§ 26-1-2.1-303 — "Creation of a security interest"; alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; assignment of rights

Indiana § 26-1-2.1-303

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 2.1: Leases

Text

(1) As used in this section, "creation of
a security interest" includes the sale of a lease contract that is subject
to IC 26-1-9.1, by reason of IC 26-1-9.1-109(a)(3).
(2) Except as provided in subsection (3) and IC 26-1-9.1-407, a
provision in a lease agreement which (i) prohibits the voluntary or
involuntary transfer, including a transfer by sale, sublease, creation or
enforcement of a security interest, or attachment, levy, or other judicial
process, of an interest of a party under the lease contract or of the
lessor's residual interest in the goods, or (ii) makes such a transfer an
event of default, gives rise to the rights and remedies provided in
subsection (4), but a transfer that is prohibited or is an event of default
under the lease agreement is otherwise effective.
(3) A provision in a lease agreement which (i) prohibits a transfer
of a right to damages for default with respect to the whole lease
contract or of a right to payment arising out of the transferor's due
performance of the transferor's entire obligation, or (ii) makes such a
transfer an event of default, is not enforceable, and such a transfer is
not a transfer that materially impairs the prospect of obtaining return
performance by, materially changes the duty of, or materially increases
the burden or risk imposed on, the other party to the lease contract
within the purview of subsection (4).
(4) Subject to subsection (3) and IC 26-1-9.1-407:
(a) if a transfer is made which is made an event of default under
a lease agreement, the party to the lease contract not making the
transfer, unless that party waives the default or otherwise agrees,
has the rights and remedies described in IC 26-1-2.1-501(2); or
(b) if subdivision (a) is not applicable and if a transfer is made
that (i) is prohibited under a lease agreement or (ii) materially
impairs the prospect of obtaining return performance by,
materially changes the duty of, or materially increases the burden
or risk imposed on, the other party to the lease contract, unless the
party not making the transfer agrees at any time to the transfer in
the lease contract or otherwise, then, except as limited by
contract, (i) the transferor is liable to the party not making the
transfer for damages caused by the transfer to the extent that the
damages could not reasonably be prevented by the party not
making the transfer and (ii) a court having jurisdiction may grant
other appropriate relief, including cancellation of the lease
contract or an injunction against the transfer.
(5) A transfer of "the lease" or of "all my rights under the lease", or
a transfer in similar general terms, is a transfer of rights and, unless the
language or the circumstances, as in a transfer for security, indicate the
contrary, the transfer is a delegation of duties by the transferor to the
transferee. Acceptance by the transferee constitutes a promise by the
transferee to perform those duties. The promise is enforceable by either
the transferor or the other party to the lease contract.
(6) Unless otherwise agreed by the lessor and the lessee, a
delegation of performance does not relieve the transferor as against the
other party of any duty to perform or of any liability for default.
(7) In a consumer lease, to prohibit the transfer of an interest of a
party under the lease contract or to make a transfer an event of default,
the language must be specific, by a writing, and conspicuous.

Legislative History

As added by P.L.189-1991, SEC.3. Amended by P.L.57-2000, SEC.24; P.L.1-2002, SEC.99.