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TABLE OF CONTENTS

 

TITLE 13

COMMERCIAL CODE

 

DIVISION 1.  GENERAL PROVISIONS

 

Chapter 11.  General Provisions

 

§ 1101.  Short titles.

§ 1102.  Scope of division.

§ 1103.  Construction of title to promote its purposes and policies; applicability of supplemental principles of law.

§ 1104.  Construction against implied repeal.

§ 1105.  (Reserved).

§ 1106.  Use of singular and plural; gender (Reserved).

§ 1107.  Section captions.

§ 1108.  Relation to Electronic Signatures in Global and National Commerce Act.

§ 1109.  Construction.

 

Chapter 12.  General Definitions and Principles of Interpretation

 

§ 1201.  General definitions.

§ 1202.  Notice; knowledge.

§ 1203.  Lease distinguished from security interest.

§ 1204.  Value.

§ 1205.  Reasonable time; seasonableness.

§ 1206.  Presumptions.

 

Chapter 13.  Territorial Applicability and General Rules

 

§ 1301.  Territorial applicability; parties' power to choose

applicable law.

§ 1302.  Variation by agreement.

§ 1303.  Course of performance, course of dealing and usage of trade.

§ 1304.  Obligation of good faith.

§ 1305.  Remedies to be liberally administered.

§ 1306.  Waiver or renunciation of claim or right after breach.

§ 1307.  Prima facie evidence by third-party documents.

§ 1308.  Performance or acceptance under reservation of rights.

§ 1309.  Option to accelerate at will.

§ 1310.  Subordinated obligations.

 

DIVISION 2.  SALES

 

Chapter 21.  Short Title, General Construction and Subject Matter

 

§ 2101.  Short title of division.

§ 2102.  Scope; certain security and other transactions excluded from division.

§ 2103.  Definitions and index of definitions.

§ 2104.  Definitions: "merchant"; "between merchants"; "financing agency."

§ 2105.  Definitions: transferability; "goods"; "future" goods; "lot"; "commercial unit."

§ 2106.  Definitions: "contract"; "agreement"; "contract for sale"; "sale"; "present sale"; "conforming" to contract; "termination"; "cancellation."

§ 2107.  Goods to be severed from realty: recording.

 

Chapter 22.  Form, Formation and Readjustment of Contract

 

§ 2201.  Formal requirements; statute of frauds.

§ 2202.  Final written expression: parol or extrinsic evidence.

§ 2203.  Seals inoperative.

§ 2204.  Formation in general.

§ 2205.  Firm offers.

§ 2206.  Offer and acceptance in formation of contract.

§ 2207.  Additional terms in acceptance or confirmation.

§ 2208.  Course of performance or practical construction (Deleted by amendment).

§ 2209.  Modification, rescission and waiver.

§ 2210.  Delegation of performance; assignment of rights.

 

Chapter 23.  General Obligation and Construction of Contract

 

§ 2301.  General obligations of parties.

§ 2302.  Unconscionable contract or clause.

§ 2303.  Allocation or division of risks.

§ 2304.  Price payable in money, goods, realty or otherwise.

§ 2305.  Open price term.

§ 2306.  Output, requirements and exclusive dealings.

§ 2307.  Delivery in single lot or several lots.

§ 2308.  Absence of specified place for delivery.

§ 2309.  Absence of specific time provisions; notice of termination.

§ 2310.  Open time for payment or running of credit; authority to ship under reservation.

§ 2311.  Options and cooperation respecting performance.

§ 2312.  Warranty of title and against infringement; obligation of buyer against infringement.

§ 2313.  Express warranties by affirmation, promise, description or sample.

§ 2314.  Implied warranty: merchantability; usage of trade.

§ 2315.  Implied warranty: fitness for particular purpose.

§ 2316.  Exclusion or modification of warranties.

§ 2317.  Cumulation and conflict of warranties express or implied.

§ 2318.  Third party beneficiaries of warranties express or implied.

§ 2319.  F.O.B. and F.A.S. terms.

§ 2320.  C.I.F. and C. & F. terms.

§ 2321.  C.I.F. or C. & F.: "net landed weights"; "payment on arrival"; warranty of condition on arrival.

§ 2322.  Delivery "ex-ship."

§ 2323.  Form of bill of lading required in overseas shipment; "overseas."

§ 2324.  "No arrival, no sale" term.

§ 2325.  "Letter of credit" term; "confirmed credit."

§ 2326.  Sale on approval and sale or return; rights of creditors.

§ 2327.  Special incidents of sale on approval and sale or return.

§ 2328.  Sale by auction.

 

Chapter 24.  Title, Creditors and Good Faith Purchasers

 

§ 2401.  Passing of title; reservation for security; limited application of section.

§ 2402.  Rights of creditors of seller against sold goods.

§ 2403.  Power to transfer; good faith purchase of goods; "entrusting."

 

Chapter 25.  Performance

 

§ 2501.  Insurable interest in goods; manner of identification of goods.

§ 2502.  Right of buyer to goods on repudiation, failure to deliver or insolvency of seller.

§ 2503.  Manner of tender of delivery by seller.

§ 2504.  Shipment by seller.

§ 2505.  Shipment by seller under reservation.

§ 2506.  Rights of financing agency.

§ 2507.  Effect of tender by seller; delivery on condition.

§ 2508.  Cure by seller of improper tender or delivery; replacement.

§ 2509.  Risk of loss in absence of breach.

§ 2510.  Effect of breach on risk of loss.

§ 2511.  Tender of payment by buyer; payment by check.

§ 2512.  Payment by buyer before inspection.

§ 2513.  Right of buyer to inspection of goods.

§ 2514.  When documents deliverable on acceptance; when on payment.

§ 2515.  Preserving evidence of goods in dispute.

 

Chapter 26.  Breach, Repudiation and Excuse

 

§ 2601.  Rights of buyer on improper delivery.

§ 2602.  Manner and effect of rightful rejection.

§ 2603.  Duties of merchant buyer as to rightfully rejected goods.

§ 2604.  Options of buyer as to salvage of rightfully rejected goods.

§ 2605.  Waiver of objections of buyer by failure to particularize.

§ 2606.  What constitutes acceptance of goods.

§ 2607.  Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.

§ 2608.  Revocation of acceptance in whole or in part.

§ 2609.  Right to adequate assurance of performance.

§ 2610.  Anticipatory repudiation.

§ 2611.  Retraction of anticipatory repudiation.

§ 2612.  "Installment contract"; breach.

§ 2613.  Casualty to identified goods.

§ 2614.  Substituted performance.

§ 2615.  Excuse by failure of presupposed conditions.

§ 2616.  Procedure on notice claiming excuse.

 

Chapter 27.  Remedies

 

§ 2701.  Remedies for breach of collateral contracts not impaired.

§ 2702.  Remedies of seller on discovery of insolvency of buyer.

§ 2703.  Remedies of seller in general.

§ 2704.  Right of seller to identify goods to contract notwithstanding breach or to salvage unfinished goods.

§ 2705.  Stoppage by seller of delivery in transit or otherwise.

§ 2706.  Resale by seller including contract for resale.

§ 2707.  "Person in the position of a seller."

§ 2708.  Damages of seller for nonacceptance or repudiation.

§ 2709.  Action for the price.

§ 2710.  Incidental damages of seller.

§ 2711.  Remedies of buyer in general; security interest of buyer in rejected goods.

§ 2712.  "Cover"; procurement by buyer of substitute goods.

§ 2713.  Damages of buyer for nondelivery or repudiation.

§ 2714.  Damages of buyer for breach in regard to accepted goods.

§ 2715.  Incidental and consequential damages of buyer.

§ 2716.  Right of buyer to specific performance or replevin.

§ 2717.  Deduction of damages from price.

§ 2718.  Liquidation or limitation of damages; deposits.

§ 2719.  Contractual modification or limitation of remedy.

§ 2720.  Effect of "cancellation" or "rescission" on claims for antecedent breach.

§ 2721.  Remedies for fraud.

§ 2722.  Who can sue third parties for injury to goods.

§ 2723.  Proof of market price: time and place.

§ 2724.  Admissibility of market quotations.

§ 2725.  Statute of limitations in contracts for sale.

 

DIVISION 2A.  LEASES

 

Chapter 2A1.  General Provisions

 

§ 2A101.  Short title of division.

§ 2A102.  Scope.

§ 2A103.  Definitions and index of definitions.

§ 2A104.  Leases subject to other law.

§ 2A105.  Territorial application of division to goods covered by certificate of title.

§ 2A106.  Limitation on power of parties to consumer lease to choose applicable law and judicial forum.

§ 2A107.  Waiver or renunciation of claim or right after default.

§ 2A108.  Unconscionability.

§ 2A109.  Option to accelerate at will.

 

Chapter 2A2.  Formation and Construction of Lease Contract

 

§ 2A201.  Statute of frauds.

§ 2A202.  Final written expression: parol or extrinsic evidence.

§ 2A203.  Seals inoperative.

§ 2A204.  Formation in general.

§ 2A205.  Firm offers.

§ 2A206.  Offer and acceptance in formation of lease contract.

§ 2A207.  Course of performance or practical construction (Deleted by amendment).

§ 2A208.  Modification, rescission and waiver.

§ 2A209.  Lessee under finance lease as beneficiary of supply contract.

§ 2A210.  Express warranties.

§ 2A211.  Warranties against interference and against infringement; lessee's obligation against infringement.

§ 2A212.  Implied warranty of merchantability.

§ 2A213.  Implied warranty of fitness for particular purpose.

§ 2A214.  Exclusion or modification of warranties.

§ 2A215.  Cumulation and conflict of warranties express or implied.

§ 2A216.  Third party beneficiaries of express and implied warranties.

§ 2A217.  Identification.

§ 2A218.  Insurance and proceeds.

§ 2A219.  Risk of loss.

§ 2A220.  Effect of default on risk of loss.

§ 2A221.  Casualty to identified goods.

 

Chapter 2A3.  Effect of Lease Contract

 

§ 2A301.  Enforceability of lease contract.

§ 2A302.  Title to and possession of goods.

§ 2A303.  Alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights.

§ 2A304.  Subsequent lease of goods by lessor.

§ 2A305.  Sale or sublease of goods by lessee.

§ 2A306.  Priority of certain liens arising by operation of law.

§ 2A307.  Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

§ 2A308.  Special rights of creditors.

§ 2A309.  Lessor's and lessee's rights when goods become fixtures.

§ 2A310.  Lessor's and lessee's rights when goods become accessions.

§ 2A311.  Priority subject to subordination.

 

Chapter 2A4.  Performance of Lease Contract: Repudiated, Substituted and Excused

 

§ 2A401.  Insecurity: adequate assurance of performance.

§ 2A402.  Anticipatory repudiation.

§ 2A403.  Retraction of anticipatory repudiation.

§ 2A404.  Substituted performance.

§ 2A405.  Excused performance.

§ 2A406.  Procedure on excused performance.

§ 2A407.  Irrevocable promises: finance leases.

 

Chapter 2A5.  Default

 

Subchapter A.  In General

 

§ 2A501.  Default: procedure.

§ 2A502.  Notice after default.

§ 2A503.  Modification or impairment of rights and remedies.

§ 2A504.  Liquidation of damages.

§ 2A505.  Cancellation and termination and effect of cancellation, termination, rescission or fraud on rights and remedies.

§ 2A506.  Statute of limitations.

§ 2A507.  Proof of market rent: time and place.

 

Subchapter B.  Default by Lessor

 

§ 2A508.  Lessee's remedies.

§ 2A509.  Lessee's rights on improper delivery; rightful rejection.

§ 2A510.  Installment lease contracts: rejection and default.

§ 2A511.  Merchant lessee's duties as to rightfully rejected goods.

§ 2A512.  Lessee's duties as to rightfully rejected goods.

§ 2A513.  Cure by lessor of improper tender or delivery; replacement.

§ 2A514.  Waiver of lessee's objections.

§ 2A515.  Acceptance of goods.

§ 2A516.  Effect of acceptance of goods; notice of default; burden of establishing default after acceptance; notice of claim or litigation to person answerable over.

§ 2A517.  Revocation of acceptance of goods.

§ 2A518.  Cover; substitute goods.

§ 2A519.  Lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods.

§ 2A520.  Lessee's incidental and consequential damages.

§ 2A521.  Lessee's right to specific performance or replevin.

§ 2A522.  Lessee's right to goods on lessor's insolvency.

 

Subchapter C.  Default by Lessee

 

§ 2A523.  Lessor's remedies.

§ 2A524.  Lessor's right to identify goods to lease contract.

§ 2A525.  Lessor's right to possession of goods.

§ 2A526.  Lessor's stoppage of delivery in transit or otherwise.

§ 2A527.  Lessor's rights to dispose of goods.

§ 2A528.  Lessor's damages for nonacceptance, failure to pay, repudiation or other default.

§ 2A529.  Lessor's action for the rent.

§ 2A530.  Lessor's incidental damages.

§ 2A531.  Standing to sue third parties for injury to goods.

§ 2A532.  Lessor's rights to residual interest.

 

DIVISION 3.  NEGOTIABLE INSTRUMENTS

 

Chapter 31.  General Provisions and Definitions

 

§ 3101.  Short title of division.

§ 3102.  Subject matter.

§ 3103.  Definitions and index of definitions.

§ 3104.  Negotiable instrument.

§ 3105.  Issue of instrument.

§ 3106.  Unconditional promise or order.

§ 3107.  Instrument payable in foreign money.

§ 3108.  Payable on demand or at definite time.

§ 3109.  Payable to bearer or to order.

§ 3110.  Identification of person to whom instrument is payable.

§ 3111.  Place of payment.

§ 3112.  Interest.

§ 3113.  Date of instrument.

§ 3114.  Contradictory terms of instrument.

§ 3115.  Incomplete instrument.

§ 3116.  Joint and several liability; contribution.

§ 3117.  Other agreements affecting instrument.

§ 3118.  Statute of limitations.

§ 3119.  Notice of right to defend action.

 

Chapter 32.  Negotiation, Transfer and Indorsement

 

§ 3201.  Negotiation.

§ 3202.  Negotiation subject to rescission.

§ 3203.  Transfer of instrument; rights acquired by transfer.

§ 3204.  Indorsement.

§ 3205.  Special indorsement; blank endorsement; anomalous endorsement.

§ 3206.  Restrictive indorsement.

§ 3207.  Reacquisition.

 

Chapter 33.  Enforcement of Instruments

 

§ 3301.  Person entitled to enforce instrument.

§ 3302.  Holder in due course.

§ 3303.  Value and consideration.

§ 3304.  Overdue instrument.

§ 3305.  Defenses and claims in recoupment.

§ 3306.  Claims to an instrument.

§ 3307.  Notice of breach of fiduciary duty.

§ 3308.  Proof of signatures and status as holder in due course.

§ 3309.  Enforcement of lost, destroyed or stolen instrument.

§ 3310.  Effect of instrument on obligation for which taken.

§ 3311.  Accord and satisfaction by use of instrument.

§ 3312.  Lost, destroyed or stolen cashier's check, teller's check or certified check.

 

Chapter 34.  Liability of Parties

 

§ 3401.  Signature.

§ 3402.  Signature by representative.

§ 3403.  Unauthorized signature.

§ 3404.  Impostors; fictitious payees.

§ 3405.  Employer's responsibility for fraudulent indorsement by employee.

§ 3406.  Negligence contributing to forged signature or alteration of instrument.

§ 3407.  Alteration.

§ 3408.  Drawee not liable on unaccepted draft.

§ 3409.  Acceptance of draft; certified check.

§ 3410.  Acceptance varying draft.

§ 3411.  Refusal to pay cashier's checks, teller's checks and certified checks.

§ 3412.  Obligation of issuer of note or cashier's check.

§ 3413.  Obligation of acceptor.

§ 3414.  Obligation of drawer.

§ 3415.  Obligation of indorser.

§ 3416.  Transfer warranties.

§ 3417.  Presentment warranties.

§ 3418.  Payment or acceptance by mistake.

§ 3419.  Instruments signed for accommodation.

§ 3420.  Conversion of instrument.

 

Chapter 35.  Dishonor

 

§ 3501.  Presentment.

§ 3502.  Dishonor.

§ 3503.  Notice of dishonor.

§ 3504.  Excused presentment and notice of dishonor.

§ 3505.  Evidence of dishonor.

 

Chapter 36.  Discharge and Payment

 

§ 3601.  Discharge and effect of discharge.

§ 3602.  Payment.

§ 3603.  Tender of payment.

§ 3604.  Discharge by cancellation or renunciation.

§ 3605.  Discharge of indorsers and accommodation parties.

 

DIVISION 4.  BANK DEPOSITS AND COLLECTIONS

 

Chapter 41.  General Provisions and Definitions

 

§ 4101.  Short title of division.

§ 4102.  Applicability.

§ 4103.  Variation by agreement; measure of damages; action constituting ordinary care.

§ 4104.  Definitions and index of definitions.

§ 4105.  "Bank"; "depositary bank"; "intermediary bank"; "collecting bank"; "payor bank"; "presenting bank."

§ 4106.  Payable through or payable at bank; collecting bank.

§ 4107.  Separate office of a bank.

§ 4108.  Time of receipt of items.

§ 4109.  Delays.

§ 4110.  Electronic presentment.

§ 4111.  Statute of limitations.

 

Chapter 42.  Collection of Items: Depositary and Collecting Banks

 

§ 4201.  Status of collecting bank as agent and provisional status of credits; applicability of division; item indorsed "pay any bank."

§ 4202.  Responsibility for collection or return; when action timely.

§ 4203.  Effect of instructions.

§ 4204.  Methods of sending and presenting; sending directly to payor bank.

§ 4205.  Depositary bank holder of unindorsed item.

§ 4206.  Transfer between banks.

§ 4207.  Transfer warranties.

§ 4208.  Presentment warranties.

§ 4209.  Encoding and retention warranties.

§ 4210.  Security interest of collecting bank in items, accompanying documents and proceeds.

§ 4211.  When bank gives value for purposes of holder in due course.

§ 4212.  Presentment by notice of item not payable by, through or at a bank; liability of drawer or indorser.

§ 4213.  Medium and time of settlement by bank.

§ 4214.  Right of charge-back or refund; liability of collecting bank; return of item.

§ 4215.  Final payment of item by payor bank; when provisional debits and credits become final; when certain credits become available for withdrawal.

§ 4216.  Insolvency and preference.

 

Chapter 43.  Collection of Items: Payor Banks

 

§ 4301.  Deferred posting; recovery of payment by return of items; time of dishonor; return of items by payor bank.

§ 4302.  Responsibility of payor bank for late return of item.

§ 4303.  When items subject to notice, stop-payment order, legal process or set-off; order in which items may be charged or certified.

 

Chapter 44.  Relationship Between Payor Bank and Its Customer

 

§ 4401.  When bank may charge account of customer.

§ 4402.  Liability of bank to customer for wrongful dishonor; time of determining insufficiency of account.

§ 4403.  Right of customer to stop payment; burden of proof of loss.

§ 4404.  Bank not obligated to pay check more than six months old.

§ 4405.  Death or incapacity of customer.

§ 4406.  Duty of customer to discover and report unauthorized signature or alteration.

§ 4407.  Right of payor bank to subrogation on improper payment.

 

Chapter 45.  Collection of Documentary Drafts

 

§ 4501.  Handling of documentary drafts; duty to send for presentment and to notify customer of dishonor.

§ 4502.  Presentment of "on arrival" drafts.

§ 4503.  Responsibility of presenting bank for documents and goods; report of reasons for dishonor; referee in case of need.

§ 4504.  Privilege of presenting bank to deal with goods; security interest for expenses.

 

DIVISION 4A.  FUNDS TRANSFERS

 

Chapter 4A1.  Subject Matter and Definitions

 

§ 4A101.  Short title of division.

§ 4A102.  Subject matter.

§ 4A103.  Payment order; definitions.

§ 4A104.  Funds transfer; definitions.

§ 4A105.  Other definitions.

§ 4A106.  Time payment order is received.

§ 4A107.  Federal Reserve regulations and operating circulars.

§ 4A108.  Relationship to Electronic Fund Transfer Act.

 

Chapter 4A2.  Issue and Acceptance of Payment Order

 

§ 4A201.  Security procedure.

§ 4A202.  Authorized and verified payment orders.

§ 4A203.  Unenforceability of certain verified payment orders.

§ 4A204.  Refund of payment and duty of customer to report with respect to unauthorized payment order.

§ 4A205.  Erroneous payment orders.

§ 4A206.  Transmission of payment order through funds-transfer or other communication system.

§ 4A207.  Misdescription of beneficiary.

§ 4A208.  Misdescription of intermediary bank or beneficiary's bank.

§ 4A209.  Acceptance of payment order.

§ 4A210.  Rejection of payment order.

§ 4A211.  Cancellation and amendment of payment order.

§ 4A212.  Liability and duty of receiving bank regarding unaccepted payment order.

 

Chapter 4A3.  Execution of Sender's Payment Order by Receiving Bank

 

§ 4A301.  Execution and execution date.

§ 4A302.  Obligations of receiving bank in execution of payment order.

§ 4A303.  Erroneous execution of payment order.

§ 4A304.  Duty of sender to report erroneously executed payment order.

§ 4A305.  Liability for late or improper execution or failure to execute payment order.

 

Chapter 4A4.  Payment

 

§ 4A401.  Payment date.

§ 4A402.  Obligation of sender to pay receiving bank.

§ 4A403.  Payment by sender to receiving bank.

§ 4A404.  Obligation of beneficiary's bank to pay and give notice to beneficiary.

§ 4A405.  Payment by beneficiary's bank to beneficiary.

§ 4A406.  Payment by originator to beneficiary; discharge of underlying obligation.

 

Chapter 4A5.  Miscellaneous Provisions

 

§ 4A501.  Variation by agreement and effect of funds-transfer system rule.

§ 4A502.  Creditor process served on receiving bank; setoff by beneficiary's bank.

§ 4A503.  Injunction or restraining order with respect to funds transfer.

§ 4A504.  Order in which items and payment orders may be charged to account; order of withdrawals from account.

§ 4A505.  Preclusion of objection to debit of customer's account.

§ 4A506.  Rate of interest.

§ 4A507.  Choice of law.

 

DIVISION 5.  LETTERS OF CREDIT

 

Chapter 51.  Letters of Credit

 

§ 5101.  Short title of division.

§ 5102.  Definitions.

§ 5103.  Scope.

§ 5104.  Formal requirements.

§ 5105.  Consideration.

§ 5106.  Issuance, amendment, cancellation and duration.

§ 5107.  Confirmer, nominated person and advisor.

§ 5108.  Issuer's rights and obligations.

§ 5109.  Fraud and forgery.

§ 5110.  Warranties.

§ 5111.  Remedies.

§ 5112.  Transfer of letter of credit.

§ 5113.  Transfer by operation of law.

§ 5114.  Assignment of proceeds.

§ 5115.  Statute of limitations.

§ 5116.  Choice of law and forum.

§ 5117.  Subrogation of issuer, applicant and nominated person.

§ 5118.  Security interest of issuer or nominated person.

 

DIVISION 6.  BULK TRANSFERS (Repealed)

 

Chapter 61.  Bulk Transfers (Repealed)

 

§ 6101 - § 6111 (Repealed).

 

DIVISION 7.  WAREHOUSE RECEIPTS, BILLS OF

LADING AND OTHER DOCUMENTS OF TITLE

 

Chapter 71.  General

 

§ 7101.  Short title of division.

§ 7102.  Definitions and index of definitions.

§ 7103.  Relation of division to treaty or statute.

§ 7104.  Negotiable and nonnegotiable document of title.

§ 7105.  Reissuance in alternative medium.

§ 7106.  Control of electronic document of title.

 

Chapter 72.  Warehouse Receipts: Special Provisions

 

§ 7201.  Person that may issue a warehouse receipt; storage under bond.

§ 7202.  Form of warehouse receipt; effect of omission.

§ 7203.  Liability for nonreceipt or misdescription.

§ 7204.  Duty of care; contractual limitation of warehouse's liability.

§ 7205.  Title under warehouse receipt defeated in certain cases.

§ 7206.  Termination of storage at warehouse's option.

§ 7207.  Goods must be kept separate; fungible goods.

§ 7208.  Altered warehouse receipts.

§ 7209.  Lien of warehouse.

§ 7210.  Enforcement of warehouse's lien.

 

Chapter 73.  Bills of Lading: Special Provisions

 

§ 7301.  Liability for nonreceipt or misdescription; "said to contain"; "shipper's weight, load and count"; improper handling.

§ 7302.  Through bills of lading and similar documents of title.

§ 7303.  Diversion; reconsignment; change of instructions.

§ 7304.  Tangible bills of lading in a set.

§ 7305.  Destination bills.

§ 7306.  Altered bills of lading.

§ 7307.  Lien of carrier.

§ 7308.  Enforcement of carrier's lien.

§ 7309.  Duty of care; contractual limitation of carrier's liability.

 

Chapter 74.  Warehouse Receipts and Bills of Lading: General Obligations

 

§ 7401.  Irregularities in issue of receipt or bill or conduct of issuer.

§ 7402.  Duplicate document of title; overissue.

§ 7403.  Obligation of bailee to deliver; excuse.

§ 7404.  No liability for good faith delivery pursuant to document of title.

 

Chapter 75.  Warehouse Receipts and Bills of Lading: Negotiation and Transfer

 

§ 7501.  Form of negotiation and requirements of due negotiation.

§ 7502.  Rights acquired by due negotiation.

§ 7503.  Document of title to goods defeated in certain cases.

§ 7504.  Rights acquired in absence of due negotiation; effect of diversion; stoppage of delivery.

§ 7505.  Indorser not guarantor for other parties.

§ 7506.  Delivery without indorsement; right to compel indorsement.

§ 7507.  Warranties on negotiation or delivery of document of title.

§ 7508.  Warranties of collecting bank as to documents of title.

§ 7509.  Adequate compliance with commercial contract.

 

Chapter 76.  Warehouse Receipts and Bills of Lading: Miscellaneous Provisions

 

§ 7601.  Lost, stolen or destroyed documents of title.

§ 7602.  Judicial process against goods covered by negotiable document of title.

§ 7603.  Conflicting claims; interpleader.

 

DIVISION 8.  INVESTMENT SECURITIES

 

Chapter 81.  Short Title and General Matters

 

§ 8101.  Short title of division.

§ 8102.  Definitions.

§ 8103.  Rules for determining whether certain obligations and interests are securities or financial assets.

§ 8104.  Acquisition of security or financial asset or interest therein.

§ 8105.  Notice of adverse claim.

§ 8106.  Control.

§ 8107.  Whether indorsement, instruction or entitlement order is effective.

§ 8108.  Warranties in direct holding.

§ 8109.  Warranties in indirect holding.

§ 8110.  Applicability; choice of law.

§ 8111.  Clearing corporation rules.

§ 8112.  Creditor's legal process.

§ 8113.  Statute of frauds inapplicable.

§ 8114.  Evidentiary rules concerning certificated securities.

§ 8115.  Securities intermediary and others not liable to adverse claimant.

§ 8116.  Securities intermediary as purchaser for value.

 

Chapter 82.  Issue and Issuer

 

§ 8201.  Issuer.

§ 8202.  Issuer's responsibility and defenses; notice of defect or defense.

§ 8203.  Staleness as notice of defect or defense.

§ 8204.  Effect of issuer's restriction on transfer.

§ 8205.  Effect of unauthorized signature on security certificate.

§ 8206.  Completion or alteration of security certificate.

§ 8207.  Rights and duties of issuer with respect to registered owners.

§ 8208.  Effect of signature of authenticating trustee, registrar or transfer agent.

§ 8209.  Issuer's lien.

§ 8210.  Overissue.

 

Chapter 83.  Transfer of Certificated and Uncertificated Securities

 

§ 8301.  Delivery.

§ 8302.  Rights of purchaser.

§ 8303.  Protected purchaser.

§ 8304.  Indorsement.

§ 8305.  Instruction.

§ 8306.  Effect of guaranteeing signature, indorsement or instruction.

§ 8307.  Purchaser's right to requisites for registration of transfer.

 

Chapter 84.  Registration

 

§ 8401.  Duty of issuer to register transfer.

§ 8402.  Assurance that indorsement or instruction is effective.

§ 8403.  Demand that issuer not register transfer.

§ 8404.  Wrongful registration.

§ 8405.  Replacement of lost, destroyed or wrongfully taken security certificate.

§ 8406.  Obligation to notify issuer of lost, destroyed or wrongfully taken security certificate.

§ 8407.  Authenticating trustee, transfer agent and registrar.

 

Chapter 85.  Security Entitlements

 

§ 8501.  Securities account; acquisition of security entitlement from securities intermediary.

§ 8502.  Assertion of adverse claim against entitlement holder.

§ 8503.  Property interest of entitlement holder in financial asset held by securities intermediary.

§ 8504.  Duty of securities intermediary to maintain financial asset.

§ 8505.  Duty of securities intermediary with respect to payments and distributions.

§ 8506.  Duty of securities intermediary to exercise rights as directed by entitlement holder.

§ 8507.  Duty of securities intermediary to comply with entitlement order.

§ 8508.  Duty of securities intermediary to change entitlement holder's position to other form of security holding.

§ 8509.  Specification of duties of securities intermediary by other statute or regulation; manner of performance of duties of securities intermediary and exercise of rights of entitlement holder.

§ 8510.  Rights of purchaser of security entitlement from entitlement holder.

§ 8511.  Priority among security interests and entitlement holders.

 

DIVISION 9.  SECURED TRANSACTIONS

 

Chapter 91.  General Provisions

 

Subchapter A.  Short Title, Definitions and General Concepts

 

§ 9101.  Short title of division.

§ 9102.  Definitions and index of definitions.

§ 9103.  Purchase-money security interest; application of payments; burden of establishing.

§ 9104.  Control of deposit account.

§ 9105.  Control of electronic chattel paper.

§ 9106.  Control of investment property.

§ 9107.  Control of letter-of-credit right.

§ 9108.  Sufficiency of description.

 

Subchapter B.  Applicability of Division

 

§ 9109.  Scope.

§ 9110.  Security interests arising under Division 2 or 2A.

 

Chapter 92.  Effectiveness of Security Agreement, Attachment of Security Interest and Rights of Parties to Security Agreement

 

Subchapter A.  Effectiveness and Attachment

 

§ 9201.  General effectiveness of security agreement.

§ 9202.  Title to collateral immaterial.

§ 9203.  Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites.

§ 9204.  After-acquired property; future advances.

§ 9205.  Use or disposition of collateral permissible.

§ 9206.  Security interest arising in purchase or delivery of financial asset.

 

Subchapter B.  Rights and Duties

 

§ 9207.  Rights and duties of secured party having possession or control of collateral.

§ 9208.  Additional duties of secured party having control of collateral.

§ 9209.  Duties of secured party if account debtor has been notified of assignment.

§ 9210.  Request for accounting; request regarding list of collateral or statement of account.

 

Chapter 93.  Perfection and Priority

 

Subchapter A.  Law Governing Perfection and Priority

 

§ 9301.  Law governing perfection and priority of security interests.

§ 9302.  Law governing perfection and priority of agricultural liens.

§ 9303.  Law governing perfection and priority of security interests in goods covered by certificate of title.

§ 9304.  Law governing perfection and priority of security interests in deposit accounts.

§ 9305.  Law governing perfection and priority of security interests in investment property.

§ 9306.  Law governing perfection and priority of security interests in letter-of-credit rights.

§ 9307.  Location of debtor.

 

Subchapter B.  Perfection

 

§ 9308.  When security interest or agricultural lien is perfected; continuity of perfection.

§ 9309.  Security interest perfected upon attachment.

§ 9310.  When filing required to perfect security interest or agricultural lien; security interests and agricultural liens to which filing provisions do not apply.

§ 9311.  Perfection of security interests in property subject to certain statutes, regulations and treaties.

§ 9312.  Perfection of security interests in chattel paper, deposit accounts, documents, goods covered by documents, instruments, investment property, letter-of-credit rights and money; perfection by permissive filing; temporary perfection without filing or transfer of possession.

§ 9313.  When possession by or delivery to secured party perfects security interest without filing.

§ 9314.  Perfection by control.

§ 9315.  Secured party's rights on disposition of collateral and in proceeds.

§ 9316.  Effect of change in governing law.

 

Subchapter C.  Priority

 

§ 9317.  Interests which take priority over or take free of security interest or agricultural lien.

§ 9318.  No interest retained in right to payment which is sold; rights and title of seller of account or chattel paper with respect to creditors and purchasers.

§ 9319.  Rights and title of consignee with respect to creditors and purchasers.

§ 9320.  Buyer of goods.

§ 9321.  Licensee of general intangible and lessee of goods in ordinary course of business.

§ 9322.  Priorities among conflicting security interests in and agricultural liens on same collateral.

§ 9323.  Future advances.

§ 9324.  Priority of purchase-money security interests.

§ 9325.  Priority of security interests in transferred collateral.

§ 9326.  Priority of security interests created by new debtor.

§ 9327.  Priority of security interests in deposit account.

§ 9328.  Priority of security interests in investment property.

§ 9329.  Priority of security interests in letter-of-credit right.

§ 9330.  Priority of purchaser of chattel paper or instrument.

§ 9331.  Priority of rights of purchasers of instruments, documents and securities under other divisions; priority of interests in financial assets and security entitlements under Division 8.

§ 9332.  Transfer of money; transfer of funds from deposit account.

§ 9333.  Priority of certain liens arising by operation of law.

§ 9334.  Priority of security interests in fixtures and crops.

§ 9335.  Accessions.

§ 9336.  Commingled goods.

§ 9337.  Priority of security interests in goods covered by certificate of title.

§ 9338.  Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information.

§ 9339.  Priority subject to subordination.

 

Subchapter D.  Rights of Bank

 

§ 9340.  Effectiveness of right of recoupment or set-off against deposit account.

§ 9341.  Bank's rights and duties with respect to deposit account.

§ 9342.  Bank's right to refuse to enter into or disclose existence of control agreement.

 

Chapter 94.  Rights of Third Parties

 

§ 9401.  Alienability of debtor's rights.

§ 9402.  Secured party not obligated on contract of debtor or in tort.

§ 9403.  Agreement not to assert defenses against assignee.

§ 9404.  Rights acquired by assignee; claims and defenses against assignee.

§ 9405.  Modification of assigned contract.

§ 9406.  Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles and promissory notes ineffective.

§ 9407.  Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.

§ 9408.  Restrictions on assignment of promissory notes, health-care-insurance receivables and certain general intangibles ineffective.

§ 9409.  Restrictions on assignment of letter-of-credit rights ineffective.

 

Chapter 95.  Filing

 

Subchapter A.  Filing Office; Contents and Effectiveness of Financing Statement

 

§ 9501.  Filing office.

§ 9502.  Contents of financing statement; record of mortgage as financing statement; time of filing financing statement.

§ 9503.  Name of debtor and secured party.

§ 9504.  Indication of collateral.

§ 9505.  Filing and compliance with other statutes and treaties for consignments, leases, other bailments and other transactions.

§ 9506.  Effect of errors or omissions.

§ 9507.  Effect of certain events on effectiveness of financing statement.

§ 9508.  Effectiveness of financing statement if new debtor becomes bound by security agreement.

§ 9509.  Persons entitled to file a record.

§ 9510.  Effectiveness of filed record.

§ 9511.  Secured party of record.

§ 9512.  Amendment of financing statement.

§ 9513.  Termination statement.

§ 9514.  Assignment of powers of secured party of record.

§ 9515.  Duration and effectiveness of financing statement; effect of lapsed financing statement.

§ 9516.  What constitutes filing; effectiveness of filing.

§ 9517.  Effect of indexing errors.

§ 9518.  Claim concerning inaccurate or wrongfully filed record.

 

Subchapter B.  Duties and Operation of Filing Office

 

§ 9519.  Numbering, maintaining and indexing records; communicating information provided in records.

§ 9520.  Acceptance and refusal to accept record.

§ 9521.  Uniform form of written financing statement and amendment.

§ 9522.  Maintenance and destruction of records.

§ 9523.  Information from filing office; sale or license of records.

§ 9524.  Delay by filing office.

§ 9525.  Fees.

§ 9526.  Filing-office rules.

§ 9527.  Duty to report.

 

Chapter 96.  Default

 

Subchapter A.  Default and Enforcement of Security Interest

 

§ 9601.  Rights after default; judicial enforcement; consignor or buyer of accounts, chattel paper, payment intangibles or promissory notes.

§ 9602.  Waiver and variance of rights and duties.

§ 9603.  Agreement on standards concerning rights and duties.

§ 9604.  Procedure if security agreement covers real property or fixtures.

§ 9605.  Unknown debtor or secondary obligor.

§ 9606.  Time of default for agricultural lien.

§ 9607.  Collection and enforcement by secured party.

§ 9608.  Application of proceeds of collection or enforcement; liability for deficiency and right to surplus.

§ 9609.  Secured party's right to take possession after default.

§ 9610.  Disposition of collateral after default.

§ 9611.  Notification before disposition of collateral.

§ 9612.  Timeliness of notification before disposition of collateral.

§ 9613.  Contents and form of notification before disposition of collateral: general.

§ 9614.  Contents and form of notification before disposition of collateral: consumer-goods transaction.

§ 9615.  Application of proceeds of disposition; liability for deficiency and right to surplus.

§ 9616.  Explanation of calculation of surplus or deficiency.

§ 9617.  Rights of transferee of collateral.

§ 9618.  Rights and duties of certain secondary obligors.

§ 9619.  Transfer of record or legal title.

§ 9620.  Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.

§ 9621.  Notification of proposal to accept collateral.

§ 9622.  Effect of acceptance of collateral.

§ 9623.  Right to redeem collateral.

§ 9624.  Waiver.

 

Subchapter B.  Noncompliance with Division

 

§ 9625.  Remedies for secured party's failure to comply with division.

§ 9626.  Action in which deficiency or surplus is in issue.

§ 9627.  Determination of whether conduct was commercially reasonable.

§ 9628.  Nonliability and limitation on liability of secured party; liability of secondary obligor.

 

Chapter 97.  Transition Provisions

 

§ 9700.  Definitions.

§ 9701.  Effective date.

§ 9702.  Savings clause.

§ 9703.  Security interest perfected before effective date.

§ 9704.  Security interest unperfected before effective date.

§ 9705.  Effectiveness of action taken before effective date.

§ 9706.  When initial financing statement suffices to continue effectiveness of financing statement.

§ 9707.  Amendment of pre-effective-date financing statement.

§ 9708.  Persons entitled to file initial financing statement or continuation statement.

§ 9709.  Priority.

§ 9710.  Operations of prothonotaries' offices after effective date.

 

Chapter 98.  Transition Provisions for 2013 Amendments

 

§ 9800.  Definitions.

§ 9801.  Effective date.

§ 9802.  Savings clause.

§ 9803.  Security interest perfected before effective date.

§ 9804.  Security interest unperfected before effective date.

§ 9805.  Effectiveness of action taken before effective date.

§ 9806.  When initial financing statement suffices to continue effectiveness of financing statement.

§ 9807.  Amendment of pre-effective-date financing statement.

§ 9808.  Person entitled to file initial financing statement or continuation statement.

§ 9809.  Priority.

13c1101h

 

 

TITLE 13

COMMERCIAL CODE

 

Division

1.  General Provisions

2.  Sales

2A. Leases

3.  Negotiable Instruments

4.  Bank Deposits and Collections

4A. Funds Transfers

5.  Letters of Credit

6.  Bulk Transfers (Repealed)

7.  Warehouse Receipts, Bills of Lading and Other Documents of Title

8.  Investment Securities

9.  Secured Transactions

 

Enactment.  Unless otherwise noted, the provisions of Title 13 were added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

Saved from Suspension.  Pennsylvania Rule of Civil Procedure for District Justices No. 482, adopted November 7, 1988, provided that section 1101 et seq. shall not be deemed suspended or affected. Rules 401 through 482 relate to execution of judgments for the payment of money rendered by district justices. Act 207 of 2004 changed district justices to magisterial district judges. Rule 482 can now be found in the Rules of Conduct, Office Standards and Civil Procedure for Magisterial District Judges.

Pennsylvania Rule of Civil Procedure No. 3159(b)(2), adopted April 20, 1998, provided that sections 1101 et seq. shall not be deemed suspended or affected by Rules 3101 through 3149 relating to enforcement of money judgments for the payment of money.

Special Provisions in Appendix.  See Act 86 of 1979 in the appendix to this title for special provisions relating to legislative intent and effective date.

Short Titles of Implementing Statutes.  Section 1 of Act 97 of 1992 provided that the act shall be known and may be cited as the Uniform Commercial Code Modernization Act.

Section 1 of Act 44 of 1996 provided that the act shall be known and may be cited as the Uniform Commercial Code Modernization Act of 1996.

Section 1 of Act 18 of 2001 provided that the act shall be known and may be cited as the Uniform Commercial Code Modernization Act of 2001.

 

 

DIVISION 1

GENERAL PROVISIONS

 

Chapter

  11.  General Provisions

  12.  General Definitions and Principles of Interpretation

  13.  Territorial Applicability and General Rules

 

Enactment.  Division 1 was added April 16, 2008, P.L.57, No.13, effective in 60 days.

Prior Provisions.  Former Division 1, which related to the same subject matter, was added November 1, 1979, P.L.255, No.86, and repealed April 16, 2008, P.L.57, No.13, effective in 60 days.

 

 

CHAPTER 11

GENERAL PROVISIONS

 

Sec.

1101.  Short titles.

1102.  Scope of division.

1103.  Construction of title to promote its purposes and policies; applicability of supplemental principles of law.

1104.  Construction against implied repeal.

1105.  (Reserved).

1106.  Use of singular and plural; gender (Reserved).

1107.  Section captions.

1108.  Relation to Electronic Signatures in Global and National Commerce Act.

1109.  Construction.

 

Enactment.  Chapter 11 was added April 16, 2008, P.L.57, No.13, effective in 60 days.

Prior Provisions.  Former Chapter 11, which related to short title, construction, application and subject matter of title, was added November 1, 1979, P.L.255, No.86, and repealed April 16, 2008, P.L.57, No.13, effective in 60 days.

13c1101s

§ 1101.  Short titles.

(a)  Title.--This title may be cited as the Uniform Commercial Code.

(b)  Division.--This division may be cited as the Uniform Commercial Code-General Provisions.

13c1102s

§ 1102.  Scope of division.

This division applies to a transaction to the extent that it is governed by another division of this title.

13c1103s

§ 1103.  Construction of title to promote its purposes and policies; applicability of supplemental principles of law.

(a)  Liberal construction.--This title must be liberally construed and applied to promote its underlying purposes and policies, which are:

(1)  to simplify, clarify and modernize the law governing commercial transactions;

(2)  to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and

(3)  to make uniform the law among the various jurisdictions.

(b)  Law and equity.--Unless displaced by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy and other validating or invalidating cause, supplement its provisions.

13c1104s

§ 1104.  Construction against implied repeal.

This title being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.

13c1105s

§ 1105.  (Reserved).

13c1106s

§ 1106.  Use of singular and plural; gender (Reserved).

13c1107s

§ 1107.  Section captions.

Notwithstanding 1 Pa.C.S. § 1924 (relating to construction of titles, preambles, provisos, exceptions and headings), section captions are part of this title.

13c1108s

§ 1108.  Relation to Electronic Signatures in Global and National Commerce Act.

This division modifies, limits and supersedes the Electronic Signatures in Global and National Commerce Act (Public Law 106- 229, 15 U.S.C. § 7001 et seq.), but does not modify, limit or supersede section 101(c) of that act (15 U.S.C. § 7001(c)) or authorize electronic delivery of any of the notices described in section 103(b) of that act (15 U.S.C. § 7003(b)).

13c1109s

§ 1109.  Construction.

Nothing in this title shall be construed to modify or supersede the provisions of 42 Pa.C.S. Ch. 69 (relating to particular rights and immunities).

13c1109v

(Oct. 27, 2014, P.L.2896, No.185, eff. 60 days)

 

2014 Amendment.  Act 185 added section 1109.

13c1201h

 

 

CHAPTER 12

GENERAL DEFINITIONS AND PRINCIPLES

OF INTERPRETATION

 

Sec.

1201.  General definitions.

1202.  Notice; knowledge.

1203.  Lease distinguished from security interest.

1204.  Value.

1205.  Reasonable time; seasonableness.

1206.  Presumptions.

 

Enactment.  Chapter 12 was added April 16, 2008, P.L.57, No.13, effective in 60 days.

Prior Provisions.  Former Chapter 12, which related to the same subject matter, was added November 1, 1979, P.L.255, No.86, and repealed April 16, 2008, P.L.57, No.13, effective in 60 days.

13c1201s

§ 1201.  General definitions.

(a)  Definition provisions.--Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other divisions of this title that apply to particular divisions or chapters of this title, have the meanings stated.

(b)  Definitions.--Subject to additional definitions contained in subsequent provisions of this title which are applicable to specific provisions of this title, the following words and phrases when used in this title shall have, unless the context clearly indicates otherwise, the meanings given to them in this subsection:

(1)  "Action."  In the sense of a judicial proceeding, the term includes recoupment, counterclaim, set-off, suit in equity and any other proceeding in which rights are determined.

(2)  "Aggrieved party."  A party entitled to pursue a remedy.

(3)  "Agreement."  As distinguished from "contract" under paragraph (12), the term means the bargain of the parties 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 section 1303 (relating to course of performance, course of dealing and usage of trade).

(4)  "Bank."  A person engaged in the business of banking. The term includes a savings bank, savings and loan association, credit union and trust company.

(5)  "Bearer."  A person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title or certificated security, that is payable to bearer or indorsed in blank.

(6)  "Bill of lading."  A document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt.

(7)  "Branch."  The term includes a separately incorporated foreign branch of a bank.

(8)  "Burden of establishing."  As to a fact, the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.

(9)  "Buyer in ordinary course of business."  A person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind.

(i)  A person buys goods in the ordinary course of business if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices.

(ii)  A person that sells oil, gas or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind.

(iii)  A buyer in ordinary course of business may buy for cash, by exchange of other property or on secured or unsecured credit and may acquire goods or documents of title under a preexisting contract for sale.

(iv)  Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Division 2 (relating to sales) may be a buyer in ordinary course of business.

The term does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(10)  "Conspicuous."  With reference to a term, means so written, displayed or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following:

(i)  A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font or color to the surrounding text of the same or lesser size.

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

(11)  "Consumer."  An individual who enters into a transaction primarily for personal, family or household purposes.

(12)  "Contract."  As distinguished from "agreement" in paragraph (3), the total legal obligation that results from the parties' agreement as determined by this title as supplemented by any other applicable laws.

(13)  "Creditor."  The term includes a general creditor; a secured creditor; a lien creditor; a representative of creditors, including an assignee for the benefit of creditors; a trustee in bankruptcy; a receiver in equity and an executor or administrator of an insolvent debtor's or assignor's estate.

(14)  "Defendant."  Includes a person in the position of defendant in a counterclaim, cross-claim or third-party claim.

(15)  "Delivery."  With respect to an electronic document of title, means voluntary transfer of control and with respect to an instrument, a tangible document of title or chattel paper, means voluntary transfer of possession.

(16)  "Document of title."  A record that:

(i)  in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold and dispose of the record and the goods the record covers; or

(ii)  purports to be issued by or addressed to a bailee and to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.

The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt and order for delivery of goods.

(16.1)  "Electronic document of title."  A document of title evidenced by a record consisting of information stored in an electronic medium.

(17)  "Fault."  A default, breach or wrongful act or omission.

(18)  "Fungible goods."  As follows:

(i)  goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or

(ii)  goods that by agreement are treated as equivalent.

(19)  "Genuine."  Free of forgery or counterfeiting.

(20)  "Good faith."  Except as otherwise provided in Division 5 (relating to letters of credit), honesty in fact and the observance of reasonable commercial standards of fair dealing.

(21)  "Holder."  As follows:

(i)  the person in possession of a negotiable instrument that is payable either to the bearer or to an identified person that is the person in possession;

(ii)  the person in possession of a negotiable tangible document of title if the goods are deliverable either to the bearer or to the order of the person in possession; or

(iii)  the person in control of a negotiable electronic document of title.

(22)  "Insolvency proceeding."  Includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.

(23)  "Insolvent."  As follows:

(i)  having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;

(ii)  being unable to pay debts as they become due; or

(iii)  being insolvent within the meaning of Federal bankruptcy law.

(24)  "Money."  A medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.

(25)  "Organization."  A person other than an individual.

(26)  "Party."  As distinguished from "third party," a person that has engaged in a transaction or made an agreement subject to this title.

(27)  "Person."  Any individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency or instrumentality, public corporation; or other legal or commercial entity.

(28)  "Present value."  The amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either:

(i)  an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into; or

(ii)  if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.

(29)  "Purchase."  Taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift or other voluntary transaction creating an interest in property.

(30)  "Purchaser."  A person that takes by purchase.

(31)  "Record."  Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(32)  "Remedy."  Any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

(33)  "Representative."  A person empowered to act for another, including an agent; an officer of a corporation or association; and a trustee, executor or administrator of an estate.

(34)  "Right."  Includes remedy.

(35)  "Security interest."  An interest in personal property or fixtures which secures payment or performance of an obligation.

(i)  The term includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible or a promissory note, in a transaction that is subject to Division 9 (relating to secured transactions).

(ii)  The term does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under section 2401 (relating to passing of title; reservation for security; limited application of section), but a buyer may also acquire a "security interest" by complying with Division 9 (relating to secured transactions).

(iii)  Except as otherwise provided in section 2505 (relating to shipment by seller under reservation), the right of a seller or lessor of goods under Division 2 (relating to sales) or 2A (relating to leases) to retain or acquire possession of the goods is not a "security interest"; but a seller or lessor may also acquire a "security interest" by complying with Division 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under section 2401 is limited in effect to a reservation of a "security interest."

(iv)  Whether a transaction in the form of a lease creates a "security interest" is determined pursuant to section 1203 (relating to lease distinguished from security interest).

(36)  "Send."  In connection with a writing, record or notice:

(i)  to deposit in the mail or deliver for transmission by any other usual means of communication:

(A)  with postage or cost of transmission provided for;

(B)  properly addressed; and

(C)  in the case of an instrument:

(I)  to an address specified thereon or otherwise agreed upon; or

(II)  if no address is specified or agreed upon, to any address reasonable under the circumstances; or

(ii)  in any other way to cause to be received any record or notice within the time it would have arrived if properly sent.

(37)  "Signed."  Includes using any symbol executed or adopted with present intention to adopt or accept a writing.

(38)  "State."  A state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands or any territory or insular possession subject to the jurisdiction of the United States.

(39)  "Surety."  Includes a guarantor or other secondary obligor.

(39.1)  "Tangible document of title."  A document of title evidenced by a record consisting of information that is inscribed on a tangible medium.

(40)  "Term."  A portion of an agreement that relates to a particular matter.

(41)  "Unauthorized signature."  A signature made without actual, implied or apparent authority. The term includes a forgery.

(42)  "Warehouse receipt."  A document of title issued by a person engaged in the business of storing goods for hire.

(43)  "Writing."  Includes printing, typewriting or any other intentional reduction to tangible form.

(44)  "Written."  Includes printing, typewriting or any other intentional reduction to tangible form.

13c1201v

 

Cross References.  Section 1201 is referred to in sections 3103, 4A105, 8103 of this title; section 6202 of Title 12 (Commerce and Trade); section 6902 of Title 42 (Judiciary and Judicial Procedure); section 7315 of Title 51 (Military Affairs).

13c1202s

§ 1202.  Notice; knowledge.

(a)  Notice.--Subject to subsection (f), a person has notice of a fact if the person:

(1)  has actual knowledge of it;

(2)  has received a notice or notification of it; or

(3)  from all the facts and circumstances known to the person at the time in question, has reason to know that it exists.

(b)  Knowledge.--"Knowledge" means actual knowledge. "Knows" has a corresponding meaning.

(c)  Reason to know distinguished.--"Discover," "learn" or words of similar import refer to knowledge rather than to reason to know.

(d)  Notify.--A person notifies or gives a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.

(e)  Be notified.--Subject to subsection (f), a person receives a notice or notification when:

(1)  it comes to that person's attention; or

(2)  it is duly delivered in a form reasonable under the circumstances at:

(i)  the place of business through which the contract was made; or

(ii)  another location held out by that person as the place for receipt of such communications.

(f)  Communication to organizations.--Notice, knowledge or notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual's attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

13c1202v

 

Cross References.  Section 1202 is referred to in section 4A106 of this title.

13c1203s

§ 1203.  Lease distinguished from security interest.

(a)  Factual determination.--Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.

(b)  Sufficient attributes for security interest.--A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:

(1)  the original term of the lease is equal to or greater than the remaining economic life of the goods;

(2)  the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;

(3)  the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or

(4)  the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.

(c)  Insufficient attributes for security interest.--A transaction in the form of a lease does not create a security interest merely because:

(1)  the present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;

(2)  the lessee assumes risk of loss of the goods;

(3)  the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording or registration fees or service or maintenance costs;

(4)  the lessee has an option to renew the lease or to become the owner of the goods;

(5)  the lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or

(6)  the lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

(d)  Nominal consideration.--Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:

(1)  when the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or

(2)  when the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.

(e)  Remaining economic life and reasonable predictability.--The "remaining economic life of the goods" and "reasonably predictable" fair market rent, fair market value or cost of performing under the lease agreement shall be determined with reference to the facts and circumstances at the time the transaction is entered into.

13c1203v

 

Cross References.  Section 1203 is referred to in section 1201 of this title.

13c1204s

§ 1204.  Value.

Except as otherwise provided in Divisions 3 (relating to negotiable instruments), 4 (relating to bank deposits and collections) and 5 (relating to letters of credit), a person gives value for rights if the person acquires them:

(1)  in return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;

(2)  as security for or in total or partial satisfaction of a preexisting claim;

(3)  by accepting delivery under a preexisting contract for purchase; or

(4)  in return for any consideration sufficient to support a simple contract.

13c1205s

§ 1205.  Reasonable time; seasonableness.

(a)  Reasonable time.--Whether a time for taking an action required by this title is reasonable depends on the nature, purpose and circumstances of the action.

(b)  Seasonableness.--An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.

13c1205v

 

Cross References.  Section 1205 is referred to in section 4A204 of this title.

13c1206s

§ 1206.  Presumptions.

Whenever this title creates a "presumption" with respect to a fact or provides that a fact is "presumed," the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.

13c1206v

 

Cross References.  Section 1206 is referred to in section 2201 of this title.

13c1301h

 

 

CHAPTER 13

TERRITORIAL APPLICABILITY AND GENERAL RULES

Sec.

1301.  Territorial applicability; parties' power to choose applicable law.

1302.  Variation by agreement.

1303.  Course of performance, course of dealing and usage of trade.

1304.  Obligation of good faith.

1305.  Remedies to be liberally administered.

1306.  Waiver or renunciation of claim or right after breach.

1307.  Prima facie evidence by third-party documents.

1308.  Performance or acceptance under reservation of rights.

1309.  Option to accelerate at will.

1310.  Subordinated obligations.

 

Enactment.  Chapter 13 was added April 16, 2008, P.L.57, No.13, effective in 60 days.

13c1301s

§ 1301.  Territorial applicability; parties' power to choose applicable law.

(a)  Agreement; reasonable relation requirement.--Except as otherwise provided in this section, when a transaction bears a reasonable relation to this Commonwealth and also to another state or nation, the parties may agree that the law either of this Commonwealth or of such other state or nation shall govern their rights and duties.

(b)  Absence of agreement; approved relation requirement.--In the absence of an agreement effective under subsection (a), and except as provided in subsection (c), this title applies to transactions bearing an appropriate relation to this Commonwealth.

(c)  Mandatory applicability of title.--If one of the following provisions of this title specifies the applicable law, that provision governs, and a contrary agreement is effective only to the extent permitted by the law so specified:

(1)  Section 2402 (relating to rights of creditors of seller against sold goods).

(2)  Sections 2A105 (relating to territorial application of division to goods covered by certificate of title) and 2A106 (relating to limitation on power of parties to consumer lease to choose applicable law and judicial forum).

(3)  Section 4102 (relating to applicability).

(4)  Section 4A507 (relating to choice of law).

(5)  Section 5116 (relating to choice of law and forum).

(6)  Section 8110 (relating to applicability; choice of law).

(7)  Ch. 93 Subch. A (relating to law governing perfection and priority).

13c1302s

§ 1302.  Variation by agreement.

(a)  General rule.--Except as otherwise provided in subsection (b) or elsewhere in this title, the effect of provisions of this title may be varied by agreement.

(b)  Exceptions.--The obligations of good faith, diligence, reasonableness and care prescribed by this title may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever this title requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.

(c)  Effect of terminology.--The presence in certain provisions of this title of the phrase "unless otherwise agreed," or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.

13c1302v

 

Cross References.  Section 1302 is referred to in sections 2A518, 2A519, 2A527, 2A528, 5103 of this title.

13c1303s

§ 1303.  Course of performance, course of dealing and usage of trade.

(a)  Course of performance.--A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if:

(1)  the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and

(2)  the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

(b)  Course of dealing.--A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(c)  Usage of trade.--A "usage of trade" is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as fact. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

(d)  Evidentiary effect.--A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.

(e)  Construction in general.--Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:

(1)  express terms prevail over course of performance, course of dealing and usage of trade;

(2)  course of performance prevails over course of dealing and usage of trade; and

(3)  course of dealing prevails over usage of trade.

(f)  Waiver or modification.--Subject to section 2209 (relating to modification, rescission and waiver), a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.

(g)  Evidence.--Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

13c1303v

 

Cross References.  Section 1303 is referred to in sections 1201, 2202 of this title.

13c1304s

§ 1304.  Obligation of good faith.

Every contract or duty within this title imposes an obligation of good faith in its performance and enforcement.

13c1305s

§ 1305.  Remedies to be liberally administered.

(a)  Administration.--The remedies provided by this title must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed, but neither consequential or special damages nor penal damages may be had except as specifically provided in this title or by other rule of law.

(b)  Enforceability.--Any right or obligation declared by this title is enforceable by action unless the provision declaring it specifies a different and limited effect.

13c1305v

 

Cross References.  Section 1305 is referred to in section 2A501 of this title.

13c1306s

§ 1306.  Waiver or renunciation of claim or right after breach.

A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.

13c1307s

§ 1307.  Prima facie evidence by third-party documents.

A document in due form purporting to be a bill of lading, a policy or certificate of insurance, an official weigher's or inspector's certificate, a consular invoice or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

13c1308s

§ 1308.  Performance or acceptance under reservation of rights.

(a)  General rule.--Except as set forth in subsection (b), a party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. The words "without prejudice," "under protest" and the like are sufficient.

(b)  Exception.--Subsection (a) does not apply to an accord and satisfaction.

13c1309s

§ 1309.  Option to accelerate at will.

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 itself insecure," or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.

13c1310s

§ 1310.  Subordinated obligations.

An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated. Subordination does not create a security interest as against either the common debtor or a subordinated creditor.

13c2101h

 

 

DIVISION 2

SALES

 

Chapter

  21.  Short Title, General Construction and Subject Matter

  22.  Form, Formation and Readjustment of Contract

  23.  General Obligation and Construction of Contract

  24.  Title, Creditors and Good Faith Purchasers

  25.  Performance

  26.  Breach, Repudiation and Excuse

  27.  Remedies

 

Enactment.  Division 2 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

 

 

CHAPTER 21

SHORT TITLE, GENERAL CONSTRUCTION

AND SUBJECT MATTER

 

Sec.

2101.  Short title of division.

2102.  Scope; certain security and other transactions excluded from division.

2103.  Definitions and index of definitions.

2104.  Definitions: "merchant"; "between merchants"; "financing agency."

2105.  Definitions: transferability; "goods"; "future" goods; "lot"; "commercial unit."

2106.  Definitions: "contract"; "agreement"; "contract for sale"; "sale"; "present sale"; "conforming" to contract; "termination"; "cancellation."

2107.  Goods to be severed from realty: recording.

 

Enactment.  Chapter 21 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

13c2101s

§ 2101.  Short title of division.

This division shall be known and may be cited as the Uniform Commercial Code, Article 2, Sales.

13c2101v

(July 9, 1992, P.L.507, No.97, eff. one year)

13c2102s

§ 2102.  Scope; certain security and other transactions excluded from division.

Unless the context otherwise requires, this division applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction, nor does this division impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

13c2103s

§ 2103.  Definitions and index of definitions.

(a)  Definitions.--The following words and phrases when used in this division shall have, unless the context clearly indicates otherwise, the meanings given to them in this subsection:

"Buyer."  A person who buys or contracts to buy goods.

"Good faith."  (Deleted by amendment).

"Receipt."  Receipt of goods means taking physical possession of them.

"Seller."  A person who sells or contracts to sell goods.

(b)  Index of other definitions in division.--Other definitions applying to this division or to specified chapters thereof, and the sections in which they appear are:

"Acceptance."  Section 2606.

"Banker's credit."  Section 2325.

"Between merchants."  Section 2104.

"Cancellation."  Section 2106(d).

"Commercial unit."  Section 2105.

"Confirmed credit."  Section 2325.

"Conforming to contract."  Section 2106.

"Contract for sale."  Section 2106.

"Cover."  Section 2712.

"Entrusting."  Section 2403.

"Financing agency."  Section 2104.

"Future goods."  Section 2105.

"Goods."  Section 2105.

"Identification."  Section 2501.

"Installment contract."  Section 2612.

"Letter of credit."  Section 2325.

"Lot."  Section 2105.

"Merchant."  Section 2104.

"Overseas."  Section 2323.

"Person in position of seller."  Section 2707.

"Present sale."  Section 2106.

"Sale."  Section 2106.

"Sale on approval."  Section 2326.

"Sale or return."  Section 2326.

"Termination."  Section 2106.

(c)  Index of definitions in other divisions.--The following definitions in other divisions apply to this division:

"Check."  Section 3104.

"Consignee."  Section 7102.

"Consignor."  Section 7102.

"Consumer goods."  Section 9102.

"Control."  Section 7106.

"Dishonor."  Section 3502.

"Draft."  Section 3104.

(d)  Applicability of general definitions and principles.--In addition, Division 1 (relating to general provisions) contains general definitions and principles of construction and interpretation applicable throughout this division.

13c2103v

(July 9, 1992, P.L.507, No.97, eff. one year; June 8, 2001, P.L.123, No.18, eff. July 1, 2001; Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 deleted the def. of "good faith" in subsec. (a) and added the def. of "control" in subsec. (c).

2001 Amendment.  Act 18 amended subsec. (c).

Cross References.  Section 2103 is referred to in sections 2A103, 7102 of this title.

13c2104s

§ 2104.  Definitions: "merchant"; "between merchants"; "financing agency."

The following words and phrases when used in this division shall have the meanings given to them in this section:

"Between merchants."  Between merchants means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.

"Financing agency."  Any bank, finance company, or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the draft of the seller or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. The term includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (see section 2707).

"Merchant."  A person who:

(1)  deals in goods of the kind; or

(2)  otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

13c2104v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001; Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended the def. of "financing agency."

Cross References.  Section 2104 is referred to in sections 2103, 2A103, 9102 of this title.

13c2105s

§ 2105.  Definitions: transferability; "goods"; "future" goods; "lot"; "commercial unit."

(a)  "Goods".--"Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Division 8) and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in section 2107 (relating to goods to be severed from realty; recording).

(b)  Transferability; "future" goods.--Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.

(c)  Sale of part interest in goods.--There may be a sale of a part interest in existing identified goods.

(d)  Fungible goods.--An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the interest of the seller in the bulk be sold to the buyer who then becomes an owner in common.

(e)  "Lot".--"Lot" means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.

(f)  "Commercial unit".--"Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of sale 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 an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

13c2105v

 

Cross References.  Section 2105 is referred to in section 2103 of this title.

13c2106s

§ 2106.  Definitions: "contract"; "agreement"; "contract for sale"; "sale"; "present sale"; "conforming" to contract; "termination"; "cancellation."

(a)  "Contract", "agreement", "sale".--In this division unless the context otherwise requires "contract" and "agreement" are limited to those relating to the present or future sale of goods. "Contract for sale" includes both a present sale of goods and a contract to sell goods at a future time. A "sale" consists in the passing of title from the seller to the buyer for a price (section 2401). A "present sale" means a sale which is accomplished by the making of the contract.

(b)  "Conforming" to contract.--Goods or conduct including any part of a performance are "conforming" or conform to the contract when they are in accordance with the obligations under the contract.

(c)  "Termination".--"Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On "termination" all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.

(d)  "Cancellation".--"Cancellation" occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of "termination" except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.

13c2106v

 

Cross References.  Section 2106 is referred to in sections 2103, 2A103, 7102, 9102 of this title.

13c2107s

§ 2107.  Goods to be severed from realty: recording.

(a)  Minerals and structures.--A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this division if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.

(b)  Other property severable without material harm.--A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (a) or of timber to be cut is a contract for the sale of goods within this division whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.

(c)  Recording.--The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the rights of the buyer under the contract for sale.

13c2107v

(Nov. 26, 1982, P.L.696, No.201, eff. 180 days)

 

Cross References.  Section 2107 is referred to in section 2105 of this title.

13c2201h

 

 

CHAPTER 22

FORM, FORMATION AND READJUSTMENT

OF CONTRACT

 

Sec.

2201.  Formal requirements; statute of frauds.

2202.  Final written expression: parol or extrinsic evidence.

2203.  Seals inoperative.

2204.  Formation in general.

2205.  Firm offers.

2206.  Offer and acceptance in formation of contract.

2207.  Additional terms in acceptance or confirmation.

2208.  Course of performance or practical construction (Deleted by amendment).

2209.  Modification, rescission and waiver.

2210.  Delegation of performance; assignment of rights.

 

Enactment.  Chapter 22 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

13c2201s

§ 2201.  Formal requirements; statute of frauds.

(a)  General rule.--Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subsection beyond the quantity of goods shown in such writing.

(b)  Writing confirming contract between merchants.--Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (a) against such party unless written notice of objection to its contents is given within ten days after it is received.

(c)  Enforceability of contracts not satisfying general requirements.--A contract which does not satisfy the requirements of subsection (a) but which is valid in other respects is enforceable:

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

(2)  if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

(3)  with respect to goods for which payment has been made and accepted or which have been received and accepted (section 2606).

(d)  Qualified financial contracts.--Subsection (a) does not apply to a qualified financial contract, as defined in section 1206(c)(1) (relating to statute of frauds for kinds of personal property not otherwise covered), if either:

(1)  there is, as provided in section 1206(c)(3), sufficient evidence to indicate that a contract has been made; or

(2)  the parties, by means of a prior or subsequent written contract, have agreed to be bound by the terms of the qualified financial contract from the time they reach agreement (by telephone, by exchange of electronic messages or otherwise) on those terms.

13c2201v

(May 22, 1996, P.L.248, No.44, eff. imd.)

 

1996 Amendment.  Act 44 added subsec. (d). See section 14(c) of Act 44 in the appendix to this title for special provisions relating to applicability to qualified financial contracts.

References in Text.  Section 1206, referred to in this section, was repealed and added by the act of April 16, 2008 (P.L.57, No.13). Present section 1206 relates to presumptions.

Cross References.  Section 2201 is referred to in sections 2209, 2326 of this title.

13c2202s

§ 2202.  Final written expression: parol or extrinsic evidence.

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:

(1)  by course of performance, course of dealing or usage of trade (section 1303); and

(2)  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.

13c2202v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

Cross References.  Section 2202 is referred to in sections 2316, 2326 of this title.

13c2203s

§ 2203.  Seals inoperative.

The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer.

13c2204s

§ 2204.  Formation in general.

(a)  General rule.--A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(b)  Effect of undetermined time of making agreement.--An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(c)  Effect of open terms.--Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

13c2204v

 

Cross References.  Section 2204 is referred to in section 2311 of this title.

13c2205s

§ 2205.  Firm offers.

An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that 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 such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

13c2206s

§ 2206.  Offer and acceptance in formation of contract.

(a)  General rule.--Unless otherwise unambiguously indicated by the language or circumstances:

(1)  an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; and

(2)  an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

(b)  Beginning requested performance without notice.--Where 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.

13c2207s

§ 2207.  Additional terms in acceptance or confirmation.

(a)  General rule.--A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(b)  Effect on contract.--The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(1)  the offer expressly limits acceptance to the terms of the offer;

(2)  they materially alter it; or

(3)  notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(c)  Conduct establishing contract.--Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this title.

13c2208s

§ 2208.  Course of performance or practical construction (Deleted by amendment).

13c2208v

 

2008 Amendment.  Section 2208 was deleted by amendment April 16, 2008, P.L.57, No.13, effective in 60 days.

13c2209s

§ 2209.  Modification, rescission and waiver.

(a)  Consideration unnecessary for modification.--An agreement modifying a contract within this division needs no consideration to be binding.

(b)  Writing excluding modification or rescission.--A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

(c)  Compliance of modified contract with statute of frauds.--The requirements of section 2201 (relating to formal requirements; statute of frauds) must be satisfied if the contract as modified is within its provisions.

(d)  Ineffective modification or rescission as waiver.--Although an attempt at modification or rescission does not satisfy the requirements of subsection (b) or (c) it can operate as a waiver.

(e)  Retraction of waiver.--A party who has made a waiver affecting an executory portion of the 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.

13c2209v

 

Cross References.  Section 2209 is referred to in section 1303 of this title.

13c2210s

§ 2210.  Delegation of performance; assignment of rights.

(a)  Delegation of performance.--A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

(b)  Assignment of rights.--Except as otherwise provided in section 9406 (relating to discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles and promissory notes ineffective), unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of due performance by the assignor of his entire obligation can be assigned despite agreement otherwise.

(c)  Effect of security interest.--The creation, attachment, perfection or enforcement of a security interest in the seller's interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer's chance of obtaining return performance within the purview of subsection (b) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection and enforcement of the security interest remain effective, but:

(1)  the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer; and

(2)  a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.

(d)  Assignment prohibition limited to performance.--Unless the circumstances indicate the contrary, a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the performance of the assignor.

(e)  Effect and enforceability of general assignment.--An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.

(f)  Security for assignment delegating performance.--The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (section 2609).

13c2210v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended subsec. (b), relettered subsec. (c) to subsec. (d), subsec. (d) to subsec. (e) and subsec. (e) to subsec. (f) and added a new subsec. (c).

13c2301h

 

 

CHAPTER 23

GENERAL OBLIGATION AND CONSTRUCTION

OF CONTRACT

 

Sec.

2301.  General obligations of parties.

2302.  Unconscionable contract or clause.

2303.  Allocation or division of risks.

2304.  Price payable in money, goods, realty or otherwise.

2305.  Open price term.

2306.  Output, requirements and exclusive dealings.

2307.  Delivery in single lot or several lots.

2308.  Absence of specified place for delivery.

2309.  Absence of specific time provisions; notice of termination.

2310.  Open time for payment or running of credit; authority to ship under reservation.

2311.  Options and cooperation respecting performance.

2312.  Warranty of title and against infringement; obligation of buyer against infringement.

2313.  Express warranties by affirmation, promise, description or sample.

2314.  Implied warranty: merchantability; usage of trade.

2315.  Implied warranty: fitness for particular purpose.

2316.  Exclusion or modification of warranties.

2317.  Cumulation and conflict of warranties express or implied.

2318.  Third party beneficiaries of warranties express or implied.

2319.  F.O.B. and F.A.S. terms.

2320.  C.I.F. and C. & F. terms.

2321.  C.I.F. or C. & F.: "net landed weights"; "payment on arrival"; warranty of condition on arrival.

2322.  Delivery "ex-ship."

2323.  Form of bill of lading required in overseas shipment; "overseas."

2324.  "No arrival, no sale" term.

2325.  "Letter of credit" term; "confirmed credit."

2326.  Sale on approval and sale or return; rights of creditors.

2327.  Special incidents of sale on approval and sale or return.

2328.  Sale by auction.

 

Enactment.  Chapter 23 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

13c2301s

§ 2301.  General obligations of parties.

The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.

13c2302s

§ 2302.  Unconscionable contract or clause.

(a)  Finding and authority of court.--If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made, the court may:

(1)  refuse to enforce the contract;

(2)  enforce the remainder of the contract without the unconscionable clause; or

(3)  so limit the application of any unconscionable clause as to avoid any unconscionable result.

(b)  Evidence by parties.--When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

13c2303s

§ 2303.  Allocation or division of risks.

Where this division allocates a risk or a burden as between the parties "unless otherwise agreed," the agreement may not only shift the allocation but may also divide the risk or burden.

13c2304s

§ 2304.  Price payable in money, goods, realty or otherwise.

(a)  General rule.--The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.

(b)  Realty.--Even though all or part of the price is payable in an interest in realty the transfer of the goods and the obligations of the seller with reference to them are subject to this division, but not the transfer of the interest in realty or the obligations of the transferor in connection therewith.

13c2305s

§ 2305.  Open price term.

(a)  General rule.--The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if:

(1)  nothing is said as to price;

(2)  the price is left to be agreed by the parties and they fail to agree; or

(3)  the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.

(b)  Price to be fixed by party.--A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.

(c)  Price not fixed through fault of party.--When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.

(d)  Intent not to be bound without established price.--Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

13c2306s

§ 2306.  Output, requirements and exclusive dealings.

(a)  Quantity measured by output or requirements.--A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

(b)  Obligation of parties in exclusive dealings.--A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

13c2307s

§ 2307.  Delivery in single lot or several lots.

Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot.

13c2308s

§ 2308.  Absence of specified place for delivery.

Unless otherwise agreed:

(1)  the place for delivery of goods is the place of business of the seller or if he has none his residence; but

(2)  in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and

(3)  documents of title may be delivered through customary banking channels.

13c2309s

§ 2309.  Absence of specific time provisions; notice of termination.

(a)  Shipment, delivery or other action.--The time for shipment or delivery or any other action under a contract if not provided in this division or agreed upon shall be a reasonable time.

(b)  Duration of provision for successive performances.--Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.

(c)  Notice of termination.--Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.

13c2310s

§ 2310.  Open time for payment or running of credit; authority to ship under reservation.

Unless otherwise agreed:

(1)  Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery.

(2)  If the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (section 2513).

(3)  If delivery is authorized and made by way of documents of title otherwise than by paragraph (2), then payment is due, regardless of where the goods are to be received:

(i)  at the time and place at which the buyer is to receive delivery of the tangible documents; or

(ii)  at the time the buyer is to receive delivery of the electronic documents and at the seller's place of business or, if none, at the seller's residence.

(4)  Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.

13c2310v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended par. (3).

13c2311s

§ 2311.  Options and cooperation respecting performance.

(a)  Specifying particulars of performance.--An agreement for sale which is otherwise sufficiently definite (section 2204(c)) to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.

(b)  Specifying assortment of goods and shipping arrangements.--Unless otherwise agreed specifications relating to assortment of the goods are at the option of the buyer and except as otherwise provided in section 2319(a)(3) and (c) (relating to F.O.B. and F.A.S. terms) specifications or arrangements relating to shipment are at the option of the seller.

(c)  Remedies for failure to specify or cooperate.--Where such specification would materially affect the performance of the other party but is not seasonably made or where the cooperation of one party is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies:

(1)  is excused for any resulting delay in his own performance; and

(2)  may also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.

13c2311v

 

Cross References.  Section 2311 is referred to in section 2319 of this title.

13c2312s

§ 2312.  Warranty of title and against infringement; obligation of buyer against infringement.

(a)  General rule.--Subject to subsection (b) there is in a contract for sale a warranty by the seller that:

(1)  the title conveyed shall be good, and its transfer rightful; and

(2)  the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.

(b)  Exclusion or modification of warranty.--A warranty under subsection (a) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.

(c)  Warranty of merchant regularly dealing in goods.--Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

13c2312v

 

Cross References.  Section 2312 is referred to in section 2607 of this title.

13c2313s

§ 2313.  Express warranties by affirmation, promise, description or sample.

(a)  General rule.--Express warranties by the seller are created as follows:

(1)  Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(2)  Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

(3)  Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

(b)  Formal words or specific intent unnecessary.--It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he 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 opinion of the seller or commendation of the goods does not create a warranty.

13c2314s

§ 2314.  Implied warranty: merchantability; usage of trade.

(a)  Sale by merchant.--Unless excluded or modified (section 2316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

(b)  Merchantability standards for goods.--Goods to be merchantable must be at least such as:

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

(2)  in the case of fungible goods, are of fair average quality within the description;

(3)  are fit for the ordinary purposes for which such goods are used;

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

(5)  are adequately contained, packaged, and labeled as the agreement may require; and

(6)  conform to the promises or affirmations of fact made on the container or label if any.

(c)  Course of dealing or usage of trade.--Unless excluded or modified (section 2316) other implied warranties may arise from course of dealing or usage of trade.

13c2315s

§ 2315.  Implied warranty: fitness for particular purpose.

Where the seller at the time of contracting has reason to know:

(1)  any particular purpose for which the goods are required; and

(2)  that the buyer is relying on the skill or judgment of the seller to select or furnish suitable goods;

there is unless excluded or modified under section 2316 (relating to exclusion or modification of warranties) an implied warranty that the goods shall be fit for such purpose.

13c2316s

§ 2316.  Exclusion or modification of warranties.

(a)  Construction of words or conduct limiting warranties.--Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this division on parol or extrinsic evidence (section 2202) negation or limitation is inoperative to the extent that such construction is unreasonable.

(b)  Implied warranties of merchantability and fitness.--Subject to subsection (c), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

(c)  Implied warranties in general.--Notwithstanding subsection (b):

(1)  Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is," "with all faults" or other language which in common understanding calls the attention of the buyer to the exclusion of warranties and makes plain that there is no implied warranty.

(2)  When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him.

(3)  An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

(d)  Limitation of remedies for breach of warranty.--Remedies for breach of warranty can be limited in accordance with the provisions of this division on liquidation or limitation of damages (section 2718) and on contractual modification of remedy (section 2719).

13c2316v

 

Cross References.  Section 2316 is referred to in sections 2314, 2315 of this title.

13c2317s

§ 2317.  Cumulation and conflict of warranties express or implied.

Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:

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

(2)  A sample from an existing bulk displaces inconsistent general language of description.

(3)  Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

13c2318s

§ 2318.  Third party beneficiaries of warranties express or implied.

The warranty of a seller whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his 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. A seller may not exclude or limit the operation of this section.

13c2319s

§ 2319.  F.O.B. and F.A.S. terms.

(a)  Definition of F.O.B.--Unless otherwise agreed the term F.O.B. (which means "free on board") at a named place, even though used only in connection with the stated price, is a delivery term under which:

(1)  When the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this division (section 2504 (relating to shipment by seller)) and bear the expense and risk of putting them into the possession of the carrier.

(2)  When the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this division (section 2503 (relating to manner of tender of delivery by seller)).

(3)  When under either paragraph (1) or (2) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this division on the form of bill of lading (section 2323).

(b)  Definition of F.A.S.--Unless otherwise agreed the term F.A.S. vessel (which means "free alongside") at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must:

(1)  at his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and

(2)  obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.

(c)  Duty of buyer to give instructions.--Unless otherwise agreed in any case falling within subsection (a)(1) or (3) or subsection (b) the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this division (section 2311 (relating to options and cooperation respecting performance)). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.

(d)  Tender of documents and payment.--Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

13c2319v

 

Cross References.  Section 2319 is referred to in section 2311 of this title.

13c2320s

§ 2320.  C.I.F. and C. & F. terms.

(a)  Definitions.--The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. & F. or C.F. means that the price so includes cost and freight to the named destination.

(b)  Effect of C.I.F. destination term.--Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at his own expense and risk to do the following:

(1)  Put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination.

(2)  Load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for.

(3)  Obtain a policy or certificate of insurance, including any war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for any such war risk insurance.

(4)  Prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract.

(5)  Forward and tender with commercial promptness all the documents in due form and with any indorsement necessary to perfect the rights of the buyer.

(c)  Effect of C. & F. term.--Unless otherwise agreed the term C. & F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance.

(d)  Tender of documents and payment.--Under the term C.I.F. or C. & F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

13c2321s

§ 2321.  C.I.F. or C. & F.: "net landed weights"; "payment on arrival"; warranty of condition on arrival.

Under a contract containing a term C.I.F. or C. & F.:

(1)  Where the price is based on or is to be adjusted according to "net landed weights," "delivered weights," "out turn" quantity or quality or the like, unless otherwise agreed the seller must reasonably estimate the price. The payment due on tender of the documents called for by the contract is the amount so estimated, but after final adjustment of the price a settlement must be made with commercial promptness.

(2)  An agreement described in paragraph (1) or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation but has no effect on the place or time of identification to the contract for sale or delivery or on the passing of the risk of loss.

(3)  Unless otherwise agreed where the contract provides for payment on or after arrival of the goods the seller must before payment allow such preliminary inspection as is feasible; but if the goods are lost delivery of the documents and payment are due when the goods should have arrived.

13c2321v

 

Cross References.  Section 2321 is referred to in section 2513 of this title.

13c2322s

§ 2322.  Delivery "ex-ship."

(a)  Definition.--Unless otherwise agreed a term for delivery of goods "ex-ship" (which means from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are usually discharged.

(b)  Effect.--Under such a term unless otherwise agreed:

(1)  the seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods; and

(2)  the risk of loss does not pass to the buyer until the goods leave the tackle of the ship or are otherwise properly unloaded.

13c2323s

§ 2323.  Form of bill of lading required in overseas shipment; "overseas."

(a)  General rule.--Where the contract contemplates overseas shipment and contains a term C.I.F., C. & F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. & F., received for shipment.

(b)  Bill in set of parts.--Where in a case within subsection (a) a tangible bill of lading has been issued in a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set; otherwise only one part of the bill of lading need be tendered. Even if the agreement expressly requires a full set:

(1)  due tender of a single part is acceptable within the provisions of this division on cure of improper delivery (section 2508(a)); and

(2)  even though the full set is demanded, if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate.

(c)  Definition of "overseas".--A shipment by water or by air or a contract contemplating such shipment is "overseas" insofar as by usage of trade or agreement it is subject to the commercial, financing or shipping practices characteristic of international deep water commerce.

13c2323v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b).

Cross References.  Section 2323 is referred to in sections 2103, 2319, 2503 of this title.

13c2324s

§ 2324.  "No arrival, no sale" term.

Under a term "no arrival, no sale" or terms of like meaning, unless otherwise agreed:

(1)  the seller must properly ship conforming goods and if they arrive by any means he must tender them on arrival but assumes no obligation that the goods will arrive unless he has caused the non-arrival; and

(2)  where without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time, the buyer may proceed as if there had been casualty to identified goods (section 2613).

13c2324v

 

Cross References.  Section 2324 is referred to in section 2613 of this title.

13c2325s

§ 2325.  "Letter of credit" term; "confirmed credit."

(a)  Failure to furnish letter.--Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.

(b)  Effect of delivering letter.--The delivery to seller of a proper letter of credit suspends the obligation of the buyer to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from him.

(c)  Definitions.--Unless otherwise agreed the term "letter of credit" or "banker's credit" in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, where the shipment is overseas, of good international repute. The term "confirmed credit" means that the credit must also carry the direct obligation of such an agency which does business in the financial market of the seller.

13c2325v

 

Cross References.  Section 2325 is referred to in section 2103 of this title.

13c2326s

§ 2326.  Sale on approval and sale or return; rights of creditors.

(a)  Definitions.--Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is:

(1)  a "sale on approval" if the goods are delivered primarily for use; and

(2)  a "sale or return" if the goods are delivered primarily for resale.

(b)  Rights of creditors of buyer generally.--Goods held on approval are not subject to the claims of the creditors of the buyer until acceptance; goods held on sale or return are subject to such claims while in the possession of the buyer.

(c)  Treatment of "or return" term.--Any "or return" term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this division (section 2201) and as contradicting the sale aspect of the contract within the provisions of this division on parol or extrinsic evidence (section 2202).

13c2326v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended the section heading and subsec. (b), deleted subsec. (c) and relettered subsec. (d) to subsec. (c).

Cross References.  Section 2326 is referred to in sections 2103, 2A103 of this title.

13c2327s

§ 2327.  Special incidents of sale on approval and sale or return.

(a)  Sale on approval.--Under a sale on approval unless otherwise agreed:

(1)  Although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance.

(2)  Use of the goods consistent with the purpose of trial is not acceptance but failure seasonably to notify the seller of election to return the goods is acceptance, and if the goods conform to the contract acceptance of any part is acceptance of the whole.

(3)  After due notification of election to return, the return is at the risk and expense of the seller but a merchant buyer must follow any reasonable instructions.

(b)  Sale or return.--Under a sale or return unless otherwise agreed:

(1)  The option to return extends to the whole or any commercial unit of the goods while in substantially their original condition, but must be exercised seasonably.

(2)  The return is at the risk and expense of the buyer.

13c2327v

 

Cross References.  Section 2327 is referred to in section 2509 of this title.

13c2328s

§ 2328.  Sale by auction.

(a)  Sale in lots.--In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.

(b)  When sale complete.--A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.

(c)  With or without reserve.--Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract his bid until the announcement by the auctioneer of completion of the sale, but the retraction by a bidder does not revive any previous bid.

(d)  Bidding by or for seller.--If the auctioneer knowingly receives a bid on the behalf of the seller or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.

13c2401h

 

 

CHAPTER 24

TITLE, CREDITORS AND GOOD FAITH PURCHASERS

 

Sec.

2401.  Passing of title; reservation for security; limited application of section.

2402.  Rights of creditors of seller against sold goods.

2403.  Power to transfer; good faith purchase of goods; "entrusting."

 

Enactment.  Chapter 24 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

Cross References.  Chapter 24 is referred to in section 4352 of Title 23 (Domestic Relations).

13c2401s

§ 2401.  Passing of title; reservation for security; limited application of section.

Each provision of this division with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this division and matters concerning title become material the following rules apply:

(1)  Identification of goods and reservation of title.--Title to goods cannot pass under a contract for sale prior to their identification to the contract (section 2501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this title. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of Division 9 (relating to secured transactions), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.

(2)  Place of delivery of goods.--Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place, and in particular and despite any reservation of a security interest by the bill of lading:

(i)  if the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but

(ii)  if the contract requires delivery at destination, title passes on tender there.

(3)  Delivery without moving goods.--Unless otherwise explicitly agreed where delivery is to be made without moving the goods:

(i)  if the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents and, if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or

(ii)  if the goods are at the time of contracting already identified and no documents are to be delivered, title passes at the time and place of contracting.

(4)  Revesting of title upon rejection of goods or revocation of acceptance.--A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a "sale."

13c2401v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended par. (3)(i).

Cross References.  Section 2401 is referred to in sections 1201, 2106, 9102, 9109, 9110, 9309 of this title.

13c2402s

§ 2402.  Rights of creditors of seller against sold goods.

(a)  Priority of buyer over unsecured creditors.--Except as provided in subsections (b) and (c), rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the rights of the buyer to recover the goods under this division (section 2502 (relating to right of buyer to goods on insolvency of seller) and section 2716 (relating to right of buyer to specific performance or replevin)).

(b)  Right to void sale upon fraudulent retention of goods.--A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.

(c)  Other rights of creditors unimpaired.--Nothing in this division shall be deemed to impair the rights of creditors of the seller:

(1)  under the provisions of Division 9 (relating to secured transactions); or

(2)  where identification to the contract or delivery is made 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 is made under circumstances which under any rule of law of the state where the goods are situated would apart from this division constitute the transaction a fraudulent transfer or voidable preference.

13c2402v

 

Cross References.  Section 2402 is referred to in sections 1301, 7504 of this title.

13c2403s

§ 2403.  Power to transfer; good faith purchase of goods; "entrusting."

(a)  Transfer of title.--A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though:

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

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

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

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

(b)  Transfer by merchant entrusted with possession of goods.--Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.

(c)  Definition of "entrusting".--"Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the disposition of the goods by the possessor has been such as to be larcenous under the criminal law.

(d)  Rights of other purchasers and lien creditors.--The rights of other purchasers of goods and of lien creditors are governed by Division 7 (relating to documents of title) and Division 9 (relating to secured transactions).

13c2403v

(July 9, 1992, P.L.507, No.97, eff. one year)

 

1992 Amendment.  Act 97 amended subsec. (d).

Cross References.  Section 2403 is referred to in sections 2103, 2702, 2A103, 7209, 7503, 9315 of this title.

13c2501h

 

 

CHAPTER 25

PERFORMANCE

 

Sec.

2501.  Insurable interest in goods; manner of identification of goods.

2502.  Right of buyer to goods on repudiation, failure to deliver or insolvency of seller.

2503.  Manner of tender of delivery by seller.

2504.  Shipment by seller.

2505.  Shipment by seller under reservation.

2506.  Rights of financing agency.

2507.  Effect of tender by seller; delivery on condition.

2508.  Cure by seller of improper tender or delivery; replacement.

2509.  Risk of loss in absence of breach.

2510.  Effect of breach on risk of loss.

2511.  Tender of payment by buyer; payment by check.

2512.  Payment by buyer before inspection.

2513.  Right of buyer to inspection of goods.

2514.  When documents deliverable on acceptance; when on payment.

2515.  Preserving evidence of goods in dispute.

 

Enactment.  Chapter 25 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

13c2501s

§ 2501.  Insurable interest in goods; manner of identification of goods.

(a)  General rule.--The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs as follows:

(1)  When the contract is made if it is for the sale of goods already existing and identified.

(2)  If the contract is for the sale of future goods other than those described in paragraph (3), when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers.

(3)  When the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within 12 months after contracting or for the sale of crops to be harvested within 12 months or the next normal harvest season after contracting whichever is longer.

(b)  Duration of insurable interest and substitution of goods.--The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him and where the identification is by the seller alone he may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.

(c)  Other insurable interests unimpaired.--Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.

13c2501v

 

Cross References.  Section 2501 is referred to in sections 2103, 2401, 2502 of this title.

13c2502s

§ 2502.  Right of buyer to goods on repudiation, failure to deliver or insolvency of seller.

(a)  General rule.--Subject to subsections (b) and (c) and even though the goods have not been shipped a buyer who has paid a part or all of the price of goods in which he has a special property under the provisions of section 2501 (relating to insurable interest in goods; manner of identification of goods) may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:

(1)  in the case of goods bought for personal, family or household purposes, the seller repudiates or fails to deliver as required by the contract; or

(2)  in all cases, the seller becomes insolvent within ten days after receipt of the first installment on their price.

(b)  Vesting.--The buyer's right to recover the goods under subsection (a)(1) vests upon acquisition of a special property even if the seller had not then repudiated or failed to deliver.

(c)  Identification made by buyer.--If the identification creating his special property has been made by the buyer he acquires the right to recover the goods only if they conform to the contract for sale.

13c2502v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended the section heading and subsec. (a), relettered former subsec. (b) to subsec. (c) and added a new subsec. (b).

Cross References.  Section 2502 is referred to in sections 2402, 2711 of this title.

13c2503s

§ 2503.  Manner of tender of delivery by seller.

(a)  General rule.--Tender of delivery requires that the seller put and hold conforming goods at the disposition of the buyer and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this division, and in particular:

(1)  tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but

(2)  unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.

(b)  Delivery at particular destination not required.--Where the case is within section 2504 (relating to shipment by seller) tender requires that the seller comply with its provisions.

(c)  Delivery at particular destination required.--Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (a) and also in any appropriate case tender documents as described in subsections (d) and (e).

(d)  Goods in possession of bailee and deliverable without being moved.--Where goods are in the possession of a bailee and are to be delivered without being moved:

(1)  tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the right of the buyer to possession of the goods; but

(2)  tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in Division 9 (relating to secured transactions) receipt by the bailee of notification of the rights of the buyer fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.

(e)  Form and manner of delivering documents.--Where the contract requires the seller to deliver documents:

(1)  he must tender all such documents in correct form, except as provided in this division with respect to bills of lading in a set (section 2323(b)); and

(2)  tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.

13c2503v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsecs. (d)(2) and (e)(2).

Cross References.  Section 2503 is referred to in sections 2319, 2509 of this title.

13c2504s

§ 2504.  Shipment by seller.

Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination then unless otherwise agreed he must:

(1)  put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case;

(2)  obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and

(3)  promptly notify the buyer of the shipment.

Failure to notify the buyer under paragraph (3) or to make a proper contract under paragraph (1) is a ground for rejection only if material delay or loss ensues.

13c2504v

 

Cross References.  Section 2504 is referred to in sections 2319, 2503, 2505 of this title.

13c2505s

§ 2505.  Shipment by seller under reservation.

(a)  General rule.--Where the seller has identified goods to the contract by or before shipment:

(1)  His procurement of a negotiable bill of lading to his own order or otherwise reserves in him a security interest in the goods. His procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the expectation of the seller of transferring that interest to the person named.

(2)  A nonnegotiable bill of lading to himself or his nominee reserves possession of the goods as security, but except in a case of conditional delivery (section 2507(b)) a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.

(b)  Shipment in violation of contract.--When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within section 2504 (relating to shipment by seller) but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the powers of the seller as a holder of a negotiable document of title.

13c2505v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsecs. (a)(2) and (b).

Cross References.  Section 2505 is referred to in sections 1201, 2509, 9102, 9109, 9110, 9309 of this title.

13c2506s

§ 2506.  Rights of financing agency.

(a)  General rule.--A financing agency by paying or purchasing for value a draft which relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and any document of title securing it any rights of the shipper in the goods including the right to stop delivery and the right of the shipper to have the draft honored by the buyer.

(b)  Right to reimbursement unimpaired by latent defect.--The right to reimbursement of a financing agency which has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular.

13c2506v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b).

13c2507s

§ 2507.  Effect of tender by seller; delivery on condition.

(a)  Effect of tender by seller.--Tender of delivery is a condition to the duty of the buyer to accept the goods, and unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.

(b)  Delivery on condition.--Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.

13c2507v

 

Cross References.  Section 2507 is referred to in section 2505 of this title.

13c2508s

§ 2508.  Cure by seller of improper tender or delivery; replacement.

(a)  General rule.--Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.

(b)  Rejection of tender which seller believed acceptable.--Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

13c2508v

 

Cross References.  Section 2508 is referred to in section 2323 of this title.

13c2509s

§ 2509.  Risk of loss in absence of breach.

(a)  Seller to ship by carrier.--Where the contract requires or authorizes the seller to ship the goods by carrier:

(1)  if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (section 2505); but

(2)  if it does require him to deliver them 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 buyer when the goods are there duly so tendered as to enable the buyer to take delivery.

(b)  Goods held by bailee.--Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:

(1)  on his receipt, possession or control of a negotiable document of title covering the goods;

(2)  on acknowledgment by the bailee of the right of the buyer to possession of the goods; or

(3)  after his receipt, possession or control of a nonnegotiable document of title or other direction to deliver in a record, as provided in section 2503(d)(2) (relating to manner of tender of delivery by seller).

(c)  All other cases.--In any case not within subsection (a) or (b), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise on tender of delivery.

(d)  Limitations on operation of section.--The provisions of this section are subject to contrary agreement of the parties and to the provisions of this division on sale on approval (section 2327) and on effect of breach on risk of loss (section 2510).

13c2509v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b)(1) and (3).

13c2510s

§ 2510.  Effect of breach on risk of loss.

(a)  Tender of nonconforming goods.--Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.

(b)  Revocation of acceptance by buyer.--Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.

(c)  Repudiation or breach by buyer.--Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.

13c2510v

 

Cross References.  Section 2510 is referred to in section 2509 of this title.

13c2511s

§ 2511.  Tender of payment by buyer; payment by check.

(a)  Tender of payment condition to delivery.--Unless otherwise agreed tender of payment is a condition to the duty of the seller to tender and complete any delivery.

(b)  Manner of tender of payment.--Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.

(c)  Payment by check.--Subject to the provisions of this title on the effect of an instrument on an obligation (section 3310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.

13c2511v

(July 9, 1992, P.L.507, No.97, eff. one year)

 

1992 Amendment.  Act 97 amended subsec. (c).

13c2512s

§ 2512.  Payment by buyer before inspection.

(a)  General rule.--Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless:

(1)  the nonconformity appears without inspection; or

(2)  despite tender of the required documents the circumstances would justify injunction against honor under this title, including section 5109(b) (relating to conditions for injunction).

(b)  Effect of payment on rights of buyer.--Payment pursuant to subsection (a) does not constitute an acceptance of goods or impair the right of the buyer to inspect or any of his remedies.

13c2512v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended subsec. (a)(2).

13c2513s

§ 2513.  Right of buyer to inspection of goods.

(a)  General rule.--Unless otherwise agreed and subject to subsection (c), where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner. When the seller is required or authorized to send the goods to the buyer, the inspection may be after their arrival.

(b)  Expenses of inspection.--Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.

(c)  Limitation on right of inspection prior to payment.--Unless otherwise agreed and subject to the provisions of this division on C.I.F. contracts (section 2321(3)), the buyer is not entitled to inspect the goods before payment of the price when the contract provides:

(1)  for delivery "C.O.D." or on other like terms; or

(2)  for payment against documents of title, except where such payment is due only after the goods are to become available for inspection.

(d)  Agreement as to place and method of inspection.--A place or method of inspection fixed by the parties is presumed to be exclusive but unless otherwise expressly agreed it does not postpone identification or shift the place for delivery or for passing the risk of loss. If compliance becomes impossible, inspection shall be as provided in this section unless the place or method fixed was clearly intended as an indispensable condition failure of which avoids the contract.

13c2513v

 

Cross References.  Section 2513 is referred to in section 2310 of this title.

13c2514s

§ 2514.  When documents deliverable on acceptance; when on payment.

Unless otherwise agreed documents against which a draft is drawn are to be delivered to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise only on payment.

13c2515s

§ 2515.  Preserving evidence of goods in dispute.

In furtherance of the adjustment of any claim or dispute:

(1)  either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect, test and sample the goods including such of them as may be in the possession or control of the other; and

(2)  the parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment.

13c2601h

 

 

CHAPTER 26

BREACH, REPUDIATION AND EXCUSE

 

Sec.

2601.  Rights of buyer on improper delivery.

2602.  Manner and effect of rightful rejection.

2603.  Duties of merchant buyer as to rightfully rejected goods.

2604.  Options of buyer as to salvage of rightfully rejected goods.

2605.  Waiver of objections of buyer by failure to particularize.

2606.  What constitutes acceptance of goods.

2607.  Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.

2608.  Revocation of acceptance in whole or in part.

2609.  Right to adequate assurance of performance.

2610.  Anticipatory repudiation.

2611.  Retraction of anticipatory repudiation.

2612.  "Installment contract"; breach.

2613.  Casualty to identified goods.

2614.  Substituted performance.

2615.  Excuse by failure of presupposed conditions.

2616.  Procedure on notice claiming excuse.

 

Enactment.  Chapter 26 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

13c2601s

§ 2601.  Rights of buyer on improper delivery.

Subject to the provisions of this division on breach in installment contracts (section 2612) and unless otherwise agreed under the sections on contractual limitations of remedy (sections 2718 and 2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:

(1)  reject the whole;

(2)  accept the whole; or

(3)  accept any commercial unit or units and reject the rest.

13c2602s

§ 2602.  Manner and effect of rightful rejection.

(a)  Time and notice of rejection.--Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

(b)  Duties of buyer after rightful rejection.--Subject to the provisions of sections 2603 (relating to duties of merchant buyer as to rightfully rejected goods) and 2604 (relating to options of buyer as to salvage of rightfully rejected goods):

(1)  after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and

(2)  if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this division (section 2711(c) (relating to security interest of buyer in rejected goods)), he is under a duty after rejection to hold them with reasonable care at the disposition of the seller for a time sufficient to permit the seller to remove them; but

(3)  the buyer has no further obligations with regard to goods rightfully rejected.

(c)  Rights of seller after wrongful rejection.--The rights of the seller with respect to goods wrongfully rejected are governed by the provisions of this division on remedies of seller in general (section 2703).

13c2602v

 

Cross References.  Section 2602 is referred to in section 2606 of this title.

13c2603s

§ 2603.  Duties of merchant buyer as to rightfully rejected goods.

(a)  General rule.--Subject to any security interest in the buyer (section 2711(c)), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the account of the seller if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

(b)  Reimbursement for expenses and commission.--When the buyer sells goods under subsection (a), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding 10% on the gross proceeds.

(c)  Good faith conduct.--In complying with this section the buyer is held only to good faith and good faith conduct under this section is neither acceptance nor conversion nor the basis of an action for damages.

13c2603v

 

Cross References.  Section 2603 is referred to in sections 2602, 2604 of this title.

13c2604s

§ 2604.  Options of buyer as to salvage of rightfully rejected goods.

Subject to the provisions on perishables in section 2603 (relating to duties of merchant buyer as to rightfully rejected goods) if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the account of the seller or reship them to him or resell them for the account of the seller with reimbursement as provided in section 2603. Such action is not acceptance or conversion.

13c2604v

 

Cross References.  Section 2604 is referred to in section 2602 of this title.

13c2605s

§ 2605.  Waiver of objections of buyer by failure to particularize.

(a)  General rule.--The failure of the buyer to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach:

(1)  where the seller could have cured it if stated seasonably; or

(2)  between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.

(b)  Payment against defective documents.--Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.

13c2605v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b).

13c2606s

§ 2606.  What constitutes acceptance of goods.

(a)  General rule.--Acceptance of goods occurs when the buyer:

(1)  after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity;

(2)  fails to make an effective rejection (section 2602(a)), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or

(3)  does any act inconsistent with the ownership of the seller; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.

(b)  Part of commercial unit.--Acceptance of a part of any commercial unit is acceptance of that entire unit.

13c2606v

 

Cross References.  Section 2606 is referred to in sections 2103, 2201 of this title.

13c2607s

§ 2607.  Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.

(a)  Payment for accepted goods.--The buyer must pay at the contract rate for any goods accepted.

(b)  Effect of acceptance on remedies for breach.--Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this division for nonconformity.

(c)  Notice of breach.--Where a tender has been accepted:

(1)  the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and

(2)  if the claim is one for infringement or the like (section 2312(c)) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

(d)  Burden of establishing breach.--The burden is on the buyer to establish any breach with respect to the goods accepted.

(e)  Notice of litigation to person answerable over.--Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over:

(1)  He may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.

(2)  If the claim is one for infringement or the like (section 2312(c)), the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.

(f)  Obligation of buyer to hold seller harmless.--The provisions of subsections (c), (d) and (e) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (section 2312(c) (relating to warranty of merchant regularly dealing in goods)).

13c2607v

 

Cross References.  Section 2607 is referred to in section 2714 of this title.

13c2608s

§ 2608.  Revocation of acceptance in whole or in part.

(a)  Grounds for revocation.--The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it:

(1)  on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

(2)  without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the assurances of the seller.

(b)  Time and notice of revocation.--Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

(c)  Rights and duties of revoking buyer.--A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

13c2609s

§ 2609.  Right to adequate assurance of performance.

(a)  General rule.--A contract for sale imposes an obligation on each party that the expectation of the other of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

(b)  Reasonableness and adequacy between merchants.--Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

(c)  Effect of acceptance of improper delivery or payment.--Acceptance of any improper delivery or payment does not prejudice the right of the aggrieved party to demand adequate assurance of future performance.

(d)  Effect of failure to provide assurance.--After receipt of a justified demand failure to provide within a reasonable time not exceeding 30 days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

13c2609v

 

Cross References.  Section 2609 is referred to in sections 2210, 2611 of this title.

13c2610s

§ 2610.  Anticipatory repudiation.

When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:

(1)  for a commercially reasonable time await performance by the repudiating party; or

(2)  resort to any remedy for breach (section 2703 or 2711), even though he has notified the repudiating party that he would await performance by the latter and has urged retraction; and

(3)  in either case suspend his own performance or proceed in accordance with the provisions of this division on the right of the seller to identify goods to the contract notwithstanding breach or to salvage unfinished goods (section 2704).

13c2610v

 

Cross References.  Section 2610 is referred to in section 2709 of this title.

13c2611s

§ 2611.  Retraction of anticipatory repudiation.

(a)  When allowable.--Until the next performance is due by the repudiating party he can retract his repudiation unless the aggrieved party has since the repudiation cancelled or materially changed his position or otherwise indicated that he considers the repudiation final.

(b)  Method.--Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this division (section 2609).

(c)  Effect on contract rights.--Retraction reinstates the rights of the repudiating party under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

13c2612s

§ 2612.  "Installment contract"; breach.

(a)  Definition of "installment contract".--An "installment contract" is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause "each delivery is a separate contract" or its equivalent.

(b)  Right to reject nonconforming installment.--The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (c) and the seller gives adequate assurance of its cure the buyer must accept that installment.

(c)  Breach.--Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

13c2612v

 

Cross References.  Section 2612 is referred to in sections 2103, 2601, 2616, 2703, 2711 of this title.

13c2613s

§ 2613.  Casualty to identified goods.

Where the contract requires for its performance goods identified when the contract is made and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a "no arrival, no sale" term (section 2324) then:

(1)  if the loss is total the contract is avoided; and

(2)  if the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided, or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.

13c2613v

 

Cross References.  Section 2613 is referred to in section 2324 of this title.

13c2614s

§ 2614.  Substituted performance.

(a)  Manner of delivery.--Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.

(b)  Manner of payment.--If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the obligation of the buyer unless the regulation is discriminatory, oppressive or predatory.

13c2614v

 

Cross References.  Section 2614 is referred to in section 2615 of this title.

13c2615s

§ 2615.  Excuse by failure of presupposed conditions.

Except so far as a seller may have assumed a greater obligation and subject to section 2614 (relating to substituted performance):

(1)  Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (2) and (3) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

(2)  Where the causes mentioned in paragraph (1) affect only a part of the capacity of the seller to perform, he must allocate production and deliveries among his customers, but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.

(3)  The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under paragraph (2), of the estimated quota thus made available for the buyer.

13c2615v

 

Cross References.  Section 2615 is referred to in section 2616 of this title.

13c2616s

§ 2616.  Procedure on notice claiming excuse.

(a)  Right of buyer to terminate or modify contract.--Where the buyer receives notification of a material or indefinite delay or an allocation justified under section 2615 (relating to excuse by failure of presupposed conditions) he may by written notification to the seller as to any delivery concerned, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this division relating to breach of installment contracts (section 2612), then also as to the whole:

(1)  terminate and thereby discharge any unexecuted portion of the contract; or

(2)  modify the contract by agreeing to take his available quota in substitution.

(b)  Time limitation on modification.--If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding 30 days the contract lapses with respect to any deliveries affected.

(c)  Effect of agreement on section.--The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under section 2615.

13c2701h

 

 

CHAPTER 27

REMEDIES

 

Sec.

2701.  Remedies for breach of collateral contracts not impaired.

2702.  Remedies of seller on discovery of insolvency of buyer.

2703.  Remedies of seller in general.

2704.  Right of seller to identify goods to contract notwithstanding breach or to salvage unfinished goods.

2705.  Stoppage by seller of delivery in transit or otherwise.

2706.  Resale by seller including contract for resale.

2707.  "Person in the position of a seller."

2708.  Damages of seller for nonacceptance or repudiation.

2709.  Action for the price.

2710.  Incidental damages of seller.

2711.  Remedies of buyer in general; security interest of buyer in rejected goods.

2712.  "Cover"; procurement by buyer of substitute goods.

2713.  Damages of buyer for nondelivery or repudiation.

2714.  Damages of buyer for breach in regard to accepted goods.

2715.  Incidental and consequential damages of buyer.

2716.  Right of buyer to specific performance or replevin.

2717.  Deduction of damages from price.

2718.  Liquidation or limitation of damages; deposits.

2719.  Contractual modification or limitation of remedy.

2720.  Effect of "cancellation" or "rescission" on claims for antecedent breach.

2721.  Remedies for fraud.

2722.  Who can sue third parties for injury to goods.

2723.  Proof of market price: time and place.

2724.  Admissibility of market quotations.

2725.  Statute of limitations in contracts for sale.

 

Enactment.  Chapter 27 was added November 1, 1979, P.L.255, No.86, effective January 1, 1980.

13c2701s

§ 2701.  Remedies for breach of collateral contracts not impaired.

Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this division.

13c2702s

§ 2702.  Remedies of seller on discovery of insolvency of buyer.

(a)  Right to refuse or stop delivery.--Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract and stop delivery under this division (section 2705).

(b)  Reclamation of goods on credit.--Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the ten-day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer's fraudulent or innocent misrepresentation of solvency or of intent to pay.

(c)  Limitations on right of reclamation.--The right of the seller to reclaim under subsection (b) is subject to the rights of a buyer in ordinary course or other good faith purchaser under this division (section 2403). Successful reclamation of goods excludes all other remedies with respect to them.

13c2702v

(Nov. 26, 1982, P.L.696, No.201, eff. 180 days)

 

Cross References.  Section 2702 is referred to in section 2705 of this title.

13c2703s

§ 2703.  Remedies of seller in general.

Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or on the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (section 2612), then also with respect to the whole undelivered balance, the aggrieved seller may:

(1)  Withhold delivery of such goods.

(2)  Stop delivery by any bailee as provided in section 2705 (relating to stoppage by seller of delivery in transit or otherwise).

(3)  Proceed under section 2704 (relating to right of seller to identify goods to contract notwithstanding breach or to salvage unfinished goods).

(4)  Resell and recover damages as hereafter provided (section 2706 (relating to resale by seller including contract for resale)).

(5)  Recover damages for nonacceptance (section 2708) or in a proper case the price (section 2709).

(6)  Cancel.

13c2703v

 

Cross References.  Section 2703 is referred to in sections 2602, 2610, 2704, 2706 of this title.

13c2704s

§ 2704.  Right of seller to identify goods to contract notwithstanding breach or to salvage unfinished goods.

(a)  Identification and resale of goods.--An aggrieved seller under section 2703 (relating to remedies of seller in general) may:

(1)  Identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control.

(2)  Treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.

(b)  Unfinished goods.--Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.

13c2704v

 

Cross References.  Section 2704 is referred to in sections 2610, 2703 of this title.

13c2705s

§ 2705.  Stoppage by seller of delivery in transit or otherwise.

(a)  General rule.--The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (section 2702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery, or if for any other reason the seller has a right to withhold or reclaim the goods.

(b)  When seller loses right.--As against such buyer the seller may stop delivery until:

(1)  receipt of the goods by the buyer;

(2)  acknowledgment to the buyer by any bailee of the goods, except a carrier, that the bailee holds the goods for the buyer;

(3)  such acknowledgment to the buyer by a carrier by reshipment or as a warehouse; or

(4)  negotiation to the buyer of any negotiable document of title covering the goods.

(c)  Notice and compliance.--

(1)  To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.

(2)  After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.

(3)  If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.

(4)  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.

13c2705v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsecs. (b)(3) and (c)(3).

Cross References.  Section 2705 is referred to in sections 2702, 2703, 2707, 7403, 7504 of this title.

13c2706s

§ 2706.  Resale by seller including contract for resale.

(a)  General rule.--Under the conditions stated in section 2703 (relating to remedies of seller in general), the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this division (section 2710), but less expenses saved in consequence of the breach by the buyer.

(b)  Manner of resale.--Except as otherwise provided in subsection (c) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.

(c)  Notice of private sale.--Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.

(d)  Public sale.--Where the resale is at public sale:

(1)  Only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind.

(2)  It must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale.

(3)  If the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders.

(4)  The seller may buy.

(e)  Rights of good faith purchaser.--A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.

(f)  Accountability for profit.--The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (section 2707), or buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as defined in section 2711(c) (relating to remedies of buyer in general; security interest of buyer in rejected goods).

13c2706v

 

Cross References.  Section 2706 is referred to in sections 2703, 2707, 2711, 2718 of this title.

13c2707s

§ 2707.  "Person in the position of a seller."

(a)  Definition.--A "person in the position of a seller" includes:

(1)  as against a principal an agent who has paid or become responsible for the price of goods on behalf of his principal; or

(2)  anyone who otherwise holds a security interest or other right in goods similar to that of a seller.

(b)  Rights.--A person in the position of a seller may as provided in this division:

(1)  withhold or stop delivery (section 2705);

(2)  resell (section 2706); and

(3)  recover incidental damages (section 2710).

13c2707v

 

Cross References.  Section 2707 is referred to in sections 2103, 2104, 2706 of this title.

13c2708s

§ 2708.  Damages of seller for nonacceptance or repudiation.

(a)  General rule.--Subject to subsection (b) and to the provisions of this division with respect to proof of market price (section 2723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this division (section 2710) but less expenses saved in consequence of the breach by the buyer.

(b)  Exception.--If the measure of damages provided in subsection (a) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this division (section 2710), due allowance for costs reasonably incurred, and due credit for payments or proceeds of resale.

13c2708v

 

Cross References.  Section 2708 is referred to in sections 2703, 2709, 2723 of this title.

13c2709s

§ 2709.  Action for the price.

(a)  When allowable.--When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under section 2710 (relating to incidental damages of seller), the price of:

(1)  goods accepted or conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and

(2)  goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.

(b)  Duties of seller.--Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.

(c)  Remedy if price not allowable.--After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (section 2610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under section 2708 (relating to damages of seller for nonacceptance or repudiation).

13c2709v

 

Cross References.  Section 2709 is referred to in section 2703 of this title.

13c2710s

§ 2710.  Incidental damages of seller.

Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the breach by the buyer, in connection with return or resale of the goods or otherwise resulting from the breach.

13c2710v

 

Cross References.  Section 2710 is referred to in sections 2706, 2707, 2708, 2709 of this title.

13c2711s

§ 2711.  Remedies of buyer in general; security interest of buyer in rejected goods.

(a)  Cancellation and additional remedies.--Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (section 2612 (relating to "installment contract"; breach)), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid:

(1)  "cover" and have damages under section 2712 (relating to "cover"; procurement by buyer of substitute goods) as to all the goods affected whether or not they have been identified to the contract; or

(2)  recover damages for nondelivery as provided in this division (section 2713 (relating to damages of buyer for nondelivery or repudiation)).

(b)  Additional remedies for nondelivery or repudiation.--Where the seller fails to deliver or repudiates the buyer may also:

(1)  if the goods have been identified recover them as provided in this division (section 2502 (relating to right of buyer to goods upon insolvency of seller)); or

(2)  in a proper case obtain specific performance or replevy the goods as provided in this division (section 2716).

(c)  Security interest of buyer in rejected goods.--On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (section 2706).

13c2711v

 

Cross References.  Section 2711 is referred to in sections 2602, 2603, 2610, 2706, 2712, 9102, 9109, 9110, 9309, 9325 of this title.

13c2712s

§ 2712.  "Cover"; procurement by buyer of substitute goods.

(a)  Right and manner of cover.--After a breach within section 2711 (relating to remedies of buyer in general; security interest of buyer in rejected goods) the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.

(b)  Damages recoverable.--The buyer may recover from the seller as damages the difference between the cost of cover and the contract price, together with any incidental or consequential damages as defined in section 2715 (relating to incidental and consequential damages of buyer) but less expenses saved in consequence of the breach by the seller.

(c)  Other remedies unaffected by failure to cover.--Failure of the buyer to effect cover within this section does not bar him from any other remedy.

13c2712v

 

Cross References.  Section 2712 is referred to in sections 2103, 2711 of this title.

13c2713s

§ 2713.  Damages of buyer for nondelivery or repudiation.

(a)  Damages recoverable.--Subject to the provisions of this division with respect to proof of market price (section 2723), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price, together with any incidental and consequential damages provided in this division (section 2715), but less expenses saved in consequence of the breach by the seller.

(b)  Determination of market price.--Market price 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.

13c2713v

 

Cross References.  Section 2713 is referred to in sections 2711, 2723 of this title.

13c2714s

§ 2714.  Damages of buyer for breach in regard to accepted goods.

(a)  Damages for nonconformity of tender.--Where the buyer has accepted goods and given notification (section 2607(c)) he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course of events from the breach of the seller as determined in any manner which is reasonable.

(b)  Measure of damages for breach of warranty.--The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

(c)  Incidental and consequential damages.--In a proper case any incidental and consequential damages under section 2715 (relating to incidental and consequential damages of buyer) may also be recovered.

13c2715s

§ 2715.  Incidental and consequential damages of buyer.

(a)  Incidental damages.--Incidental damages resulting from the breach of the seller include:

(1)  expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected;

(2)  any commercially reasonable charges, expenses or commissions in connection with effecting cover; and

(3)  any other reasonable expense incident to the delay or other breach.

(b)  Consequential damages.--Consequential damages resulting from the breach of the seller include:

(1)  any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and

(2)  injury to person or property proximately resulting from any breach of warranty.

13c2715v

 

Cross References.  Section 2715 is referred to in sections 2712, 2713, 2714 of this title.

13c2716s

§ 2716.  Right of buyer to specific performance or replevin.

(a)  Specific performance.--Specific performance may be decreed where the goods are unique or in other proper circumstances.

(b)  Terms and conditions of decree.--The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.

(c)  Replevin.--The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing, or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family or household purposes, the buyer's right of replevin vests upon acquisition of a special property even if the seller had not then repudiated or failed to deliver.

13c2716v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended subsec. (c).

Cross References.  Section 2716 is referred to in sections 2402, 2711 of this title.

13c2717s

§ 2717.  Deduction of damages from price.

The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.

13c2718s

§ 2718.  Liquidation or limitation of damages; deposits.

(a)  Liquidated damages in agreement.--Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.

(b)  Right of buyer to restitution.--Where the seller justifiably withholds delivery of goods because of the breach of the buyer, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds:

(1)  the amount to which the seller is entitled by virtue of terms liquidating the damages of the seller in accordance with subsection (a); or

(2)  in the absence of such terms, 20% of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.

(c)  Offset.--The right of the buyer to restitution under subsection (b) is subject to offset to the extent that the seller establishes:

(1)  a right to recover damages under the provisions of this division other than subsection (a); and

(2)  the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.

(d)  Payment in goods.--Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (b); but if the seller has notice of the breach of the buyer before reselling goods received in part performance, his resale is subject to the conditions laid down in this division on resale by an aggrieved seller (section 2706).

13c2718v

 

Cross References.  Section 2718 is referred to in sections 2316, 2601, 2719 of this title.

13c2719s

§ 2719.  Contractual modification or limitation of remedy.

(a)  General rule.--Subject to the provisions of subsections (b) and (c) and of section 2718 (relating to liquidation or limitation of damages; deposits):

(1)  The agreement may provide for remedies in addition to or in substitution for those provided in this division and may limit or alter the measure of damages recoverable under this division, as by limiting the remedies of the buyer to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts.

(2)  Resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

(b)  Exclusive remedy failing in purpose.--Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title.

(c)  Limitation of consequential damages.--Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

13c2719v

 

Cross References.  Section 2719 is referred to in sections 2316, 2601 of this title.

13c2720s

§ 2720.  Effect of "cancellation" or "rescission" on claims for antecedent breach.

Unless the contrary intention clearly appears, expressions of "cancellation" or "rescission" of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.

13c2721s

§ 2721.  Remedies for fraud.

Remedies for material misrepresentation or fraud include all remedies available under this division for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.

13c2722s

§ 2722.  Who can sue third parties for injury to goods.

Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract:

(1)  A right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and if the goods have been destroyed or converted a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other.

(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 contract for sale and there is no arrangement between them for disposition of the recovery, his suit or settlement is, subject to his own interest, as a fiduciary for the other party to the contract.

(3)  Either party may with the consent of the other sue for the benefit of whom it may concern.

13c2723s

§ 2723.  Proof of market price: time and place.

(a)  Determination of market price generally.--If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price (section 2708 or 2713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.

(b)  Other evidence available.--If evidence of a price prevailing at the times or places described in this division is not readily available the price prevailing within any reasonable time before or after the time described or at any other place 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 cost of transporting the goods to or from such other place.

(c)  Admissibility of other relevant evidence.--Evidence of a relevant price prevailing at a time or place other than the one described in this division offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.

13c2723v

 

Cross References.  Section 2723 is referred to in sections 2708, 2713 of this title.

13c2724s

§ 2724.  Admissibility of market quotations.

Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.

13c2725s

§ 2725.  Statute of limitations in contracts for sale.

(a)  General rule.--An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.

(b)  Accrual of cause of action.--A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.

(c)  New action after termination of another.--Where an action commenced within the time limited by subsection (a) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.

(d)  Laws and actions unaffected by section.--This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this title becomes effective.

13c2725v

 

Cross References.  Section 2725 is referred to in section 5525 of Title 42 (Judiciary and Judicial Procedure).

13c2A101h

 

 

DIVISION 2A

LEASES

 

Chapter

 2A1.  General Provisions

 2A2.  Formation and Construction of Lease Contract

 2A3.  Effect of Lease Contract

 2A4.  Performance of Lease Contract: Repudiated, Substituted and Excused

 2A5.  Default

 

Enactment.  Division 2A was added July 9, 1992, P.L.507, No.97, effective in one year.

 

 

CHAPTER 2A1

GENERAL PROVISIONS

 

Sec.

2A101.  Short title of division.

2A102.  Scope.

2A103.  Definitions and index of definitions.

2A104.  Leases subject to other law.

2A105.  Territorial application of division to goods covered by certificate of title.

2A106.  Limitation on power of parties to consumer lease to choose applicable law and judicial forum.

2A107.  Waiver or renunciation of claim or right after default.

2A108.  Unconscionability.

2A109.  Option to accelerate at will.

 

Enactment.  Chapter 2A1 was added July 9, 1992, P.L.507, No.97, effective in one year.

13c2A101s

§ 2A101.  Short title of division.

This division shall be known and may be cited as the Uniform Commercial Code, Article 2A, Leases.

13c2A102s

§ 2A102.  Scope.

This division applies to any transaction, regardless of form, that creates a lease.

13c2A103s

§ 2A103.  Definitions and index of definitions.

(a)  Definitions.--The following words and phrases when used in this division shall have, unless the context clearly indicates otherwise, the meanings given to them in this subsection:

"Buyer in ordinary course of business."  A person who, in good faith and without knowledge that the sale to him 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 preexisting 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.

"Cancellation."  Occurs when either party puts an end to the lease contract for default by the other party.

"Commercial unit."  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.

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

"Consumer lease."  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 $25,000.

"Fault."  Wrongful act, omission, breach or default.

"Finance lease."  A lease with respect to which:

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

(2)  the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and

(3)  one of the following occurs:

(i)  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;

(ii)  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;

(iii)  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

(iv)  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 this division 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.

"Goods."  All things that are movable at the time of identification to the lease contract, or are fixtures (section 2A309), 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.

"Installment lease contract."  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.

"Lease."  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.

"Lease agreement."  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 this division. Unless the context clearly indicates otherwise, the term includes a sublease agreement.

"Lease contract."  The total legal obligation that results from the lease agreement as affected by this division and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.

"Leasehold interest."  The interest of the lessor or the lessee under a lease contract.

"Lessee."  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.

"Lessee in ordinary course of business."  A person who, in good faith and without knowledge that the lease to him 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 preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

"Lessor."  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.

"Lessor's residual interest."  The lessor's interest in the goods after expiration, termination or cancellation of the lease contract.

"Lien."  A charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.

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

"Merchant lessee."  A lessee that is a merchant with respect to goods of the kind subject to the lease.

"Present value."  The amount as of a date certain of one or more sums payable in the future, discounted to the date certain. 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.

"Purchase."  Includes taking by sale, lease, mortgage, security interest, pledge, gift or any other voluntary transaction creating an interest in goods.

"Sublease."  A lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.

"Supplier."  A person from whom a lessor buys or leases goods to be leased under a finance lease.

"Supply contract."  A contract under which a lessor buys or leases goods to be leased.

"Termination."  Occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.

(b)  Index of other definitions in division.--Other definitions applying to this division and the sections in which they appear are:

"Accessions."  Section 2A310(a).

"Construction mortgage."  Section 2A309(a).

"Encumbrance."  Section 2A309(a).

"Fixture filing."  Section 2A309(a).

"Fixtures."  Section 2A309(a).

"Purchase money lease."  Section 2A309(a).

(c)  Index of definitions in other divisions.--The following definitions in other divisions apply to this division:

"Account."  Section 9102(a).

"Between merchants."  Section 2104.

"Buyer."  Section 2103(a).

"Chattel paper."  Section 9102(a).

"Consumer goods."  Section 9102(a).

"Document."  Section 9102(a).

"Entrusting."  Section 2403(c).

"General intangible."  Section 9102(a).

"Good faith."  (Deleted by amendment).

"Instrument."  Section 9102(a).

"Merchant."  Section 2104.

"Mortgage."  Section 9102(a).

"Pursuant to commitment."  Section 9102(a).

"Receipt."  Section 2103(a).

"Sale."  Section 2106(a).

"Sale on approval."  Section 2326.

"Sale or return."  Section 2326.

"Seller."  Section 2103(a).

(d)  Applicability of general definitions and principles.--In addition, Division 1 (relating to general provisions) contains general definitions and principles of construction and interpretation applicable throughout this division.

13c2A103v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001; Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended the defs. of "buyer in ordinary course of business" and "lessee in ordinary course of business" in subsec. (a) and deleted the def. of "good faith" in subsec. (c).

2001 Amendment.  Act 18 amended subsec. (c).

Cross References.  Section 2A103 is referred to in sections 7102, 9102 of this title.

13c2A104s

§ 2A104.  Leases subject to other law.

(a)  General rule.--A lease, although subject to this division, is also subject to any applicable:

(1)  certificate of title statute of this Commonwealth;

(2)  certificate of title statute of another jurisdiction (section 2A105); or

(3)  consumer protection statute of this Commonwealth.

(b)  Conflict between division and statute.--In case of conflict between this division, other than sections 2A105 (relating to territorial application of division to goods covered by certificate of title), 2A304(c) (relating to subsequent lease of goods by lessor) and 2A305(c) (relating to sale or sublease of goods by lessee), and a statute referred to in subsection (a), the statute controls.

(c)  Noncompliance with applicable law.--Failure to comply with an applicable law has only the effect specified therein.

13c2A105s

§ 2A105.  Territorial application of division to goods covered by certificate of title.

Subject to the provisions of sections 2A304(c) (relating to subsequent lease of goods by lessor) and 2A305(c) (relating to sale or sublease of goods by lessee), with respect to goods covered by a certificate of title issued under a statute of this Commonwealth 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:

(1)  surrender of the certificate; or

(2)  four months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.

13c2A105v

 

Cross References.  Section 2A105 is referred to in sections 1301, 2A104 of this title.

13c2A106s

§ 2A106.  Limitation on power of parties to consumer lease to choose applicable law and judicial forum.

(a)  Choice of law.--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 30 days thereafter or in which the goods are to be used, the choice is not enforceable.

(b)  Choice of judicial forum.--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.

13c2A106v

 

Cross References.  Section 2A106 is referred to in section 1301 of this title.

13c2A107s

§ 2A107.  Waiver or renunciation of claim or right after default.

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.

13c2A108s

§ 2A108.  Unconscionability.

(a)  Unconscionable lease.--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.

(b)  Unconscionable conduct.--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.

(c)  Evidence by parties.--Before making a finding of unconscionability under subsection (a) or (b), 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.

(d)  Award of attorney fees.--In an action in which the lessee claims unconscionability with respect to a consumer lease:

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

(2)  If the court does not find unconscionability and the lessee claiming unconscionability has brought or maintained an action he knew to be groundless, the court shall award reasonable attorney fees to the party against whom the claim is made.

(3)  In determining attorney fees, the amount of the recovery on behalf of the claimant under subsections (a) and (b) is not controlling.

13c2A109s

§ 2A109.  Option to accelerate at will.

(a)  General rule.--A term providing that one party or his successor in interest may accelerate payment or performance or require collateral or additional collateral "at will" or "when he deems himself insecure" or in words of similar import must be construed to mean that he has power to do so only if he in good faith believes that the prospect of payment or performance is impaired.

(b)  Burden of proof.--With respect to a consumer lease, the burden of establishing good faith under subsection (a) 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.

13c2A201h

 

 

CHAPTER 2A2

FORMATION AND CONSTRUCTION OF LEASE CONTRACT

 

Sec.

2A201.  Statute of frauds.

2A202.  Final written expression: parol or extrinsic evidence.

2A203.  Seals inoperative.

2A204.  Formation in general.

2A205.  Firm offers.

2A206.  Offer and acceptance in formation of lease contract.

2A207.  Course of performance or practical construction (Deleted by amendment).

2A208.  Modification, rescission and waiver.

2A209.  Lessee under finance lease as beneficiary of supply contract.

2A210.  Express warranties.

2A211.  Warranties against interference and against infringement; lessee's obligation against infringement.

2A212.  Implied warranty of merchantability.

2A213.  Implied warranty of fitness for particular purpose.

2A214.  Exclusion or modification of warranties.

2A215.  Cumulation and conflict of warranties express or implied.

2A216.  Third party beneficiaries of express and implied warranties.

2A217.  Identification.

2A218.  Insurance and proceeds.

2A219.  Risk of loss.

2A220.  Effect of default on risk of loss.

2A221.  Casualty to identified goods.

 

Enactment.  Chapter 2A2 was added July 9, 1992, P.L.507, No.97, effective in one year.

13c2A201s

§ 2A201.  Statute of frauds.

(a)  General rule.--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 $1,000; or

(2)  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.

(b)  Description of goods or term.--Any description of leased goods or of the lease term is sufficient and satisfies subsection (a)(2), whether or not it is specific, if it reasonably identifies what is described.

(c)  Omitted or incorrectly stated terms.--A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under subsection (a)(2) beyond the lease term and the quantity of goods shown in the writing.

(d)  Enforceability of lease not satisfying general requirements.--A lease contract that does not satisfy the requirements of subsection (a), but which is valid in other respects, is enforceable:

(1)  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;

(2)  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

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

(e)  Term of lease not satisfying general requirements.--The lease term under a lease contract referred to in subsection (d) is:

(1)  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;

(2)  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

(3)  a reasonable lease term.

13c2A202s

§ 2A202.  Final written expression: parol or extrinsic evidence.

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:

(1)  by course of dealing or usage of trade or by course of performance; and

(2)  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.

13c2A202v

 

Cross References.  Section 2A202 is referred to in section 2A214 of this title.

13c2A203s

§ 2A203.  Seals inoperative.

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.

13c2A204s

§ 2A204.  Formation in general.

(a)  General rule.--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.

(b)  Effect of undetermined time of making agreement.--An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.

(c)  Effect of open terms.--Although one 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.

13c2A205s

§ 2A205.  Firm offers.

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 months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

13c2A206s

§ 2A206.  Offer and acceptance in formation of lease contract.

(a)  General rule.--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.

(b)  Beginning requested performance without notice.--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.

13c2A207s

§ 2A207.  Course of performance or practical construction (Deleted by amendment).

13c2A207v

2008 Amendment.  Section 2A207 was deleted by amendment April 16, 2008, P.L.57, No.13, effective in 60 days.

13c2A208s

§ 2A208.  Modification, rescission and waiver.

(a)  Consideration unnecessary for modification.--An agreement modifying a lease contract needs no consideration to be binding.

(b)  Writing excluding modification or rescission.--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.

(c)  Ineffective modification or rescission as waiver.--Although an attempt at modification or rescission does not satisfy the requirements of subsection (b), it may operate as a waiver.

(d)  Retraction of waiver.--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.

13c2A208v

 

Cross References.  Section 2A208 is referred to in section 2A207 of this title.

13c2A209s

§ 2A209.  Lessee under finance lease as beneficiary of supply contract.

(a)  General rule.--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 subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom.

(b)  Effect of extension of benefits.--The extension of the benefit of a supplier's promises and warranties to the lessee (subsection (a)) does not:

(1)  modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise; or

(2)  impose any duty or liability under the supply contract on the lessee.

(c)  Modification or rescission by supplier and lessor.--Any modification or rescission of the 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 is deemed to have assumed, in addition to the obligations of the lessor to the lessee 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.

(d)  Additional rights of lessee.--In addition to the extension of the benefit of the supplier's promises and of warranties to the lessee under subsection (a), 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.

13c2A210s

§ 2A210.  Express warranties.

(a)  General rule.--Express warranties by the lessor are created as follows:

(1)  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.

(2)  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.

(3)  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.

(b)  Formal words or specific intent unnecessary.--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.

13c2A211s

§ 2A211.  Warranties against interference and against infringement; lessee's obligation against infringement.

(a)  General rule.--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.

(b)  Warranty of merchant regularly dealing in goods.--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.

(c)  Obligation of lessee against infringement.--A lessee who furnishes specifications to a lessor or a supplier 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.

13c2A211v

 

Cross References.  Section 2A211 is referred to in sections 2A214, 2A516 of this title.

13c2A212s

§ 2A212.  Implied warranty of merchantability.

(a)  General rule.--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.

(b)  Merchantability standards for goods.--Goods to be merchantable must be at least such as:

(1)  pass without objection in the trade under the description in the lease agreement;

(2)  in the case of fungible goods, are of fair average quality within the description;

(3)  are fit for the ordinary purposes for which goods of that type 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)  are adequately contained, packaged and labeled as the lease agreement may require; and

(6)  conform to any promises or affirmations of fact made on the container or label.

(c)  Course of dealing or usage of trade.--Other implied warranties may arise from course of dealing or usage of trade.

13c2A213s

§ 2A213.  Implied warranty of fitness for particular purpose.

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.

13c2A214s

§ 2A214.  Exclusion or modification of warranties.

(a)  Construction of words or conduct creating or limiting warranties.--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 section 2A202 (relating to final written expression: parol or extrinsic evidence), negation or limitation is inoperative to the extent that the construction is unreasonable.

(b)  Implied warranties of merchantability and fitness; specific language.--Subject to subsection (c), 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 (c), 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."

(c)  Implied warranties of merchantability and fitness; alternative methods.--Notwithstanding subsection (b), but subject to subsection (d):

(1)  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;

(2)  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

(3)  an implied warranty may also be excluded or modified by course of dealing, course of performance or usage of trade.

(d)  Warranties against interference and infringement.--To exclude or modify a warranty against interference or against infringement (section 2A211) 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.

13c2A215s

§ 2A215.  Cumulation and conflict of warranties express or implied.

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:

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

(2)  A sample from an existing bulk displaces inconsistent general language of description.

(3)  Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

13c2A216s

§ 2A216.  Third party beneficiaries of express and implied warranties.

A warranty to or for the benefit of a lessee under this division, 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.

13c2A217s

§ 2A217.  Identification.

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:

(1)  when the lease contract is made, if the lease contract is for a lease of goods that are existing and identified;

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

13c2A217v

 

Cross References.  Section 2A217 is referred to in section 2A522 of this title.

13c2A218s

§ 2A218.  Insurance and proceeds.

(a)  Insurable interest of lessee.--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.

(b)  Substitution of goods by lessor.--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.

(c)  Duration of insurable interest of lessor.--Notwithstanding a lessee's insurable interest under subsections (a) and (b), 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)  Other insurable interests unimpaired.--Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.

(e)  Agreement to determine obligations of parties.--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.

13c2A219s

§ 2A219.  Risk of loss.

(a)  General rule.--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)  Time of passage to lessee.--Subject to the provisions of this division on the effect of default on risk of loss (section 2A220), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:

(1)  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.

(2)  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.

(3)  In any case not within paragraph (1) or (2), 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.

13c2A219v

 

Cross References.  Section 2A219 is referred to in sections 2A221, 2A529 of this title.

13c2A220s

§ 2A220.  Effect of default on risk of loss.

(a)  Default by lessor.--Where risk of loss is to pass to the lessee and the time of passage is not stated:

(1)  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.

(2)  If the lessee rightfully revokes acceptance, he, to the extent of any deficiency in his effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.

(b)  Default by lessee.--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 his effective insurance coverage, may treat the risk of loss as resting on the lessee for a commercially reasonable time.

13c2A220v

 

Cross References.  Section 2A220 is referred to in section 2A219 of this title.

13c2A221s

§ 2A221.  Casualty to identified goods.

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 section 2A219 (relating to risk of loss), then:

(1)  if the loss is total, the lease contract is avoided; and

(2)  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 his 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.

13c2A301h

 

 

CHAPTER 2A3

EFFECT OF LEASE CONTRACT

 

Sec.

2A301.  Enforceability of lease contract.

2A302.  Title to and possession of goods.

2A303.  Alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights.

2A304.  Subsequent lease of goods by lessor.

2A305.  Sale or sublease of goods by lessee.

2A306.  Priority of certain liens arising by operation of law.

2A307.  Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

2A308.  Special rights of creditors.

2A309.  Lessor's and lessee's rights when goods become fixtures.

2A310.  Lessor's and lessee's rights when goods become accessions.

2A311.  Priority subject to subordination.

 

Enactment.  Chapter 2A3 was added July 9, 1992, P.L.507, No.97, effective in one year.

13c2A301s

§ 2A301.  Enforceability of lease contract.

Except as otherwise provided in this division, 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.

13c2A302s

§ 2A302.  Title to and possession of goods.

Except as otherwise provided in this division, each provision of this division 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.

13c2A303s

§ 2A303.  Alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights.

(a)  Definition.--As used in this section, the term "creation of a security interest" includes the sale of a lease contract that is subject to Division 9 (relating to secured transactions) by reason of section 9109(a)(3) (relating to scope).

(b)  General rule.--Except as provided in subsection (c) and section 9407 (relating to restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest), 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 (d), but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.

(c)  Transfer of right to damages.--A provision 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, 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 (d).

(d)  Certain rights and remedies.--Subject to subsection (c) and section 9407:

(1)  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 section 2A501(b) (relating to default: procedure).

(2)  If paragraph (1) is not applicable and if a transfer is made that is prohibited under a lease agreement or 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 limited by contract, 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 a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.

(e)  Effect and enforceability of general transfer.--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.

(f)  Effect of delegation of performance.--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 any liability for default.

(g)  Requirements for prohibition of transfer in consumer lease.--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.

13c2A303v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended subsecs. (a) and (b), deleted subsec. (c), amended and relettered subsec. (d) to subsec. (c), amended and relettered subsec. (e) to subsec. (d), relettered subsec. (f) to subsec. (e), subsec. (g) to subsec. (f) and subsec. (h) to subsec. (g) and amended subsec. (h) heading.

Cross References.  Section 2A303 is referred to in sections 2A304, 2A305, 9406, 9407 of this title.

13c2A304s

§ 2A304.  Subsequent lease of goods by lessor.

(a)  General rule.--Subject to section 2A303 (relating to alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights), 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 (b) and section 2A527(d) (relating to lessor's rights to dispose of goods), 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:

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

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

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

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

(b)  Merchants regularly dealing in goods.--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 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.

(c)  Goods covered by certificate of title.--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 Commonwealth or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

13c2A304v

 

Cross References.  Section 2A304 is referred to in sections 2A104, 2A105, 7209, 7503 of this title.

13c2A305s

§ 2A305.  Sale or sublease of goods by lessee.

(a)  General rule.--Subject to the provisions of section 2A303 (relating to alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights), 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 (b) and section 2A511(d) (relating to merchant lessee's duties as to rightfully rejected goods), 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:

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

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

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

(b)  Merchants regularly dealing in goods.--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.

(c)  Goods covered by certificate of title.--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 Commonwealth or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

13c2A305v

 

Cross References.  Section 2A305 is referred to in sections 2A104, 2A105, 7209, 7503 of this title.

13c2A306s

§ 2A306.  Priority of certain liens arising by operation of law.

If a person in the ordinary course of his 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 this division 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.

13c2A306v

 

Cross References.  Section 2A306 is referred to in section 2A307 of this title.

13c2A307s

§ 2A307.  Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

(a)  Creditor of lessee.--Except as otherwise provided in section 2A306 (relating to priority of certain liens arising by operation of law), a creditor of a lessee takes subject to the lease contract.

(b)  Creditor of lessor.--Except as otherwise provided in subsection (c) and in sections 2A306 and 2A308 (relating to special rights of creditors), 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)  Lessee.--Except as otherwise provided in sections 9317 (relating to interests which take priority over or take free of security interest or agricultural lien), 9321 (relating to licensee of general intangible and lessee of goods in ordinary course of business) and 9323 (relating to future advances), a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.

(d)  Lessee not in ordinary course of business.--(Deleted by amendment).

13c2A307v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

13c2A308s

§ 2A308.  Special rights of creditors.

(a)  Creditor of lessor.--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.

(b)  Nonimpairment of rights of creditor of lessor.--Nothing in this division impairs the rights of creditors of a lessor if the lease contract:

(1)  becomes enforceable, not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like; and

(2)  is made under circumstances which under any statute or rule of law apart from this division would constitute the transaction a fraudulent transfer or voidable preference.

(c)  Creditor of seller.--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 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.

13c2A308v

 

Cross References.  Section 2A308 is referred to in sections 2A307, 7504 of this title.

13c2A309s

§ 2A309.  Lessor's and lessee's rights when goods become fixtures.

(a)  Definitions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection:

"Construction mortgage."  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.

"Encumbrance."  Includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests.

"Fixture filing."  The filing, in the office where a record of 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 section 9502(a) and (b) (relating to contents of financing statement; record of mortgage as financing statement; time of filing financing statement).

"Fixtures."  Goods are fixtures when they become so related to particular real estate that an interest in them arises under real estate law.

"Purchase money lease."  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.

(b)  Lease of goods that are fixtures.--Under this division, a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this division of ordinary building materials incorporated into an improvement on land.

(c)  Lease under real estate law.--This division does not prevent creation of a lease of fixtures pursuant to real estate law.

(d)  Priority of perfected interest of lessor of fixtures.--The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if:

(1)  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 days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate; or

(2)  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 lessee has an interest of record in the real estate or is in possession of the real estate.

(e)  Priority of interest of lessor of fixtures whether or not perfected.--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:

(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 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;

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

(3)  the encumbrancer or owner has consented in writing 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.

If the lessee's right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.

(f)  Subordination to construction mortgage.--Notwithstanding subsection (d)(1) but otherwise subject to subsections (d) and (e), 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.

(g)  Priority of interest in other cases.--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.

(h)  Removal of goods if interest of lessor has priority.--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:

(1)  on default, expiration, termination or cancellation of the lease agreement but subject to the lease agreement and this division; or

(2)  if necessary to enforce other rights and remedies of the lessor or lessee under this division;

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 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.

(i)  Perfection of interest of lessor.--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 Division 9 (relating to secured transactions).

13c2A309v

(June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

 

2001 Amendment.  Act 18 amended subsec. (a).

Cross References.  Section 2A309 is referred to in section 2A103 of this title.

13c2A310s

§ 2A310.  Lessor's and lessee's rights when goods become accessions.

(a)  Definition.--Goods are "accessions" when they are installed in or affixed to other goods.

(b)  Priority of interest before accession.--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 (d).

(c)  Priority of interest on or after accession.--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 (d) 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.

(d)  Subordination to interest in the whole.--The interest of a lessor or a lessee under a lease contract described in subsection (b) or (c) 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.

(e)  Removal of goods if interest has priority.--When under subsections (b) or (c) and (d) 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:

(1)  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 division; or

(2)  if necessary to enforce his other rights and remedies under this division;

remove the goods from the whole, free and clear of all interests in the whole, but he 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.

13c2A310v

 

Cross References.  Section 2A310 is referred to in section 2A103 of this title.

13c2A311s

§ 2A311.  Priority subject to subordination.

Nothing in this division prevents subordination by agreement by any person entitled to priority.

13c2A401h

 

 

CHAPTER 2A4

PERFORMANCE OF LEASE CONTRACT: REPUDIATED,

SUBSTITUTED AND EXCUSED

 

Sec.

2A401.  Insecurity: adequate assurance of performance.

2A402.  Anticipatory repudiation.

2A403.  Retraction of anticipatory repudiation.

2A404.  Substituted performance.

2A405.  Excused performance.

2A406.  Procedure on excused performance.

2A407.  Irrevocable promises: finance leases.

 

Enactment.  Chapter 2A4 was added July 9, 1992, P.L.507, No.97, effective in one year.

13c2A401s

§ 2A401.  Insecurity: adequate assurance of performance.

(a)  General rule.--A lease contract imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired.

(b)  Demand for adequate assurance of performance.--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 he has not already received the agreed return.

(c)  Failure to provide adequate assurance of performance.--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 30 days after receipt of a demand by the other party.

(d)  Reasonableness and adequacy between merchants.--Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards.

(e)  Effect of acceptance of nonconforming delivery or payment.--Acceptance of any nonconforming delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.

13c2A401v

 

Cross References.  Section 2A401 is referred to in sections 2A402, 2A403 of this title.

13c2A402s

§ 2A402.  Anticipatory repudiation.

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 to the other, the aggrieved party may:

(1)  for a commercially reasonable time, await retraction of repudiation and performance by the repudiating party;

(2)  make demand pursuant to section 2A401 (relating to insecurity: adequate assurance of performance) and await assurance of future performance adequate under the circumstances of the particular case; or

(3)  resort to any right or remedy upon default under the lease contract or this division, 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 this division on the lessor's right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods (section 2A524).

13c2A402v

 

Cross References.  Section 2A402 is referred to in sections 2A508, 2A529 of this title.

13c2A403s

§ 2A403.  Retraction of anticipatory repudiation.

(a)  When allowable.--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.

(b)  Method.--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 section 2A401 (relating to insecurity: adequate assurance of performance).

(c)  Effect on contract rights.--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.

13c2A404s

§ 2A404.  Substituted performance.

(a)  Manner of delivery.--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.

(b)  Manner of payment.--If the agreed means or manner of payment fails because of domestic or foreign governmental regulation:

(1)  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

(2)  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.

13c2A404v

 

Cross References.  Section 2A404 is referred to in section 2A405 of this title.

13c2A405s

§ 2A405.  Excused performance.

Subject to section 2A404 (relating to substituted performance), the following rules apply:

(1)  Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with paragraphs (2) and (3) 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.

(2)  If the causes mentioned in paragraph (1) affect only part of the lessor's or the supplier's capacity to perform, he shall allocate production and deliveries among his customers but at his option may include regular customers not then under contract for sale or lease as well as his own requirements for further manufacture. He may so allocate in any manner that is fair and reasonable.

(3)  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 paragraph (2), of the estimated quota thus made available for the lessee.

13c2A405v

 

Cross References.  Section 2A405 is referred to in section 2A406 of this title.

13c2A406s

§ 2A406.  Procedure on excused performance.

(a)  Right of lessee to terminate or modify contract.--If the lessee receives notification of a material or indefinite delay or an allocation justified under section 2A405 (relating to excused performance), 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 impaired (section 2A510):

(1)  terminate the lease contract (section 2A505(b)); or

(2)  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.

(b)  Time limitation on modification.--If, after receipt of a notification from the lessor under section 2A405, the lessee fails so to modify the lease agreement within a reasonable time not exceeding 30 days, the lease contract lapses with respect to any deliveries affected.

13c2A407s

§ 2A407.  Irrevocable promises: finance leases.

(a)  General rule.--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.

(b)  Effect of irrevocable and independent promise.--A promise that has become irrevocable and independent under subsection (a):

(1)  is effective and enforceable between the parties, and by or against third parties including assignees of the parties; and

(2)  is not subject to cancellation, termination, modification, repudiation, excuse or substitution without the consent of the party to whom the promise runs.

(c)  Limitation on applicability of section.--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.

13c2A407v

 

Cross References.  Section 2A407 is referred to in section 2A508 of this title.

13c2A501h

 

 

CHAPTER 2A5

DEFAULT

 

Subchapter

   A.  In General

   B.  Default by Lessor

   C.  Default by Lessee

 

Enactment.  Chapter 2A5 was added July 9, 1992, P.L.507, No.97, effective in one year.

 

 

SUBCHAPTER A

IN GENERAL

 

Sec.

2A501.  Default: procedure.

2A502.  Notice after default.

2A503.  Modification or impairment of rights and remedies.

2A504.  Liquidation of damages.

2A505.  Cancellation and termination and effect of cancellation, termination, rescission or fraud on rights and remedies.

2A506.  Statute of limitations.

2A507.  Proof of market rent: time and place.

13c2A501s

§ 2A501.  Default: procedure.

(a)  Determination of default.--Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this division.

(b)  Available rights and remedies.--If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this division and, except as limited by this division, as provided in the lease agreement.

(c)  Methods of enforcement of contract.--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 administrative proceeding, arbitration or the like, in accordance with this division.

(d)  Rights and remedies cumulative.--Except as otherwise provided in section 1305(a) (relating to remedies to be liberally administered) or this division or the lease agreement, the rights and remedies referred to in subsections (b) and (c) are cumulative.

(e)  Agreements covering real property and goods.--If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this chapter 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 chapter does not apply.

13c2A501v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (d).

Cross References.  Section 2A501 is referred to in section 2A303 of this title.

13c2A502s

§ 2A502.  Notice after default.

Except as otherwise provided in this division 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.

13c2A503s

§ 2A503.  Modification or impairment of rights and remedies.

(a)  Provisions in lease agreements.--Except as otherwise provided in this division, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this division and may limit or alter the measure of damages recoverable under this division.

(b)  Specified remedy construed as optional.--Resort to a remedy provided under this division 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 this division.

(c)  Consequential damages.--Consequential damages may be liquidated under section 2A504 (relating to liquidation of damages), 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.

(d)  Other rights and remedies unimpaired.--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 this division.

13c2A503v

 

Cross References.  Section 2A503 is referred to in sections 2A518, 2A519, 2A527 of this title.

13c2A504s

§ 2A504.  Liquidation of damages.

(a)  General rule.--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.

(b)  Invalidity or failure of purpose of remedy.--If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (a), 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 this division.

(c)  Right of lessee to restitution.--If the lessor justifiably withholds or stops delivery of goods because of the lessee's default or insolvency (section 2A525 or 2A526), the lessee is entitled to restitution of any amount by which the sum of his payments exceeds:

(1)  the amount to which the lessor is entitled by virtue of terms liquidating the lessor's damages in accordance with subsection (a); or

(2)  in the absence of those terms, 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 $500.

(d)  Restitution subject to offset.--A lessee's right to restitution under subsection (c) is subject to offset to the extent the lessor establishes:

(1)  a right to recover damages under the provisions of this division other than subsection (a); and

(2)  the amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

13c2A504v

 

Cross References.  Section 2A504 is referred to in sections 2A503, 2A518, 2A519, 2A527, 2A528 of this title.

13c2A505s

§ 2A505.  Cancellation and termination and effect of cancellation, termination, rescission or fraud on rights and remedies.

(a)  Cancellation of contract.--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.

(b)  Termination of contract.--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.

(c)  Damage claim for antecedent default.--Unless the contrary intention clearly appears, expressions of "cancellation," "rescission" or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for an antecedent default.

(d)  Misrepresentation or fraud.--Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this division for default.

(e)  Inconsistency of claim or remedy.--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.

13c2A505v

 

Cross References.  Section 2A505 is referred to in sections 2A406, 2A508, 2A523 of this title.

13c2A506s

§ 2A506.  Statute of limitations.

(a)  General rule.--An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four 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 year.

(b)  Accrual of cause of action.--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.

(c)  New action after termination of another.--If an action commenced within the time limited by subsection (a) 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 months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.

(d)  Unaffected laws and actions.--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 this division becomes effective.

13c2A507s

§ 2A507.  Proof of market rent: time and place.

(a)  Rent prevailing; general rule.--Damages based on market rent (section 2A519 or 2A528) 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 times specified in sections 2A519 (relating to lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods) and 2A528 (relating to lessor's damages for nonacceptance, failure to pay, repudiation or other default).

(b)  Rent prevailing at other times.--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 agreement and prevailing at the times or places described in this division 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.

(c)  Admissibility of new prevailing rent.--Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this division offered by one party is not admissible unless and until he has given the other party notice the court finds sufficient to prevent unfair surprise.

(d)  Admissibility of market quotations.--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.

13c2A508h

 

 

SUBCHAPTER B

DEFAULT BY LESSOR

 

Sec.

2A508.  Lessee's remedies.

2A509.  Lessee's rights on improper delivery; rightful

rejection.

2A510.  Installment lease contracts: rejection and default.

2A511.  Merchant lessee's duties as to rightfully rejected

goods.

2A512.  Lessee's duties as to rightfully rejected goods.

2A513.  Cure by lessor of improper tender or delivery;

replacement.

2A514.  Waiver of lessee's objections.

2A515.  Acceptance of goods.

2A516.  Effect of acceptance of goods; notice of default;

burden of establishing default after acceptance;

notice of claim or litigation to person answerable

over.

2A517.  Revocation of acceptance of goods.

2A518.  Cover; substitute goods.

2A519.  Lessee's damages for nondelivery, repudiation, default

and breach of warranty in regard to accepted goods.

2A520.  Lessee's incidental and consequential damages.

2A521.  Lessee's right to specific performance or replevin.

2A522.  Lessee's right to goods on lessor's insolvency.

13c2A508s

§ 2A508.  Lessee's remedies.

(a)  General rule.--If a lessor fails to deliver the goods in conformity to the lease contract (section 2A509) or repudiates the lease contract (section 2A402), or a lessee rightfully rejects the goods (section 2A509) or justifiably revokes acceptance of the goods (section 2A517), 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 (section 2A510), the lessor is in default under the lease contract and the lessee may:

(1)  cancel the lease contract (section 2A505(a));

(2)  recover so much of the rent and security as has been paid and is just under the circumstances;

(3)  cover and recover damages as to all goods affected, whether or not they have been identified to the lease contract (sections 2A518 and 2A520), or recover damages for nondelivery (sections 2A519 and 2A520); and

(4)  exercise any other rights or pursue any other remedies provided in the lease contract.

(b)  Recovery of nondelivered goods.--If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also:

(1)  if the goods have been identified, recover them (section 2A522); or

(2)  in a proper case, obtain specific performance or replevy the goods (section 2A521).

(c)  Rights and remedies for other defaults.--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 section 2A519(c) (relating to lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods).

(d)  Damages for breach of warranty.--If a lessor has breached a warranty, whether express or implied, the lessee may recover damages (section 2A519(d)).

(e)  Security interest in goods in lessee's possession.--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 section 2A527(e) (relating to lessor's rights to dispose of goods).

(f)  Deduction of damages from rent due.--Subject to the provisions of section 2A407 (relating to irrevocable promises: finance leases), 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.

13c2A508v

 

Cross References.  Section 2A508 is referred to in sections 2A511, 2A512, 2A518, 2A527, 9102, 9109, 9110, 9309, 9325 of this title.

13c2A509s

§ 2A509.  Lessee's rights on improper delivery; rightful rejection.

(a)  General rule.--Subject to the provisions of section 2A510 (relating to installment lease contracts: rejection and default) 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.

(b)  Effectiveness of rejection.--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.

13c2A509v

 

Cross References.  Section 2A509 is referred to in sections 2A508, 2A515 of this title.

13c2A510s

§ 2A510.  Installment lease contracts: rejection and default.

(a)  General rule.--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 (b) and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.

(b)  Impairment of contract as a whole.--Whenever nonconformity or default with respect to one or more deliveries substantially impairs the value of the installment 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.

13c2A510v

 

Cross References.  Section 2A510 is referred to in sections 2A406, 2A508, 2A509, 2A523 of this title.

13c2A511s

§ 2A511.  Merchant lessee's duties as to rightfully rejected goods.

(a)  General rule.--Subject to any security interest of a lessee (section 2A508(e)), 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 his 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.

(b)  Reimbursement of expenses and commission.--If a merchant lessee (subsection (a)) or any other lessee (section 2A512) disposes of goods, he 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 10% of the gross proceeds.

(c)  Good faith conduct.--In complying with this section or section 2A512 (relating to lessee's duties as to rightfully rejected goods), 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.

(d)  Rights of good faith purchaser.--A purchaser who purchases in good faith from a lessee pursuant to this section or section 2A512 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 this division.

13c2A511v

 

Cross References.  Section 2A511 is referred to in sections 2A305, 2A512 of this title.

13c2A512s

§ 2A512.  Lessee's duties as to rightfully rejected goods.

(a)  General rule.--Except as otherwise provided with respect to goods that threaten to decline in value speedily (section 2A511) and subject to any security interest of a lessee (section 2A508(e)):

(1)  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 seasonable notification of rejection;

(2)  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 section 2A511 (relating to merchant lessee's duties as to rightfully rejected goods); but

(3)  the lessee has no further obligations with regard to goods rightfully rejected.

(b)  Action of lessee not acceptance or conversion.--Action by the lessee pursuant to subsection (a) is not acceptance or conversion.

13c2A512v

 

Cross References.  Section 2A512 is referred to in section 2A511 of this title.

13c2A513s

§ 2A513.  Cure by lessor of improper tender or delivery; replacement.

(a)  General rule.--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.

(b)  Substitution of conforming tender.--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 he seasonably notifies the lessee.

13c2A513v

 

Cross References.  Section 2A513 is referred to in section 2A514 of this title.

13c2A514s

§ 2A514.  Waiver of lessee's objections.

(a)  General rule.--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:

(1)  if, stated seasonably, the lessor or the supplier could have cured it (section 2A513); or

(2)  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.

(b)  Payment against defective documents.--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.

13c2A514v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b).

13c2A515s

§ 2A515.  Acceptance of goods.

(a)  General rule.--Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and:

(1)  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

(2)  the lessee fails to make an effective rejection of the goods (section 2A509(b)).

(b)  Part of commercial unit.--Acceptance of a part of any commercial unit is acceptance of that entire unit.

13c2A516s

§ 2A516.  Effect of acceptance of goods; notice of default; burden of establishing default after acceptance; notice of claim or litigation to person answerable over.

(a)  Payment for accepted goods.--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.

(b)  Effect of acceptance on remedies for default.--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 this division or the lease agreement for nonconformity.

(c)  Notice of default and burden of proof.--If a tender has been accepted:

(1)  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;

(2)  except in the case of a consumer lease, within a reasonable time after the lessee receives notice of litigation for infringement or the like (section 2A211), the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and

(3)  the burden is on the lessee to establish any default.

(d)  Notice of litigation to person answerable over.--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:

(1)  The lessee may give the lessor or the supplier written notice of the litigation. If the notice states that the 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 litigations, then, unless the person notified after seasonable receipt of the notice does come in and defend, that person is so bound.

(2)  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 (section 2A211) 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.

(e)  Obligation of lessee to hold lessor or supplier harmless.--Subsections (c) and (d) apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (section 2A211).

13c2A516v

 

Cross References.  Section 2A516 is referred to in section 2A519 of this title.

13c2A517s

§ 2A517.  Revocation of acceptance of goods.

(a)  General rule.--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:

(1)  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

(2)  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.

(b)  Revocation of acceptance if lessor defaults under lease contract.--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.

(c)  Revocation for other defaults by lessor.--If the lease agreement so provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor.

(d)  Time and notice of revocation.--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.

(e)  Rights and duties of revoking lessee.--A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.

13c2A517v

 

Cross References.  Section 2A517 is referred to in section 2A508 of this title.

13c2A518s

§ 2A518.  Cover; substitute goods.

(a)  Right and manner of cover.--After default by a lessor under the lease contract of the type described in section 2A508(a) (relating to lessee's remedies) 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.

(b)  Damages recoverable.--Except as otherwise provided with respect to damages liquidated in the lease agreement (section 2A504) or otherwise determined pursuant to agreement of the parties (sections 1302 and 2A503), 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:

(1)  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

(2)  any incidental or consequential damages less expenses saved in consequence of the lessor's default.

(c)  Recovery in other cases.--If a lessee's cover is by lease agreement that for any reason does not qualify for treatment under subsection (b), or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and section 2A519 (relating to lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods) governs.

13c2A518v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b) intro. par.

Cross References.  Section 2A518 is referred to in sections 2A508, 2A519 of this title.

13c2A519s

§ 2A519.  Lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods.

(a)  Measure of damages for nondelivery or rejection.--Except as otherwise provided with respect to damages liquidated in the lease agreement (section 2A504) or otherwise determined pursuant to agreement of the parties (sections 1302 and 2A503), 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 section 2A518(b) (relating to cover; substitute goods), or is by purchase or otherwise, the measure of damages for nondelivery 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 lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.

(b)  Determination of market rent.--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.

(c)  Measure of damages for nonconforming tender or delivery or other default.--Except as otherwise agreed, if the lessee has accepted goods and given notification (section 2A516(c)), 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.

(d)  Measure of damages for breach of warranty.--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.

13c2A519v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (a).

Cross References.  Section 2A519 is referred to in sections 2A507, 2A508, 2A518 of this title.

13c2A520s

§ 2A520.  Lessee's incidental and consequential damages.

(a)  Incidental damages.--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.

(b)  Consequential damages.--Consequential damages resulting from a lessor's default include:

(1)  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

(2)  injury to person or property proximately resulting from any breach of warranty.

13c2A520v

 

Cross References.  Section 2A520 is referred to in section 2A508 of this title.

13c2A521s

§ 2A521.  Lessee's right to specific performance or replevin.

(a)  Specific performance.--Specific performance may be decreed if the goods are unique or in other proper circumstances.

(b)  Terms and conditions of decree for specific performance.--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.

(c)  Replevin or other similar remedy.--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.

13c2A521v

 

Cross References.  Section 2A521 is referred to in section 2A508 of this title.

13c2A522s

§ 2A522.  Lessee's right to goods on lessor's insolvency.

(a)  General rule.--Subject to subsection (b) 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 (section 2A217) 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 days after receipt of the first installment of rent and security.

(b)  Goods to conform to contract.--A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.

13c2A522v

 

Cross References.  Section 2A522 is referred to in section 2A508 of this title.

13c2A523h

 

 

SUBCHAPTER C

DEFAULT BY LESSEE

 

Sec.

2A523.  Lessor's remedies.

2A524.  Lessor's right to identify goods to lease contract.

2A525.  Lessor's right to possession of goods.

2A526.  Lessor's stoppage of delivery in transit or otherwise.

2A527.  Lessor's rights to dispose of goods.

2A528.  Lessor's damages for nonacceptance, failure to pay, repudiation or other default.

2A529.  Lessor's action for the rent.

2A530.  Lessor's incidental damages.

2A531.  Standing to sue third parties for injury to goods.

2A532.  Lessor's rights to residual interest.

13c2A523s

§ 2A523.  Lessor's remedies.

(a)  General rule.--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 (section 2A510), the lessee is in default under the lease contract and the lessor may:

(1)  Cancel the lease contract (section 2A505(a)).

(2)  Proceed respecting goods not identified to the lease contract (section 2A524).

(3)  Withhold delivery of the goods and take possession of goods previously delivered (section 2A525).

(4)  Stop delivery of the goods by any bailee (section 2A526).

(5)  Dispose of the goods and recover damages (section 2A527), or retain the goods and recover damages (section 2A528), or in a proper case recover rent (section 2A529).

(6)  Exercise any other rights or pursue any other remedies provided in the lease contract.

(b)  When lessor does not fully exercise right or obtain remedy.--If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under subsection (a), 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.

(c)  Other rights and remedies.--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:

(1)  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 (a) or (b); or

(2)  if the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in subsection (b).

13c2A523v

 

Cross References.  Section 2A523 is referred to in sections 2A524, 2A525, 2A527, 2A528, 2A529 of this title.

13c2A524s

§ 2A524.  Lessor's right to identify goods to lease contract.

(a)  General rule.--A lessor aggrieved under section 2A523(a) (relating to lessor's remedies) may:

(1)  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

(2)  dispose of goods (section 2A527(a)) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.

(b)  Unfinished goods.--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.

13c2A524v

 

Cross References.  Section 2A524 is referred to in sections 2A402, 2A523 of this title.

13c2A525s

§ 2A525.  Lessor's right to possession of goods.

(a)  Insolvency of lessee.--If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.

(b)  Default by lessee.--After a default by the lessee under the lease contract of the type described in section 2A523(a) or (c)(1) (relating to lessor's remedies) or, if 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 (section 2A527).

(c)  Method of proceeding on default.--The lessor may proceed under subsection (b) without judicial process if it can be done without breach of the peace or the lessor may proceed by action.

13c2A525v

 

Cross References.  Section 2A525 is referred to in sections 2A504, 2A523, 2A527 of this title.

13c2A526s

§ 2A526.  Lessor's stoppage of delivery in transit or otherwise.

(a)  General rule.--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.

(b)  When lessor loses right.--In pursuing its remedies under subsection (a), the lessor may stop delivery until:

(1)  receipt of the goods by the lessee;

(2)  acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or

(3)  such an acknowledgment to the lessee by a carrier via reshipment or as a warehouse.

(c)  Notice and compliance.--

(1)  To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.

(2)  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.

(3)  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.

13c2A526v

(Apr. 16, 2008, P.L.57, No.13, eff. 60 days)

 

2008 Amendment.  Act 13 amended subsec. (b)(3).

Cross References.  Section 2A526 is referred to in sections 2A504, 2A523, 2A527, 7403, 7504 of this title.

13c2A527s

§ 2A527.  Lessor's rights to dispose of goods.

(a)  General rule.--After a default by a lessee under the lease contract of the type described in section 2A523(a) or (c)(1) (relating to lessor's remedies) or after the lessor refuses to deliver or takes possession of goods (section 2A525 or 2A526) or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale or otherwise.

(b)  Damages recoverable.--Except as otherwise provided with respect to damages liquidated in the lease agreement (section 2A504) or otherwise determined pursuant to agreement of the parties (sections 1302 and 2A503), if the disposition is by lease agreement substantially similar to the original lease agreement and the lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages:

(1)  accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement;