by
sale or otherwise, the lessor may recover from the lessee as if the
lessor had elected not to dispose of the goods and IC 26-1-2.1-528
governs.
(4) A subsequent buyer or lessee who buys or leases from the
lessor in good faith for value as a result of a disposition under this
section takes the goods free of the original lease contract and any
rights of the original lessee even though the lessor fails to comply
with one or more of the requirements of IC 26-1-2.1.
(5) The lessor is not accountable to the lessee for any profit made
on any disposition. A lessee who has rightfully rejected or justifiably
revoked acceptance shall account to the lessor for any excess over
the amount of the lessee's security interest (IC 26-1-2.1-508(5)).
As added by P.L.189-1991, SEC.3.
Lessor's damages for nonacceptance or repudiation
Sec. 528. (1) Except as otherwise provided with respect to
damages liquidated in the lease agreement (IC 26-1-2.1-504) or
otherwise determined pursuant to agreement of the parties (IC
26-1-1-102(3) and IC 26-1-2.1-503), if a lessor elects to retain the
goods or a lessor elects to dispose of the goods and the disposition
is by lease agreement that for any reason does not qualify for
(2) If the measure of damages provided in subsection (1) is
inadequate to put a lessor in as good a position as performance would
have, the measure of damages is the present value of the profit,
including reasonable overhead, the lessor would have made from full
performance by the lessee, together with any incidental damages
allowed under IC 26-1-2.1-530, due allowance for costs reasonably
incurred and due credit for payments or proceeds of disposition.
As added by P.L.189-1991, SEC.3.
Lessor's action for the rent
Sec. 529. (1) After default by the lessee under the lease contract
of the type described in IC 26-1-2.1-523(1) or IC 26-1-2.1-523(3)(a)
or, if agreed, after other default by the lessee, if the lessor complies
with subsection (2), the lessor may recover from the lessee as
damages:
(a) for goods accepted by the lessee and not repossessed by or
tendered to the lessor, and for conforming goods lost or
damaged within a commercially reasonable time after risk of
loss passes to the lessee (IC 26-1-2.1-219):
(i) accrued and unpaid rent as of the date of entry of
judgment in favor of the lessor;
(ii) the present value as of the same date of the rent for the
then remaining lease term of the lease agreement; and
(iii) any incidental damages allowed under IC 26-1-2.1-530,
less expenses saved in consequence of the lessee's default;
and
(b) for goods identified to the lease contract if the lessor is
unable after reasonable effort to dispose of them at a reasonable
price or the circumstances reasonably indicate that effort will be
unavailing:
(i) accrued and unpaid rent as of the date of entry of
judgment in favor of the lessor;
(ii) the present value as of the same date of the rent for the
then remaining lease term of the lease agreement; and
(iii) any incidental damages allowed under IC 26-1-2.1-530,
less expenses saved in consequence of the lessee's default.
(2) Except as provided in subsection (3), the lessor shall hold for
the lessee for the remaining lease term of the lease agreement any
goods that have been identified to the lease contract and are in the
lessor's control.
(3) The lessor may dispose of the goods at any time before
collection of the judgment for damages obtained pursuant to
subsection (1). If the disposition is before the end of the remaining
lease term of the lease agreement, the lessor's recovery against the
lessee for damages is governed by IC 26-1-2.1-527 or
IC 26-1-2.1-528, and the lessor will cause an appropriate credit to be
provided against a judgment for damages to the extent that the
amount of the judgment exceeds the recovery available pursuant to
IC 26-1-2.1-527 or IC 26-1-2.1-528.
(4) Payment of the judgment for damages obtained pursuant to
subsection (1) entitles the lessee to use and possession of the goods
not then disposed of for the remaining lease term of and in
accordance with the lease agreement.
(5) After default by the lessee under the lease contract of the type
described in IC 26-1-2.1-523(1) or IC 26-1-2.1-523(3)(a) or, if
agreed, after other default by the lessee, a lessor who is held not
entitled to rent under this section must nevertheless be awarded
damages for non-acceptance under IC 26-1-2.1-527 and
IC 26-1-2.1-528.
As added by P.L.189-1991, SEC.3.
Lessor's incidental damages
Sec. 530. Incidental damages to an aggrieved lessor include any
commercially reasonable charges, expenses, or commissions incurred
in stopping delivery, in the transportation, care and custody of goods
after the lessee's default, in connection with return or disposition of
the goods, or otherwise resulting from the default.
As added by P.L.189-1991, SEC.3.
Standing to sue third parties for injury to goods
Sec. 531. (1) If a third party so deals with goods that have been
identified to a lease contract as to cause actionable injury to a party
to the lease contract (a) the lessor has a right of action against the
(i) has a security interest in the goods;
(ii) has an insurable interest in the goods; or
(iii) bears the risk of loss under the lease contract or has since
the injury assumed that risk as against the lessor and the goods
have been converted or destroyed.
(2) If at the time of the injury the party plaintiff did not bear the
risk of loss as against the other party to the lease contract and there
is no arrangement between them for disposition of the recovery, the
party plaintiff suit or settlement, subject to the party plaintiff's own
interest, is as a fiduciary for the other party to the lease contract.
(3) Either party with the consent of the other may sue for the
benefit of whom it may concern.
As added by P.L.189-1991, SEC.3.
Recovery by lessor for loss of or damage to residual interest
Sec. 532. In addition to any other recovery permitted by
IC 26-1-2.1 or other law, the lessor may recover from the lessee an
amount that will fully compensate the lessor for any loss of or
damage to the lessor's residual interest in the goods caused by the
default of the lessee.
As added by P.L.189-1991, SEC.3.