ARTICLE 2A
LEASES

PART 1
GENERAL PROVISIONS AND DEFINITIONS

      Sec. 42a-2A-101. Short title: Uniform Commercial Code-Leases. This article may be cited as "Uniform Commercial Code-Leases".

      (P.A. 02-131, S. 1.)

      Sec. 42a-2A-102. Definitions and index of definitions. (a) In this article:

      (1) "Authenticate" means:

      (A) To sign; or

      (B) To execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record.

      (2) "Cancellation" means an act by either party which ends a lease contract because of a default by the other party.

      (3) "Commercial unit" means a unit of goods which by commercial usage is a single whole for purposes of lease and whose division materially impairs its character or value in the relevant market or in use. A commercial unit may be a single article, such as a machine; a set of articles, such as a suite of furniture or a line of machinery; a quantity, such as a gross or carload; or any other unit treated in use or in the relevant market as a single whole.

      (4) "Computer" means an electronic device that can perform substantial computations, including numerous arithmetic operations or logic operations, without human intervention during the computation or operation.

      (5) "Conforming" goods or conduct under a lease contract means goods or performance that are in accordance with the obligations under the contract.

      (6) "Conspicuous", with reference to a term, means so written, displayed or otherwise presented that a reasonable person against which it is to operate ought to have noticed it. A term in an electronic record intended to evoke a response by an electronic agent is conspicuous if it is presented in a form that would enable a reasonably configured electronic agent to take it into account or react without review of the record by an individual. Conspicuous terms include the following:

      (A) With respect to a person:

      (i) A heading in capitals in a size equal to or greater than, or in contrasting type, font or color to, the surrounding text;

      (ii) Language in the body of a record or display in larger or other contrasting type, font or color or set off from the surrounding text by symbols or other marks that call attention to the language; and

      (iii) A term prominently referenced in an electronic record or display which is readily accessible and reviewable from the record or display; and

      (B) With respect to a person or an electronic agent, a term or reference to a term that is so placed in a record or display that the person or electronic agent can not proceed without taking some action with respect to the term or reference.

      (7) "Consumer" means an individual who leases or contracts to lease goods that, at the time of contracting, are intended by the individual to be used primarily for personal, family or household purposes. Personal, family or household use does not include professional or commercial purposes, including agriculture, business management and investment management, other than management of the individual's personal or family investments.

      (8) "Consumer lease" means a lease between a merchant lessor and a consumer.

      (9) "Delivery" means the voluntary transfer of physical possession or control of goods.

      (10) "Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical or electromagnetic capabilities or similar capabilities.

      (11) "Electronic agent" means a computer program or electronic or other automated means used to initiate an action or to respond to electronic messages or performances without intervention by an individual at the time of the action or response.

      (12) "Electronic message" means an electronic record or display stored, generated or transmitted by electronic means for purposes of communication to another person or electronic agent.

      (13) "Electronic event" means an electronic authentication, message, record or performance.

      (14) "Finance lease" means a lease with respect to which:

      (A) The lessor does not select, manufacture or supply the goods;

      (B) The lessor acquires the goods or the right to possession and use of the goods in connection with the lease or, in the case of goods that have been leased previously by the lessor and are not being leased to a consumer, in connection with another lease; and

      (C) One of the following occurs:

      (i) The lessee receives a copy of the agreement by which the lessor acquired, or proposes to acquire, the goods or the right to possession and use of the goods before authenticating the lease agreement;

      (ii) The lessee's approval of the agreement or of the general contractual terms under which the lessor acquired or proposes to acquire the goods or the right to possession and use of the goods is a condition to the effectiveness of the lease contract;

      (iii) The lessee, before authenticating the lease agreement, 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

      (iv) If the lease is not a consumer lease, before the lessee authenticates the lease agreement, the lessor informs the lessee in writing:

      (I) Of the identity of the person supplying the goods to the lessor, unless the lessee has selected such person and directed the lessor to acquire the goods or the right to possession and use of the goods from such person;

      (II) That the lessee is entitled under this article 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

      (III) That the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of such promises and warranties, including any disclaimers and limitations of such promises and warranties, or a statement of remedies.

      (15) "Goods" means all things that are movable at the time of identification to a lease contract or that are fixtures. The term includes the unborn young of animals. The term does not include money in which the rent is to be paid, the subject of foreign exchange transactions, documents, letters of credit, instruments, investment property, accounts, chattel paper or general intangibles, payment intangibles or minerals, or the like, including oil and gas, before extraction.

      (16) "Information processing system" means an electronic system for creating, generating, sending, receiving, storing, displaying or processing information.

      (17) "Lease" means the transfer of the right to possession and use of goods for a period in return for consideration. The term includes a sublease unless the context clearly indicates otherwise. The term does not include a sale, including a sale on approval or a sale or return, or retention or creation of a security interest.

      (18) "Lease agreement" means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in this article. The term includes a sublease agreement unless the context clearly indicates otherwise.

      (19) "Lease contract" means the total legal obligation resulting from the lease agreement as affected by this article and other applicable law. The term includes a sublease contract unless the context clearly indicates otherwise.

      (20) "Leasehold interest" means the interest of the lessor or the lessee under a lease contract.

      (21) "Lessee" means a person that acquires the right to possession and use of goods under a lease. The term includes a sublessee unless the context clearly indicates otherwise.

      (22) "Lessee in ordinary course of business" means a person that, in good faith and without knowledge that the person's lease is in violation of ownership rights, a security interest or a leasehold interest of a third party in the goods, leases in the ordinary course from a person in the business of selling or leasing goods of that kind for cash or by exchange of other property or on secured or unsecured credit, including acquiring goods or documents of title under a preexisting lease contract, but not including a transfer in bulk, or as security for or in total or partial satisfaction of a money debt. The term does not include a pawnbroker.

      (23) "Lessor" means a person that transfers the right to possession and use of goods under a lease. The term includes a sublessor unless the context clearly indicates otherwise.

      (24) "Lessor's residual interest" means the lessor's interest in goods after expiration, termination or cancellation of a lease contract.

      (25) "Lien" means a charge against or interest in goods to secure payment of a debt or performance of an obligation. The term does not include a security interest.

      (26) "Lot" means a parcel or single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.

      (27) "Merchant lessee" means a lessee that is a merchant with respect to goods of the kind subject to the lease.

      (28) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. In determining present value, the discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into. Otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

      (29) "Receive" means:

      (A) With respect to goods, to take delivery; or

      (B) With respect to a notice:

      (i) To come to a person's attention; or

      (ii) To be delivered to and available at a location designated by agreement for the purpose of notice, or, in the absence of an agreed location:

      (I) To be delivered at the person's residence, or the person's place of business through which the contract was made, or at any other place held out by the person as a place for the receipt of such notices; or

      (II) In the case of an electronic record, to come into existence in an information processing system in a form capable of being processed by or perceived from a system of that type, if the recipient uses, has designated or holds out that system as a place for the receipt of the notices.

      (30) "Send" means, with any costs provided for and properly addressed or directed as reasonable under the circumstances or as otherwise agreed, to (A) deposit in the mail or with a commercially reasonable carrier, (B) deliver for transmission to or creation in another location or system, or (C) take the steps necessary to initiate transmission to or creation in another location or system. In addition, with respect to an electronic message, the term means to initiate operations that in the ordinary course will cause the record to come into existence in an information processing system in a form capable of being processed by or perceived from a system of that type by the recipient, if the recipient uses, has designated or holds out that system or address as a place for the receipt of communications of the kind. Receipt within the time in which it would have arrived if properly sent has the effect of a proper sending.

      (31) "Sublease" means a lease of goods whose right to possession and use is acquired by the lessor as a lessee under an existing lease.

      (32) "Supplier" means a person from which a lessor buys or leases goods to be leased under a finance lease.

      (33) "Supply contract" means a contract under which a lessor buys or leases goods to be leased.

      (34) "Termination" means the ending of a contract or a part thereof by an act by a party under a power created by agreement or law, or by operation of the terms of the agreement for a reason other than for a default by the other party.

      (b) The following definitions in other articles apply to this article:

      "Account". Section 42a-9-102(a)(2).

      "Between merchants". Section 42a-2-104(3).

      "Buyer". Section 42a-2-103(1)(a).

      "Chattel paper". Section 42a-9-102(a)(11).

      "Consumer goods". Section 42a-9-102(a)(23).

      "Document". Section 42a-9-102(a)(30).

      "Entrusting". Section 42a-2-403(3).

      "General intangible". Section 42a-9-102(a)(42).

      "Instrument". Section 42a-9-102(a)(47).

      "Merchant". Section 42a-2-104(1).

      "Mortgage". Section 42a-9-102(a)(55).

      "Pursuant to commitment". Section 42a-9-102(a)(68).

      "Sale". Section 42a-2-106(1).

      "Sale on approval". Section 42a-2-326(1)(a).

      "Sale or return". Section 42a-2-326(1)(b).

      "Seller". Section 42a-2-103(1)(c).

      (c) In addition, article 1 contains general definitions and principles of construction that apply throughout this article.

      (P.A. 02-131, S. 2; P.A. 04-64, S. 55; P.A. 05-109, S. 26.)

      History: P.A. 04-64 amended Subsec. (a)(23) by replacing "receiving" with "acquiring" in definition of "lessee in ordinary course of business" to conform to revisions made to article 7 by the same act; P.A. 05-109 amended Subsec. (a) by deleting definitions of "good faith" and "record" and making technical changes and amended Subsec. (b) by making a technical change in reference to definition of "seller" to conform to revisions made to article 1 by the same act.

      Sec. 42a-2A-103. Scope. This article applies to any transaction regardless of form which creates a lease.

      (P.A. 02-131, S. 3.)

      Sec. 42a-2A-104. Transactions subject to other law. (a) A transaction subject to this article is also subject to:

      (1) Any certificate of title statute covering automobiles, trailers, mobile homes, boats, farm tractors or the like, including chapters 247, 282 and 283 and sections 21-67a and 49-5, except as to the rights of a lessee in the ordinary course of business under subsection (d) of section 42a-2A-404 and subsection (d) of section 42a-2A-405 whose rights arise before a certificate of title covering the goods is effective in the name of any other purchaser;

      (2) Any applicable certificate of title statute of another jurisdiction;

      (3) Any applicable law which establishes a different rule for consumer leases; and

      (4) Any other law of this state to which the transaction is subject, such as laws dealing with:

      (A) The sale or lease of agricultural products;

      (B) The consignment or transfer by artists of works of art or fine prints;

      (C) Distribution agreements, franchises and other relationships through which goods are leased;

      (D) Liability for products which cause injury to person or property;

      (E) The making and disclaimer of warranties;

      (F) Dealers in particular products, such as automobiles, motorized wheelchairs, agricultural equipment and hearing aids; and

      (G) Noncommercial motor vehicles leases subject to chapter 742a.

      (b) If a law of this state applies to a transaction subject to this article, the following rules apply:

      (1) A requirement that a term, waiver, notice or disclaimer be in a writing is satisfied by a record.

      (2) A requirement that a writing or a term be signed is satisfied by an authentication.

      (c) Except for the rights of a lessee in the ordinary course of business under subdivision (1) of subsection (a) of this section, in the event of a conflict between this article, other than section 42a-2A-105, 42a-2A-401 or 42a-2A-402, and a law referred to in subsection (a) of this section, the law referred to in subsection (a) of this section governs.

      (d) Failure to comply with the laws referred to in subsection (a) of this section has only the effect specified therein.

      (P.A. 02-131, S. 4.)

      Sec. 42a-2A-105. Territorial application of article to goods covered by certificate of title. (a) This section applies to goods covered by a certificate of title, even if there is no other relationship between the jurisdiction under whose certificate of title law the goods are covered and the goods or the lessee or lessor.

      (b) Goods become covered by a certificate of title when a valid application for the certificate of title and the application fee are delivered to the appropriate authority. Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.

      (c) Subject to subsection (d) of section 42a-2A-404 and subsection (d) of section 42a-2A-405, with respect to goods covered by a certificate of title under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with the certificate of title statute are governed by the local law of the jurisdiction whose certificate covers the goods from the time the goods become covered by the certificate until the goods cease to be covered by the certificate.

      (P.A. 02-131, S. 5.)

      Sec. 42a-2A-106. Limitation on power of parties to consumer lease to choose applicable law or judicial forum. (a) A choice-of-law term in a consumer lease contract is not enforceable if the law chosen is that of a jurisdiction other than one in which the lessee resides at the time the lease agreement becomes enforceable or within thirty days thereafter or in which the goods are to be used.

      (b) The parties may choose an exclusive judicial forum. However, in a consumer lease, the law of the forum is governed by subsection (d) of section 51-345 and any choice of forum in a term of a consumer lease must comply with said section. A choice of forum in a term of an agreement is not exclusive unless the agreement expressly so provides.

      (P.A. 02-131, S. 6.)

      Sec. 42a-2A-107. Unconscionability. (a) If a court as a matter of law finds a lease contract or any term thereof to have been unconscionable at the time it was made, the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable term or so limit the application of an unconscionable term as to avoid an unconscionable result.

      (b) With respect to a consumer lease, if the court finds as a matter of law that a lease contract or a term of the contract was induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from the lease contract, the court may grant appropriate relief.

      (c) If it is claimed or appears to the court that a lease contract or any term thereof, or any conduct that induced a lease contract or any term thereof or that occurred in the collection of a claim arising from the lease contract, may be unconscionable, the parties must be afforded a reasonable opportunity to present evidence as to the commercial setting, purpose and effect of the lease contract, term or conduct to aid the court in making the determination.

      (d) In an action in which a lessee claims unconscionability with respect to a consumer lease, the following rules apply:

      (1) If the court finds unconscionability under subsection (a) or (b) of this section, the court shall award reasonable attorney's fees to the lessee.

      (2) In determining attorney's fees, the amount of the recovery on behalf of the claimant under subsection (a) or (b) of this section is not controlling.

      (P.A. 02-131, S. 7.)

      History: (Revisor's note: In Subsec. (a), "that" was deleted editorially by the Revisors after "matter of law finds" for grammatical accuracy).

      Sec. 42a-2A-108. Option to accelerate at will. (a) A term in a lease agreement providing that one party or the party's successor in interest may accelerate payment or performance or require collateral or additional collateral "at will" or when the party "deems itself insecure", or words of similar import, shall be construed to mean that the party shall have power to do so only if the party in good faith believes that the prospect of payment or performance is impaired.

      (b) In a consumer lease, the burden of establishing good faith under subsection (a) of this section is on the party that exercised the power. In all other leases, the burden of establishing lack of good faith is on the party against which the power has been exercised.

      (P.A. 02-131, S. 8.)

      Sec. 42a-2A-109. Effect of agreement; questions determined by court. (a) Unless a section in this article otherwise provides, the effect of any provision of this article may be varied by agreement.

      (b) The presence of mandatory language, such as "must" or "shall", or the absence of enabling language, such as "unless otherwise agreed", does not by itself preclude the parties from varying by agreement a provision of this article.

      (c) Whenever this article allocates a risk or imposes a burden as between the parties, they may agree to shift the allocation and apportion the risk or burden.

      (P.A. 02-131, S. 9.)

PART 2
FORMATION, TERMS AND READJUSTMENT
OF LEASE CONTRACT. ELECTRONIC CONTRACTS

(A)

FORMATION, TERMS AND READJUSTMENT

      Sec. 42a-2A-201. Formal requirements. (a) Except as otherwise provided in this section, a lease contract is not enforceable by way of action or defense unless:

      (1) The total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars; or

      (2) There is a record, authenticated by the party against which enforcement is sought or by such party's authorized agent as the record of such person, which is sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the duration of the lease.

      (b) A record is not insufficient merely because it omits a term, including a quantity term, or incorrectly states a term agreed upon, but, if the record contains a quantity term, the contract is not enforceable beyond the quantity of goods shown in the record.

      (c) Any description of the leased goods or of the duration of the lease is sufficient and satisfies subdivision (2) of subsection (a) of this section, whether or not it is specific, if it reasonably identifies what is described.

      (d) An otherwise valid lease contract that does not satisfy the requirements of subsection (a) of this section is nevertheless enforceable:

      (1) If the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale by the lessor to others in the ordinary course of business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement;

      (2) If the party against which enforcement is sought admits in the party's pleading, testimony in court or otherwise under oath that a lease contract was made, but the lease contract is not enforceable under this subdivision beyond the quantity of goods admitted; or

      (3) With respect to goods that have been received and accepted by the lessee.

      (e) The duration of a lease under a lease contract referred to in subsection (d) of this section is:

      (1) If there is a record authenticated by the party against which enforcement is sought or by such party's authorized agent specifying the duration of the lease, the period so specified;

      (2) If the party against which enforcement is sought admits in such party's pleading or testimony, or otherwise in court, the duration of the lease, the period so admitted; or

      (3) A reasonable duration.

      (f) An enforceable lease contract under this section is not unenforceable merely because it is not capable of being performed within one year or any other applicable period after its making.

      (g) The affixing of a seal to a record evidencing a lease contract or offer does not make the record a sealed instrument. The law with respect to sealed instruments does not apply to the lease contract or offer.

      (P.A. 02-131, S. 10.)

      Sec. 42a-2A-202. Parol or extrinsic evidence. (a) Terms on which the confirmatory records of the parties agree, or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to the included terms, may not be contradicted by evidence of any previous agreement or of a contemporaneous oral agreement. However, terms in such a record may be supplemented by evidence of:

      (1) Consistent additional terms, unless the court finds that the record was intended as a complete and exclusive statement of the terms of the agreement; and

      (2) Course of performance, course of dealing or usage of trade.

      (b) Terms in a record may be explained by evidence of course of performance, course of dealing or usage of trade without a preliminary determination by the court that the language used is ambiguous. Terms in a record may also be explained from other sources as determined by the court under applicable law.

      (P.A. 02-131, S. 11.)

      Sec. 42a-2A-203. Formation in general. (a) A lease contract may be made in any manner sufficient to show agreement, including by offer and acceptance, conduct of both parties which recognizes the existence of a lease contract or the interaction of electronic agents.

      (b) If the parties so intend, an agreement sufficient to constitute a lease contract may be found even if the time of its making is undetermined, one or more terms are left open or to be agreed upon, the records of the parties do not otherwise establish a lease contract or one party reserves the right to modify terms.

      (c) Even if one or more terms are left open or to be agreed upon, a lease contract does not fail for indefiniteness if the parties intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy.

      (P.A. 02-131, S. 12.)

      Sec. 42a-2A-204. Firm offers. An offer by a merchant to enter into a lease contract made in an authenticated record that by its terms gives assurance that the offer will be held open is not revocable for lack of consideration during the time stated. If a time is not stated, the offer is irrevocable for a reasonable time not exceeding ninety days. A term of assurance in a record supplied by the offeree is ineffective unless the term is conspicuous.

      (P.A. 02-131, S. 13.)

      Sec. 42a-2A-205. Offer and acceptance. (a) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable under the circumstances.

      (b) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror that is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

      (P.A. 02-131, S. 14.)

(B)

ELECTRONIC CONTRACTS

      Sec. 42a-2A-206. Electronic contracting; formation. Except as otherwise provided in sections 42a-2A-207 to 42a-2A-210, inclusive, the following rules apply:

      (1) A lease contract may be formed by the interaction of electronic agents. If the interaction resulting from the electronic agents' engaging in operations is sufficient to show an agreement under section 42a-2A-203 or 42a-2A-205, a lease contract is formed unless the operations resulted from fraud, electronic mistake or the like.

      (2) A lease contract may be formed by the interaction of an electronic agent and an individual, acting on the individual's own behalf or for another person. A lease contract is formed if the individual takes actions that the individual is free to refuse to take or makes a statement that the individual has reason to know will:

      (A) Cause the electronic agent to complete the transaction or performance; or

      (B) Indicate acceptance of an offer, regardless of other expressions or actions by the individual to which the electronic agent cannot react.

      (3) In an interaction between individuals, if an offer evokes an electronic message in response, a lease contract is formed:

      (A) If the offer is accepted under section 42a-2A-205, when the acceptance is received; or

      (B) If the offer is accepted by an electronic performance, when the performance is received, unless the originating message required acceptance in a different manner.

      (P.A. 02-131, S. 15.)

      Sec. 42a-2A-207. Legal recognition of electronic records and authentications. (a) A record or authentication may not be denied legal effect or enforceability solely because it is in electronic form.

      (b) This article does not require that a record or authentication be generated, stored, sent, received or otherwise processed by electronic means or in electronic form.

      (c) In any transaction, a person may establish reasonable requirements regarding the type of authentication or record acceptable to such person.

      (P.A. 02-131, S. 16.)

      Sec. 42a-2A-208. Attribution. An electronic record is attributed to a person if it was the act of the person or such person's electronic agent, or if the person is otherwise bound by it under the law of agency. The party relying on attribution of an electronic record to another person has the burden of establishing attribution.

      (P.A. 02-131, S. 17.)

      Sec. 42a-2A-209. Contract formation; electronic record. (a) Except as otherwise provided in subsection (b) of this section, an electronic record is effective when received, even if no other person is aware of its receipt.

      (b) If an offer in an electronic message evokes an electronic message in response, a lease contract, if any, is formed as determined in section 42a-2A-206.

      (c) Receipt of an electronic acknowledgment establishes that the message was received but does not establish by itself that the content sent corresponds to the content received.

      (P.A. 02-131, S. 18.)

      Sec. 42a-2A-210. Contract formation; electronic agents. (a) A person that uses an electronic agent for authentication, agreement or performance is bound by the operations of the electronic agent even if no person was aware of or reviewed the electronic agent's actions or the results of the operations.

      (b) Whether a lease contract is formed by the interaction of electronic agents or the interaction of an electronic agent and a person is determined by section 42a-2A-206.

      (P.A. 02-131, S. 19.)

PART 3
CONSTRUCTION OF LEASE CONTRACT

      Sec. 42a-2A-301. Course of performance or practical construction. Section 42a-2A-301 is repealed, effective October 1, 2005.

      (P.A. 02-131, S. 20; P.A. 05-109, S. 56.)

      Sec. 42a-2A-302. Modification, rescission and waiver. (a) An agreement made in good faith modifying a lease contract needs no consideration to be binding.

      (b) An authenticated record containing a term that prohibits modification or rescission except by an authenticated record may not be otherwise modified or rescinded. Such a term in a form or record supplied by a merchant to a nonmerchant must be separately authenticated. A party whose language or conduct is inconsistent with the term is precluded from asserting the term if the assertion is unjust in view of a material change of position in reliance on the language or conduct.

      (c) A condition in a lease contract may be waived by the party for whose benefit it was included. Language or conduct is relevant to show a waiver. A party that has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notice 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.

      (P.A. 02-131, S. 21.)

      Sec. 42a-2A-303. Lessee under finance lease as beneficiary of supply contract. (a) The benefit of the supplier's promises to the lessor under a 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 supply contract and all defenses or claims arising therefrom.

      (b) The extension of the benefit of a supplier's promises and of warranties to the lessee does not modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or impose any duty or liability under the supply contract on the lessee.

      (c) A modification or rescission of a supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor assumes, in addition to the obligations of the lessor to the lessee under the lease contract, the promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.

      (d) In addition to the extension of the benefit of the supplier's promises and of warranties to the lessee under subsection (a) of this section, the lessee retains all rights that the lessee may have against the supplier which arise from a contract between the lessee and the supplier or under other law.

      (P.A. 02-131, S. 22.)

      Sec. 42a-2A-304. Identification. Identification of existing goods as goods to which a lease contract refers may be made at any time and in any manner expressly agreed to by the parties. In the absence of express agreement, identification occurs:

      (1) If the contract is for the lease of already existing and designated goods, when the lease contract is made;

      (2) If the contract is for the lease of future goods other than those described in subdivision (3) of this section, when the goods are shipped, marked or otherwise designated by the lessor as goods to which the lease contract refers, if the lease contract is for a lease of goods that are not existing and identified; or

      (3) If the lease contract is for a lease of unborn young of animals, when the young are conceived.

      (P.A. 02-131, S. 23.)

      Sec. 42a-2A-305. Insurance and proceeds. (a) A lessee obtains an insurable interest in existing goods identified to the lease contract even if the goods are nonconforming and the lessee has an option to return or reject them.

      (b) If a lessee has an insurable interest only by reason of the lessor's identification of the goods, the lessor may substitute other goods for those identified until the lessee's default or insolvency or notice to the lessee that the identification is final.

      (c) The lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee.

      (d) This section does not affect any insurable interest recognized under any other law.

      (e) The parties, by agreement, may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and determine the beneficiary of the proceeds of the insurance.

      (P.A. 02-131, S. 24.)

      Sec. 42a-2A-306. Risk of loss. (a) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee.

      (b) If under the lease contract risk of loss will pass to the lessee but the agreement does not specify when the risk passes, except as otherwise provided in subsection (c) of this section, risk of loss passes to the lessee, regardless of the conformity of the goods to the lease contract, as follows:

      (1) Subject to this subsection, the risk of loss passes to a lessee upon receipt of the goods. If the lessee does not intend to take possession, risk of loss passes to the lessee when the lessee receives control of the goods.

      (2) If the lease contract requires or authorizes a lessor to ship goods by carrier, the following rules apply:

      (A) If the lease contract 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.

      (B) If the lease contract requires delivery at a particular destination and the goods arrive there in the possession of the carrier, the risk of loss passes to the lessee when the goods are so tendered as to enable the lessee to take delivery.

      (3) If 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 to the lessee of the lessee's right to possession of the goods.

      (c) A default under the lease contract by either party affects the risk of loss only in the following cases:

      (1) If the lessee rightfully rejects the goods or justifiably revokes acceptance of the goods, the lessor has the risk of loss from the time that the rejection or revocation is effective.

      (2) If the lessor has tendered nonconforming goods so that the lessee would have the right to reject the goods or revoke acceptance of the goods, the goods are damaged or lost before the lessee effectively rejects or revokes acceptance, and the risk of loss would have otherwise passed to the lessee under subsection (b) or (c) of this section, the lessor has the risk of loss to the extent the nonconformity of the goods caused the damage or loss.

      (3) If conforming goods are identified to the lease contract when the lessee repudiates or is otherwise in breach and the risk of loss has not otherwise passed to the lessee, the lessee has the risk of loss for such goods for a commercially reasonable time after the breach or repudiation.

      (P.A. 02-131, S. 25.)

      Sec. 42a-2A-307. Casualty to identified goods. If the lease contract requires for its performance goods identified when the lease contract is made and the goods suffer casualty without the fault of the lessee, the lessor or the supplier before delivery or if the goods suffer casualty before the risk of loss passes to the lessee under the lease agreement or section 42a-2A-306, the following rules apply:

      (1) If the loss occurs before the goods are delivered to the lessee, the lessor or supplier shall seasonably notify the lessee of the nature and extent of the loss.

      (2) If the loss is total, the lease contract is avoided.

      (3) If the loss is partial or the goods no longer conform to the lease contract, the lessee may nevertheless demand inspection and may treat the lease contract as avoided or, except in a finance lease that is not a consumer lease, accept or retain the goods with due allowance from the rent payable for the balance of the duration of the lease for the nonconformity but without further right against the lessor.

      (P.A. 02-131, S. 26.)

      Sec. 42a-2A-308. Termination; survival of obligations. (a) Except as otherwise provided in subsection (b) of this section, on the termination of a lease contract, all obligations that are still executory on both sides are discharged.

      (b) The following survive termination of a lease contract:

      (1) A right based on a previous default or performance of the lease contract;

      (2) A term limiting the scope, manner, method or location of the exercise of rights in the goods;

      (3) An obligation of confidentiality, nondisclosure or noncompetition;

      (4) A choice of law or forum;

      (5) An obligation to return or dispose of goods or return any unearned part of the rent;

      (6) An obligation to arbitrate or otherwise resolve disputes through alternative dispute resolution procedures;

      (7) A term limiting the time for bringing an action or for providing notice;

      (8) An indemnity term;

      (9) A limitation of remedy or disclaimer of warranty;

      (10) An obligation to provide an accounting and make any payment due under the accounting;

      (11) Other rights, remedies or limitations stated in the agreement as surviving to the extent enforceable under applicable law; and

      (12) Other rights, remedies or limitations if in the circumstances their survival is necessary to achieve the purposes of the parties.

      (P.A. 02-131, S. 27.)

PART 4
EFFECT OF LEASE CONTRACT

      Sec. 42a-2A-401. Enforceability of lease contract. Except as otherwise provided in this title, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods and against creditors.

      (P.A. 02-131, S. 28.)

      Sec. 42a-2A-402. Title to and possession of goods. Except as otherwise provided in this article, the application of this article is not affected by whether the lessor or a third party has title to the goods, by whether the lessor, the lessee, or a third party has possession of the goods or by any statute or rule of law that possession or the absence of possession is fraudulent.

      (P.A. 02-131, S. 29.)

      Sec. 42a-2A-403. Alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights. (a) In this section, "creation of a security interest" includes the sale of a lease contract that is subject to article 9 by reason of subdivision (3) of subsection (a) of section 42a-9-109.

      (b) Except as otherwise provided in subsection (c) of this section and section 42a-9-407, a provision in a lease agreement which (1) 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 (2) makes such a transfer an event of default, gives rise to the rights and remedies provided in subsection (e) of this section. However, a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.

      (c) Language in a consumer lease prohibiting the transfer of an interest of a party under the lease contract or making a transfer an event of default must be specific, be in a record and be conspicuous.

      (d) A term in a lease agreement which (1) 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 (2) makes such a transfer an event of default, is not enforceable. 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 meaning of subsection (e) of this section.

      (e) Subject to subsection (d) of this section and section 42a-9-407:

      (1) If a transfer is made that is an event of default under a lease agreement, the other party to the lease contract has the rights and remedies described in subsection (c) of section 42a-2A-702, unless such party waives the default or otherwise agrees; and

      (2) If subdivision (1) of this subsection does not apply and a transfer is made that (A) is prohibited under a lease agreement, or (B) 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 or unless 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.

      (f) 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 such duties. The promise is enforceable by either the transferor or the other party to the lease contract.

      (g) 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 liability for default.

      (P.A. 02-131, S. 30.)

      Sec. 42a-2A-404. Subsequent lease of goods by lessor. (a) Subject to section 42a-2A-403, 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 that the lessor had or had power to transfer and, except as otherwise provided in subsection (b) of this section and subsection (d) of section 42a-2A-720, takes subject to the existing lease contract.

      (b) A lessor with voidable rights or voidable title acquired in a purchase of goods from a transferor has power to transfer a good leasehold interest to a good faith subsequent lessee for value. Under this subsection, voidable rights or voidable title is acquired when the goods have been delivered under a transaction of purchase even if:

      (1) The transferor was deceived as to the identity of the lessor;

      (2) The delivery was in exchange for a check later dishonored;

      (3) It was agreed that the transaction was to be a cash sale; or

      (4) The delivery was procured through fraud punishable under criminal law.

      (c) A subsequent lessee in the ordinary course of business from a lessor that is a merchant dealing in goods of that kind to which the goods were entrusted by the existing lessee of such lessor before the interest of the subsequent lessee became enforceable against such lessor obtains, to the extent of the leasehold interest transferred, all rights to the goods of such lessor and the existing lessee, and takes free of the existing lease contract.

      (d) 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.

      (P.A. 02-131, S. 31.)

      Sec. 42a-2A-405. Sale or sublease of goods by lessee. (a) Subject to section 42a-2A-403, 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 otherwise provided in subsection (b) of this section and in subsection (e) of section 42a-2A-727, takes subject to the existing lease contract.

      (b) A lessee with a voidable leasehold interest acquired in a lease transaction from a lessor has power to transfer a good leasehold interest to a good faith subsequent lessee for value to which the goods have been delivered. Under this subsection, a voidable leasehold interest is acquired when the goods have been delivered under the lease contract even if:

      (1) The lessor was deceived as to the identity of the lessee;

      (2) The delivery was in exchange for a check later dishonored; or

      (3) The delivery was procured through fraud punishable under criminal law.

      (c) A buyer in the ordinary course of business or a sublessee in the ordinary course of business from a lessee that is a merchant dealing in goods of that kind to which the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the rights of the lessor and lessee to the goods and takes free of the existing lease contract.

      (d) 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.

      (P.A. 02-131, S. 32.)

      Sec. 42a-2A-406. Priority of certain liens arising by operation of law. 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 such goods in the possession of such person given by statute or rule of law for such services or materials has priority over any interest of the lessor or lessee under the lease contract or this article, unless the lien is created by statute and the statute provides otherwise or the lien is created by rule of law and the rule of law provides otherwise.

      (P.A. 02-131, S. 33.)

      Sec. 42a-2A-407. Priority of liens arising by attachment or levy on goods. (a) Except as otherwise provided in section 42a-2A-406, a creditor of a lessee takes subject to the lease contract.

      (b) Except as otherwise provided in subsection (c) of this section and sections 42a-2A-406 and 42a-2A-408, 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.

      (c) Except as otherwise provided in sections 42a-9-317, 42a-9-321 and 42a-9-323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.

      (P.A. 02-131, S. 34.)

      Sec. 42a-2A-408. Special rights of creditors. (a) Except as otherwise provided in subsections (b) and (c) of this section, the rights of creditors of the lessor with respect to goods identified to a lease contract and retained by the lessor are subject to the lessee's rights under section 42a-2A-708, subsection (d) of section 42a-2A-724 and section 42a-2A-737 if the lessee's rights vest before a creditor's claim in rem attaches to the goods.

      (b) A creditor of a lessor may treat a lease or an identification of goods to a lease contract as void if, as against the creditor, a retention of possession or identification by the lessor is fraudulent under any law of the state in which the goods are situated. However, the retention of possession in good faith and current course of trade by a merchant lessor for a commercially reasonable time after a lease or identification is not fraudulent.

      (c) Except as otherwise provided in subsection (a) of this section and sections 42a-2A-404 and 42a-2A-405, this article does not impair the rights of creditors of the lessor if identification to the lease contract or delivery is not made in current course of trade but is made in satisfaction of or as security for a preexisting claim for money, security or the like under circumstances that under any law of the state where the goods are situated, apart from this article, would constitute a fraudulent transfer or a voidable preference.

      (d) 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, a retention of possession by the seller is fraudulent under any law of the state where the goods are situated. However, it is not fraudulent for a seller to retain possession of the goods pursuant to a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods if the buyer bought for value and in good faith.

      (P.A. 02-131, S. 35.)

      Sec. 42a-2A-409. Rights of lessor and lessee when goods become fixures. (a) In this section:

      (1) "Construction mortgage" means a mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates.

      (2) "Encumbrance" includes a real property mortgage, other lien on real estate and any other right in real property which is not an ownership interest.

      (3) "Fixture filing" means a filing, in the office where a mortgage on the real property would be filed or recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of subsections (a) and (b) of section 42a-9-502.

      (4) "Fixtures" means goods that have become so related to particular real property that an interest in them arises under real property law.

      (5) "Purchase money lease" means a lease in which the lessee does not have possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable.

      (b) A lease under this article may be of goods that are fixtures or may continue in goods that become fixtures, but there may be no lease under this article of ordinary building materials incorporated into an improvement on land.

      (c) This article does not prevent creation of a lease of fixtures under real property law.

      (d) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the lessee has an interest of record in or is in possession of the real property and:

      (1) Except as otherwise provided in subsection (f) of this section, the lease is a purchase money lease, the interest of the encumbrancer or owner arises before the goods become fixtures and the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within twenty days thereafter; or

      (2) The interest of the lessor is perfected by a fixture filing before the interest of the encumbrancer or owner is of record and the lessor's interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner.

      (e) 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 property if:

      (1) 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 property 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;

      (2) The conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the lease contract is enforceable;

      (3) The encumbrancer or owner has, in an authenticated record, consented to the lease or has disclaimed an interest in the goods as fixtures; or

      (4) The lessee has a right to remove the goods as against the encumbrancer or owner, but if the lessee's right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.

      (f) Except as otherwise provided in subsections (d) and (e) of this section, 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 property under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.

      (g) In cases not covered by subsections (c) to (f), inclusive, of this section, 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 property which is not the lessee is determined by the priority rules governing conflicting interests in real property.

      (h) If the interest of a lessor of fixtures, including the lessor's residual interest, has priority over all owners and encumbrancers of the real property, the lessor or the lessee may on default, expiration, termination or cancellation of the lease contract, but subject to the lease agreement and this article, or if necessary to enforce other rights of the lessor or lessee under this article, remove the goods from the real property, free and clear of all conflicting interests of all owners and encumbrancers of the real property. However, the lessor or lessee shall reimburse any encumbrancer or owner of the real property which is not the lessee and which has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real property, 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.

      (i) Even if 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 pertinent provisions of article 9.

      (P.A. 02-131, S. 36.)

      Sec. 42a-2A-410. Lessor's and lessee's rights when goods become accessions. (a) In this section, "accessions" means goods that are installed in or affixed to other goods.

      (b) Except as otherwise provided in subsection (c) of this section, the interest of a lessor or a lessee under a lease contract entered into before the goods become accessions is superior to all interests in the whole and valid against all persons subsequently acquiring interests in the whole, but is invalid against any person with an interest in the whole that has not in a record consented to the lease or disclaimed an interest in the goods as part of the whole.

      (c) The interest of a lessor or a lessee under a lease contract described in subsection (b) of this section is subordinate to the interest of:

      (1) 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

      (2) 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.

      (d) If, under this section, a lessor or lessee holds an interest in accessions which has priority over the claims of all persons that have interests in the whole, the lessor or lessee on default, expiration, termination or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this article, or if necessary to enforce other rights under this article, may remove the goods from the whole. However, the lessor or lessee shall reimburse any holder of an interest in the whole which is not the lessee and which 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 the goods until the party seeking removal gives adequate security for the performance of this obligation.

      (P.A. 02-131, S. 37.)

      Sec. 42a-2A-411. Priority subject to subordination. Nothing in this article prevents subordination by agreement by any person entitled to priority.

      (P.A. 02-131, S. 38.)

PART 5
WARRANTIES

      Sec. 42a-2A-501. Definitions. In this part:

      (1) "Damage" means all loss resulting from a breach of warranty, including incidental and consequential damages.

      (2) "Goods" includes a component incorporated into other goods.

      (3) "Immediate lessee" means a lessee that has a contract with the lessor.

      (4) "Remote lessee" means a lessee from a lessor other than the lessor or seller against which a claim under this part is asserted.

      (5) "Representation" means a description of the goods, an affirmation of fact or promise about the quality or performance of the goods to be delivered, or a sample or model of the goods.

      (P.A. 02-131, S. 39.)

      Sec. 42a-2A-502. Warranty against interference and against infringement; lessee's obligation against infringement. (a) Except in a finance lease, a lessor in a lease contract warrants that, except for claims by any person by way of infringement or the like, for the duration of the lease no person holds:

      (1) A claim to or interest in the goods which will interfere with the lessee's enjoyment of the lessee's leasehold interest; or

      (2) A colorable claim to or interest in the goods which will unreasonably expose the lessee to litigation.

      (b) A finance lessor warrants that, except for claims by way of infringement or the like, for the duration of the lease no person holds:

      (1) A claim or interest in the goods that arose from an act or omission of the lessor which will interfere with the lessee's enjoyment of the lessee's leasehold interest; or

      (2) A colorable claim to or interest in the goods that arose from an act or omission of the lessor which will unreasonably expose the lessee to litigation.

      (c) Except in a finance lease, a lessor that is a merchant regularly dealing in goods of the kind warrants that the goods will be delivered free of the rightful claim of a third party by way of infringement or the like. However, a lessee that furnishes specifications to the lessor holds the lessor harmless against any claim of infringement or the like that arises out of compliance with the specifications.

      (d) A warranty under subsections (a) to (c), inclusive, of this section may be disclaimed or modified only by specific language or by circumstances that give the lessee reason to know that the lessor purports to transfer only such right as the lessor or a third party may have.

      (P.A. 02-131, S. 40.)

      Sec. 42a-2A-503. Express warranties to lessee. (a) Any representation made by the lessor to the lessee, including a representation made in any medium of communication to the public, such as advertising, 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 representation or, with respect to a sample or model, that the whole of the goods will conform to the sample or model.

      (b) To create an express warranty, it is not necessary that the lessor use formal words such as "warranty" or "guaranty" or have a specific intention to make a warranty. However, a representation merely of the value of the goods or an affirmation purporting to be merely the lessor's opinion or commendation of the goods does not create an express warranty under subsection (a) of this section.

      (c) A representation, including a representation made in any medium of communication to the public, such as advertising, which was made to the lessee and which relates to the goods becomes part of the basis of the bargain unless:

      (1) The lessee knew that the representation was not true;

      (2) A reasonable person in the position of the lessee would not believe that the representation was part of the agreement; or

      (3) In the case of a representation made in a medium for communication to the public, including advertising, the lessee did not know of the representation at the time of the agreement.

      (d) A right of action for breach of warranty under this section accrues as provided under subsection (c) of section 42a-2A-715.

      (P.A. 02-131, S. 41.)

      Sec. 42a-2A-504. Implied warranty of merchantability. (a) Except in a finance lease and subject to sections 42a-2A-506 and 42a-2A-507, a warranty that the goods are merchantable is implied in a contract for their lease if the lessor is a merchant with respect to goods of that kind.

      (b) Goods, to be merchantable, must:

      (1) Pass without objection in the trade under the contract description;

      (2) In the case of fungible goods, be of fair, average quality within the description;

      (3) Be fit for the ordinary purposes for which goods of that description are used;

      (4) Run, within the variation permitted by the lease agreement, of even kind, quality and quantity within each unit and among all units involved;

      (5) Be adequately contained, packaged and labeled as the lease agreement or circumstances may require; and

      (6) Conform to any representations made on the container or label.

      (c) Subject to section 42a-2A-506, other implied warranties may arise from course of dealing or usage of trade.

      (P.A. 02-131, S. 42.)

      Sec. 42a-2A-505. Implied warranty of fitness for particular purpose. Except in a finance lease and subject to section 42a-2A-506, if a lessor at the time of contracting has reason to know 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 an implied warranty that the goods are fit for such purpose.

      (P.A. 02-131, S. 43.)

      Sec. 42a-2A-506. Disclaimer or modification of warranty. (a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to disclaim or modify an express warranty must be construed wherever reasonable as consistent with each other. However, subject to section 42a-2A-202, words or conduct disclaiming or modifying an express warranty are ineffective to the extent that such construction is unreasonable.

      (b) Subject to subsection (c) of this section, to disclaim or modify an implied warranty of merchantability or fitness, or any part of either implied warranty, the following rules apply:

      (1) The language must be in a record and be conspicuous.

      (2) In other than a consumer lease contract, the language is sufficient if:

      (A) In the case of an implied warranty of merchantability, it mentions merchantability; and

      (B) In the case of an implied warranty of fitness, the language states, for example, that "There are no warranties which extend beyond the description on the face hereof".

      (c) Unless the circumstances indicate otherwise, all implied warranties are disclaimed by expressions such as "as is" or "with all faults", or similar language, or conduct that in common understanding makes it clear to the lessee that the lessor assumes no responsibility for the quality or fitness of the goods. In a consumer contract, the requirements of this subsection must be satisfied by conspicuous language in a record.

      (d) An implied warranty may also be disclaimed or modified by course of performance, course of dealing or usage of trade.

      (e) If a lessee before entering into the contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods or the sample or model, there is no implied warranty with regard to defects which a reasonable examination ought in the circumstances to have revealed to the lessee.

      (f) Remedies for breach of warranty may be limited in accordance with this article with respect to liquidation or limitation of damages and contractual modification of remedy.

      (g) Subsections (b) to (f), inclusive, of this section shall not apply to leases of new or used consumer goods, except for those goods clearly marked "irregular", "factory seconds" or "damaged". Any language, oral or written, used by a lessor or manufacturer of consumer goods that attempts to exclude or modify any implied warranties of merchantability and fitness for a particular purpose, or to exclude or modify the consumer's remedies for breach of such warranties, shall be unenforceable.

      (P.A. 02-131, S. 44.)

      Sec. 42a-2A-507. Cumulation and conflict of warranties. Warranties, whether express or implied, must be construed as consistent with each other and as cumulative. However, if such construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining such intention, the following rules apply:

      (1) Exact or technical specifications prevail over an inconsistent sample or model or general language of description.

      (2) A sample from an existing bulk or a model prevails over inconsistent general language of description.

      (3) Except in a consumer lease, an express warranty prevails over inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

      (P.A. 02-131, S. 45.)

      Sec. 42a-2A-508. Extension of express or implied warranty. (a) In a consumer lease contract, a lessor's express or implied warranty made to an immediate consumer lessee extends to any member of the family or household or an invitee to the household of the immediate consumer lessee or a transferee from the immediate consumer lessee who may reasonably be expected to use or be affected by the goods and who suffers damage other than injury to the person resulting from a breach of warranty. The lessor may not disclaim, modify or limit damages arising under this section.

      (b) A lessor's warranty, whether express or implied, extends to any individual who may reasonably be expected to use, consume or be affected by the goods and who is injured in person by breach of the warranty. A lessor may not disclaim or limit the operation of this subsection.

      (c) Nothing in this article diminishes the rights and remedies of any third party beneficiary or assignee under the law of contracts or of persons to which goods are transferred by operation of law or displaces any other law that extends a warranty to or for the benefit of any other person.

      (d) The scope of any warranty extended under this section to other than the immediate lessee and the remedies for breach of such warranty may be limited by the enforceable terms of the contract between the lessor and the immediate lessee. To the extent not limited:

      (1) The scope of the warranty is determined by sections 42a-2A-402, 42a-2A-403, 42a-2A-404 and 42a-2A-405; and

      (2) The remedies for breach of warranty for other than the immediate lessee are determined by the terms of the contract between the lessor and the lessee and by this article.

      (e) A right of action for breach of warranty under this section accrues under section 42a-2A-705.

      (P.A. 02-131, S. 46.)

PART 6
PERFORMANCE OF LEASE CONTRACT:
REPUDIATION, SUBSTITUTION AND EXCUSE

      Sec. 42a-2A-601. Right to adequate assurance of performance. (a) A lease contract imposes an obligation on each party not to impair the other's expectation of receiving due performance. If reasonable grounds for insecurity arise with respect to the performance of either party, the other party may demand in a record adequate assurance of due performance and, until that assurance is received, if commercially reasonable, may suspend any performance for which the agreed return has not already been received.

      (b) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered is determined according to commercial standards.

      (c) Acceptance of improper delivery or payment does not prejudice an aggrieved party's right to demand adequate assurance of future performance.

      (d) After receipt of a demand under subsection (a) of this section, failure to provide within a reasonable time, not exceeding thirty days, assurance of due performance which is adequate under the circumstances of the particular case is a repudiation of the contract under section 42a-2A-602.

      (P.A. 02-131, S. 47.)

      Sec. 42a-2A-602. Anticipatory repudiation. (a) If either party to a lease contract repudiates a performance not yet due and the loss of performance will substantially impair the value of the lease contract to the other, the aggrieved party may:

      (1) Await performance by the repudiating party for a commercially reasonable time, or resort to any remedy for default, even if the aggrieved party has urged the repudiating party to retract the repudiation or has notified the repudiating party that the aggrieved party would await the agreed performance; and

      (2) In either case, suspend the aggrieved party's own performance or, if a lessor, proceed in accordance with section 42a-2A-718.

      (b) Repudiation includes language that one party will not or cannot make a performance still due under the contract or voluntary, affirmative conduct that reasonably appears to the other party to make a future performance impossible.

      (P.A. 02-131, S. 48.)

      Sec. 42a-2A-603. Retraction of anticipatory repudiation. (a) A repudiating party may retract a repudiation until the repudiating party's next performance is due unless the aggrieved party, after the repudiation, has canceled the lease contract, materially changed the aggrieved party's position or otherwise indicated that the repudiation is considered to be final.

      (b) A retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform the contract. However, a retraction must include any assurance justifiably demanded under section 42a-2A-601.

      (c) Retraction reinstates a repudiating party's rights under the lease contract with due excuse and allowance to the aggrieved party for any delay caused by the repudiation.

      (P.A. 02-131, S. 49.)

      Sec. 42a-2A-604. Substituted performance. (a) If, without the fault of the lessee, lessor or supplier, agreed berthing, loading or unloading facilities or an agreed type of carrier becomes unavailable, or an agreed manner of delivery otherwise becomes commercially impracticable, a party may claim excuse under section 42a-2A-605 unless a commercially reasonable substitute is