This is an extract of our Leases Bar Exam document, which we sell as part of our Oklahoma Bar Bundle Outlines collection written by the top tier of Oklahoma City University School Of Law students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Oklahoma Bar Bundle Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Leases: Article 2A INTRODUCTION
* Article 2A generally follows Article 2 by substituting the term "lease" for the term "sale" but there are a few new or different rules in Article 2A
* Oklahoma has adopted Article 2A, so if it shows up, it will be in essay SCOPE OF ARTICLE 2A
* Lease Defined o A "lease" is:
A "transfer of the right to possession and use of goods for a term in return for consideration"
"goods" identified same as in Article 2: moveable at time of identification to the contracto Sublease Included
Lease includes a "sublease"
* Lease vs. Disguised Sale on Credit o Article 2A applies only to TRUE LEASES
If so called lease is really a sale of goods on credit, Article 2A doesn't
apply Lessor really is a seller of goods and is also an Article 9 secured party who should take steps Article 9 requires for perfection of the interest in the goods Test For Distinguishing a Lease from a Disguised Sale Disguised Sale If:*
Lessee has no right to terminate his obligation to pay during the lease term,
Lease term (including mandatory renewals) is equal to or greater than the economic life of the goods or gives the 'lessee" an Option to Renew for the rest of the economic life for nominal or no additional consideration
Lease provides that the "lessee" will become owner of the goods or has an option to purchase the goods for nominal or no additional consideration.*
* Sally agree sell tractor to Bob on credit. But for tax reasons
they decide to disguise it as a lease. Draw up a "lease". Socalled lease will run for 10 years, the entire useful life of the tractor. Lease not terminable by Bob, but Sally can repossess in event Bob doesn't pay. Lease says at end of 10 years, goods become Bob's if pay $1.
This is not a true lease, but a sale of goods, and so governed by Article 2 and 9 if gonna take security interest
Factors That by Themselves Don't Indicate a Disguised Sale
* Lessee pays consideration equal to or greater than FMV of leasedgoods (as long as doesn't cover total economic life
* Lessee has an option to renew the lease or become owner of goods
* Lessee assumes major duties
* Paying taxes, risk of loss, etc. Protective Article 9 Filing
* For situations of doubt, article 9 allows lessors to make a protective filing under Article 9, file financing statement but use terms lessor and lessee instead of secured party and debtor
* If alleged lease later found to be secured transaction, filing will protect seller from other creditors
ARTICLE 2 RULES COPIED
* In General o Just minor differences between 2 & 2A which are noted below
* Statute of Frauds o Lease must be in writing if the total payments under the lease will be $1000
Signed by party against whom enforcement sought Describe leased goods & lease term Indicate lease contract been made QUANTITY OF LEASED GOODS
* No "Battle of the Forms" Provision o No battle of the forms provision o So, should be Mirror Image
* Consumer Protection o If lessee is consumer, a consumer lease arises o Rules for Consumer Leases:
Option to Accelerate at Will If lease has a term allowing acceleration of the entire leaseobligation at the will of the lessor, the term is enforceable only if the lessor exercises it in good faith Burden on lessor to show good faith*
Unconscionability 2A contains unconscionability section like Article 2, but does evenfurther.
* Substantive Unconscionability Not Required
* Only requires procedural unconscionability
* IF consumer lease has been induced by unconscionable conduct, the court may award appropriate relief even though the lease is otherwise fair.
* Same rule applies if lessor engages in unconscionable conduct in the collection of a claim arising from the lease
Buy the full version of these notes or essay plans and more in our Oklahoma Bar Bundle Outlines.