By: Parker S.B. No. 1070
73R4720 LJR-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to certain commercial transactions.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Title 1, Business & Commerce Code, is amended by
1-5 adding Chapter 2A to read as follows:
1-6 CHAPTER 2A. LEASES
1-7 SUBCHAPTER A. GENERAL PROVISIONS
1-8 Sec. 2A.101. SHORT TITLE. This chapter shall be known and
1-9 may be cited as the Uniform Commercial Code--Leases.
1-10 Sec. 2A.102. SCOPE. This chapter applies to any
1-11 transaction, regardless of form, that creates a lease of goods.
1-12 This chapter does not apply to a transaction that creates an
1-13 interest in or lease of real estate, except to the extent that
1-14 provision is made for leases of fixtures by Section 2A.309.
1-15 Sec. 2A.103. DEFINITIONS AND INDEX OF DEFINITIONS. (a) In
1-16 this chapter unless the context otherwise requires:
1-17 (1) "Buyer in the ordinary course of business" means a
1-18 person who in good faith and without knowledge that the sale to him
1-19 or her is in violation of the ownership rights or security interest
1-20 or leasehold interest of a third party in the goods buys in the
1-21 ordinary course from a person in the business of selling goods of
1-22 that kind but does not include a pawnbroker. "Buying" may be for
1-23 cash or by exchange of other property or on secured or unsecured
1-24 credit and includes receiving goods or documents of title under a
2-1 preexisting contract for sale but does not include a transfer in
2-2 bulk or as security for or in total or partial satisfaction of a
2-3 money debt.
2-4 (2) "Cancellation" occurs when either party puts an
2-5 end to the lease contract for default by the other party.
2-6 (3) "Commercial unit" means a unit of goods as by
2-7 commercial usage is a single whole for purposes of lease and
2-8 division of which materially impairs its character or value on the
2-9 market or in use. A commercial unit may be a single article, as a
2-10 machine, or a set of articles, as a suite of furniture or a line of
2-11 machinery, or a quantity, as a gross or carload, or any other unit
2-12 treated in use or in the relevant market as a single whole.
2-13 (4) "Conforming" goods or performance under a lease
2-14 contract means performance or goods that are in accordance with the
2-15 obligations under the lease contract.
2-16 (5) "Consumer lease" means a lease that a lessor
2-17 regularly engaged in the business of leasing or selling makes to a
2-18 lessee who is an individual and who takes under the lease primarily
2-19 for a personal, family, or household purpose, if the total payments
2-20 to be made under the lease contract, excluding payments for options
2-21 to renew or buy, do not exceed $25,000.
2-22 (6) "Fault" means a wrongful act, omission, breach, or
2-23 default.
2-24 (7) "Finance lease" means a lease with respect to
2-25 which:
2-26 (A) the lessor does not select, manufacture, or
2-27 supply the goods;
3-1 (B) the lessor acquires the goods or the right
3-2 to possession and use of the goods in connection with the lease;
3-3 and
3-4 (C) one of the following occurs:
3-5 (i) the lessee receives a copy of the
3-6 contract by which the lessor acquired the goods or the right to
3-7 possession and use of the goods before signing the lease contract;
3-8 (ii) the lessee's approval of the contract
3-9 by which the lessor acquired the goods or the right to possession
3-10 and use of the goods is a condition to effectiveness of the lease
3-11 contract;
3-12 (iii) the lessee, before signing the lease
3-13 contract, receives an accurate and complete statement designating
3-14 the promises and warranties, and any disclaimers of warranties,
3-15 limitations or modifications of remedies, or liquidated damages,
3-16 including those of a third party, such as the manufacturer of the
3-17 goods, provided to the lessor by the person supplying the goods in
3-18 connection with or as part of the contract by which the lessor
3-19 acquired the goods or the right to possession and use of the goods;
3-20 or
3-21 (iv) if the lease is not a consumer lease,
3-22 the lessor, before the lessee signs the lease contract, informs the
3-23 lessee in writing (a) of the identity of the person supplying the
3-24 goods to the lessor, unless the lessee has selected that person and
3-25 directed the lessor to acquire the goods or the right to possession
3-26 and use of the goods from that person, (b) that the lessee is
3-27 entitled under this chapter to the promises and warranties,
4-1 including those of any third party, provided to the lessor by the
4-2 person supplying the goods in connection with or as part of the
4-3 contract by which the lessor acquired the goods or the right to
4-4 possession and use of the goods, and (c) that the lessee may
4-5 communicate with the person supplying the goods to the lessor and
4-6 receive an accurate and complete statement of those promises and
4-7 warranties, including any disclaimers and limitations of them or of
4-8 remedies.
4-9 (8) "Goods" means all things that are moveable at the
4-10 time of identification to the lease contract, or are fixtures
4-11 (Section 2A.309), but the term does not include money, documents,
4-12 instruments, accounts, chattel paper, general intangibles, or
4-13 minerals or the like, including oil and gas, before extraction.
4-14 The term also includes the unborn young of animals.
4-15 (9) "Installment lease contract" means a lease
4-16 contract that authorizes or requires the delivery of goods in
4-17 separate lots to be separately accepted, even though the lease
4-18 contract contains the clause "each delivery is a separate lease" or
4-19 its equivalent.
4-20 (10) "Lease" means a transfer of the right to
4-21 possession and use of goods for a term in return for consideration,
4-22 but a sale, including a sale on approval or a sale or return, or
4-23 retention or creation of a security interest is not a lease.
4-24 Unless the context clearly indicates otherwise, the term includes a
4-25 sublease.
4-26 (11) "Lease agreement" means the bargain, with respect
4-27 to the lease, of the lessor and the lessee in fact as found in
5-1 their language or by implication from other circumstances including
5-2 course of dealing or usage of trade or course of performance as
5-3 provided by this chapter. Unless the context clearly indicates
5-4 otherwise, the term includes a sublease agreement.
5-5 (12) "Lease contract" means the total legal obligation
5-6 that results from the lease agreement as affected by this chapter
5-7 and any other applicable rules of law. Unless the context clearly
5-8 indicates otherwise, the term includes a sublease contract.
5-9 (13) "Leasehold interest" means the interest of the
5-10 lessor or the lessee under a lease contract.
5-11 (14) "Lessee" means a person who acquires the right to
5-12 possession and use of goods under a lease. Unless the context
5-13 clearly indicates otherwise, the term includes a sublessee.
5-14 (15) "Lessee in ordinary course of business" means a
5-15 person who in good faith and without knowledge that the lease to
5-16 him or her is in violation of the ownership rights or security
5-17 interest or leasehold interest of a third party in the goods,
5-18 leases in ordinary course from a person in the business of selling
5-19 or leasing goods of that kind but does not include a pawnbroker.
5-20 "Leasing" may be for cash or by exchange of other property or on
5-21 secured or unsecured credit and includes receiving goods or
5-22 documents of title under a preexisting lease contract but does not
5-23 include a transfer in bulk or as security for or in total or
5-24 partial satisfaction of a money debt.
5-25 (16) "Lessor" means a person who transfers the right
5-26 to possession and use of goods under a lease. Unless the context
5-27 clearly indicates otherwise, the term includes a sublessor.
6-1 (17) "Lessor's residual interest" means the lessor's
6-2 interest in the goods after the expiration, termination, or
6-3 cancellation of the lease contract.
6-4 (18) "Lien" means a charge against or interest in
6-5 goods to secure payment of a debt or performance of an obligation,
6-6 but the term does not include a security interest.
6-7 (19) "Lot" means a parcel or a single article that is
6-8 the subject matter of a separate lease or delivery, whether or not
6-9 it is sufficient to perform the lease contract.
6-10 (20) "Merchant lessee" means a lessee that is a
6-11 merchant with respect to goods of the kind subject to the lease.
6-12 (21) "Present value" means the amount as of a date
6-13 certain of one or more sums payable in the future, discounted to
6-14 the date certain. The discount is determined by the interest rate
6-15 specified by the parties if the rate was not manifestly
6-16 unreasonable at the time the transaction was entered into;
6-17 otherwise, the discount is determined by a commercially reasonable
6-18 rate that takes into account the facts and circumstances of each
6-19 case at the time the transaction was entered into.
6-20 (22) "Purchase" includes taking by sale, lease,
6-21 mortgage, security interest, pledge, gift, or any other voluntary
6-22 transaction creating an interest in goods.
6-23 (23) "Sublease" means a lease of goods the right to
6-24 possession and use of which was acquired by the lessor as a lessee
6-25 under an existing lease.
6-26 (24) "Supplier" means a person from whom a lessor buys
6-27 or leases goods to be leased under a finance lease.
7-1 (25) "Supply contract" means a contract under which a
7-2 lessor buys or leases goods to be leased.
7-3 (26) "Termination" occurs when either party pursuant
7-4 to a power created by agreement or law puts an end to the lease
7-5 contract otherwise than for default.
7-6 (b) Other definitions applying to this chapter and the
7-7 sections in which they appear are:
7-8 "Accessions". Section 2A.310(a).
7-9 "Construction mortgage". Section 2A.309(a)(4).
7-10 "Encumbrance". Section 2A.309(a)(5).
7-11 "Fixtures". Section 2A.309(a)(1).
7-12 "Fixture filing". Section 2A.309(a)(2).
7-13 "Purchase money lease". Section 2A.309(a)(3).
7-14 (c) The following definitions in other chapters apply to
7-15 this chapter:
7-16 "Account". Section 9.106.
7-17 "Between merchants". Section 2.104(c).
7-18 "Buyer". Section 2.103(a)(1).
7-19 "Chattel paper". Section 9.105(a)(2).
7-20 "Consumer goods". Section 9.109(1).
7-21 "Document". Section 9.105(a)(6).
7-22 "Entrusting". Section 2.403(c).
7-23 "General intangibles". Section 9.106.
7-24 "Good faith". Section 2.103(a)(2).
7-25 "Instrument". Section 9.105(a)(9).
7-26 "Merchant". Section 2.104(a).
7-27 "Mortgage". Section 9.105(a)(10).
8-1 "Pursuant to commitment". Section 9.105(a)(11).
8-2 "Receipt". Section 2.103(a)(3).
8-3 "Sale". Section 2.106(a).
8-4 "Sale on approval". Section 2.326.
8-5 "Sale or return". Section 2.326.
8-6 "Seller". Section 2.103(a)(4).
8-7 (d) In addition Chapter 1 contains general definitions and
8-8 principles of construction and interpretation applicable throughout
8-9 this chapter.
8-10 Sec. 2A.104. LEASES SUBJECT TO OTHER LAWS. (a) A lease,
8-11 although subject to this chapter, is also subject to any
8-12 applicable:
8-13 (1) certificate of title statute of this state,
8-14 including the provisions of the Certificate of Title Act (Article
8-15 6687-1, Vernon's Texas Civil Statutes), Chapter 31, Parks and
8-16 Wildlife Code, and Section 19, Texas Manufactured Housing Standards
8-17 Act (Article 5221f, Vernon's Texas Civil Statutes);
8-18 (2) certificate of title statute of another
8-19 jurisdiction (Section 2A.105); or
8-20 (3) consumer law of this state, both decisional and
8-21 statutory, including, to the extent that they apply to a lease
8-22 transaction, the provisions of Chapters 17 and 35, Business &
8-23 Commerce Code; Title 79, Revised Statutes (Article 5069-1.01 et
8-24 seq., Vernon's Texas Civil Statutes); the Texas Pawnshop Act
8-25 (Article 5069-51.01 et seq., Vernon's Texas Civil Statutes); and
8-26 the Texas Manufactured Housing Standards Act (Article 5221f,
8-27 Vernon's Texas Civil Statutes).
9-1 (b) In case of conflict between this chapter, other than
9-2 Sections 2A.105, 2A.304(c) and 2A.305(c), and any statute or law
9-3 referred to in Subsection (a), the statute or law controls.
9-4 (c) Failure to comply with any applicable statute has only
9-5 the effect specified therein.
9-6 Sec. 2A.105. TERRITORIAL APPLICATION OF CHAPTER TO GOODS
9-7 COVERED BY CERTIFICATE OF TITLE. Subject to the provisions of
9-8 Sections 2A.304(c) and 2A.305(c), with respect to goods covered by
9-9 a certificate of title issued under a statute of this state or of
9-10 another jurisdiction, compliance and the effect of compliance or
9-11 noncompliance with a certificate of title statute are governed by
9-12 the law (including the conflict of laws rules) of the jurisdiction
9-13 issuing the certificate until the earlier of:
9-14 (1) surrender of the certificate; or
9-15 (2) four months after the goods are removed from that
9-16 jurisdiction and thereafter until a new certificate of title is
9-17 issued by another jurisdiction.
9-18 Sec. 2A.106. LIMITATION ON POWER OF PARTIES TO CONSUMER
9-19 LEASE TO CHOOSE APPLICABLE LAW AND JUDICIAL FORUM. (a) If the law
9-20 chosen by the parties to a consumer lease is that of a jurisdiction
9-21 other than a jurisdiction in which the lessee resides at the time
9-22 the lease agreement becomes enforceable or within 30 days
9-23 thereafter or in which the goods are to be used, the choice is not
9-24 enforceable.
9-25 (b) If the judicial forum chosen by the parties to a
9-26 consumer lease is a forum located in a jurisdiction other than the
9-27 jurisdiction in which the lessee in fact signed the lease
10-1 agreement, resides at the commencement of the action, or resided at
10-2 the time the lease contract became enforceable or in which the
10-3 goods are in fact used by the lessee, the choice is not
10-4 enforceable.
10-5 Sec. 2A.107. WAIVER OR RENUNCIATION OF CLAIM OR RIGHT AFTER
10-6 DEFAULT. A claim or right arising out of an alleged default or
10-7 breach of warranty may be discharged in whole or in part without
10-8 consideration by a written waiver or renunciation signed and
10-9 delivered by the aggrieved party.
10-10 Sec. 2A.108. UNCONSCIONABILITY. (a) If the court as a
10-11 matter of law finds a lease contract or any clause of a lease
10-12 contract to have been unconscionable at the time it was made, the
10-13 court may refuse to enforce the lease contract, or it may enforce
10-14 the remainder of the lease contract without the unconscionable
10-15 clause, or it may so limit the application of any unconscionable
10-16 clause as to avoid any unconscionable result.
10-17 (b) With respect to a consumer lease, if the court as a
10-18 matter of law finds that a lease contract or any clause of a lease
10-19 contract has been induced by unconscionable conduct or that
10-20 unconscionable conduct has occurred in the collection of a claim
10-21 arising from a lease contract, the court may grant appropriate
10-22 relief.
10-23 (c) Before making a finding of unconscionability under
10-24 Subsection (a) or (b), the court, on its own motion or that of a
10-25 party, shall afford the parties a reasonable opportunity to present
10-26 evidence as to the setting, purpose, and effect of the lease
10-27 contract or clause thereof or of the conduct.
11-1 (d) In an action in which the lessee claims
11-2 unconscionability with respect to a consumer lease:
11-3 (1) if the court finds unconscionability under
11-4 Subsection (a) or (b), the court shall award reasonable attorney's
11-5 fees to the lessee; and
11-6 (2) in determining attorney's fees, the amount of the
11-7 recovery on behalf of the claimant under Subsections (a) and (b) is
11-8 not controlling.
11-9 Sec. 2A.109. OPTION TO ACCELERATE AT WILL. (a) A term
11-10 providing that one party or the party's successor in interest may
11-11 accelerate payment or performance or require collateral or
11-12 additional collateral "at will" or "when the party deems himself or
11-13 herself insecure" or in words of similar import must be construed
11-14 to mean that the party has power to do so only if the party in good
11-15 faith believes that the prospect of payment or performance is
11-16 impaired.
11-17 (b) With respect to a consumer lease, the burden of
11-18 establishing good faith under Subsection (a) is on the party who
11-19 exercises the power; otherwise the burden of establishing lack of
11-20 good faith is on the party against whom the power has been
11-21 exercised.
11-22 SUBCHAPTER B. FORMATION AND
11-23 CONSTRUCTION OF LEASE CONTRACT
11-24 Sec. 2A.201. STATUTE OF FRAUDS. (a) A lease contract is
11-25 not enforceable by way of action or defense unless:
11-26 (1) the total payments to be made under the lease
11-27 contract, excluding payments for options to renew or buy, are less
12-1 than $1,000; or
12-2 (2) there is a writing, signed by the party against
12-3 whom enforcement is sought or by that party's authorized agent,
12-4 sufficient to indicate that a lease contract has been made between
12-5 the parties and to describe the goods leased and the lease term.
12-6 (b) Any description of leased goods or of the lease term is
12-7 sufficient and satisfies Subsection (a)(2), whether or not it is
12-8 specific, if it reasonably identifies what is described.
12-9 (c) A writing is not insufficient because it omits or
12-10 incorrectly states a term agreed upon, but the lease contract is
12-11 not enforceable under Subsection (a)(2) beyond the lease term and
12-12 the quantity of goods shown in the writing.
12-13 (d) A lease contract that does not satisfy the requirements
12-14 of Subsection (a), but which is valid in other respects, is
12-15 enforceable:
12-16 (1) if the goods are to be specially manufactured or
12-17 obtained for the lessee and are not suitable for lease or sale to
12-18 others in the ordinary course of the lessor's business, and the
12-19 lessor, before notice of repudiation is received and under
12-20 circumstances that reasonably indicate that the goods are for the
12-21 lessee, has made either a substantial beginning of their
12-22 manufacture or commitments for their procurement;
12-23 (2) if the party against whom enforcement is sought
12-24 admits in that party's pleading, testimony or otherwise in court
12-25 that a lease contract was made, but the lease contract is not
12-26 enforceable under this provision beyond the quantity of goods
12-27 admitted;
13-1 (3) with respect to goods that have been received and
13-2 accepted by the lessee; or
13-3 (4) if the lease contract would otherwise be
13-4 enforceable under general principles of equitable estoppel,
13-5 detrimental reliance or unjust enrichment.
13-6 (e) The lease term under a lease contract referred to in
13-7 Subsection (d) is:
13-8 (1) if there is a writing signed by the party against
13-9 whom enforcement is sought or by that party's authorized agent
13-10 specifying the lease term, the term so specified;
13-11 (2) if the party against whom enforcement is sought
13-12 admits in that party's pleading, testimony, or otherwise in court a
13-13 lease term, the term so admitted; or
13-14 (3) a reasonable lease term.
13-15 Sec. 2A.202. FINAL WRITTEN EXPRESSION; PAROL OR EXTRINSIC
13-16 EVIDENCE. Terms with respect to which the confirmatory memoranda
13-17 of the parties agree or which are otherwise set forth in a writing
13-18 intended by the parties as a final expression of their agreement
13-19 with respect to such terms as are included therein may not be
13-20 contradicted by evidence of a prior agreement or of a
13-21 contemporaneous oral agreement but may be explained or
13-22 supplemented:
13-23 (1) by course of dealing or usage of trade or by
13-24 course of performance; and
13-25 (2) by evidence of consistent additional terms unless
13-26 the court finds the writing to have been intended also as a
13-27 complete and exclusive statement of the terms of the agreement.
14-1 Sec. 2A.203. SEALS INOPERATIVE. The affixing of a seal to a
14-2 writing evidencing a lease contract or an offer to enter into a
14-3 lease contract does not render the writing a sealed instrument and
14-4 the law with respect to sealed instruments does not apply to the
14-5 lease contract or offer.
14-6 Sec. 2A.204. FORMATION IN GENERAL. (a) A lease contract
14-7 may be made in any manner sufficient to show agreement, including
14-8 conduct by both parties which recognizes the existence of a lease
14-9 contract.
14-10 (b) An agreement sufficient to constitute a lease contract
14-11 may be found although the moment of its making is undetermined.
14-12 (c) Although one or more terms are left open, a lease
14-13 contract does not fail for indefiniteness if the parties have
14-14 intended to make a lease contract and there is a reasonably certain
14-15 basis for giving an appropriate remedy.
14-16 Sec. 2A.205. FIRM OFFERS. An offer by a merchant to lease
14-17 goods to or from another person in a signed writing that by its
14-18 terms gives assurance it will be held open is not revocable, for
14-19 lack of consideration, during the time stated or, if no time is
14-20 stated, for a reasonable time, but in no event may the period of
14-21 irrevocability exceed three months. Any such term of assurance on
14-22 a form supplied by the offeree must be separately signed by the
14-23 offeror.
14-24 Sec. 2A.206. OFFER AND ACCEPTANCE IN FORMATION OF LEASE
14-25 CONTRACT. (a) Unless otherwise unambiguously indicated by the
14-26 language or circumstances, an offer to make a lease contract must
14-27 be construed as inviting acceptance in any manner and by any medium
15-1 reasonable in the circumstances.
15-2 (b) If the beginning of a requested performance is a
15-3 reasonable method of acceptance, an offeror who is not notified of
15-4 acceptance within a reasonable time may treat the offer as having
15-5 lapsed before acceptance.
15-6 Sec. 2A.207. COURSE OF PERFORMANCE OR PRACTICAL
15-7 CONSTRUCTION. (a) If a lease contract involves repeated occasions
15-8 for performance by either party with knowledge of the nature of the
15-9 performance and opportunity for objection to it by the other, a
15-10 course of performance accepted or acquiesced in without objection
15-11 is relevant to determine the meaning of the lease agreement.
15-12 (b) The express terms of a lease agreement and any course of
15-13 performance, as well as any course of dealing and usage of trade,
15-14 must be construed whenever reasonable as consistent with each
15-15 other; but if that construction is unreasonable, express terms
15-16 control course of performance, course of performance controls both
15-17 course of dealing and usage of trade, and course of dealing
15-18 controls usage of trade.
15-19 (c) Subject to the provisions of Section 2A.208 on
15-20 modification and waiver, course of performance is relevant to show
15-21 a waiver or modification of a term inconsistent with the course of
15-22 performance.
15-23 Sec. 2A.208. MODIFICATION, RESCISSION AND WAIVER. (a) An
15-24 agreement modifying a lease contract needs no consideration to be
15-25 binding.
15-26 (b) A signed lease agreement that excludes modification or
15-27 rescission except by a signed writing may not be otherwise modified
16-1 or rescinded, but, except as between merchants, such a requirement
16-2 on a form supplied by a merchant must be separately signed by the
16-3 other party.
16-4 (c) Although an attempt at modification or rescission does
16-5 not satisfy the requirements of Subsection (b), it may operate as a
16-6 waiver.
16-7 (d) A party who has made a waiver affecting an executory
16-8 portion of a lease contract may retract the waiver by reasonable
16-9 notification received by the other party that strict performance
16-10 will be required of any term waived, unless a retraction would be
16-11 unjust in view of a material change of position in reliance on the
16-12 waiver.
16-13 Sec. 2A.209. LESSEE UNDER FINANCE LEASE AS BENEFICIARY OF
16-14 SUPPLY CONTRACT. (a) The benefit of a supplier's promises to the
16-15 lessor under the supply contract and of all warranties, whether
16-16 express or implied, including those of any third party provided in
16-17 connection with or as part of the supply contract, extends to the
16-18 lessee to the extent of the lessee's leasehold interest under a
16-19 finance lease related to the supply contract, but is subject to the
16-20 terms of the warranty and of the supply contract and all defenses
16-21 or claims arising therefrom.
16-22 (b) The extension of the benefit of a supplier's promises
16-23 and of warranties to the lessee (Section 2A.209(a)) does not:
16-24 (1) modify the rights and obligations of the parties
16-25 to the supply contract, whether arising therefrom or otherwise; or
16-26 (2) impose any duty or liability under the supply
16-27 contract on the lessee.
17-1 (c) Any modification or rescission of the supply contract by
17-2 the supplier and the lessor is effective between the supplier and
17-3 the lessee unless, before the modification or rescission, the
17-4 supplier has received notice that the lessee has entered into a
17-5 finance lease related to the supply contract. If the modification
17-6 or rescission is effective between the supplier and the lessee, the
17-7 lessor is deemed to have assumed, in addition to the obligations of
17-8 the lessor to the lessee under the lease contract, promises of the
17-9 supplier to the lessor and warranties that were so modified or
17-10 rescinded as they existed and were available to the lessee before
17-11 modification or rescission.
17-12 (d) In addition to the extension of the benefit of the
17-13 supplier's promises and of warranties to the lessee under
17-14 Subsection (a), the lessee retains all rights that the lessee may
17-15 have against the supplier which arise from an agreement between the
17-16 lessee and the supplier or under other law.
17-17 Sec. 2A.210. EXPRESS WARRANTIES. (a) Express warranties by
17-18 the lessor are created as follows:
17-19 (1) Any affirmation of fact or promise made by the
17-20 lessor to the lessee that relates to the goods and becomes part of
17-21 the basis of the bargain creates an express warranty that the goods
17-22 will conform to the affirmation or promise.
17-23 (2) Any description of the goods which is made part of
17-24 the basis of the bargain creates an express warranty that the goods
17-25 will conform to the description.
17-26 (3) Any sample or model that is made part of the basis
17-27 of the bargain creates an express warranty that the whole of the
18-1 goods will conform to the sample or model.
18-2 (b) It is not necessary to the creation of an express
18-3 warranty that the lessor use formal words, such as "warrant" or
18-4 "guarantee," or that the lessor have a specific intention to make a
18-5 warranty, but an affirmation merely of the value of the goods or a
18-6 statement purporting to be merely the lessor's opinion or
18-7 commendation of the goods does not create a warranty.
18-8 Sec. 2A.211. WARRANTIES AGAINST INTERFERENCE AND AGAINST
18-9 INFRINGEMENT; LESSEE'S OBLIGATION AGAINST INFRINGEMENT. (a) There
18-10 is in a lease contract a warranty that for the lease term no person
18-11 holds a claim to or interest in the goods that arose from an act or
18-12 omission of the lessor other than a claim by way of infringement or
18-13 the like, which will interfere with the lessee's enjoyment of its
18-14 leasehold interest.
18-15 (b) Except in a finance lease there is in a lease contract
18-16 by a lessor who is a merchant regularly dealing in goods of the
18-17 kind a warranty that the goods are delivered free of the rightful
18-18 claim of any person by way of infringement or the like.
18-19 (c) A lessee who furnishes specifications to a lessor or a
18-20 supplier shall hold the lessor and the supplier harmless against a
18-21 claim by way of infringement or the like that arises out of
18-22 compliance with the specifications.
18-23 Sec. 2A.212. IMPLIED WARRANTY OF MERCHANTABILITY. (a)
18-24 Except in a finance lease, a warranty that the goods will be
18-25 merchantable is implied in a lease contract if the lessor is a
18-26 merchant with respect to goods of that kind.
18-27 (b) Goods to be merchantable must be at least such as:
19-1 (1) pass without objection in the trade under the
19-2 description in the lease agreement;
19-3 (2) in the case of fungible goods, are of fair average
19-4 quality within the description;
19-5 (3) are fit for the ordinary purposes for which goods
19-6 of that type are used;
19-7 (4) run, within the variation permitted by the lease
19-8 agreement, of even kind, quality, and quantity within each unit and
19-9 among all units involved;
19-10 (5) are adequately contained, packaged, and labeled as
19-11 the lease agreement may require; and
19-12 (6) conform to any promises or affirmations of fact
19-13 made on the container or label.
19-14 (c) Other implied warranties may arise from course of
19-15 dealing or usage of trade.
19-16 Sec. 2A.213. IMPLIED WARRANTY OF FITNESS FOR PARTICULAR
19-17 PURPOSE. Except in a finance lease, if the lessor at the time the
19-18 lease contract is made has reason to know of any particular purpose
19-19 for which the goods are required and that the lessee is relying on
19-20 the lessor's skill or judgment to select or furnish suitable goods,
19-21 there is in the lease contract an implied warranty that the goods
19-22 will be fit for that purpose.
19-23 Sec. 2A.214. EXCLUSION OR MODIFICATION OF WARRANTIES. (a)
19-24 Words or conduct relevant to the creation of an express warranty
19-25 and words or conduct tending to negate or limit a warranty must be
19-26 construed whenever reasonable, as consistent with each other; but,
19-27 subject to the provisions of Section 2A.202 on parol or extrinsic
20-1 evidence, negation or limitation is inoperative to the extent that
20-2 the construction is unreasonable.
20-3 (b) Subject to Subsection (c), to exclude or modify the
20-4 implied warranty of merchantability or any part of it the language
20-5 must mention "merchantability," be by a writing, and be
20-6 conspicuous. Subject to Subsection (c), to exclude or modify an
20-7 implied warranty of fitness the exclusion must be by a writing and
20-8 be conspicuous. Language to exclude all implied warranties of
20-9 fitness is sufficient if it is in writing, is conspicuous and
20-10 states, for example, "There is no warranty that the goods will be
20-11 fit for a particular purpose."
20-12 (c) Notwithstanding Subsection (b), but subject to
20-13 Subsection (d),
20-14 (1) unless the circumstances indicate otherwise, all
20-15 implied warranties are excluded by expressions like "as is," or
20-16 "with all faults," or by other language that in common
20-17 understanding calls the lessee's attention to the exclusion of
20-18 warranties and makes plain that there is no implied warranty, if in
20-19 writing and conspicuous;
20-20 (2) if the lessee before entering into the lease
20-21 contract has examined the goods or the sample or model as fully as
20-22 desired or has refused to examine the goods, there is no implied
20-23 warranty with regard to defects that an examination ought in the
20-24 circumstances to have revealed; and
20-25 (3) an implied warranty also may be excluded or
20-26 modified by course of dealing, course of performance, or usage of
20-27 trade.
21-1 (d) To exclude or modify a warranty against interference or
21-2 against infringement (Section 2A.211) or any part of it, the
21-3 language must be specific, be by a writing, and be conspicuous,
21-4 unless the circumstances, including course of performance, course
21-5 of dealing, or usage of trade, give the lessee reason to know that
21-6 the goods are being leased subject to a claim or interest of any
21-7 person.
21-8 Sec. 2A.215. ACCUMULATION AND CONFLICT OF WARRANTIES EXPRESS
21-9 OR IMPLIED. Warranties, whether express or implied, must be
21-10 construed as consistent with each other and as cumulative, but if
21-11 that construction is unreasonable, the intention of the parties
21-12 determines which warranty is dominant. In ascertaining that
21-13 intention the following rules apply:
21-14 (1) exact or technical specifications displace an
21-15 inconsistent sample or model or general language of description;
21-16 (2) a sample from an existing bulk displaces
21-17 inconsistent general language of description; and
21-18 (3) express warranties displace inconsistent implied
21-19 warranties other than an implied warranty of fitness for a
21-20 particular purpose.
21-21 Sec. 2A.216. THIRD-PARTY BENEFICIARIES OF EXPRESS AND
21-22 IMPLIED WARRANTIES. This chapter does not provide whether anyone
21-23 other than a lessee may take advantage of an express or implied
21-24 warranty of quality made to the lessee or whether the lessee or
21-25 anyone entitled to take advantage of a warranty made to the lessee
21-26 may sue a third party other than the immediate lessor, or the
21-27 supplier in a finance lease, for deficiencies in the quality of the
22-1 goods. These matters are left to the courts for their
22-2 determination.
22-3 Sec. 2A.217. IDENTIFICATION. Identification of goods as
22-4 goods to which a lease contract refers may be made at any time and
22-5 in any manner explicitly agreed to by the parties. In the absence
22-6 of explicit agreement, identification occurs:
22-7 (1) when the lease contract is made if the lease
22-8 contract is for a lease of goods that are existing and identified;
22-9 (2) when the goods are shipped, marked, or otherwise
22-10 designated by the lessor as goods to which the lease contract
22-11 refers, if the lease contract is for a lease of goods that are not
22-12 existing and identified; or
22-13 (3) when the young are conceived, if the lease
22-14 contract is for a lease of the unborn young of animals.
22-15 Sec. 2A.218. INSURANCE AND PROCEEDS. (a) A lessee obtains
22-16 an insurable interest when existing goods are identified to the
22-17 lease contract even though the goods identified are nonconforming
22-18 and the lessee has an option to reject them.
22-19 (b) If a lessee has an insurable interest only by reason of
22-20 the lessor's identification of the goods, the lessor, until default
22-21 or insolvency or notification to the lessee that identification is
22-22 final, may substitute other goods for those identified.
22-23 (c) Notwithstanding a lessee's insurable interest under
22-24 Subsections (a) and (b), the lessor retains an insurable interest
22-25 during the existence of the lease contract.
22-26 (d) Nothing in this section impairs any insurable interest
22-27 recognized under any other statute or rule of law.
23-1 (e) The parties by agreement may determine that one or more
23-2 parties have an obligation to obtain and pay for insurance covering
23-3 the goods and by agreement may determine the beneficiary of the
23-4 proceeds of the insurance.
23-5 Sec. 2A.219. RISK OF LOSS. (a) Except in the case of a
23-6 finance lease, risk of loss is retained by the lessor and does not
23-7 pass to the lessee. In the case of a finance lease, risk of loss
23-8 passes to the lessee.
23-9 (b) Subject to the provisions of this chapter on the effect
23-10 of default on risk of loss (Section 2A.220), if risk of loss is to
23-11 pass to the lessee and the time of passage is not stated, the
23-12 following rules apply:
23-13 (1) If the lease contract requires or authorizes the
23-14 goods to be shipped by carrier:
23-15 (A) and it does not require delivery at a
23-16 particular destination, the risk of loss passes to the lessee when
23-17 the goods are duly delivered to the carrier; but
23-18 (B) if it does require delivery at a particular
23-19 destination and the goods are there duly tendered while in the
23-20 possession of the carrier, the risk of loss passes to the lessee
23-21 when the goods are there duly so tendered as to enable the lessee
23-22 to take delivery.
23-23 (2) If the goods are held by a bailee to be delivered
23-24 without being moved, the risk of loss passes to the lessee on
23-25 acknowledgement by the bailee of the lessee's right to possession
23-26 of the goods.
23-27 (3) In any case not within Subdivision (1) or (2), the
24-1 risk of loss passes to the lessee on tender of delivery if the
24-2 lessee is a merchant; otherwise the risk of loss passes to the
24-3 lessee on the lessee's receipt of the goods.
24-4 Sec. 2A.220. EFFECT OF DEFAULT ON RISK OF LOSS. (a) Where
24-5 risk of loss is to pass to the lessee and the time of passage is
24-6 not stated:
24-7 (1) if a tender or delivery of goods so fails to
24-8 conform to the lease contract as to give a right of rejection, the
24-9 risk of their loss remains with the lessor, or, in the case of a
24-10 finance lease, the supplier, until cure or acceptance; or
24-11 (2) if the lessee rightfully revokes acceptance, the
24-12 lessee, to the extent of any deficiency in the lessee's effective
24-13 insurance coverage, may treat the risk of loss as having remained
24-14 with the lessor from the beginning.
24-15 (b) Whether or not risk of loss is to pass to the lessee, if
24-16 the lessee as to conforming goods already identified to a lease
24-17 contract repudiates or is otherwise in default under the lease
24-18 contract, the lessor, or, in the case of a finance lease, the
24-19 supplier, to the extent of any deficiency in the lessor's or the
24-20 supplier's effective insurance coverage may treat the risk of loss
24-21 as resting on the lessee for a commercially reasonable time.
24-22 Sec. 2A.221. CASUALTY TO IDENTIFIED GOODS. If a lease
24-23 contract requires goods identified when the lease contract is made,
24-24 and the goods suffer casualty without fault of the lessee, the
24-25 lessor or the supplier before delivery, or the goods suffer
24-26 casualty before risk of loss passes to the lessee under the lease
24-27 agreement or Section 2A.219:
25-1 (1) if the loss is total, the lease contract is
25-2 avoided; and
25-3 (2) if the loss is partial or the goods have so
25-4 deteriorated as to no longer conform to the lease contract, the
25-5 lessee may nevertheless demand inspection and at the lessee's
25-6 option either treat the lease contract as avoided or, except in a
25-7 finance lease that is not a consumer lease, accept the goods with
25-8 due allowance from the rent payable for the balance of the lease
25-9 term for the deterioration or the deficiency in quantity but
25-10 without further right against the lessor.
25-11 SUBCHAPTER C. EFFECT OF LEASE CONTRACT
25-12 Sec. 2A.301. ENFORCEABILITY OF LEASE CONTRACT. Except as
25-13 otherwise provided in this title, a lease contract is effective and
25-14 enforceable according to its terms between the parties, against
25-15 purchasers of the goods and against creditors of the parties.
25-16 Sec. 2A.302. TITLE TO AND POSSESSION OF GOODS. Except as
25-17 otherwise provided in this title, each provision of this chapter
25-18 applies whether the lessor or a third party has title to the goods,
25-19 and whether the lessor, the lessee, or a third party has possession
25-20 of the goods, notwithstanding any statute or rule of law that
25-21 possession or the absence of possession is fraudulent.
25-22 Sec. 2A.303. ALIENABILITY OF PARTY'S INTEREST UNDER LEASE
25-23 CONTRACT OR OF LESSOR'S RESIDUAL INTEREST IN GOODS; DELEGATION OF
25-24 PERFORMANCE; TRANSFER OF RIGHTS. (a) As used in this section,
25-25 "creation of a security interest" includes the sale of a lease
25-26 contract that is subject to Chapter 9 of this code, Secured
25-27 Transactions, by reason of Section 9.102(a)(2).
26-1 (b) Except as provided in Subsections (c) and (d), a
26-2 provision in a lease agreement which (1) prohibits the voluntary or
26-3 involuntary transfer, including a transfer by sale, sublease,
26-4 creation or enforcement of a security interest, or attachment,
26-5 levy, or other judicial process, of an interest of a party under
26-6 the lease contract or of the lessor's residual interest in the
26-7 goods, or (2) makes such a transfer an event of default, gives rise
26-8 to the rights and remedies provided in Subsection (e) of this
26-9 section, but a transfer that is prohibited or is an event of
26-10 default under the lease agreement is otherwise effective.
26-11 (c) A provision in a lease agreement which (1) prohibits the
26-12 creation or enforcement of a security interest in an interest of a
26-13 party under the lease contract or in the lessor's residual interest
26-14 in the goods, or (2) makes such a transfer an event of default, is
26-15 not enforceable unless, and then only to the extent that, there is
26-16 an actual transfer by the lessee of the lessee's right of
26-17 possession or use of the goods in violation of the provision or an
26-18 actual delegation of a material performance of either party to the
26-19 lease contract in violation of the provision. Neither the granting
26-20 nor the enforcement of a security interest in (1) the lessor's
26-21 interest in the lease contract or (2) the lessor's residual
26-22 interest in the goods is a transfer that materially impairs the
26-23 prospect of obtaining return performance by, materially changes the
26-24 duty of, or materially increases the burden of risk imposed on, the
26-25 lessee within the purview of Subsection (e) unless, and then only
26-26 to the extent that, there is an actual delegation of a material
26-27 performance of the lessor.
27-1 (d) A provision in a lease agreement which (1) prohibits a
27-2 transfer of a right to damages for default with respect to the
27-3 whole lease contract or of a right to payment arising out of the
27-4 transferor's due performance of the transferor's entire obligation,
27-5 or (2) makes such a transfer an event of default, is not
27-6 enforceable, and such a transfer is not a transfer that materially
27-7 impairs the prospect of obtaining return performance by, materially
27-8 changes the duty of, or materially increases the burden or risk
27-9 imposed on, the other party to the lease contract within the
27-10 purview of Subsection (e).
27-11 (e) Subject to Subsections (c) and (d):
27-12 (1) if a transfer is made which is made an event of
27-13 default under a lease agreement, the party to the lease contract
27-14 not making the transfer, unless that party waives the default or
27-15 otherwise agrees, has the rights and remedies described in Section
27-16 2A.501(b); and
27-17 (2) if Subdivision (1) is not applicable and if a
27-18 transfer is made that (A) is prohibited under a lease agreement or
27-19 (B) materially impairs the prospect of obtaining return performance
27-20 by, materially changes the duty of, or materially increases the
27-21 burden of risk imposed on, the other party to the lease contract,
27-22 unless the party not making the transfer agrees at any time to the
27-23 transfer in the lease contract or otherwise, then, except as
27-24 limited by contract, (i) the transferor is liable to the party not
27-25 making the transfer for damages caused by the transfer to the
27-26 extent that the damages could not reasonably be prevented by the
27-27 party not making the transfer and (ii) a court having jurisdiction
28-1 may grant other appropriate relief, including cancellation of the
28-2 lease contract or an injunction against the transfer.
28-3 (f) A transfer of "the lease" or of "all my rights under the
28-4 lease," or a transfer in similar general terms, is a transfer of
28-5 rights and, unless the language or the circumstances, as in a
28-6 transfer for security, indicate the contrary, the transfer is a
28-7 delegation of duties by the transferor to the transferee.
28-8 Acceptance by the transferee constitutes a promise by the
28-9 transferee to perform those duties. This promise is enforceable by
28-10 either the transferor or the other party to the lease contract.
28-11 (g) Unless otherwise agreed by the lessor and the lessee, a
28-12 delegation of performance does not relieve the transferor as
28-13 against the other party of any duty to perform or of any liability
28-14 for default.
28-15 (h) In a consumer lease, to prohibit the transfer of an
28-16 interest of a party under the lease contract or to make a transfer
28-17 an event of default, the language must be specific, by a writing,
28-18 and conspicuous.
28-19 Sec. 2A.304. SUBSEQUENT LEASE OF GOODS BY LESSOR. (a)
28-20 Subject to Section 2A.303 of this chapter, a subsequent lessee from
28-21 a lessor of goods under an existing lease contract obtains, to the
28-22 extent of the leasehold interest transferred, the leasehold
28-23 interest in the goods that the lessor had or had power to transfer,
28-24 and except as provided by Subsection (b) or Section 2A.527(d) takes
28-25 subject to the existing lease contract. A lessor with voidable
28-26 title has power to transfer a good leasehold interest to a good
28-27 faith subsequent lessee for value, but only to the extent set forth
29-1 in the preceding sentence. If goods have been delivered under a
29-2 transaction of purchase, the lessor has that power even though:
29-3 (1) the lessor's transferor was deceived as to the
29-4 identity of the lessor;
29-5 (2) the delivery was in exchange for a check which is
29-6 later dishonored;
29-7 (3) it was agreed that the transaction was to be a
29-8 "cash sale"; or
29-9 (4) the delivery was procured through fraud punishable
29-10 as larcenous under the criminal law.
29-11 (b) A subsequent lessee in the ordinary course of business
29-12 from a lessor who is a merchant dealing in goods of that kind to
29-13 whom the goods were entrusted by the existing lessee of that lessor
29-14 before the interest of the subsequent lessee became enforceable
29-15 against that lessor obtains, to the extent of the leasehold
29-16 interest transferred, all of that lessor's and the existing
29-17 lessee's rights to the goods, and takes free of the existing lease
29-18 contract.
29-19 (c) A subsequent lessee from the lessor of goods that are
29-20 subject to an existing lease contract and are covered by a
29-21 certificate of title issued under a statute of this state or of
29-22 another jurisdiction takes no greater rights than those provided
29-23 both by this section and by the certificate of title statute.
29-24 Sec. 2A.305. SALE OR SUBLEASE OF GOODS BY LESSEE. (a)
29-25 Subject to the provisions of Section 2A.303, a buyer or sublessee
29-26 from the lessee of goods under an existing lease contract obtains,
29-27 to the extent of the interest transferred, the leasehold interest
30-1 in the goods that the lessee had or had power to transfer, and
30-2 except as provided by Subsection (b) and Section 2A.511, takes
30-3 subject to the existing lease contract. A lessee with a voidable
30-4 leasehold interest has power to transfer a good leasehold interest
30-5 to a good faith buyer for value or a good faith sublessee for
30-6 value, but only to the extent set forth in the preceding sentence.
30-7 When goods have been delivered under a transaction of lease the
30-8 lessee has that power even though:
30-9 (1) the lessor was deceived as to the identity of the
30-10 lessee;
30-11 (2) the delivery was in exchange for a check which is
30-12 later dishonored; or
30-13 (3) the delivery was procured through fraud punishable
30-14 as larcenous under the criminal law.
30-15 (b) A buyer in the ordinary course of business or a
30-16 sublessee in the ordinary course of business from a lessee who is a
30-17 merchant dealing in goods of that kind to whom the goods were
30-18 entrusted by the lessor obtains, to the extent of the interest
30-19 transferred, all of the lessor's and lessee's rights to the goods,
30-20 and takes free of the existing lease contract.
30-21 (c) A buyer or sublessee from the lessee of goods that are
30-22 subject to an existing lease contract and are covered by a
30-23 certificate of title issued under a statute of this state or of
30-24 another jurisdiction takes no greater rights than those provided
30-25 both by this section and by the certificate of title statute.
30-26 Sec. 2A.306. PRIORITY OF CERTAIN LIENS ARISING BY OPERATION
30-27 OF LAW. If a person in the ordinary course of the person's
31-1 business furnishes services or materials with respect to goods
31-2 subject to a lease contract, a lien upon those goods in the
31-3 possession of that person given by statute or rule of law for those
31-4 materials or services takes priority over any interest of the
31-5 lessor or lessee under the lease contract or this chapter unless
31-6 the lien is created by statute and the statute provides otherwise
31-7 or unless the lien is created by rule of law and the rule of law
31-8 provides otherwise.
31-9 Sec. 2A.307. PRIORITY OF LIENS ARISING BY ATTACHMENT OR LEVY
31-10 ON, SECURITY INTERESTS IN, AND OTHER CLAIMS TO GOODS. (a) Except
31-11 as otherwise provided in Section 2A.306, a creditor of a lessee
31-12 takes subject to the lease contract.
31-13 (b) Except as otherwise provided in Subsections (c) and (d)
31-14 and Sections 2A.306 and 2A.308, a creditor of a lessor takes
31-15 subject to the lease contract unless:
31-16 (1) the creditor holds a lien that attached to the
31-17 goods before the lease contract became enforceable;
31-18 (2) the creditor holds a security interest in the
31-19 goods and the lessee did not give value and receive delivery of the
31-20 goods without knowledge of the security interest; or
31-21 (3) the creditor holds a security interest in the
31-22 goods which was perfected (Section 9.303) before the lease contract
31-23 became enforceable.
31-24 (c) A lessee in the ordinary course of business takes the
31-25 leasehold interest free of a security interest in the goods created
31-26 by the lessor even though the security interest is perfected
31-27 (Section 9.303) and the lessee knows of its existence.
32-1 (d) A lessee other than a lessee in the ordinary course of
32-2 business takes the leasehold interest free of a security interest
32-3 to the extent that it secures future advances made after the
32-4 secured party acquires knowledge of the lease or more than 45 days
32-5 after the lease contract becomes enforceable, whichever first
32-6 occurs, unless the future advances are made pursuant to a
32-7 commitment entered into without knowledge of the lease and before
32-8 the expiration of the 45-day period.
32-9 Sec. 2A.308. SPECIAL RIGHTS OF CREDITORS. (a) A creditor
32-10 of a lessor in possession of goods subject to a lease contract may
32-11 treat the lease contract as void if as against the creditor
32-12 retention of possession by the lessor is fraudulent or voids the
32-13 lease contract under any statute or rule of law, but retention of
32-14 possession in good faith and current course of trade by the lessor
32-15 for a commercially reasonable time after the lease contract becomes
32-16 enforceable is not fraudulent and does not void the lease contract.
32-17 (b) Nothing in this chapter impairs the rights of creditors
32-18 of a lessor if the lease contract is made under circumstances which
32-19 under any statute or rule of law apart from this chapter would
32-20 constitute the transaction a fraudulent transfer or voidable
32-21 preference.
32-22 (c) A creditor of a seller may treat a sale or an
32-23 identification of goods to a contract for sale as void if as
32-24 against the creditor retention of possession by the seller is
32-25 fraudulent under any statute or rule of law, but retention of
32-26 possession of the goods pursuant to a lease contract entered into
32-27 by the seller as lessee and the buyer as lessor in connection with
33-1 the sale or identification of the goods is not fraudulent if the
33-2 buyer bought for value and in good faith.
33-3 Sec. 2A.309. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME
33-4 FIXTURES. (a) In this section:
33-5 (1) goods are "fixtures" when they become so related
33-6 to particular real estate that an interest in them arises under
33-7 real estate law;
33-8 (2) a "fixture filing" is the filing, in the office
33-9 where a mortgage on the real estate would be filed or recorded, of
33-10 a financing statement covering goods that are or are to become
33-11 fixtures and conforming to the requirements of Section 9.402(e);
33-12 (3) a lease is a "purchase money lease" unless the
33-13 lessee has possession or use of the goods or the right to
33-14 possession or use of the goods before the lease agreement is
33-15 enforceable;
33-16 (4) a mortgage is a "construction mortgage" to the
33-17 extent it secures an obligation incurred for the construction of an
33-18 improvement on land including the acquisition cost of the land, if
33-19 the recorded writing so indicates; and
33-20 (5) "encumbrance" includes real estate mortgages and
33-21 other liens on real estate and all other rights in real estate that
33-22 are not ownership interests.
33-23 (b) Under this chapter a lease may be of goods that are
33-24 fixtures or may continue in goods that become fixtures, but no
33-25 lease exists under this chapter of ordinary building materials
33-26 incorporated into an improvement on land.
33-27 (c) This chapter does not prevent the creation of a lease of
34-1 fixtures pursuant to real estate law.
34-2 (d) The perfected interest of a lessor of fixtures has
34-3 priority over a conflicting interest of an encumbrancer or owner of
34-4 the real estate if:
34-5 (1) the lease is a purchase money lease, the
34-6 conflicting interest of the encumbrancer or owner arises before the
34-7 goods become fixtures, a fixture filing covering the fixtures is
34-8 filed or recorded before the goods become fixtures or within 10
34-9 days thereafter, and the lessee has an interest of record in the
34-10 real estate or is in possession of the real estate; or
34-11 (2) the interest of the lessor is perfected by a
34-12 fixture filing before the interest of the encumbrancer or owner is
34-13 of record, the lessor's interest has priority over any conflicting
34-14 interest of a predecessor in title of the encumbrancer or owner,
34-15 and the lessee has an interest of record in the real estate or is
34-16 in possession of the real estate.
34-17 (e) The interest of a lessor of fixtures, whether or not
34-18 perfected, has priority over the conflicting interest of an
34-19 encumbrancer or owner of the real estate if:
34-20 (1) the fixtures are readily removable factory or
34-21 office machines, readily removable equipment that is not primarily
34-22 used or leased for use in the operation of the real estate, or
34-23 readily removable replacements of domestic appliances that are
34-24 goods subject to a consumer lease, and before the goods become
34-25 fixtures the lease contract is enforceable; or
34-26 (2) the conflicting interest is a lien on the real
34-27 estate obtained by legal or equitable proceedings after the lease
35-1 contract is enforceable; or
35-2 (3) the encumbrancer or owner has consented in writing
35-3 to the lease or has disclaimed an interest in the goods as
35-4 fixtures; or
35-5 (4) the lessee has a right to remove the goods as
35-6 against the encumbrancer or owner. If the lessee's right to remove
35-7 terminates, the priority of the interest of the lessor continues
35-8 for a reasonable time.
35-9 (f) Notwithstanding Subsection (d)(1) but otherwise subject
35-10 to Subsections (d) and (e), the interest of a lessor of fixtures,
35-11 including the lessor's residual interest, is subordinate to the
35-12 conflicting interest of an encumbrancer of the real estate under a
35-13 construction mortgage recorded before the goods become fixtures if
35-14 the goods become fixtures before the completion of the
35-15 construction. To the extent given to refinance a construction
35-16 mortgage, the conflicting interest of an encumbrancer of the real
35-17 estate under a mortgage has this priority to the same extent as the
35-18 encumbrancer of the real estate under the construction mortgage.
35-19 (g) In cases not within the preceding subsections, priority
35-20 between the interest of a lessor of fixtures, including the
35-21 lessor's residual interest, and the conflicting interest of an
35-22 encumbrancer or owner of the real estate who is not the lessee is
35-23 determined by the priority rules governing conflicting interests in
35-24 real estate.
35-25 (h) If the interest of a lessor of fixtures, including the
35-26 lessor's residual interest, has priority over all conflicting
35-27 interests of all owners and encumbrancers of the real estate, the
36-1 lessor or the lessee may (1) on default, expiration, termination,
36-2 or cancellation of the lease agreement but subject to the lease
36-3 agreement and this chapter, or (2) if necessary to enforce other
36-4 rights and remedies of the lessor or lessee under this chapter,
36-5 remove the goods from the real estate, free and clear of all
36-6 conflicting interests of all owners and encumbrancers of the real
36-7 estate, but the lessor or lessee must reimburse any encumbrancer or
36-8 owner of the real estate who is not the lessee and who has not
36-9 otherwise agreed for the cost of repair of any physical injury, but
36-10 not for any diminution in value of the real estate caused by the
36-11 absence of the goods removed or by any necessity of replacing them.
36-12 A person entitled to reimbursement may refuse permission to remove
36-13 until the party seeking removal gives adequate security for the
36-14 performance of this obligation.
36-15 (i) Even though the lease agreement does not create a
36-16 security interest, the interest of a lessor of fixtures, including
36-17 the lessor's residual interest, is perfected by filing a financing
36-18 statement as a fixture filing for leased goods that are or are to
36-19 become fixtures in accordance with the relevant provisions of
36-20 Chapter 9.
36-21 Sec. 2A.310. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME
36-22 ACCESSIONS. (a) Goods are "accessions" when they are installed in
36-23 or affixed to other goods.
36-24 (b) The lessor's residual interest in the accessions and the
36-25 interest of a lessor or a lessee under a lease contract entered
36-26 into before the goods became accessions are superior to all
36-27 interests in the whole except as stated in Subsection (d).
37-1 (c) The lessor's residual interest in the accessions and the
37-2 interest of a lessor or a lessee under a lease contract entered
37-3 into at the time or after the goods became accessions are superior
37-4 to all subsequently acquired interests in the whole except as
37-5 stated in Subsection (d) but are subordinate to interests in the
37-6 whole existing at the time the lease contract was made unless the
37-7 holders of such interests in the whole have in writing consented to
37-8 the lease or disclaimed an interest in the goods as part of the
37-9 whole.
37-10 (d) The lessor's residual interest in the accessions and the
37-11 interest of a lessor or a lessee under a lease contract described
37-12 by Subsection (b) or (c) are subordinate to the interest of:
37-13 (1) a buyer in the ordinary course of business or a
37-14 lessee in the ordinary course of business of any interest in the
37-15 whole acquired after the goods became accessions; or
37-16 (2) a creditor with a security interest in the whole
37-17 perfected before the lease contract was made to the extent that the
37-18 creditor makes subsequent advances without knowledge of the lease
37-19 contract.
37-20 (e) When under Subsections (b) or (c) and (d) a lessor or a
37-21 lessee of accessions holds an interest that is superior to all
37-22 interests in the whole, the lessor or the lessee may (1) on
37-23 default, expiration, termination, or cancellation of the lease
37-24 contract by the other party but subject to the provisions of the
37-25 lease contract and this chapter, or (2) if necessary to enforce the
37-26 lessor's or lessee's other rights and remedies under this chapter,
37-27 remove the goods from the whole, free and clear of all interests in
38-1 the whole, but the party must reimburse any holder of an interest
38-2 in the whole who is not the lessee and who has not otherwise agreed
38-3 for the cost of repair of any physical injury but not for any
38-4 diminution in value of the whole caused by the absence of the goods
38-5 removed or by any necessity for replacing them. A person entitled
38-6 to reimbursement may refuse permission to remove until the party
38-7 seeking removal gives adequate security for the performance of this
38-8 obligation.
38-9 SUBCHAPTER D. PERFORMANCE OF LEASE CONTRACT:
38-10 REPUDIATED, SUBSTITUTED AND EXCUSED
38-11 Sec. 2A.401. INSECURITY: ADEQUATE ASSURANCE OF PERFORMANCE.
38-12 (a) A lease contract imposes an obligation on each party that the
38-13 other's expectation of receiving due performance will not be
38-14 impaired.
38-15 (b) If reasonable grounds for insecurity arise with respect
38-16 to the performance of either party, the insecure party may demand
38-17 in writing adequate assurance of due performance. Until the
38-18 insecure party receives that assurance, if commercially reasonable,
38-19 the insecure party may suspend any performance for which the party
38-20 has not already received the agreed return.
38-21 (c) A repudiation of the lease contract occurs if assurance
38-22 of due performance adequate under the circumstances of the
38-23 particular case is not provided to the insecure party within a
38-24 reasonable time, not to exceed 30 days after receipt of a demand by
38-25 the other party.
38-26 (d) Between merchants, the reasonableness of grounds for
38-27 insecurity and the adequacy of any assurance offered must be
39-1 determined according to commercial standards.
39-2 (e) Acceptance of any nonconforming delivery or payment does
39-3 not prejudice the aggrieved party's right to demand adequate
39-4 assurance of future performance.
39-5 Sec. 2A.402. ANTICIPATORY REPUDIATION. If either party
39-6 repudiates a lease contract with respect to a performance not yet
39-7 due under the lease contract, the loss of which performance will
39-8 substantially impair the value of the lease contract to the other,
39-9 the aggrieved party may:
39-10 (1) for a commercially reasonable time, await
39-11 retraction of repudiation and performance by the repudiating party;
39-12 (2) make demand pursuant to Section 2A.401 and await
39-13 assurance of future performance adequate under the circumstances of
39-14 the particular case; or
39-15 (3) resort to any right or remedy on default under the
39-16 lease contract or this chapter, even though the aggrieved party has
39-17 notified the repudiating party that the aggrieved party would await
39-18 the repudiating party's performance and assurance and has urged
39-19 retraction. In addition, whether or not the aggrieved party is
39-20 pursuing one of the foregoing remedies, the aggrieved party may
39-21 suspend performance or, if the aggrieved party is the lessor,
39-22 proceed in accordance with the provisions of this chapter on the
39-23 lessor's right to identify goods to the lease contract
39-24 notwithstanding default or to salvage unfinished goods (Section
39-25 2A.524).
39-26 Sec. 2A.403. RETRACTION OF ANTICIPATORY REPUDIATION. (a)
39-27 Until the repudiating party's next performance is due, the
40-1 repudiating party can retract the repudiation unless, since the
40-2 repudiation, the aggrieved party has canceled the lease contract or
40-3 materially changed the aggrieved party's position or otherwise
40-4 indicated that the aggrieved party considers the repudiation final.
40-5 (b) Retraction may be by any method that clearly indicates
40-6 to the aggrieved party that the repudiating party intends to
40-7 perform under the lease contract and includes any assurance
40-8 demanded under Section 2A.401.
40-9 (c) Retraction reinstates a repudiating party's rights under
40-10 a lease contract with due excuse and allowance to the aggrieved
40-11 party for any delay occasioned by the repudiation.
40-12 Sec. 2A.404. SUBSTITUTED PERFORMANCE. (a) If without fault
40-13 of the lessee, the lessor and the supplier, the agreed berthing,
40-14 loading, or unloading facilities fail or the agreed type of carrier
40-15 becomes unavailable or the agreed manner of delivery otherwise
40-16 becomes commercially impracticable, but a commercially reasonable
40-17 substitute is available, the substitute performance must be
40-18 tendered and accepted.
40-19 (b) If the agreed means or manner of payment fails because
40-20 of domestic or foreign governmental regulation:
40-21 (1) the lessor may withhold or stop delivery or cause
40-22 the supplier to withhold or stop delivery unless the lessee
40-23 provides a means or manner of payment that is commercially a
40-24 substantial equivalent; and
40-25 (2) if delivery has already been taken, payment by the
40-26 means or in the manner provided by the regulation discharges the
40-27 lessee's obligation unless the regulation is discriminatory,
41-1 oppressive, or predatory.
41-2 Sec. 2A.405. EXCUSED PERFORMANCE. Subject to Section 2A.404
41-3 on substituted performance, the following rules apply:
41-4 (1) Delay in delivery or nondelivery in whole or in
41-5 part by a lessor or a supplier who complies with Subdivisions (2)
41-6 and (3) is not a default under the lease contract if performance as
41-7 agreed has been made impracticable by the occurrence of a
41-8 contingency the nonoccurrence of which was a basic assumption on
41-9 which the lease contract was made or by compliance in good faith
41-10 with any applicable foreign or domestic governmental regulation or
41-11 order, whether or not the regulation or order later proves to be
41-12 invalid.
41-13 (2) If the causes mentioned in Subdivision (1) affect
41-14 only part of the lessor's or the supplier's capacity to perform,
41-15 the lessor or supplier shall allocate production and deliveries
41-16 among the lessor's or supplier's customers but at the lessor's or
41-17 supplier's option may include regular customers not then under
41-18 contract for sale or lease as well as the lessor's or supplier's
41-19 own requirements for further manufacture. The lessor or supplier
41-20 may so allocate in any manner that is fair and reasonable.
41-21 (3) The lessor seasonably shall notify the lessee and
41-22 in the case of a finance lease the supplier seasonably shall notify
41-23 the lessor and the lessee, if known, that there will be delay or
41-24 nondelivery and, if allocation is required under Subdivision (2),
41-25 of the estimated quota made available for the lessee.
41-26 Sec. 2A.406. PROCEDURE ON EXCUSED PERFORMANCE. (a) If the
41-27 lessee receives notification of a material or indefinite delay or
42-1 an allocation justified under Section 2A.405, the lessee may by
42-2 written notification to the lessor as to any goods involved, and
42-3 with respect to all of the goods if under an installment lease
42-4 contract the value of the whole lease contract is substantially
42-5 impaired (Section 2A.510):
42-6 (1) terminate the lease contract (Section 2A.505(b));
42-7 or
42-8 (2) except in a finance lease that is not a consumer
42-9 lease, modify the lease contract by accepting the available quota
42-10 in substitution, with due allowance from the rent payable for the
42-11 balance of the lease term for the deficiency but without further
42-12 right against the lessor.
42-13 (b) If, after receipt of a notification from the lessor
42-14 under Section 2A.405, the lessee fails to modify the lease
42-15 agreement within a reasonable time not exceeding 30 days, the lease
42-16 contract lapses with respect to any deliveries affected.
42-17 Sec. 2A.407. IRREVOCABLE PROMISES: FINANCE LEASES. (a) In
42-18 the case of a finance lease that is not a consumer lease, a term in
42-19 the lease agreement that provides that the lessee's promises under
42-20 the lease contract become irrevocable and independent upon the
42-21 lessee's acceptance of the goods is enforceable.
42-22 (b) A promise that has become irrevocable and independent
42-23 under Subsection (a):
42-24 (1) is effective and enforceable between the parties,
42-25 and by or against third parties including assignees of the parties;
42-26 and
42-27 (2) is not subject to cancellation, termination,
43-1 modification, repudiation, excuse, or substitution without the
43-2 consent of the party to whom the promise runs.
43-3 SUBCHAPTER E. DEFAULT
43-4 Sec. 2A.501. DEFAULT: PROCEDURE. (a) Whether the lessor
43-5 or the lessee is in default under a lease contract is determined by
43-6 the lease agreement and this chapter.
43-7 (b) If the lessor or the lessee is in default under the
43-8 lease contract, the party seeking enforcement has rights and
43-9 remedies as provided in this chapter and, except as limited by this
43-10 chapter, as provided in the lease agreement.
43-11 (c) If the lessor or the lessee is in default under the
43-12 lease contract, the party seeking enforcement may reduce the
43-13 party's claim to judgment or otherwise enforce the lease contract
43-14 by self-help or any available judicial procedure or nonjudicial
43-15 procedure, including administrative proceeding, arbitration, or the
43-16 like, in accordance with this chapter.
43-17 (d) Except as otherwise provided by Section 1.106(a) or this
43-18 chapter or the lease agreement, the rights and remedies referred to
43-19 in Subsections (b) and (c) are cumulative.
43-20 (e) If the lease agreement covers both real property and
43-21 goods, the party seeking enforcement may proceed under this
43-22 subchapter as to the goods, or under other applicable law as to
43-23 both the real property and the goods in accordance with that
43-24 party's rights and remedies in respect of the real property, in
43-25 which case this subchapter does not apply.
43-26 Sec. 2A.502. NOTICE AFTER DEFAULT. Except as provided by
43-27 this chapter or the lease agreement, the lessor or lessee in
44-1 default under the lease contract is not entitled to notice of
44-2 default or notice of enforcement from the other party to the lease
44-3 agreement.
44-4 Sec. 2A.503. MODIFICATION OR IMPAIRMENT OF RIGHTS AND
44-5 REMEDIES. (a) Except as otherwise provided in this chapter, the
44-6 lease agreement may include rights and remedies for default in
44-7 addition to or in substitution for those provided by this chapter
44-8 and may limit or alter the measure of damages recoverable under
44-9 this chapter.
44-10 (b) Resort to a remedy provided under this chapter or in the
44-11 lease agreement is optional unless the remedy is expressly agreed
44-12 to be exclusive. If circumstances cause an exclusive or limited
44-13 remedy to fail its essential purpose, or provision for an exclusive
44-14 remedy is unconscionable, remedy may be had as provided by this
44-15 chapter.
44-16 (c) Consequential damages may be liquidated under Section
44-17 2A.504 or otherwise be limited, altered, or excluded unless the
44-18 limitation, alteration, or exclusion is unconscionable.
44-19 Liquidation, limitation, alteration, or exclusion of consequential
44-20 damages for injury to the person in the case of consumer goods is
44-21 prima facie unconscionable, but liquidation, limitation,
44-22 alteration, or exclusion of damages where the loss is commercial is
44-23 not prima facie unconscionable.
44-24 (d) Rights and remedies on default by the lessor or the
44-25 lessee with respect to an obligation or promise collateral or
44-26 ancillary to the lease contract are not impaired by this chapter.
44-27 Sec. 2A.504. LIQUIDATION OF DAMAGES. (a) Damages payable
45-1 by either party for default or any other act or omission, including
45-2 indemnity for loss or diminution of anticipated tax benefits or
45-3 loss or damage to lessor's residual interest, may be liquidated in
45-4 the lease agreement but only at an amount or by a formula that is
45-5 reasonable in light of the then anticipated harm caused by the
45-6 default or other act or omission. In a consumer lease, a term
45-7 fixing liquidated damages that are unreasonably large in light of
45-8 the actual harm is unenforceable as a penalty.
45-9 (b) If the lease agreement provides for liquidation of
45-10 damages, and such provision does not comply with Subsection (a) or
45-11 such provision is an exclusive or limited remedy that circumstances
45-12 cause to fail of its essential purpose, remedy may be had as
45-13 provided in this chapter.
45-14 (c) If the lessor justifiably withholds or stops delivery of
45-15 goods because of the lessee's default or insolvency (Section 2A.525
45-16 or 2A.526), the lessee is entitled to restitution of any amount by
45-17 which the sum of the lessee's payments exceeds:
45-18 (1) the amount to which the lessor is entitled by
45-19 virtue of terms liquidating the lessor's damages in accordance with
45-20 Subsection (a); or
45-21 (2) in the absence of those terms, 20 percent of the
45-22 then present value of the total rent the lessee was obligated to
45-23 pay for the balance of the lease term, or, in the case of a
45-24 consumer lease, the lesser of such amount or $500.
45-25 (d) A lessee's right to restitution under Subsection (c) is
45-26 subject to offset to the extent the lessor establishes:
45-27 (1) a right to recover damages under the provisions of
46-1 this chapter other than Subsection (a); and
46-2 (2) the amount of value of any benefits received by
46-3 the lessee directly or indirectly by reason of the lease contract.
46-4 Sec. 2A.505. CANCELLATION AND TERMINATION AND EFFECT OF
46-5 CANCELLATION, TERMINATION, RESCISSION, OR FRAUD ON RIGHTS AND
46-6 REMEDIES. (a) On cancellation of the lease contract, all
46-7 obligations that are still executory on both sides are discharged,
46-8 but any right based on prior default or performance survives, and
46-9 the canceling party also retains any remedy for default of the
46-10 whole lease contract or any unperformed balance.
46-11 (b) On termination of the lease contract, all obligations
46-12 that are still executory on both sides are discharged but any right
46-13 based on a prior default or performance survives.
46-14 (c) Unless the contrary intention clearly appears,
46-15 expressions of "cancellation," "rescission," or the like of the
46-16 lease contract may not be construed as a renunciation or discharge
46-17 of any claim in damages for an antecedent default.
46-18 (d) Rights and remedies for material misrepresentation or
46-19 fraud include all rights and remedies available under this chapter
46-20 for default.
46-21 (e) Neither rescission nor a claim for rescission of the
46-22 lease contract nor rejection or return of the goods may bar or be
46-23 deemed inconsistent with a claim for damages or other right or
46-24 remedy.
46-25 Sec. 2A.506. STATUTE OF LIMITATIONS. (a) An action for
46-26 default under a lease contract, including breach of warranty or
46-27 indemnity, must be commenced within four years after the cause of
47-1 action accrued. By the original lease contract the parties may not
47-2 expand such period of limitation but, except in the case of a
47-3 consumer lease, may reduce the period of limitation to not less
47-4 than one year.
47-5 (b) A cause of action for default accrues when the act or
47-6 omission on which the default or breach of warranty is based is or
47-7 should have been discovered by the aggrieved party. A cause of
47-8 action for indemnity accrues:
47-9 (1) in the case of an indemnity against liability,
47-10 when the act or omission on which the claim for indemnity is based
47-11 is or should have been discovered by the indemnified party; or
47-12 (2) in the case of an indemnity against loss or
47-13 damage, when the person indemnified makes payment thereof.
47-14 (c) If an action commenced within the time limited by
47-15 Subsection (a) is so terminated as to leave available a remedy by
47-16 another action for the same default or breach of warranty or
47-17 indemnity, the other action may be commenced after the expiration
47-18 of the time limited and within six months after the termination of
47-19 the first action unless the termination resulted from voluntary
47-20 discontinuance or from dismissal for failure or neglect to
47-21 prosecute.
47-22 (d) This section does not alter the law on tolling of the
47-23 statute of limitations nor does it apply to causes of action that
47-24 have accrued before this chapter becomes effective.
47-25 Sec. 2A.507. PROOF OF MARKET RENT. (a) Damages based on
47-26 market rent (Section 2A.519 or 2A.528) are determined according to
47-27 the rent for the use of the goods concerned for a lease term
48-1 identical to the remaining lease term of the original lease
48-2 agreement and prevailing at the times specified in Sections 2A.519
48-3 and 2A.528.
48-4 (b) If evidence of rent for the use of the goods concerned
48-5 for a lease term identical to the remaining lease term of the
48-6 original lease agreement and prevailing at the times or places
48-7 described in this chapter is not readily available, the rent
48-8 prevailing within any reasonable time before or after the time
48-9 described or at any other place or for a different lease term which
48-10 in commercial judgment or under usage of trade would serve as a
48-11 reasonable substitute for the one described may be used, making any
48-12 proper allowance for the difference, including the cost of
48-13 transporting the goods to or from the other place.
48-14 (c) Evidence of a relevant rent prevailing at a time or
48-15 place or for a lease term other than the one described in this
48-16 chapter offered by one party is not admissible unless and until the
48-17 party has given the other party notice the court finds sufficient
48-18 to prevent unfair surprise.
48-19 (d) If the prevailing rent or value of any goods regularly
48-20 leased in any established market is in issue, reports in official
48-21 publications or trade journals or in newspapers or periodicals of
48-22 general circulation published as the reports of that market are
48-23 admissible in evidence. The circumstances of the preparation of
48-24 the report may be shown to affect its weight but not its
48-25 admissibility.
48-26 Sec. 2A.508. LESSEE'S REMEDIES. (a) If a lessor fails to
48-27 deliver the goods in conformity to the lease contract (Section
49-1 2A.509) or repudiates the lease contract (Section 2A.402), or a
49-2 lessee rightfully rejects the goods (Section 2A.509) or justifiably
49-3 revokes acceptance of the goods (Section 2A.517), then with respect
49-4 to any goods involved, and with respect to all of the goods if
49-5 under an installment lease contract and the value of the whole
49-6 lease contract is substantially impaired (Section 2A.510), the
49-7 lessor is in default under the lease contract and the lessee may:
49-8 (1) cancel the lease contract (Section 2A.505(a));
49-9 (2) recover so much of the rent and security as has
49-10 been paid and is just under the circumstances;
49-11 (3) cover and recover damages as to all goods affected
49-12 whether or not they have been identified to the lease contract
49-13 (Sections 2A.518 and 2A.520), or recover damages for nondelivery
49-14 (Sections 2A.519 and 2A.520); or
49-15 (4) exercise any other rights or pursue any other
49-16 remedies provided in the lease contract.
49-17 (b) If a lessor fails to deliver the goods in conformity to
49-18 the lease contract or repudiates the lease contract, the lessee may
49-19 also:
49-20 (1) if the goods have been identified, recover them
49-21 (Section 2A.522); or
49-22 (2) in a proper case, obtain specific performance,
49-23 replevin, detinue, sequestration, claim and delivery, or the like
49-24 for the goods (Section 2A.521).
49-25 (c) If a lessor is otherwise in default under a lease
49-26 contract, the lessee may exercise the rights and pursue the
49-27 remedies provided in the lease contract, which may include a right
50-1 to cancel the lease, and in Section 2A.519(c).
50-2 (d) If a lessor has breached a warranty, whether express or
50-3 implied, the lessee may recover damages (Section 2A.519(d)).
50-4 (e) On rightful rejection or justifiable revocation or
50-5 acceptance, a lessee has a security interest in goods in the
50-6 lessee's possession or control for any rent and security that has
50-7 been paid and any expenses reasonably incurred in their inspection,
50-8 receipt, transportation, and care and custody and may hold those
50-9 goods and dispose of them in good faith and in a commercially
50-10 reasonable manner, subject to Section 2A.527(e).
50-11 (f) Subject to the provisions of Section 2A.407, a lessee,
50-12 on notifying the lessor of the lessee's intention to do so, may
50-13 deduct all or part of the damages resulting from any default under
50-14 the lease contract from any part of the rent still due under the
50-15 same lease contract.
50-16 Sec. 2A.509. LESSEE'S RIGHTS ON IMPROPER DELIVERY; RIGHTFUL
50-17 REJECTION. (a) Subject to the provisions of Section 2A.510 on
50-18 default in installment lease contracts, if the goods or the tender
50-19 or delivery fail in any respect to conform to the lease contract,
50-20 the lessee may reject or accept the goods or accept any commercial
50-21 unit or units and reject the rest of the goods.
50-22 (b) Rejection of goods is ineffective unless it is within a
50-23 reasonable time after tender or delivery of the goods and the
50-24 lessee seasonably notifies the lessor.
50-25 Sec. 2A.510. INSTALLMENT LEASE CONTRACTS: REJECTION AND
50-26 DEFAULT. (a) Under an installment lease contract a lessee may
50-27 reject any delivery that is nonconforming if the nonconformity
51-1 substantially impairs the value of that delivery and cannot be
51-2 cured or the nonconformity is a defect in the required documents;
51-3 but if the nonconformity does not fall within Subsection (b) and
51-4 the lessor or the supplier gives adequate assurance of its cure,
51-5 the lessee must accept the delivery.
51-6 (b) Whenever nonconformity or default with respect to one or
51-7 more deliveries substantially impairs the value of the installment
51-8 lease contract as a whole there is a default with respect to the
51-9 whole. But the aggrieved party reinstates the installment lease
51-10 contract as a whole if the aggrieved party accepts a nonconforming
51-11 delivery without seasonably notifying of cancellation or brings an
51-12 action with respect only to past deliveries or demands performance
51-13 as to future deliveries.
51-14 Sec. 2A.511. MERCHANT LESSEE'S DUTIES AS TO RIGHTFULLY
51-15 REJECTED GOODS. Subject to any security interest of a lessee
51-16 (Section 2A.508(e)), if a lessor or a supplier has no agent or
51-17 place of business at the market of rejection, a merchant lessee,
51-18 after rejection of goods in the lessee's possession or control,
51-19 shall follow any reasonable instructions received from the lessor
51-20 or the supplier with respect to the goods. In the absence of those
51-21 instructions, a merchant lessee shall make reasonable efforts to
51-22 sell, lease, or otherwise dispose of the goods for the lessor's
51-23 account if they threaten to decline in value speedily.
51-24 Instructions are not reasonable if on demand indemnity for expenses
51-25 is not forthcoming.
51-26 Sec. 2A.512. LESSEE'S DUTIES AS TO RIGHTFULLY REJECTED
51-27 GOODS. (a) Except as otherwise provided with respect to goods
52-1 that threaten to decline in value speedily (Section 2A.511) and
52-2 subject to any security interest of a lessee (Section 2A.508(e)):
52-3 (1) the lessee, after rejection of goods in the
52-4 lessee's possession, shall hold them with reasonable care at the
52-5 lessor's or the supplier's disposition for a reasonable time after
52-6 the lessee's seasonable notification of rejection;
52-7 (2) if the lessor or the supplier gives no
52-8 instructions within a reasonable time after notification of
52-9 rejection, the lessee may store the rejected goods for the lessor's
52-10 or the supplier's account or ship them to the lessor or the
52-11 supplier or dispose of them for the lessor's or the supplier's
52-12 account with reimbursement in the manner provided by Subsection
52-13 (d); but
52-14 (3) the lessee has no further obligations with regard
52-15 to goods rightfully rejected.
52-16 (b) Action by the lessee pursuant to Subsection (a) is not
52-17 acceptance or conversion.
52-18 (c) If a merchant lessee (Section 2A.511) or any other
52-19 lessee disposes of goods, the lessee is entitled to reimbursement
52-20 either from the lessor or the supplier or out of the proceeds for
52-21 reasonable expenses of caring for and disposing of the goods and,
52-22 if the expenses include no disposition commission, to such
52-23 commission as is usual in the trade, or if there is none, to a
52-24 reasonable sum not exceeding 10 percent of the gross proceeds.
52-25 (d) In complying with this section or Section 2A.511, the
52-26 lessee is held only to good faith. Good faith conduct hereunder is
52-27 neither acceptance or conversion nor the basis of an action for
53-1 damages.
53-2 (e) A purchaser who purchases in good faith from a lessee
53-3 pursuant to this section or Section 2A.511 takes the goods free of
53-4 any rights of the lessor and the supplier even though the lessee
53-5 fails to comply with one or more of the requirements of this
53-6 chapter.
53-7 Sec. 2A.513. CURE BY LESSOR OF IMPROPER TENDER OR DELIVERY;
53-8 REPLACEMENT. (a) If any tender or delivery by the lessor or the
53-9 supplier is rejected because nonconforming and the time for
53-10 performance has not yet expired, the lessor or the supplier may
53-11 seasonably notify the lessee of the lessor's or the supplier's
53-12 intention to cure and may then make a conforming delivery within
53-13 the time provided by the lease contract.
53-14 (b) If the lessee rejects a nonconforming tender that the
53-15 lessor or the supplier had reasonable grounds to believe would be
53-16 acceptable with or without money allowance, the lessor or the
53-17 supplier may have a further reasonable time to substitute a
53-18 conforming tender if the lessor or supplier seasonably notifies the
53-19 lessee.
53-20 Sec. 2A.514. WAIVER OF LESSEE'S OBJECTIONS. (a) In
53-21 rejecting goods, a lessee's failure to state a particular defect
53-22 that is ascertainable by reasonable inspection precludes the lessee
53-23 from relying on the defect to justify rejection or to establish
53-24 default:
53-25 (1) if, stated seasonably, the lessor or the supplier
53-26 could have cured it (Section 2A.513); or
53-27 (2) between merchants if the lessor or the supplier
54-1 after rejection has made a request in writing for a full and final
54-2 written statement of all defects on which the lessee proposes to
54-3 rely.
54-4 (b) A lessee's failure to reserve rights when paying rent or
54-5 other consideration against documents precludes recovery of the
54-6 payment for defects apparent on the face of the documents.
54-7 Sec. 2A.515. ACCEPTANCE OF GOODS. (a) Acceptance of goods
54-8 occurs after the lessee has had a reasonable opportunity to inspect
54-9 the goods and:
54-10 (1) the lessee signifies or acts with respect to the
54-11 goods in a manner that signifies to the lessor or the supplier that
54-12 the goods are conforming or that the lessee will take or retain
54-13 them in spite of their nonconformity; or
54-14 (2) the lessee fails to make an effective rejection of
54-15 the goods (Section 2A.509(b)).
54-16 (b) Acceptance of a part of any commercial unit is
54-17 acceptance of that entire unit.
54-18 Sec. 2A.516. EFFECT OF ACCEPTANCE OF GOODS; NOTICE OF
54-19 DEFAULT; BURDEN OF ESTABLISHING DEFAULT AFTER ACCEPTANCE; NOTICE OF
54-20 CLAIM OR LITIGATION TO PERSON ANSWERABLE OVER. (a) A lessee must
54-21 pay rent for any goods accepted in accordance with the lease
54-22 contract, with due allowance for goods rightfully rejected or not
54-23 delivered.
54-24 (b) A lessee's acceptance of goods precludes rejection of
54-25 the goods accepted. In the case of a finance lease that is not a
54-26 consumer lease, if made with knowledge of a nonconformity,
54-27 acceptance cannot be revoked because of it. In any other case, if
55-1 made with knowledge of a nonconformity, acceptance cannot be
55-2 revoked because of it unless the acceptance was on the reasonable
55-3 assumption that the nonconformity would be seasonably cured.
55-4 Acceptance does not of itself impair any other remedy provided by
55-5 this chapter or the lease agreement for nonconformity.
55-6 (c) If a tender has been accepted:
55-7 (1) within a reasonable time after the lessee
55-8 discovers or should have discovered any default, the lessee shall
55-9 notify the lessor and supplier, if any, or be barred from any
55-10 remedy against the party not notified;
55-11 (2) within a reasonable time after the lessee receives
55-12 notice of litigation for infringement or the like (Section 2A.211)
55-13 the lessee shall notify the lessor or be barred from any remedy
55-14 over for liability established by the litigation; and
55-15 (3) the burden is on the lessee to establish any
55-16 default.
55-17 (d) If a lessee is sued for breach of a warranty or other
55-18 obligation for which a lessor or a supplier is answerable over, the
55-19 following apply:
55-20 (1) The lessee may give the lessor or the supplier, or
55-21 both, written notice of the litigation. If the notice states that
55-22 the person notified may come in and defend and that if the person
55-23 notified does not do so that person will be bound in any action
55-24 against that person by the lessee by any determination of fact
55-25 common to both litigations, then unless the person notified after
55-26 seasonable receipt of the notice does come in and defend that
55-27 person is so bound.
56-1 (2) The lessor or the supplier may demand in writing
56-2 that the lessee turn over control of the litigation including
56-3 settlement if the claim is one for infringement or the like
56-4 (Section 2A.211) or else be barred from any remedy over. If the
56-5 demand states that the lessor or the supplier agrees to bear all
56-6 expense and to satisfy any adverse judgment, then unless the lessee
56-7 after seasonable receipt of the demand does turn over control the
56-8 lessee is so barred.
56-9 (e) Subsections (c) and (d) apply to any obligation of a
56-10 lessee to hold the lessor or the supplier harmless against
56-11 infringement or the like (Section 2A.211).
56-12 (f) Subsection (c) shall not apply to a consumer lease.
56-13 Sec. 2A.517. REVOCATION OF ACCEPTANCE OF GOODS. (a) A
56-14 lessee may revoke acceptance of a lot or commercial unit whose
56-15 nonconformity substantially impairs its value to the lessee if the
56-16 lessee has accepted it:
56-17 (1) except in the case of a finance lease that is not
56-18 a consumer lease, on the reasonable assumption that its
56-19 nonconformity would be cured and it has not been seasonably cured;
56-20 or
56-21 (2) without discovery of the nonconformity if the
56-22 lessee's acceptance was reasonably induced either by the lessor's
56-23 assurances or, except in the case of a finance lease that is not a
56-24 consumer lease, by the difficulty of discovery before acceptance.
56-25 (b) A lessee may revoke acceptance of a lot or commercial
56-26 unit if the lessor defaults under the lease contract and the
56-27 default substantially impairs the value of that lot or commercial
57-1 unit to the lessee.
57-2 (c) If the lease agreement so provides, the lessee may
57-3 revoke acceptance of a lot or commercial unit because of other
57-4 defaults by the lessor.
57-5 (d) Revocation of acceptance must occur within a reasonable
57-6 time after the lessee discovers or should have discovered the
57-7 ground for it and before any substantial change in condition of the
57-8 goods which is not caused by the nonconformity. Revocation is not
57-9 effective until the lessee notifies the lessor.
57-10 (e) A lessee who so revokes has the same rights and duties
57-11 with regard to the goods involved as if the lessee had rejected
57-12 them.
57-13 Sec. 2A.518. COVER; SUBSTITUTE GOODS. (a) After default by
57-14 a lessor under the lease contract of the type described by Section
57-15 2A.508(a), or, if agreed, after other default by the lessor, the
57-16 lessee may cover by making any purchase or lease of or contract to
57-17 purchase or lease goods in substitution for those due from the
57-18 lessor.
57-19 (b) Except as otherwise provided with respect to damages
57-20 liquidated in the lease agreement (Section 2A.504) or otherwise
57-21 determined pursuant to agreement of the parties (Sections 1.102(c)
57-22 and 2A.503), if a lessee's cover is by a lease agreement
57-23 substantially similar to the original lease agreement and the new
57-24 lease agreement is made in good faith and in a commercially
57-25 reasonable manner, the lessee may recover from the lessor as
57-26 damages (1) the present value, as of the date of the commencement
57-27 of the term of the new lease agreement, of the rent under the new
58-1 lease agreement applicable to that period of the new lease term
58-2 which is comparable to the then remaining term of the original
58-3 lease agreement minus the present value as of the same date of the
58-4 total rent for the then remaining lease term of the original lease
58-5 agreement, and (2) any incidental or consequential damages, less
58-6 expenses saved as a consequence of the lessor's default.
58-7 (c) If the lessee's cover is by lease agreement that for any
58-8 reason does not qualify for treatment under Subsection (b) or is
58-9 by purchase or otherwise, the lessee may recover from the lessor as
58-10 if the lessee had elected not to cover and Section 2A.519 governs.
58-11 Sec. 2A.519. LESSEE'S DAMAGES FOR NONDELIVERY, REPUDIATION,
58-12 DEFAULT, AND BREACH OF WARRANTY IN REGARD TO ACCEPTED GOODS. (a)
58-13 Except as otherwise provided with respect to damages liquidated in
58-14 the lease agreement (Section 2A.504) or otherwise determined
58-15 pursuant to agreement of the parties (Sections 1.102(c) and
58-16 2A.503), if a lessee elects not to cover or a lessee elects to
58-17 cover and the cover is by lease agreement that for any reason does
58-18 not qualify for treatment under Section 2A.518(b) or is by purchase
58-19 or otherwise, the measure of damages for nondelivery or repudiation
58-20 by the lessor or for rejection or revocation of acceptance by the
58-21 lessee is the present value, as of the date of the default, of the
58-22 then market rent minus the present value as of the same date of the
58-23 original rent, computed for the remaining lease term of the
58-24 original lease agreement, together with incidental and
58-25 consequential damages, less expenses saved in consequence of the
58-26 lessor's default.
58-27 (b) Market rent is to be determined as of the place for
59-1 tender or, in cases of rejection after arrival or revocation of
59-2 acceptance, as of the place of arrival.
59-3 (c) Except as otherwise agreed, if the lessee has accepted
59-4 goods and given notification (Section 2A.516(c)), the measure of
59-5 damages for nonconforming tender or delivery or other default by a
59-6 lessor is the loss resulting in the ordinary course of events from
59-7 the lessor's default as determined in any manner that is reasonable
59-8 together with incidental and consequential damages, less expenses
59-9 saved in consequence of the lessor's default.
59-10 (d) Except as otherwise agreed, the measure of damages for
59-11 breach of warranty is the present value at the time and place of
59-12 acceptance of the difference between the value of the use of the
59-13 goods accepted and the value if they had been as warranted for the
59-14 lease term, unless special circumstances show proximate damages of
59-15 a different amount, together with incidental and consequential
59-16 damages, less expenses saved in consequence of the lessor's default
59-17 or breach of warranty.
59-18 Sec. 2A.520. LESSEE'S INCIDENTAL AND CONSEQUENTIAL DAMAGES.
59-19 (a) Incidental damages resulting from a lessor's default include
59-20 expenses reasonably incurred in inspection, receipt,
59-21 transportation, and care and custody of goods rightfully rejected
59-22 or goods the acceptance of which is justifiably revoked, any
59-23 commercially reasonable charges, expenses or commissions in
59-24 connection with effecting cover, and any other reasonable expense
59-25 incident to the default.
59-26 (b) Consequential damages resulting from a lessor's default
59-27 include:
60-1 (1) any loss resulting from general or particular
60-2 requirements and needs of which the lessor at the time of
60-3 contracting had reason to know and which could not reasonably be
60-4 prevented by cover or otherwise; and
60-5 (2) injury to person or property proximately resulting
60-6 from any breach of warranty.
60-7 Sec. 2A.521. LESSEE'S RIGHT TO SPECIFIC PERFORMANCE,
60-8 REPLEVIN, AND OTHER REMEDIES. (a) Specific performance may be
60-9 decreed if the goods are unique or in other proper circumstances.
60-10 (b) A decree for specific performance may include the terms
60-11 and conditions as to payment of the rent, damages, or other relief
60-12 that the court deems just.
60-13 (c) A lessee has a right of replevin, detinue,
60-14 sequestration, claim and delivery, or the like for goods identified
60-15 to the lease contract if after reasonable effort the lessee is
60-16 unable to effect cover for those goods or the circumstances
60-17 reasonably indicate that the effort will be unavailing.
60-18 Sec. 2A.522. LESSEE'S RIGHT TO GOODS ON LESSOR'S INSOLVENCY.
60-19 (a) Subject to Subsection (b) and even though the goods have not
60-20 been shipped, a lessee who has paid a part or all of the rent and
60-21 security for goods identified to a lease contract (Section 2A.217)
60-22 on making and keeping good a tender of any unpaid portion of the
60-23 rent and security due under the lease contract may recover the
60-24 goods identified from the lessor if the lessor becomes insolvent
60-25 within 10 days after receipt of the first installment of rent and
60-26 security.
60-27 (b) A lessee acquires the right to recover goods identified
61-1 to a lease contract only if they conform to the lease contract.
61-2 Sec. 2A.523. LESSOR'S REMEDIES. (a) If a lessee wrongfully
61-3 rejects or revokes acceptance of goods or fails to make a payment
61-4 when due or repudiates with respect to a part or the whole, then,
61-5 with respect to any goods involved, and with respect to all of the
61-6 goods if under an installment lease contract, the value of the
61-7 whole lease contract is substantially impaired (Section 2A.510),
61-8 the lessee is in default under the lease contract and the lessor
61-9 may:
61-10 (1) cancel the lease contract (Section 2A.505(a));
61-11 (2) proceed respecting goods not identified to the
61-12 lease contract (Section 2A.524);
61-13 (3) withhold delivery of the goods and take possession
61-14 of goods previously delivered (Section 2A.525);
61-15 (4) stop delivery of the goods by any bailee (Section
61-16 2A.526);
61-17 (5) dispose of the goods and recover damages (Section
61-18 2A.527), or retain the goods and recover damages (Section 2A.528),
61-19 or in a proper case recover rent (Section 2A.529); or
61-20 (6) exercise any other rights or pursue any other
61-21 remedies provided in the lease contract.
61-22 (b) If a lessor does not fully exercise a right or obtain a
61-23 remedy to which the lessor is entitled under Subsection (a), the
61-24 lessor may recover the loss resulting in the ordinary course of
61-25 events from the lessee's default as determined in any reasonable
61-26 manner, together with incidental damages, less expenses saved in
61-27 consequence of the lessee's default.
62-1 (c) If a lessee is otherwise in default under a lease
62-2 contract, the lessor may exercise the rights and pursue the
62-3 remedies provided in the lease contract, which may include a right
62-4 to cancel the lease. In addition, unless otherwise provided in the
62-5 lease contract:
62-6 (1) if the default substantially impairs the value of
62-7 the lease contract to the lessor, the lessor may exercise the
62-8 rights and pursue the remedies provided by Subsection (a) or (b);
62-9 or
62-10 (2) if the default does not substantially impair the
62-11 value of the lease contract to the lessor, the lessor may recover
62-12 as provided by Subsection (b).
62-13 Sec. 2A.524. LESSOR'S RIGHT TO IDENTIFY GOODS TO LEASE
62-14 CONTRACT. (a) A lessor aggrieved under Section 2A.523(a) may:
62-15 (1) identify to the lease contract conforming goods
62-16 not already identified, if at the time the lessor learned of the
62-17 default they were in the lessor's or the supplier's possession or
62-18 control; and
62-19 (2) dispose of goods (Section 2A.527(a)) that
62-20 demonstrably have been intended for the particular lease contract
62-21 even though those goods are unfinished.
62-22 (b) If the goods are unfinished, in the exercise of
62-23 reasonable commercial judgment for the purposes of avoiding loss
62-24 and of effective realization, an aggrieved lessor or the supplier
62-25 may either complete manufacture and wholly identify the goods to
62-26 the lease contract or cease manufacture and lease, sell, or
62-27 otherwise dispose of the goods for scrap or salvage value or
63-1 proceed in any other reasonable manner.
63-2 Sec. 2A.525. LESSOR'S RIGHT TO POSSESSION OF GOODS. (a) If
63-3 a lessor discovers the lessee to be insolvent, the lessor may
63-4 refuse to deliver the goods.
63-5 (b) After a default by the lessee under the lease contract
63-6 of the type described by Section 2A.523(a) or (c)(1) or, if agreed,
63-7 after other default by the lessee, the lessor has the right to take
63-8 possession of the goods. If the lease contract so provides, the
63-9 lessor may require the lessee to assemble the goods and make them
63-10 available to the lessor at a place to be designated by the lessor
63-11 which is reasonably convenient to both parties. Without removal,
63-12 the lessor may render unusable any goods employed in trade or
63-13 business, and may dispose of goods on the lessee's premises
63-14 (Section 2A.527).
63-15 (c) The lessor may proceed under Subsection (b) without
63-16 judicial process if that can be done without breach of the peace or
63-17 the lessor may proceed by action.
63-18 Sec. 2A.526. LESSOR'S STOPPAGE OF DELIVERY IN TRANSIT OR
63-19 OTHERWISE. (a) A lessor may stop delivery of goods in the
63-20 possession of a carrier or other bailee if the lessor discovers the
63-21 lessee to be insolvent and may stop delivery of carload, truckload,
63-22 planeload, or larger shipments of express or freight if the lessee
63-23 repudiates or fails to make a payment due before delivery, whether
63-24 for rent, security or otherwise under the lease contract, or for
63-25 any other reason the lessor has a right to withhold or take
63-26 possession of the goods.
63-27 (b) In pursuing its remedies under Subsection (a), the
64-1 lessor may stop delivery until:
64-2 (1) receipt of the goods by the lessee;
64-3 (2) acknowledgement to the lessee by any bailee of the
64-4 goods, except a carrier, that the bailee holds the goods for the
64-5 lessee; or
64-6 (3) such an acknowledgement to the lessee by a carrier
64-7 via reshipment or as warehouseman.
64-8 (c)(1) To stop delivery, a lessor shall so notify as to
64-9 enable the bailee by reasonable diligence to prevent delivery of
64-10 the goods.
64-11 (2) After notification, the bailee shall hold and
64-12 deliver the goods according to the directions of the lessor, but
64-13 the lessor is liable to the bailee for any ensuing charges or
64-14 damages.
64-15 (3) A carrier who has issued a nonnegotiable bill of
64-16 lading is not obligated to obey a notification to stop received
64-17 from a person other than the consignor.
64-18 Sec. 2A.527. LESSOR'S RIGHTS TO DISPOSE OF GOODS. (a)
64-19 After a default by a lessee under the lease contract of the type
64-20 described in Section 2A.523(a) or (c)(1) or after the lessor
64-21 refuses to deliver or takes possession of goods (Section 2A.525 or
64-22 2A.526), or, if agreed, after other default by a lessee, the lessor
64-23 may dispose of the goods concerned or the undelivered balance
64-24 thereof by lease, sale or otherwise.
64-25 (b) Except as otherwise provided with respect to damages
64-26 liquidated in the lease agreement (Section 2A.504) or otherwise
64-27 determined pursuant to agreement of the parties (Sections 1.102(c)
65-1 and 2A.503), if the disposition is by lease agreement substantially
65-2 similar to the original lease agreement and the new lease agreement
65-3 is made in good faith and in a commercially reasonable manner, the
65-4 lessor may recover from the lessee as damages (1) accrued and
65-5 unpaid rent as of the date of the commencement of the term of the
65-6 new lease agreement, (2) the present value, as of the same date, of
65-7 the total rent for the then remaining lease term of the original
65-8 lease agreement minus the present value, as of the same date, of
65-9 the rent under the new lease agreement applicable to that period of
65-10 the new lease term which is comparable to the then remaining term
65-11 of the original lease agreement, and (3) any incidental damages
65-12 allowed under Section 2A.530, less expenses saved in consequence
65-13 of the lessee's default.
65-14 (c) If the lessor's disposition is by lease agreement that
65-15 for any reason does not qualify for treatment under Subsection (b),
65-16 or is by sale or otherwise, the lessor may recover from the lessee
65-17 as if the lessor had elected not to dispose of the goods and
65-18 Section 2A.528 governs.
65-19 (d) A subsequent buyer or lessee who buys or leases from the
65-20 lessor in good faith for value as a result of a disposition under
65-21 this section takes the goods free of the original lease contract
65-22 and any rights of the original lessee even though the lessor fails
65-23 to comply with one or more of the requirements of this chapter.
65-24 (e) The lessor is not accountable to the lessee for any
65-25 profit made on any disposition. A lessee who has rightfully
65-26 rejected or justifiably revoked acceptance shall account to the
65-27 lessor for any excess over the amount of the lessee's security
66-1 interest (Section 2A.508(e)).
66-2 Sec. 2A.528. LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO
66-3 PAY, REPUDIATION, OR OTHER DEFAULT. (a) Except as otherwise
66-4 provided with respect to damages liquidated in the lease agreement
66-5 (Section 2A.504) or otherwise determined pursuant to agreement of
66-6 the parties (Sections 1.102(c) and 2A.503), if a lessor elects to
66-7 retain the goods or a lessor elects to dispose of the goods and the
66-8 disposition is by lease agreement that for any reason does not
66-9 qualify for treatment under Section 2A.527(b) or is by sale or
66-10 otherwise, the lessor may recover from the lessee as damages for a
66-11 default of the type described in Section 2A.523(a) or (c)(1), or,
66-12 if agreed, for other default of the lessee, (i) accrued and unpaid
66-13 rent as of the date of default if the lessee has never taken
66-14 possession of the goods, or, if the lessee has taken possession of
66-15 the goods, as of the date the lessor repossesses the goods or an
66-16 earlier date on which the lessee makes a tender of the goods to the
66-17 lessor, (ii) the present value as of the date determined under
66-18 clause (i) of the total rent for the then remaining lease term of
66-19 the original lease agreement minus the present value as of the same
66-20 date of the market rent at the place where the goods are located
66-21 computed for the same lease term, and (iii) any incidental damages
66-22 allowed under Section 2A.530, less expenses saved in consequence of
66-23 the lessee's default.
66-24 (b) If the measure of damages provided in Subsection (a) is
66-25 inadequate to put a lessor in as good a position as performance
66-26 would have, the measure of damages is the present value of the
66-27 profit, including reasonable overhead, the lessor would have made
67-1 from full performance by the lessee, together with any incidental
67-2 damages allowed under Section 2A.530, due allowance for costs
67-3 reasonably incurred and due credit for payments or proceeds of
67-4 disposition.
67-5 Sec. 2A.529. LESSOR'S ACTION FOR THE RENT. (a) After
67-6 default by the lessee under the lease contract of the type
67-7 described in Section 2A.523(a) or (c)(1), or, if agreed, after
67-8 other default by the lessee, if the lessor complies with Subsection
67-9 (b), the lessor may recover from the lessee as damages:
67-10 (1) for goods accepted by the lessee and not
67-11 repossessed by or tendered to the lessor, and for conforming goods
67-12 lost or damaged within a commercially reasonable time after risk of
67-13 loss passes to the lessee (Section 2A.219), (i) accrued and unpaid
67-14 rent as of the date of entry of judgment in favor of the lessor,
67-15 (ii) the present value as of the same date of the rent for the then
67-16 remaining lease term of the lease agreement, and (iii) any
67-17 incidental damages allowed under Section 2A.530, less expenses
67-18 saved in consequence of the lessee's default; and
67-19 (2) for goods identified to the lease contract if the
67-20 lessor is unable after reasonable effort to dispose of them at a
67-21 reasonable price or the circumstances reasonably indicate that
67-22 effort will be unavailing, (i) accrued and unpaid rent as of the
67-23 date of entry of judgment in favor of the lessor, (ii) the present
67-24 value as of the same date of the rent for the then remaining lease
67-25 term of the lease agreement, and (iii) any incidental damages
67-26 allowed under Section 2A.530, less expenses saved in consequence of
67-27 the lessee's default.
68-1 (b) Except as provided by Subsection (c) of this section,
68-2 the lessor shall hold for the lessee for the remaining lease term
68-3 of the lease agreement any goods that have been identified to the
68-4 lease contract and are in the lessor's control.
68-5 (c) The lessor may dispose of the goods at any time before
68-6 collection of the judgment for damages obtained pursuant to
68-7 Subsection (a). If the disposition is before the end of the
68-8 remaining lease term of the lease agreement, the lessor's recovery
68-9 against the lessee for damages is governed by Section 2A.527 or
68-10 2A.528, and the lessor will cause an appropriate credit to be
68-11 provided against any judgment for damages to the extent that the
68-12 amount of the judgment exceeds the recovery available pursuant to
68-13 Section 2A.527 or 2A.528.
68-14 (d) Payment of the judgment for damages obtained pursuant to
68-15 Subsection (a) entitles the lessee to the use and possession of the
68-16 goods not then disposed of for the remaining lease term of and in
68-17 accordance with the lease agreement.
68-18 (e) After a lessee has wrongfully rejected or revoked
68-19 acceptance of goods, has failed to pay rent then due, or has
68-20 repudiated (Section 2A.402), a lessor who is held not entitled to
68-21 rent under this section must nevertheless be awarded damages for
68-22 nonacceptance under Section 2A.527 or 2A.528.
68-23 Sec. 2A.530. LESSOR'S INCIDENTAL DAMAGES. Incidental
68-24 damages to an aggrieved lessor include any commercially reasonable
68-25 charges, expenses, or commissions incurred in stopping delivery, in
68-26 the transportation, care and custody of goods after the lessee's
68-27 default, in connection with return or disposition of the goods, or
69-1 otherwise resulting from the default.
69-2 Sec. 2A.531. STANDING TO SUE THIRD PARTIES FOR INJURY TO
69-3 GOODS. (a) If a third party so deals with goods that have been
69-4 identified to a lease contract as to cause actionable injury to a
69-5 party to the lease contract:
69-6 (1) the lessor has a right of action against the third
69-7 party; and
69-8 (2) the lessee also has a right of action against the
69-9 third party if the lessee:
69-10 (A) has a security interest in the goods;
69-11 (B) has an insurable interest in the goods;
69-12 (C) bears the risk of loss under the lease
69-13 contract or has since the injury assumed that risk as against the
69-14 lessor and the goods have been converted or destroyed.
69-15 (b) If at the time of the injury the party plaintiff did not
69-16 bear the risk of loss as against the other party to the lease
69-17 contract and there is no arrangement between them for disposition
69-18 of the recovery, the party's suit or settlement, subject to the
69-19 party's own interest, is as a fiduciary for the other party to the
69-20 lease contract.
69-21 (c) Either party with the consent of the other may sue for
69-22 the benefit of whom it may concern.
69-23 Sec. 2A.532. LESSOR'S RIGHTS TO RESIDUAL INTEREST. In
69-24 addition to any other recovery permitted by this chapter or other
69-25 law, the lessor may recover from the lessee an amount that will
69-26 fully compensate the lessor for any loss of or damage to the
69-27 lessor's residual interest in the goods caused by the default of
70-1 the lessee.
70-2 SECTION 2. Section 1.105, Business & Commerce Code, is
70-3 amended by amending Subsection (b) and adding Subsection (c) to
70-4 read as follows:
70-5 (b) Where one of the following provisions of this title
70-6 specifies the applicable law, that provision governs and a contrary
70-7 agreement is effective only to the extent permitted by the law
70-8 (including the conflict of laws rules) so specified:
70-9 Rights of creditors against sold goods. Section 2.402.
70-10 Applicability of the chapter on Leases. Sections 2A.105 and
70-11 2A.106.
70-12 Applicability of the chapter on Bank Deposits and
70-13 Collections. Section 4.102.
70-14 Governing law in the chapter on Funds Transfers. Section
70-15 4A.507.
70-16 <Bulk transfers subject to the chapter on Bulk Transfers.
70-17 Section 6.102.>
70-18 Applicability of the chapter on Investment Securities.
70-19 Section 8.106.
70-20 Perfection provisions of the chapter on Secured Transactions.
70-21 Section 9.103.
70-22 (c) If a transaction that is subject to this title is a
70-23 "qualified transaction," as defined in Section 35.51 of this code,
70-24 then except as provided in Subsection (b) of this section, Section
70-25 35.51 governs the effect of an agreement by the parties that the
70-26 law of a particular jurisdiction governs an issue relating to the
70-27 transaction or that the law of a particular jurisdiction governs
71-1 the interpretation or construction of an agreement relating to the
71-2 transaction or a provision of the agreement.
71-3 SECTION 3. Section 2.403(d), Business & Commerce Code, is
71-4 amended to read as follows:
71-5 (d) The rights of other purchasers of goods and of lien
71-6 creditors are governed by the chapters on Secured Transactions
71-7 (Chapter 9)<, Bulk Transfers (Chapter 6)> and Documents of Title
71-8 (Chapter 7).
71-9 SECTION 4. Section 9.113, Business & Commerce Code, is
71-10 amended to read as follows:
71-11 Sec. 9.113. Security Interests Arising Under Chapter on
71-12 Sales OR UNDER CHAPTER ON LEASES. A security interest arising
71-13 solely under the chapter on Sales (Chapter 2) or the chapter on
71-14 Leases (Chapter 2A) is subject to the provisions of this chapter
71-15 except that to the extent that and so long as the debtor does not
71-16 have or does not lawfully obtain possession of the goods
71-17 (1) no security agreement is necessary to make the
71-18 security interest enforceable; and
71-19 (2) no filing is required to perfect the security
71-20 interest; and
71-21 (3) the rights of the secured party on default by the
71-22 debtor are governed by the chapter on Sales (Chapter 2) or by the
71-23 chapter on Leases (Chapter 2A) in the case of a security interest
71-24 arising solely under such chapter.
71-25 SECTION 5. Section 9.410(b), Business & Commerce Code, is
71-26 amended to read as follows:
71-27 (b) A secured party may change the name or mailing address
72-1 of the secured party in more than one financing statement by filing
72-2 a written statement of master amendment <assignment> signed by the
72-3 secured party of record in each financing statement and setting
72-4 forth the name of the secured party of record and file number of
72-5 each financing statement and the new name or mailing address of the
72-6 secured party. The secured party must also provide filing
72-7 information in computer-readable form prescribed by the secretary
72-8 of state.
72-9 SECTION 6. Section 17.46(b), Business & Commerce Code, is
72-10 amended to read as follows:
72-11 (b) Except as provided in Subsection (d) of this section,
72-12 the term "false, misleading, or deceptive acts or practices"
72-13 includes, but is not limited to, the following acts:
72-14 (1) passing off goods or services as those of another;
72-15 (2) causing confusion or misunderstanding as to the
72-16 source, sponsorship, approval, or certification of goods or
72-17 services;
72-18 (3) causing confusion or misunderstanding as to
72-19 affiliation, connection, or association with, or certification by,
72-20 another;
72-21 (4) using deceptive representations or designations of
72-22 geographic origin in connection with goods or services;
72-23 (5) representing that goods or services have
72-24 sponsorship, approval, characteristics, ingredients, uses,
72-25 benefits, or quantities which they do not have or that a person has
72-26 a sponsorship, approval, status, affiliation, or connection which
72-27 he does not;
73-1 (6) representing that goods are original or new if
73-2 they are deteriorated, reconditioned, reclaimed, used, or
73-3 secondhand;
73-4 (7) representing that goods or services are of a
73-5 particular standard, quality, or grade, or that goods are of a
73-6 particular style or model, if they are of another;
73-7 (8) disparaging the goods, services, or business of
73-8 another by false or misleading representation of facts;
73-9 (9) advertising goods or services with intent not to
73-10 sell them as advertised;
73-11 (10) advertising goods or services with intent not to
73-12 supply a reasonable expectable public demand, unless the
73-13 advertisements disclosed a limitation of quantity;
73-14 (11) making false or misleading statements of fact
73-15 concerning the reasons for, existence of, or amount of price
73-16 reductions;
73-17 (12) representing that an agreement confers or
73-18 involves rights, remedies, or obligations which it does not have or
73-19 involve, or which are prohibited by law;
73-20 (13) knowingly making false or misleading statements
73-21 of fact concerning the need for parts, replacement, or repair
73-22 service;
73-23 (14) misrepresenting the authority of a salesman,
73-24 representative or agent to negotiate the final terms of a consumer
73-25 transaction;
73-26 (15) basing a charge for the repair of any item in
73-27 whole or in part on a guaranty or warranty instead of on the value
74-1 of the actual repairs made or work to be performed on the item
74-2 without stating separately the charges for the work and the charge
74-3 for the warranty or guaranty, if any;
74-4 (16) disconnecting, turning back, or resetting the
74-5 odometer of any motor vehicle so as to reduce the number of miles
74-6 indicated on the odometer gauge;
74-7 (17) advertising of any sale by fraudulently
74-8 representing that a person is going out of business;
74-9 (18) using or employing a chain referral sales plan in
74-10 connection with the sale or offer to sell of goods, merchandise, or
74-11 anything of value, which uses the sales technique, plan,
74-12 arrangement, or agreement in which the buyer or prospective buyer
74-13 is offered the opportunity to purchase merchandise or goods and in
74-14 connection with the purchase receives the seller's promise or
74-15 representation that the buyer shall have the right to receive
74-16 compensation or consideration in any form for furnishing to the
74-17 seller the names of other prospective buyers if receipt of the
74-18 compensation or consideration is contingent upon the occurrence of
74-19 an event subsequent to the time the buyer purchases the merchandise
74-20 or goods;
74-21 (19) representing that a guarantee or warranty confers
74-22 or involves rights or remedies which it does not have or involve,
74-23 provided, however, that nothing in this subchapter shall be
74-24 construed to expand the implied warranty of merchantability as
74-25 defined in Sections 2.314 through 2.318 and Sections 2A.212 through
74-26 2A.216 of the Business & Commerce Code to involve obligations in
74-27 excess of those which are appropriate to the goods;
75-1 (20) selling or offering to sell, either directly or
75-2 associated with the sale of goods or services, a right of
75-3 participation in a multi-level distributorship. As used herein,
75-4 "multi-level distributorship" means a sales plan for the
75-5 distribution of goods or services in which promises of rebate or
75-6 payment are made to individuals, conditioned upon those individuals
75-7 recommending or securing additional individuals to assume positions
75-8 in the sales operation, and where the rebate or payment is not
75-9 exclusively conditioned on or in relation to proceeds from the
75-10 retail sales of goods;
75-11 (21) representing that work or services have been
75-12 performed on, or parts replaced in, goods when the work or services
75-13 were not performed or the parts replaced;
75-14 (22) filing suit founded upon a written contractual
75-15 obligation of and signed by the defendant to pay money arising out
75-16 of or based on a consumer transaction for goods, services, loans,
75-17 or extensions of credit intended primarily for personal, family,
75-18 household, or agricultural use in any county other than in the
75-19 county in which the defendant resides at the time of the
75-20 commencement of the action or in the county in which the defendant
75-21 in fact signed the contract; provided, however, that a violation of
75-22 this subsection shall not occur where it is shown by the person
75-23 filing such suit he neither knew or had reason to know that the
75-24 county in which such suit was filed was neither the county in which
75-25 the defendant resides at the commencement of the suit nor the
75-26 county in which the defendant in fact signed the contract;
75-27 (23) the failure to disclose information concerning
76-1 goods or services which was known at the time of the transaction if
76-2 such failure to disclose such information was intended to induce
76-3 the consumer into a transaction into which the consumer would not
76-4 have entered had the information been disclosed; or
76-5 (24) using the term "corporation," "incorporated," or
76-6 an abbreviation of either of those terms in the name of a business
76-7 entity that is not incorporated under the laws of this state or
76-8 another jurisdiction.
76-9 SECTION 7. Title 1, Business & Commerce Code, is amended by
76-10 adding Chapter 4A to read as follows:
76-11 CHAPTER 4A. FUNDS TRANSFERS
76-12 SUBCHAPTER A. SUBJECT MATTER AND DEFINITIONS
76-13 Sec. 4A.101. SHORT TITLE. This chapter may be cited as
76-14 Uniform Commercial Code--Funds Transfers.
76-15 Sec. 4A.102. SUBJECT MATTER. Except as otherwise provided
76-16 in Section 4A.108, this chapter applies to funds transfers defined
76-17 in Section 4A.104.
76-18 Sec. 4A.103. PAYMENT ORDER-DEFINITIONS. (a) In this
76-19 chapter:
76-20 (1) "Payment order" means an instruction of a sender
76-21 to a receiving bank, transmitted orally, electronically, or in
76-22 writing, to pay, or to cause another bank to pay, a fixed or
76-23 determinable amount of money to a beneficiary if:
76-24 (A) the instruction does not state a condition
76-25 of payment to the beneficiary other than the time of payment;
76-26 (B) the receiving bank is to be reimbursed by
76-27 debiting an account of, or otherwise receiving payment from, the
77-1 sender; and
77-2 (C) the instruction is transmitted by the sender
77-3 directly to the receiving bank or to an agent, funds transfer
77-4 system, or communication system for transmittal to the receiving
77-5 bank.
77-6 (2) "Beneficiary" means the person to be paid by the
77-7 beneficiary's bank.
77-8 (3) "Beneficiary's bank" means the bank identified in
77-9 a payment order in which an account of the beneficiary is to be
77-10 credited pursuant to the order or which otherwise is to make
77-11 payment to the beneficiary if the order does not provide for
77-12 payment to an account.
77-13 (4) "Receiving bank" means the bank to which the
77-14 sender's instruction is addressed.
77-15 (5) "Sender" means the person giving the instruction
77-16 to the receiving bank.
77-17 (b) If an instruction complying with Subsection (a)(1) is to
77-18 make more than one payment to a beneficiary, the instruction is a
77-19 separate payment order with respect to each payment.
77-20 (c) A payment order is issued when it is sent to the
77-21 receiving bank.
77-22 Sec. 4A.104. FUNDS TRANSFER-DEFINITIONS. In this chapter:
77-23 (1) "Funds transfer" means the series of transactions,
77-24 beginning with the originator's payment order, made for the purpose
77-25 of making payment to the beneficiary of the order. The term
77-26 includes any payment order issued by the originator's bank or an
77-27 intermediary bank intended to carry out the originator's payment
78-1 order. A funds transfer is completed by acceptance by the
78-2 beneficiary's bank of a payment order for the benefit of the
78-3 beneficiary of the originator's payment order.
78-4 (2) "Intermediary bank" means a receiving bank other
78-5 than the originator's bank or the beneficiary's bank.
78-6 (3) "Originator" means the sender of the first payment
78-7 order in a funds transfer.
78-8 (4) "Originator's bank" means:
78-9 (A) the receiving bank to which the payment
78-10 order of the originator is issued if the originator is not a bank;
78-11 or
78-12 (B) the originator if the originator is a bank.
78-13 Sec. 4A.105. OTHER DEFINITIONS. (a) In this chapter:
78-14 (1) "Authorized account" means a deposit account of a
78-15 customer in a bank designated by the customer as a source of
78-16 payment of payment orders issued by the customer to the bank. If a
78-17 customer does not so designate an account, any account of the
78-18 customer is an authorized account if payment of a payment order
78-19 from that account is not inconsistent with a restriction on the use
78-20 of that account.
78-21 (2) "Bank" means a person engaged in the business of
78-22 banking and includes a savings bank, savings and loan association,
78-23 credit union, and trust company. A branch or separate office of a
78-24 bank is a separate bank for purposes of this chapter.
78-25 (3) "Customer" means a person, including a bank,
78-26 having an account with a bank or from whom a bank has agreed to
78-27 receive payment orders.
79-1 (4) "Funds transfer business day" of a receiving bank
79-2 means the part of a day during which the receiving bank is open for
79-3 the receipt, processing, and transmittal of payment orders and
79-4 cancellations and amendments of payment orders.
79-5 (5) "Funds transfer system" means a wire transfer
79-6 network, automated clearinghouse, or other communication system of
79-7 a clearinghouse or other association of banks through which a
79-8 payment order by a bank may be transmitted to the bank to which the
79-9 order is addressed.
79-10 (6) "Good faith" means honesty in fact and the
79-11 observance of reasonable commercial standards of fair dealing.
79-12 (7) "Prove" with respect to a fact means to meet the
79-13 burden of establishing the fact (Section 1.201(8)).
79-14 (b) Other definitions applying to this chapter and the
79-15 sections in which they appear are:
79-16 (1) "Acceptance." Section 4A.209.
79-17 (2) "Beneficiary." Section 4A.103.
79-18 (3) "Beneficiary's bank." Section 4A.103.
79-19 (4) "Executed." Section 4A.301.
79-20 (5) "Execution date." Section 4A.301.
79-21 (6) "Funds transfer." Section 4A.104.
79-22 (7) "Funds transfer system rule." Section 4A.501.
79-23 (8) "Intermediary bank." Section 4A.104.
79-24 (9) "Originator." Section 4A.104.
79-25 (10) "Originator's bank." Section 4A.104.
79-26 (11) "Payment by beneficiary's bank to beneficiary."
79-27 Section 4A.405.
80-1 (12) "Payment by originator to beneficiary." Section
80-2 4A.406.
80-3 (13) "Payment by sender to receiving bank." Section
80-4 4A.403.
80-5 (14) "Payment date." Section 4A.401.
80-6 (15) "Payment order." Section 4A.103.
80-7 (16) "Receiving bank." Section 4A.103.
80-8 (17) "Security procedure." Section 4A.201.
80-9 (18) "Sender." Section 4A.103.
80-10 (c) The following definitions in Chapter 4 apply to this
80-11 chapter:
80-12 (1) "Clearinghouse." Section 4.104.
80-13 (2) "Item." Section 4.104.
80-14 (3) "Suspends payments." Section 4.104.
80-15 (d) In addition, Chapter 1 contains general definitions and
80-16 principles of construction and interpretation applicable throughout
80-17 this chapter.
80-18 Sec. 4A.106. TIME PAYMENT ORDER IS RECEIVED. (a) The time
80-19 of receipt of a payment order or communication cancelling or
80-20 amending a payment order is determined by the rules applicable to
80-21 receipt of a notice stated in Section 1.201. A receiving bank may
80-22 fix a cutoff time or times on a funds transfer business day for the
80-23 receipt and processing of payment orders and communications
80-24 cancelling or amending payment orders. Different cutoff times may
80-25 apply to payment orders, cancellations, or amendments, or to
80-26 different categories of payment orders, cancellations, or
80-27 amendments. A cutoff time may apply to senders generally or
81-1 different cutoff times may apply to different senders or categories
81-2 of payment orders. If a payment order or communication cancelling
81-3 or amending a payment order is received after the close of a funds
81-4 transfer business day or after the appropriate cutoff time on a
81-5 funds transfer business day, the receiving bank may treat the
81-6 payment order or communication as received at the opening of the
81-7 next funds transfer business day.
81-8 (b) If this chapter refers to an execution date or payment
81-9 date or states a day on which a receiving bank is required to take
81-10 action, and the date or day does not fall on a funds transfer
81-11 business day, the next day that is a funds transfer business day is
81-12 treated as the date or day stated, unless the contrary is stated in
81-13 this chapter.
81-14 Sec. 4A.107. FEDERAL RESERVE REGULATIONS AND OPERATING
81-15 CIRCULARS. Regulations of the Board of Governors of the Federal
81-16 Reserve System and operating circulars of the Federal Reserve Banks
81-17 supersede any inconsistent provision of this chapter to the extent
81-18 of the inconsistency.
81-19 Sec. 4A.108. EXCLUSION OF CONSUMER TRANSACTIONS GOVERNED BY
81-20 FEDERAL LAW. This chapter does not apply to a funds transfer any
81-21 part of which is governed by the Electronic Fund Transfer Act, 15
81-22 U.S.C. Sec. 1693 et seq., as amended from time to time.
81-23 (Sections 4A.109-4A.200 reserved for expansion
81-24 SUBCHAPTER B. ISSUE AND
81-25 ACCEPTANCE OF PAYMENT ORDER
81-26 Sec. 4A.201. SECURITY PROCEDURE. "Security procedure" means
81-27 a procedure established by an agreement between a customer and a
82-1 receiving bank for the purpose of (i) verifying that a payment
82-2 order or communication amending or cancelling a payment order is
82-3 that of the customer, or (ii) detecting error in the transmission
82-4 or the content of the payment order or communication. A security
82-5 procedure may require the use of algorithms or other codes,
82-6 identifying words or numbers, encryption, callback procedures, or
82-7 similar security devices. Comparison of a signature on a payment
82-8 order or communication with an authorized specimen signature of the
82-9 customer is not by itself a security procedure.
82-10 Sec. 4A.202. AUTHORIZED AND VERIFIED PAYMENT ORDERS. (a) A
82-11 payment order received by the receiving bank is the authorized
82-12 order of the person identified as sender if that person authorized
82-13 the order or is otherwise bound by it under the law of agency.
82-14 (b) If a bank and its customer have agreed that the
82-15 authenticity of payment orders issued to the bank in the name of
82-16 the customer as sender will be verified pursuant to a security
82-17 procedure, a payment order received by the receiving bank is
82-18 effective as the order of the customer, whether or not authorized,
82-19 if (i) the security procedure is a commercially reasonable method
82-20 of providing security against unauthorized payment orders, and (ii)
82-21 the bank proves that it accepted the payment order in good faith
82-22 and in compliance with the security procedure and any written
82-23 agreement or instruction of the customer restricting acceptance of
82-24 payment orders issued in the name of the customer. The bank is not
82-25 required to follow an instruction that violates a written agreement
82-26 with the customer or notice of which is not received at a time and
82-27 in a manner affording the bank a reasonable opportunity to act on
83-1 it before the payment order is accepted.
83-2 (c) Commercial reasonableness of a security procedure is a
83-3 question of law to be determined by considering the wishes of the
83-4 customer expressed to the bank, the circumstances of the customer
83-5 known to the bank, including the size, type, and frequency of
83-6 payment orders normally issued by the customer to the bank,
83-7 alternative security procedures offered to the customer, and
83-8 security procedures in general use by customers and receiving banks
83-9 similarly situated. A security procedure is deemed to be
83-10 commercially reasonable if:
83-11 (1) the security procedure was chosen by the customer
83-12 after the bank offered, and the customer refused, a security
83-13 procedure that was commercially reasonable for the customer; and
83-14 (2) the customer expressly agreed in writing to be
83-15 bound by any payment order, whether or not authorized, issued in
83-16 its name and accepted by the bank in compliance with the security
83-17 procedure chosen by the customer.
83-18 (d) The term "sender" in this chapter includes the customer
83-19 in whose name a payment order is issued if the order is the
83-20 authorized order of the customer under Subsection (a) or it is
83-21 effective as the order of the customer under Subsection (b).
83-22 (e) This section applies to amendments and cancellations of
83-23 payment orders to the same extent it applies to payment orders.
83-24 (f) Except as provided in this section and in Section
83-25 4A.203(a)(1), the rights and obligations arising under this section
83-26 or Section 4A.203 may not be varied by agreement.
83-27 Sec. 4A.203. UNENFORCEABILITY OF CERTAIN VERIFIED PAYMENT
84-1 ORDERS. (a) If an accepted payment order is not, under Section
84-2 4A.202(a), an authorized order of a customer identified as sender,
84-3 but is effective as an order of the customer pursuant to Section
84-4 4A.202(b), the following rules apply:
84-5 (1) By express written agreement, the receiving bank
84-6 may limit the extent to which it is entitled to enforce or retain
84-7 payment of the payment order.
84-8 (2) The receiving bank is not entitled to enforce or
84-9 retain payment of the payment order if the customer proves that the
84-10 order was not caused, directly or indirectly, by a person:
84-11 (A) entrusted at any time with duties to act for
84-12 the customer with respect to payment orders or the security
84-13 procedure; or
84-14 (B) who obtained access to transmitting
84-15 facilities of the customer or who obtained, from a source
84-16 controlled by the customer and without authority of the receiving
84-17 bank, information facilitating breach of the security procedure,
84-18 regardless of how the information was obtained or whether the
84-19 customer was at fault. Information includes any access device,
84-20 computer software, or the like.
84-21 (b) This section applies to amendments of payment orders to
84-22 the same extent it applies to payment orders.
84-23 Sec. 4A.204. REFUND OF PAYMENT AND DUTY OF CUSTOMER TO
84-24 REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER. (a) If a
84-25 receiving bank accepts a payment order issued in the name of its
84-26 customer as sender which is (i) not authorized and not effective as
84-27 the order of the customer under Section 4A.202, or (ii) not
85-1 enforceable, in whole or in part, against the customer under
85-2 Section 4A.203, the bank shall refund any payment of the payment
85-3 order received from the customer to the extent the bank is not
85-4 entitled to enforce payment and shall pay interest on the
85-5 refundable amount calculated from the date the bank received
85-6 payment to the date of the refund. However, the customer is not
85-7 entitled to interest from the bank on the amount to be refunded if
85-8 the customer fails to exercise ordinary care to determine that the
85-9 order was not authorized by the customer and to notify the bank of
85-10 the relevant facts within a reasonable time not exceeding 90 days
85-11 after the date the customer received notification from the bank
85-12 that the order was accepted or that the customer's account was
85-13 debited with respect to the order. The bank is not entitled to any
85-14 recovery from the customer on account of a failure by the customer
85-15 to give notification as stated in this section.
85-16 (b) Reasonable time under Subsection (a) may be fixed by
85-17 agreement as stated in Section 1.204, but the obligation of a
85-18 receiving bank to refund payment as stated in Subsection (a) may
85-19 not otherwise be varied by agreement.
85-20 Sec. 4A.205. ERRONEOUS PAYMENT ORDERS. (a) If an accepted
85-21 payment order was transmitted pursuant to a security procedure for
85-22 the detection of error and the payment order (i) erroneously
85-23 instructed payment to a beneficiary not intended by the sender,
85-24 (ii) erroneously instructed payment in an amount greater than the
85-25 amount intended by the sender, or (iii) was an erroneously
85-26 transmitted duplicate of a payment order previously sent by the
85-27 sender, the following rules apply:
86-1 (1) If the sender proves that the sender or a person
86-2 acting on behalf of the sender pursuant to Section 4A.206 complied
86-3 with the security procedure and that the error would have been
86-4 detected if the receiving bank had also complied, the sender is not
86-5 obliged to pay the order to the extent stated in Subdivisions (2)
86-6 and (3).
86-7 (2) If the funds transfer is completed on the basis of
86-8 an erroneous payment order described in clause (i) or (iii) of
86-9 Subsection (a), the sender is not obliged to pay the order and the
86-10 receiving bank is entitled to recover from the beneficiary any
86-11 amount paid to the beneficiary to the extent allowed by the law
86-12 governing mistake and restitution.
86-13 (3) If the funds transfer is completed on the basis of
86-14 a payment order described in clause (ii) of Subsection (a), the
86-15 sender is not obliged to pay the order to the extent the amount
86-16 received by the beneficiary is greater than the amount intended by
86-17 the sender. In that case, the receiving bank is entitled to
86-18 recover from the beneficiary the excess amount received to the
86-19 extent allowed by the law governing mistake and restitution.
86-20 (b) If (i) the sender of an erroneous payment order
86-21 described in Subsection (a) is not obliged to pay all or part of
86-22 the order, and (ii) the sender receives notification from the
86-23 receiving bank that the order was accepted by the bank or that the
86-24 sender's account was debited with respect to the order, the sender
86-25 has a duty to exercise ordinary care, on the basis of information
86-26 available to the sender, to discover the error with respect to the
86-27 order and to advise the bank of the relevant facts within a
87-1 reasonable time, not exceeding 90 days, after the bank's
87-2 notification was received by the sender. If the bank proves that
87-3 the sender failed to perform that duty, the sender is liable to the
87-4 bank for the loss the bank proves it incurred as a result of the
87-5 failure, but the liability of the sender may not exceed the amount
87-6 of the sender's order.
87-7 (c) This section applies to amendments to payment orders to
87-8 the same extent it applies to payment orders.
87-9 Sec. 4A.206. TRANSMISSION OF PAYMENT ORDER THROUGH FUNDS
87-10 TRANSFER OR OTHER COMMUNICATION SYSTEM. (a) If a payment order
87-11 addressed to a receiving bank is transmitted to a funds transfer
87-12 system or other third-party communication system for transmittal to
87-13 the bank, the system is deemed to be an agent of the sender for the
87-14 purpose of transmitting the payment order to the bank. If there is
87-15 a discrepancy between the terms of the payment order transmitted to
87-16 the system and the terms of the payment order transmitted by the
87-17 system to the bank, the terms of the payment order of the sender
87-18 are those transmitted by the system. This section does not apply
87-19 to a funds transfer system of the Federal Reserve Banks.
87-20 (b) This section applies to cancellations and amendments of
87-21 payment orders to the same extent it applies to payment orders.
87-22 Sec. 4A.207. MISDESCRIPTION OF BENEFICIARY. (a) Subject to
87-23 Subsection (b), if, in a payment order received by the
87-24 beneficiary's bank, the name, bank account number, or other
87-25 identification of the beneficiary refers to a nonexistent or
87-26 unidentifiable person or account, no person has rights as a
87-27 beneficiary of the order and acceptance of the order cannot occur.
88-1 (b) If a payment order received by the beneficiary's bank
88-2 identifies the beneficiary both by name and by an identifying or
88-3 bank account number and the name and number identify different
88-4 persons, the following rules apply:
88-5 (1) Except as provided in Subsection (c), if the
88-6 beneficiary's bank does not know that the name and number refer to
88-7 different persons or if the funds transfer is processed by the
88-8 beneficiary bank in a fully automated manner, it may rely on the
88-9 number as the proper identification of the beneficiary of the
88-10 order. The beneficiary's bank need not determine whether the name
88-11 and number refer to the same person.
88-12 (2) If the beneficiary's bank pays the person
88-13 identified by name or any individual processing the funds transfer
88-14 on behalf of the beneficiary bank knows that the name and number
88-15 identify different persons, no person has rights as beneficiary
88-16 except the person paid by the beneficiary's bank if that person was
88-17 entitled to receive payment from the originator of the funds
88-18 transfer. If no person has rights as beneficiary, acceptance of
88-19 the order cannot occur.
88-20 (c) If (i) a payment order described in Subsection (b) is
88-21 accepted, (ii) the originator's payment order described the
88-22 beneficiary inconsistently by name and number, and (iii) the
88-23 beneficiary's bank pays the person identified by number as
88-24 permitted by Subsection (b)(1), the following rules apply:
88-25 (1) If the originator is a bank, the originator is
88-26 obliged to pay its order.
88-27 (2) If the originator is not a bank and proves that
89-1 the person identified by number was not entitled to receive payment
89-2 from the originator, the originator is not obliged to pay its order
89-3 unless the originator's bank proves that the originator, before
89-4 acceptance of the originator's order, had notice that payment of a
89-5 payment order issued by the originator might be made by the
89-6 beneficiary's bank on the basis of an identifying or bank account
89-7 number even if it identifies a person different from the named
89-8 beneficiary. Proof of notice may be made by any admissible
89-9 evidence. The originator's bank satisfies the burden of proof if
89-10 it proves that the originator, before the payment order was
89-11 accepted, signed a writing stating the information to which the
89-12 notice relates.
89-13 (d) In a case governed by Subsection (b)(1), if the
89-14 beneficiary's bank rightfully pays the person identified by number
89-15 and that person was not entitled to receive payment from the
89-16 originator, the amount paid may be recovered from that person to
89-17 the extent allowed by the law governing mistake and restitution as
89-18 follows:
89-19 (1) If the originator is obliged to pay its payment
89-20 order as stated in Subsection (c), the originator has the right to
89-21 recover.
89-22 (2) If the originator is not a bank and is not obliged
89-23 to pay its payment order, the originator's bank has the right to
89-24 recover.
89-25 Sec. 4A.208. MISDESCRIPTION OF INTERMEDIARY BANK OR
89-26 BENEFICIARY'S BANK. (a) This subsection applies to a payment
89-27 order identifying an intermediary bank or the beneficiary's bank
90-1 only by an identifying number.
90-2 (1) The receiving bank may rely on the number as the
90-3 proper identification of the intermediary or beneficiary's bank and
90-4 does not need to determine whether the number identifies a bank.
90-5 (2) The sender is obliged to compensate the receiving
90-6 bank for any loss and expenses incurred by the receiving bank as a
90-7 result of its reliance on the number in executing or attempting to
90-8 execute the order.
90-9 (b) This subsection applies to a payment order identifying
90-10 an intermediary bank or the beneficiary's bank both by name and an
90-11 identifying number if the name and number identify different
90-12 persons.
90-13 (1) If the sender is a bank, the receiving bank may
90-14 rely on the number as the proper identification of the intermediary
90-15 or beneficiary's bank if the receiving bank, when it executes the
90-16 sender's order, does not know that the name and number identify
90-17 different persons. The receiving bank need not determine whether
90-18 the name and number refer to the same person or whether the number
90-19 refers to a bank. The sender is obliged to compensate the
90-20 receiving bank for any loss and expenses incurred by the receiving
90-21 bank as a result of its reliance on the number in executing or
90-22 attempting to execute the order.
90-23 (2) If the sender is not a bank and the receiving bank
90-24 proves that the sender, before the payment order was accepted, had
90-25 notice that the receiving bank might rely on the number as the
90-26 proper identification of the intermediary or beneficiary's bank
90-27 even if it identifies a person different from the bank identified
91-1 by name, the rights and obligations of the sender and the receiving
91-2 bank are governed by Subsection (b)(1), as though the sender were a
91-3 bank. Proof of notice may be made by any admissible evidence. The
91-4 receiving bank satisfies the burden of proof if it proves that the
91-5 sender, before the payment order was accepted, signed a writing
91-6 stating the information to which the notice relates.
91-7 (3) Regardless of whether the sender is a bank, the
91-8 receiving bank may rely on the name as the proper identification of
91-9 the intermediary or beneficiary's bank if the receiving bank, at
91-10 the time it executes the sender's order, does not know that the
91-11 name and number identify different persons. The receiving bank
91-12 need not determine whether the name and number refer to the same
91-13 person.
91-14 (4) If the receiving bank knows that the name and
91-15 number identify different persons, reliance on either the name or
91-16 the number in executing the sender's payment order is a breach of
91-17 the obligation stated in Section 4A.302(a)(1).
91-18 Sec. 4A.209. ACCEPTANCE OF PAYMENT ORDER. (a) Subject to
91-19 Subsection (d), a receiving bank other than the beneficiary's bank
91-20 accepts a payment order when it executes the order.
91-21 (b) Subject to Subsections (c) and (d), a beneficiary's bank
91-22 accepts a payment order at the earliest of the following times:
91-23 (1) when the bank (i) pays the beneficiary as stated
91-24 in Section 4A.405(a) or (b), or (ii) notifies the beneficiary of
91-25 receipt of the order or that the account of the beneficiary has
91-26 been credited with respect to the order unless the notice indicates
91-27 that the bank is rejecting the order or that funds with respect to
92-1 the order may not be withdrawn or used until receipt of payment
92-2 from the sender of the order;
92-3 (2) when the bank receives payment of the entire
92-4 amount of the sender's order pursuant to Section 4A.403(a)(1) or
92-5 (2); or
92-6 (3) the opening of the next funds transfer business
92-7 day of the bank following the payment date of the order if, at that
92-8 time, the amount of the sender's order is fully covered by a
92-9 withdrawable credit balance in an authorized account of the sender
92-10 or the bank has otherwise received full payment from the sender,
92-11 unless the order was rejected before that time or is rejected
92-12 within (i) one hour after that time, or (ii) one hour after the
92-13 opening of the next business day of the sender following the
92-14 payment date if that time is later. If notice of rejection is
92-15 received by the sender after the payment date and the authorized
92-16 account of the sender does not bear interest, the bank is obliged
92-17 to pay interest to the sender on the amount of the order for the
92-18 number of days elapsing after the payment date to the day the
92-19 sender receives notice or learns that the order was not accepted,
92-20 counting that day as an elapsed day. If the withdrawable credit
92-21 balance during that period falls below the amount of the order, the
92-22 amount of interest payable is reduced accordingly.
92-23 (c) Acceptance of a payment order cannot occur before the
92-24 order is received by the receiving bank. Acceptance does not occur
92-25 under Subsection (b)(2) or (3) if the beneficiary of the payment
92-26 order does not have an account with the receiving bank, the account
92-27 has been closed, or the receiving bank is not permitted by law to
93-1 receive credits for the beneficiary's account.
93-2 (d) A payment order issued to the originator's bank cannot
93-3 be accepted until the payment date if the bank is the beneficiary's
93-4 bank, or the execution date if the bank is not the beneficiary's
93-5 bank. If the originator's bank executes the originator's payment
93-6 order before the execution date or pays the beneficiary of the
93-7 originator's payment order before the payment date and the payment
93-8 order is subsequently canceled pursuant to Section 4A.211(b), the
93-9 bank may recover from the beneficiary any payment received to the
93-10 extent allowed by the law governing mistake and restitution.
93-11 Sec. 4A.210. REJECTION OF PAYMENT ORDER. (a) A payment
93-12 order is rejected by the receiving bank by a notice of rejection
93-13 transmitted to the sender orally, electronically, or in writing. A
93-14 notice of rejection need not use any particular words and is
93-15 sufficient if it indicates that the receiving bank is rejecting the
93-16 order or will not execute or pay the order. Rejection is effective
93-17 when the notice is given if transmission is by a means that is
93-18 reasonable under the circumstances. If notice of rejection is
93-19 given by a means that is not reasonable, rejection is effective
93-20 when the notice is received. If an agreement of the sender and
93-21 receiving bank establishes the means to be used to reject a payment
93-22 order:
93-23 (1) any means complying with the agreement is
93-24 reasonable; and
93-25 (2) any means not complying is not reasonable unless
93-26 no significant delay in receipt of the notice resulted from the use
93-27 of the noncomplying means.
94-1 (b) This subsection applies if a receiving bank other than
94-2 the beneficiary's bank fails to execute a payment order despite the
94-3 existence on the execution date of a withdrawable credit balance in
94-4 an authorized account of the sender sufficient to cover the order.
94-5 If the sender does not receive notice of rejection of the order on
94-6 the execution date and the authorized account of the sender does
94-7 not bear interest, the bank is obliged to pay interest to the
94-8 sender on the amount of the order for the number of days elapsing
94-9 after the execution date to the earlier of the day the order is
94-10 canceled pursuant to Section 4A.211(d) or the day the sender
94-11 receives notice or learns that the order was not executed, counting
94-12 the final day of the period as an elapsed day. If the withdrawable
94-13 credit balance during that period falls below the amount of the
94-14 order, the amount of interest is reduced accordingly.
94-15 (c) If a receiving bank suspends payments, all unaccepted
94-16 payment orders issued to it are deemed rejected at the time the
94-17 bank suspends payments.
94-18 (d) Acceptance of a payment order precludes a later
94-19 rejection of the order. Rejection of a payment order precludes a
94-20 later acceptance of the order.
94-21 Sec. 4A.211. CANCELLATION AND AMENDMENT OF PAYMENT ORDER.
94-22 (a) A communication of the sender of a payment order cancelling or
94-23 amending the order may be transmitted to the receiving bank orally,
94-24 electronically, or in writing. If a security procedure is in
94-25 effect between the sender and the receiving bank, the communication
94-26 is not effective to cancel or amend the order unless the
94-27 communication is verified pursuant to the security procedure or the
95-1 bank agrees to the cancellation or amendment.
95-2 (b) Subject to Subsection (a), a communication by the sender
95-3 cancelling or amending a payment order is effective to cancel or
95-4 amend the order if notice of the communication is received at a
95-5 time and in a manner affording the receiving bank a reasonable
95-6 opportunity to act on the communication before the bank accepts the
95-7 payment order.
95-8 (c) After a payment order has been accepted, cancellation or
95-9 amendment of the order is not effective unless the receiving bank
95-10 agrees or a funds transfer system rule allows cancellation or
95-11 amendment without agreement of the bank.
95-12 (1) With respect to a payment order accepted by a
95-13 receiving bank other than the beneficiary's bank, cancellation or
95-14 amendment is not effective unless a conforming cancellation or
95-15 amendment of the payment order issued by the receiving bank is also
95-16 made.
95-17 (2) With respect to a payment order accepted by the
95-18 beneficiary's bank, cancellation or amendment is not effective
95-19 unless the order was issued in execution of an unauthorized payment
95-20 order or because of a mistake by a sender in the funds transfer
95-21 which resulted in the issuance of a payment order (i) that is a
95-22 duplicate of a payment order previously issued by the sender,
95-23 (ii) that orders payment to a beneficiary not entitled to receive
95-24 payment from the originator, or (iii) that orders payment in an
95-25 amount greater than the amount the beneficiary was entitled to
95-26 receive from the originator. If the payment order is canceled or
95-27 amended, the beneficiary's bank is entitled to recover from the
96-1 beneficiary any amount paid to the beneficiary to the extent
96-2 allowed by the law governing mistake and restitution.
96-3 (d) An unaccepted payment order is canceled by operation of
96-4 law at the close of the fifth funds transfer business day of the
96-5 receiving bank after the execution date or payment date of the
96-6 order.
96-7 (e) A canceled payment order cannot be accepted. If an
96-8 accepted payment order is canceled, the acceptance is nullified and
96-9 no person has any right or obligation based on the acceptance.
96-10 Amendment of a payment order is deemed to be cancellation of the
96-11 original order at the time of amendment and issue of a new payment
96-12 order in the amended form at the same time.
96-13 (f) Unless otherwise provided in an agreement of the parties
96-14 or in a funds transfer system rule, if the receiving bank, after
96-15 accepting a payment order, agrees to cancellation or amendment of
96-16 the order by the sender or is bound by a funds transfer system rule
96-17 allowing cancellation or amendment without the bank's agreement,
96-18 the sender, whether or not cancellation or amendment is effective,
96-19 is liable to the bank for any loss and expenses, including
96-20 reasonable attorney's fees, incurred by the bank as a result of the
96-21 cancellation or amendment or attempted cancellation or amendment.
96-22 (g) A payment order is not revoked by the death or legal
96-23 incapacity of the sender unless the receiving bank knows of the
96-24 death or of an adjudication of incapacity by a court of competent
96-25 jurisdiction and has reasonable opportunity to act before
96-26 acceptance of the order.
96-27 (h) A funds transfer system rule is not effective to the
97-1 extent it conflicts with Subsection (c)(2).
97-2 Sec. 4A.212. LIABILITY AND DUTY OF RECEIVING BANK REGARDING
97-3 UNACCEPTED PAYMENT ORDER. If a receiving bank fails to accept a
97-4 payment order that it is obliged by express agreement to accept,
97-5 the bank is liable for breach of the agreement to the extent
97-6 provided in the agreement or in this chapter, but does not
97-7 otherwise have any duty to accept a payment order or, before
97-8 acceptance, to take any action, or refrain from taking action, with
97-9 respect to the order except as provided in this chapter or by
97-10 express agreement. Liability based on acceptance arises only when
97-11 acceptance occurs as stated in Section 4A.209, and liability is
97-12 limited to that provided in this chapter. A receiving bank is not
97-13 the agent of the sender or beneficiary of the payment order it
97-14 accepts, or of any other party to the funds transfer, and the bank
97-15 owes no duty to any party to the funds transfer except as provided
97-16 in this chapter or by express agreement.
97-17 (Sections 4A.213-4A.300 reserved for expansion
97-18 SUBCHAPTER C. EXECUTION OF
97-19 SENDER'S PAYMENT ORDER BY RECEIVING BANK
97-20 Sec. 4A.301. EXECUTION AND EXECUTION DATE. (a) A payment
97-21 order is "executed" by the receiving bank when it issues a payment
97-22 order intended to carry out the payment order received by the bank.
97-23 A payment order received by the beneficiary's bank can be accepted
97-24 but cannot be executed.
97-25 (b) "Execution date" of a payment order means the date on
97-26 which the receiving bank may properly issue a payment order in
97-27 execution of the sender's order. The execution date may be
98-1 determined by instruction of the sender but cannot be earlier than
98-2 the day the order is received and, unless otherwise determined, is
98-3 the day the order is received. If the sender's instruction states
98-4 a payment date, the execution date is the payment date or an
98-5 earlier date on which execution is reasonably necessary to allow
98-6 payment to the beneficiary on the payment date.
98-7 Sec. 4A.302. OBLIGATIONS OF RECEIVING BANK IN EXECUTION OF
98-8 PAYMENT ORDER. (a) Except as provided in Subsections (b) through
98-9 (d), if the receiving bank accepts a payment order pursuant to
98-10 Section 4A.209(a), the bank has the following obligations in
98-11 executing the order:
98-12 (1) The receiving bank is obliged to issue, on the
98-13 execution date, a payment order complying with the sender's order
98-14 and to follow the sender's instructions concerning (i) any
98-15 intermediary bank or funds transfer system to be used in carrying
98-16 out the funds transfer, or (ii) the means by which payment orders
98-17 are to be transmitted in the funds transfer. If the originator's
98-18 bank issues a payment order to an intermediary bank, the
98-19 originator's bank is obliged to instruct the intermediary bank
98-20 according to the instruction of the originator. An intermediary
98-21 bank in the funds transfer is similarly bound by an instruction
98-22 given to it by the sender of the payment order it accepts.
98-23 (2) If the sender's instruction states that the funds
98-24 transfer is to be carried out telephonically or by wire transfer or
98-25 otherwise indicates that the funds transfer is to be carried out by
98-26 the most expeditious means, the receiving bank is obliged to
98-27 transmit its payment order by the most expeditious available means
99-1 and to instruct any intermediary bank accordingly. If a sender's
99-2 instruction states a payment date, the receiving bank is obliged to
99-3 transmit its payment order at a time and by means reasonably
99-4 necessary to allow payment to the beneficiary on the payment date
99-5 or as soon thereafter as is feasible.
99-6 (b) Unless otherwise instructed, a receiving bank executing
99-7 a payment order may (i) use any funds transfer system if use of
99-8 that system is reasonable in the circumstances, and (ii) issue a
99-9 payment order to the beneficiary's bank or to an intermediary bank
99-10 through which a payment order conforming to the sender's order can
99-11 expeditiously be issued to the beneficiary's bank if the receiving
99-12 bank exercises ordinary care in the selection of the intermediary
99-13 bank. A receiving bank is not required to follow an instruction of
99-14 the sender designating a funds transfer system to be used in
99-15 carrying out the funds transfer if the receiving bank, in good
99-16 faith, determines that it is not feasible to follow the instruction
99-17 or that following the instruction would unduly delay completion of
99-18 the funds transfer.
99-19 (c) Unless Subsection (a)(2) applies or the receiving bank
99-20 is otherwise instructed, the bank may execute a payment order by
99-21 transmitting its payment order by first class mail or by any means
99-22 reasonable in the circumstances. If the receiving bank is
99-23 instructed to execute the sender's order by transmitting its
99-24 payment order by a particular means, the receiving bank may issue
99-25 its payment order by the means stated or by any means as
99-26 expeditious as the means stated.
99-27 (d) Unless instructed by the sender, (i) the receiving bank
100-1 may not obtain payment of its charges for services and expenses in
100-2 connection with the execution of the sender's order by issuing a
100-3 payment order in an amount equal to the amount of the sender's
100-4 order less the amount of the charges, and (ii) may not instruct a
100-5 subsequent receiving bank to obtain payment of its charges in the
100-6 same amount.
100-7 Sec. 4A.303. ERRONEOUS EXECUTION OF PAYMENT ORDER. (a) A
100-8 receiving bank that (i) executes the payment order of the sender by
100-9 issuing a payment order in an amount greater than the amount of the
100-10 sender's order or (ii) issues a payment order in execution of the
100-11 sender's order and then issues a duplicate order, is entitled to
100-12 payment of the amount of the sender's order under Section 4A.402(c)
100-13 if that subsection is otherwise satisfied. The bank is entitled to
100-14 recover from the beneficiary of the erroneous order the excess
100-15 payment received to the extent allowed by the law governing mistake
100-16 and restitution.
100-17 (b) A receiving bank that executes the payment order of the
100-18 sender by issuing a payment order in an amount less than the amount
100-19 of the sender's order is entitled to payment of the amount of the
100-20 sender's order under Section 4A.402(c) if (i) that subsection is
100-21 otherwise satisfied and (ii) the bank corrects its mistake by
100-22 issuing an additional payment order for the benefit of the
100-23 beneficiary of the sender's order. If the error is not corrected,
100-24 the issuer of the erroneous order is entitled to receive or retain
100-25 payment from the sender of the order it accepted only to the extent
100-26 of the amount of the erroneous order. This subsection does not
100-27 apply if the receiving bank executes the sender's payment order by
101-1 issuing a payment order in an amount less than the amount of the
101-2 sender's order for the purpose of obtaining payment of its charges
101-3 for services and expenses pursuant to instruction of the sender.
101-4 (c) If a receiving bank executes the payment order of the
101-5 sender by issuing a payment order to a beneficiary different from
101-6 the beneficiary of the sender's order and the funds transfer is
101-7 completed on the basis of that error, the sender of the payment
101-8 order that was erroneously executed and all previous senders in the
101-9 funds transfer are not obliged to pay the payment orders they
101-10 issued. The issuer of the erroneous order is entitled to recover
101-11 from the beneficiary of the order the payment received to the
101-12 extent allowed by the law governing mistake and restitution.
101-13 Sec. 4A.304. DUTY OF SENDER TO REPORT ERRONEOUSLY EXECUTED
101-14 PAYMENT ORDER. If the sender of a payment order that is
101-15 erroneously executed as stated in Section 4A.303 receives
101-16 notification from the receiving bank that the order was executed or
101-17 that the sender's account was debited with respect to the order,
101-18 the sender has a duty to exercise ordinary care to determine, on
101-19 the basis of information available to the sender, that the order
101-20 was erroneously executed and to notify the bank of the relevant
101-21 facts within a reasonable time not exceeding 90 days after the
101-22 notification from the bank was received by the sender. If the
101-23 sender fails to perform that duty, the bank is not obliged to pay
101-24 interest on any amount refundable to the sender under Section
101-25 4A.402(d) for the period before the bank learns of the execution
101-26 error. The bank is not entitled to any recovery from the sender on
101-27 account of a failure by the sender to perform the duty stated in
102-1 this section.
102-2 Sec. 4A.305. LIABILITY FOR LATE OR IMPROPER EXECUTION OR
102-3 FAILURE TO EXECUTE PAYMENT ORDER. (a) If a funds transfer is
102-4 completed but execution of a payment order by the receiving bank in
102-5 breach of Section 4A.302 of this chapter results in delay in
102-6 payment to the beneficiary, the bank is obliged to pay interest to
102-7 either the originator or the beneficiary of the funds transfer for
102-8 the period of delay caused by the improper execution. Except as
102-9 provided by Subsection (c), additional damages are not recoverable.
102-10 (b) If execution of a payment order by a receiving bank in
102-11 breach of Section 4A.302 results in (i) noncompletion of the funds
102-12 transfer, (ii) failure to use an intermediary bank designated by
102-13 the originator, or (iii) issuance of a payment order that does not
102-14 comply with the terms of the payment order of the originator, the
102-15 bank is liable to the originator for its expenses in the funds
102-16 transfer and for incidental expenses and interest losses, to the
102-17 extent not covered by Subsection (a) of this section, resulting
102-18 from the improper execution. Except as provided by Subsection (c),
102-19 additional damages are not recoverable.
102-20 (c) In addition to the amounts payable under Subsections (a)
102-21 and (b), damages, including consequential damages, are recoverable
102-22 to the extent provided in an express written agreement of the
102-23 receiving bank.
102-24 (d) If a receiving bank fails to execute a payment order it
102-25 was obliged by express agreement to execute, the receiving bank is
102-26 liable to the sender for its expenses in the transaction and for
102-27 incidental expenses and interest losses resulting from the failure
103-1 to execute. Additional damages, including consequential damages,
103-2 are recoverable to the extent provided in an express written
103-3 agreement of the receiving bank, but are not otherwise recoverable.
103-4 (e) Reasonable attorney's fees are recoverable if demand for
103-5 compensation under Subsection (a) or (b) is made and refused before
103-6 an action is brought on the claim. If a claim is made for breach
103-7 of an agreement under Subsection (d) and the agreement does not
103-8 provide for damages, reasonable attorney's fees are recoverable if
103-9 demand for compensation under Subsection (d) of this section is
103-10 made and refused before an action is brought on the claim.
103-11 (f) Except as provided by this section, the liability of a
103-12 receiving bank under Subsections (a) and (b) of this section may
103-13 not be varied by agreement.
103-14 (Sections 4A.306-4A.400 reserved for expansion
103-15 Subchapter D. Payment
103-16 Sec. 4A.401. PAYMENT DATE. "Payment date" of a payment
103-17 order means the day on which the amount of the order is payable to
103-18 the beneficiary by the beneficiary's bank. The payment date may be
103-19 determined by instruction of the sender but cannot be earlier than
103-20 the day the order is received by the beneficiary's bank and, unless
103-21 otherwise determined, is the day the order is received by the
103-22 beneficiary's bank.
103-23 Sec. 4A.402. OBLIGATION OF SENDER TO PAY RECEIVING BANK.
103-24 (a) This section is subject to Sections 4A.205 and 4A.207.
103-25 (b) With respect to a payment order issued to the
103-26 beneficiary's bank, acceptance of the order by the bank obliges the
103-27 sender to pay the bank the amount of the order, but payment is not
104-1 due until the payment date of the order.
104-2 (c) This subsection is subject to Subsection (e) and to
104-3 Section 4A.303. With respect to a payment order issued to a
104-4 receiving bank other than the beneficiary's bank, acceptance of the
104-5 order by the receiving bank obliges the sender to pay the bank the
104-6 amount of the sender's order. Payment by the sender is not due
104-7 until the execution date of the sender's order. The obligation of
104-8 that sender to pay its payment order is excused if the funds
104-9 transfer is not completed by acceptance by the beneficiary's bank
104-10 of a payment order instructing payment to the beneficiary of that
104-11 sender's payment order.
104-12 (d) If the sender of a payment order pays the order and was
104-13 not obliged to pay all or part of the amount paid, the bank
104-14 receiving payment is obliged to refund payment to the extent the
104-15 sender was not obliged to pay. Except as provided by Sections
104-16 4A.204 and 4A.304, interest is payable on the refundable amount
104-17 from the date of payment.
104-18 (e) If a funds transfer is not completed as provided by
104-19 Subsection (c) and an intermediary bank is obliged to refund
104-20 payment as provided by Subsection (d) but is unable to do so
104-21 because not permitted by applicable law or because the bank
104-22 suspends payments, a sender in the funds transfer that executed a
104-23 payment order in compliance with an instruction, as provided by
104-24 Section 4A.302(a)(1), to route the funds transfer through that
104-25 intermediary bank is entitled to receive or retain payment from the
104-26 sender of the payment order that it accepted. The first sender in
104-27 the funds transfer that issued an instruction requiring routing
105-1 through that intermediary bank is subrogated to the right of the
105-2 bank that paid the intermediary bank to a refund as stated in
105-3 Subsection (d).
105-4 (f) The right of the sender of a payment order to be excused
105-5 from the obligation to pay the order as stated in Subsection (c) or
105-6 to receive a refund under Subsection (d) may not be varied by
105-7 agreement.
105-8 Sec. 4A.403. PAYMENT BY SENDER TO RECEIVING BANK. (a)
105-9 Payment of the sender's obligation under Section 4A.402 to pay the
105-10 receiving bank occurs as follows:
105-11 (1) If the sender is a bank, payment occurs when the
105-12 receiving bank receives final settlement of the obligation through
105-13 a Federal Reserve Bank or through a funds transfer system;
105-14 (2) If the sender is a bank and the sender
105-15 (i) credited an account of the receiving bank with the sender, or
105-16 (ii) caused an account of the receiving bank in another bank to be
105-17 credited, payment occurs when the credit is withdrawn or, if not
105-18 withdrawn, at midnight of the day on which the credit is
105-19 withdrawable and the receiving bank learns of that fact.
105-20 (3) If the receiving bank debits an account of the
105-21 sender with the receiving bank, payment occurs when the debit is
105-22 made to the extent the debit is covered by a withdrawable credit
105-23 balance in the account.
105-24 (b) If the sender and receiving bank are members of a funds
105-25 transfer system that nets obligations multilaterally among
105-26 participants, the receiving bank receives final settlement when
105-27 settlement is complete in accordance with the rules of the system.
106-1 The obligation of the sender to pay the amount of a payment order
106-2 transmitted through the funds transfer system may be satisfied, to
106-3 the extent permitted by the rules of the system, by setting off and
106-4 applying against the sender's obligation the right of the sender to
106-5 receive payment from the receiving bank of the amount of any other
106-6 payment order transmitted to the sender by the receiving bank
106-7 through the funds transfer system. The aggregate balance of
106-8 obligations owed by each sender to each receiving bank in the funds
106-9 transfer system may be satisfied, to the extent permitted by the
106-10 rules of the system, by setting off and applying against that
106-11 balance the aggregate balance of obligations owed to the sender by
106-12 other members of the system. The aggregate balance is determined
106-13 after the right of setoff stated in the second sentence of this
106-14 subsection has been exercised.
106-15 (c) If two banks transmit payment orders to each other under
106-16 an agreement that settlement of the obligations of each bank to the
106-17 other under Section 4A.402 will be made at the end of the day or
106-18 other period, the total amount owed with respect to all orders
106-19 transmitted by one bank shall be set off against the total amount
106-20 owed with respect to all orders transmitted by the other bank. To
106-21 the extent of the setoff, each bank has made payment to the other.
106-22 (d) In a case not covered by Subsection (a), the time when
106-23 payment of the sender's obligation under Section 4A.402(b) or (c)
106-24 occurs is governed by applicable principles of law that determine
106-25 when an obligation is satisfied.
106-26 Sec. 4A.404. OBLIGATION OF BENEFICIARY'S BANK TO PAY AND
106-27 GIVE NOTICE TO BENEFICIARY. (a) Subject to Sections 4A.211(e) and
107-1 4A.405(d) and (e), if a beneficiary's bank accepts a payment order,
107-2 the bank is obliged to pay the amount of the order to the
107-3 beneficiary of the order. Payment is due on the payment date of
107-4 the order, but if acceptance occurs on the payment date after the
107-5 close of the funds transfer business day of the bank, payment is
107-6 due on the next funds transfer business day. If the bank refuses
107-7 to pay after demand by the beneficiary and receipt of notice of
107-8 particular circumstances that will give rise to consequential
107-9 damages as a result of nonpayment, the beneficiary may recover
107-10 damages resulting from the refusal to pay to the extent the bank
107-11 had notice of the damages, unless the bank proves that it did not
107-12 pay because of a reasonable doubt concerning the right of the
107-13 beneficiary to payment.
107-14 (b) If a payment order accepted by the beneficiary's bank
107-15 instructs payment to an account of the beneficiary, the bank is
107-16 obliged to notify the beneficiary of receipt of the order before
107-17 midnight of the next funds transfer business day following the
107-18 payment date. If the payment order does not instruct payment to an
107-19 account of the beneficiary, the bank is required to notify the
107-20 beneficiary only if notice is required by the order. Notice may be
107-21 given by first class mail or any other means reasonable in the
107-22 circumstances. If the bank fails to give the required notice, the
107-23 bank is obliged to pay interest to the beneficiary on the amount of
107-24 the payment order from the day notice should have been given until
107-25 the day the beneficiary learned of receipt of the payment order by
107-26 the bank. No other damages are recoverable. Reasonable attorney's
107-27 fees are recoverable if demand for interest is made and refused
108-1 before an action is brought on the claim.
108-2 (c) The right of a beneficiary to receive payment and
108-3 damages as stated in Subsection (a) may not be varied by agreement
108-4 or a funds transfer system rule. The right of a beneficiary to be
108-5 notified as stated in Subsection (b) may be varied by agreement of
108-6 the beneficiary or by a funds transfer system rule if the
108-7 beneficiary is notified of the rule before initiation of the funds
108-8 transfer.
108-9 Sec. 4A.405. PAYMENT BY BENEFICIARY'S BANK TO BENEFICIARY.
108-10 (a) If the beneficiary's bank credits an account of the
108-11 beneficiary of a payment order, payment of the bank's obligation
108-12 under Section 4A.404(a) occurs when and to the extent:
108-13 (1) the beneficiary is notified of the right to
108-14 withdraw the credit;
108-15 (2) the bank lawfully applies the credit to a debt of
108-16 the beneficiary; or
108-17 (3) funds with respect to the order are otherwise made
108-18 available to the beneficiary by the bank.
108-19 (b) If the beneficiary's bank does not credit an account of
108-20 the beneficiary of a payment order, the time when payment of the
108-21 bank's obligation under Section 4A.404(a) occurs is governed by
108-22 principles of law that determine when an obligation is satisfied.
108-23 (c) Except as provided by Subsections (d) and (e), if the
108-24 beneficiary's bank pays the beneficiary of a payment order under a
108-25 condition to payment or agreement of the beneficiary giving the
108-26 bank the right to recover payment from the beneficiary if the bank
108-27 does not receive payment of the order, the condition to payment or
109-1 agreement is not enforceable.
109-2 (d) A funds transfer system rule may provide that payments
109-3 made to beneficiaries of funds transfers through the system are
109-4 provisional until receipt of payment by the beneficiary's bank of
109-5 the payment order is accepted. A beneficiary's bank that makes a
109-6 payment that is provisional under the rule is entitled to refund
109-7 from the beneficiary if (i) the rule requires that both the
109-8 beneficiary and the originator be given notice of the provisional
109-9 nature of the payment before the funds transfer is initiated, (ii)
109-10 the beneficiary, the beneficiary's bank and the originator's bank
109-11 agreed to be bound by the rule, and (iii) the beneficiary's bank
109-12 did not receive payment of the payment order that it accepted. If
109-13 the beneficiary is obliged to refund payment to the beneficiary's
109-14 bank, acceptance of the payment order by the beneficiary's bank is
109-15 nullified and no payment by the originator of the funds transfer to
109-16 the beneficiary occurs under Section 4A.406.
109-17 (e) This subsection applies to a funds transfer that
109-18 includes a payment order transmitted over a funds transfer system
109-19 that (i) nets obligations multilaterally among participants, and
109-20 (ii) has in effect a loss-sharing agreement among participants for
109-21 the purpose of providing funds necessary to complete settlement of
109-22 the obligations of one or more participants that do not meet their
109-23 settlement obligations. If the beneficiary's bank in the funds
109-24 transfer accepts a payment order and the system fails to complete
109-25 settlement pursuant to its rules with respect to any payment order
109-26 in the funds transfer:
109-27 (1) the acceptance by the beneficiary's bank is
110-1 nullified and no person has any right or obligation based on the
110-2 acceptance;
110-3 (2) the beneficiary's bank is entitled to recover
110-4 payment from the beneficiary;
110-5 (3) no payment by the originator to the beneficiary
110-6 occurs under Section 4A.406; and
110-7 (4) subject to Section 4A.402(e), each sender in the
110-8 funds transfer is excused from its obligation to pay its payment
110-9 order under Section 4A.402(c) because the funds transfer has not
110-10 been completed.
110-11 Sec. 4A.406. PAYMENT BY ORIGINATOR TO BENEFICIARY; DISCHARGE
110-12 OF UNDERLYING OBLIGATION. (a) Subject to Sections 4A.211(e) and
110-13 4A.405(d) and (e), the originator of a funds transfer pays the
110-14 beneficiary of the originator's payment order:
110-15 (1) at the time a payment order for the benefit of the
110-16 beneficiary is accepted by the beneficiary's bank in the funds
110-17 transfer; and
110-18 (2) in an amount equal to the amount of the order
110-19 accepted by the beneficiary's bank, but not more than the amount of
110-20 the originator's order.
110-21 (b) If payment under Subsection (a) is made to satisfy an
110-22 obligation, the obligation is discharged to the same extent
110-23 discharge would result from payment to the beneficiary of the same
110-24 amount in money, unless (i) the payment under Subsection (a) of
110-25 this section was made by a means prohibited by the contract of the
110-26 beneficiary with respect to the obligation, (ii) the beneficiary,
110-27 within a reasonable time after receiving notice of receipt of the
111-1 order by the beneficiary's bank, notified the originator of the
111-2 beneficiary's refusal of the payment, (iii) funds with respect to
111-3 the order were not withdrawn by the beneficiary or applied to a
111-4 debt of the beneficiary, and (iv) the beneficiary would suffer a
111-5 loss that could reasonably have been avoided if payment had been
111-6 made by a means complying with the contract. If payment by the
111-7 originator does not result in discharge under this section, the
111-8 originator is subrogated to the rights of the beneficiary to
111-9 receive payment from the beneficiary's bank under Section
111-10 4A.404(a).
111-11 (c) For the purpose of determining whether discharge of an
111-12 obligation occurs under Subsection (b), if the beneficiary's bank
111-13 accepts a payment order in an amount equal to the amount of the
111-14 originator's payment order less charges of one or more receiving
111-15 banks in the funds transfer, payment to the beneficiary is deemed
111-16 to be in the amount of the originator's order unless upon demand by
111-17 the beneficiary the originator does not pay the beneficiary the
111-18 amount of the deducted charges.
111-19 (d) Rights of the originator or of the beneficiary of a
111-20 funds transfer under this section may be varied only by agreement
111-21 of the originator and the beneficiary.
111-22 (Sections 4A.407-4A.500 reserved for expansion
111-23 SUBCHAPTER E. MISCELLANEOUS PROVISIONS
111-24 Sec. 4A.501. VARIATION BY AGREEMENT AND EFFECT OF FUNDS
111-25 TRANSFER SYSTEM RULE. (a) Except as otherwise provided in this
111-26 chapter, the rights and obligations of a party to a funds transfer
111-27 may be varied by agreement of the affected party.
112-1 (b) "Funds transfer system rule" means a rule of an
112-2 association of banks (i) governing transmission of payment orders
112-3 by means of a funds transfer system of the association or rights
112-4 and obligations with respect to those orders, or (ii) to the
112-5 extent the rule governs rights and obligations between banks that
112-6 are parties to a funds transfer in which a Federal Reserve Bank,
112-7 acting as an intermediary bank, sends a payment order to the
112-8 beneficiary's bank. Except as otherwise provided in this chapter,
112-9 a funds transfer system rule governing rights and obligations
112-10 between participating banks using the system may be effective even
112-11 if the rule conflicts with this chapter and indirectly affects
112-12 another party to the funds transfer who does not consent to the
112-13 rule. A funds transfer system rule may also govern rights and
112-14 obligations of parties other than participating banks using the
112-15 system to the extent stated in Sections 4A.404(c), 4A.405(d), and
112-16 4A.507(c).
112-17 Sec. 4A.502. CREDITOR PROCESS SERVED ON RECEIVING BANK;
112-18 SETOFF BY BENEFICIARY'S BANK. (a) As used in this section,
112-19 "creditor process" means levy, attachment, garnishment, notice of
112-20 lien, sequestration, or similar process issued by or on behalf of a
112-21 creditor or other claimant with respect to an account.
112-22 (b) This subsection applies to creditor process with respect
112-23 to an authorized account of the sender of a payment order if the
112-24 creditor process is served on the receiving bank. For the purpose
112-25 of determining rights with respect to the creditor process, if the
112-26 receiving bank accepts the payment order, the balance in the
112-27 authorized account is deemed to be reduced by the amount of the
113-1 payment order to the extent the bank did not otherwise receive
113-2 payment of the order, unless the creditor process is served at a
113-3 time and in a manner affording the bank a reasonable opportunity to
113-4 act on it before the bank accepts the payment order.
113-5 (c) If a beneficiary's bank has received a payment order for
113-6 payment to the beneficiary's account in the bank the following
113-7 rules apply:
113-8 (1) The bank may credit the beneficiary's account, and
113-9 the amount credited may be set off against an obligation owed by
113-10 the beneficiary to the bank or may be applied to satisfy creditor
113-11 process served on the bank with respect to the account.
113-12 (2) The bank may credit the beneficiary's account and
113-13 allow withdrawal of the amount credited unless creditor process
113-14 with respect to the account is served at a time and in a manner
113-15 affording the bank a reasonable opportunity to act to prevent
113-16 withdrawal.
113-17 (3) If creditor process with respect to the
113-18 beneficiary's account has been served and the bank has had a
113-19 reasonable opportunity to act on it, the bank may not reject the
113-20 payment order except for a reason unrelated to the service of
113-21 process.
113-22 (d) Creditor process with respect to a payment by the
113-23 originator to the beneficiary pursuant to a funds transfer may be
113-24 served only on the beneficiary's bank with respect to the debt owed
113-25 by that bank to the beneficiary. Any other bank served with the
113-26 creditor process is not obliged to act with respect to the process.
113-27 Sec. 4A.503. INJUNCTION OR RESTRAINING ORDER WITH RESPECT TO
114-1 FUNDS TRANSFER. For proper cause and in compliance with applicable
114-2 law, a court may restrain (i) a person from issuing a payment order
114-3 to initiate a funds transfer, (ii) an originator's bank from
114-4 executing the payment order of the originator, or (iii) the
114-5 beneficiary's bank from releasing funds to the beneficiary or the
114-6 beneficiary from withdrawing the funds. A court may not otherwise
114-7 restrain a person from issuing a payment order, paying or receiving
114-8 payment of a payment order, or otherwise acting with respect to a
114-9 funds transfer.
114-10 Sec. 4A.504. ORDER IN WHICH ITEMS AND PAYMENT ORDERS MAY BE
114-11 CHARGED TO ACCOUNT; ORDER OF WITHDRAWALS FROM ACCOUNT. (a) If a
114-12 receiving bank has received more than one payment order of the
114-13 sender or one or more payment orders and other items that are
114-14 payable from the sender's account, the bank may charge the sender's
114-15 account with respect to the various orders and items in any
114-16 sequence.
114-17 (b) In determining whether a credit to an account has been
114-18 withdrawn by the holder of the account or applied to a debt of the
114-19 holder of the account, credits first made to the account are first
114-20 withdrawn or applied.
114-21 Sec. 4A.505. PRECLUSION OF OBJECTION TO DEBIT OF CUSTOMER'S
114-22 ACCOUNT. If a receiving bank has received payment from its
114-23 customer with respect to a payment order issued in the name of the
114-24 customer as sender and accepted by the bank, and the customer
114-25 received notification reasonably identifying the order, the
114-26 customer is precluded from asserting that the bank is not entitled
114-27 to retain the payment unless the customer notifies the bank of the
115-1 customer's objection to the payment within one year after the
115-2 notification was received by the customer.
115-3 Sec. 4A.506. RATE OF INTEREST. (a) If, under this chapter,
115-4 a receiving bank is obliged to pay interest with respect to a
115-5 payment order issued to the bank, the amount payable may be
115-6 determined (i) by agreement of the sender and receiving bank, or
115-7 (ii) by funds transfer system rule if the payment order is
115-8 transmitted through a funds transfer system.
115-9 (b) If the amount of interest is not determined by an
115-10 agreement or rule as stated in Subsection (a), the amount is
115-11 calculated by multiplying the applicable Federal Funds rate by the
115-12 amount on which interest is payable, and then multiplying the
115-13 product by the number of days for which interest is payable. The
115-14 applicable Federal Funds rate is the average of the Federal Funds
115-15 rates published by the Federal Reserve Bank of New York for each of
115-16 the days for which interest is payable divided by 360. The Federal
115-17 Funds rate for any day on which a published rate is not available
115-18 is the same as the published rate for the next preceding day for
115-19 which there is a published rate. If a receiving bank that accepted
115-20 a payment order is required to refund payment to the sender of the
115-21 order because the funds transfer was not completed, but the failure
115-22 to complete was not due to any fault by the bank, the interest
115-23 payable is reduced by a percentage equal to the reserve requirement
115-24 on deposits of the receiving bank.
115-25 Sec. 4A.507. CHOICE OF LAW. (a) The following rules apply
115-26 unless the affected parties otherwise agree or Subsection (c)
115-27 applies:
116-1 (1) The rights and obligations between the sender of a
116-2 payment order and the receiving bank are governed by the law of the
116-3 jurisdiction in which the receiving bank is located.
116-4 (2) The rights and obligations between the
116-5 beneficiary's bank and the beneficiary are governed by the law of
116-6 the jurisdiction in which the beneficiary's bank is located.
116-7 (3) The issue of when payment is made pursuant to a
116-8 funds transfer by the originator to the beneficiary is governed by
116-9 the law of the jurisdiction in which the beneficiary's bank is
116-10 located.
116-11 (b) If the parties described by each subdivision of
116-12 Subsection (a) have made an agreement selecting the law of a
116-13 particular jurisdiction to govern rights and obligations between
116-14 each other, the law of that jurisdiction governs those rights and
116-15 obligations as to matters of construction and interpretation,
116-16 whether or not the payment order or the funds transfer bears a
116-17 reasonable relation to that jurisdiction, and as to validity, to
116-18 the extent permitted by Section 1.105 of this code.
116-19 (c) A funds transfer system rule may select the law of a
116-20 particular jurisdiction to govern (i) rights and obligations
116-21 between participating banks with respect to payment orders
116-22 transmitted or processed through the system, or (ii) the rights
116-23 and obligations of some or all parties to a funds transfer any part
116-24 of which is carried out by means of the system. A choice of law
116-25 made pursuant to clause (i) is binding on participating banks. A
116-26 choice of law made pursuant to clause (ii) is binding on the
116-27 originator, other sender, or a receiving bank having notice that
117-1 the funds transfer system might be used in the funds transfer and
117-2 of the choice of law by the system when the originator, other
117-3 sender, or receiving bank issued or accepted a payment order. The
117-4 beneficiary of a funds transfer is bound by the choice of law if,
117-5 when the funds transfer is initiated, the beneficiary has notice
117-6 that the funds transfer system might be used in the funds transfer
117-7 and of the choice of law by the system. The law of a jurisdiction
117-8 selected pursuant to this Subsection (c) may govern, as to matters
117-9 of construction and interpretation, whether or not the law bears a
117-10 reasonable relation to the matter in issue.
117-11 (d) In the event of inconsistency between an agreement under
117-12 Subsection (b) and a choice-of-law rule under Subsection (c), the
117-13 agreement under Subsection (b) prevails.
117-14 (e) If a funds transfer is made by use of more than one
117-15 funds transfer system and there is inconsistency between
117-16 choice-of-law rules of the systems, the matter in issue is governed
117-17 by the law of the selected jurisdiction that has the most
117-18 significant relationship to the matter in issue.
117-19 SECTION 8. Section 24.003(b), Business & Commerce Code, is
117-20 amended to read as follows:
117-21 (b) A debtor who is generally not paying <able to pay> the
117-22 debtor's debts as they become due is presumed to be insolvent.
117-23 SECTION 9. Section 24.004(d), Business & Commerce Code, is
117-24 amended to read as follows:
117-25 (d) "Reasonably equivalent value" includes without
117-26 limitation, a transfer or obligation that is within the range of
117-27 values for which the transferor would have <wilfully> sold the
118-1 assets in an arm's <arms> length transaction.
118-2 SECTION 10. Section 24.005(a), Business & Commerce Code, is
118-3 amended to read as follows:
118-4 (a) A transfer made or obligation incurred by a debtor is
118-5 fraudulent as to a creditor, whether the creditor's claim arose
118-6 <within a reasonable time> before or within a reasonable time after
118-7 the transfer was made or the obligation was incurred, if the debtor
118-8 made the transfer or incurred the obligation:
118-9 (1) with actual intent to hinder, delay, or defraud
118-10 any creditor of the debtor; or
118-11 (2) without receiving a reasonably equivalent value in
118-12 exchange for the transfer or obligation, and the debtor:
118-13 (A) was engaged or was about to engage in a
118-14 business or a transaction for which the remaining assets of the
118-15 debtor were unreasonably small in relation to the business or
118-16 transaction; or
118-17 (B) intended to incur, or believed or reasonably
118-18 should have believed that the debtor would incur, debts beyond the
118-19 debtor's ability to pay as they became due.
118-20 SECTION 11. Sections 24.009(c) and (d), Business & Commerce
118-21 Code, are amended to read as follows:
118-22 (c)(1) Except as provided by Subdivision (2) of this
118-23 subsection, if <If> the judgment under Subsection (b) of this
118-24 section is based upon the value of the asset transferred, the
118-25 judgment must be for an amount equal to the value of the asset at
118-26 the time of the transfer, subject to adjustment as the equities may
118-27 require.
119-1 (2) The value of the asset transferred is not to be
119-2 adjusted to include the value of improvements made by a good faith
119-3 transferee, including:
119-4 (A) physical additions or changes to the asset
119-5 transferred;
119-6 (B) repairs to the asset;
119-7 (C) payment of any tax on the asset;
119-8 (D) payment of any debt secured by a lien on the
119-9 asset that is superior or equal to the rights of a voiding creditor
119-10 under this chapter; and
119-11 (E) preservation of the asset.
119-12 (d)(1) Notwithstanding voidability of a transfer or an
119-13 obligation under this chapter, a good faith transferee or obligee
119-14 is entitled, at the transferee's or obligee's election, to the
119-15 extent of the value <of any improvements made by a good faith
119-16 transferee or obligee, and> given the debtor for the transfer or
119-17 obligation, to:
119-18 (A) a lien, prior to the rights of a voiding
119-19 creditor under this chapter <creditor's claim>, or a right to
119-20 retain any interest in the asset transferred;
119-21 (B) enforcement of any obligation incurred; or
119-22 (C) a reduction in the amount of the liability
119-23 on the judgment.
119-24 (2) Notwithstanding voidability of a transfer under
119-25 this chapter, to the extent of the value of any improvements made
119-26 by a good faith transferee, the good faith transferee is entitled
119-27 to a lien on the asset transferred prior to the rights of a voiding
120-1 creditor under this chapter <In this subsection, "improvement"
120-2 includes:>
120-3 <(A) physical additions or changes to the
120-4 property transferred;>
120-5 <(B) repairs to such property;>
120-6 <(C) payment of any tax on such property;>
120-7 <(D) payment of any debt secured by a lien on
120-8 such property that is superior or equal to the rights of the
120-9 trustee; and>
120-10 <(E) preservation of such property>.
120-11 SECTION 12. Section 24.010, Business & Commerce Code, is
120-12 amended to read as follows:
120-13 Sec. 24.010. Extinguishment of Cause of Action. (a) Except
120-14 as provided by Subsection (b) of this section, a <A> cause of
120-15 action with respect to a fraudulent transfer or obligation under
120-16 this chapter is extinguished unless action is brought:
120-17 (1) under Section 24.005(a)(1) of this code, within
120-18 four years after the transfer was made or the obligation was
120-19 incurred or, if later, within one year after the transfer or
120-20 obligation was or could reasonably have been discovered by the
120-21 claimant;
120-22 (2) under Section 24.005(a)(2) or 24.006(a) of this
120-23 code, within four years after the transfer was made or the
120-24 obligation was incurred; or
120-25 (3) under Section 24.006(b) of this code, within one
120-26 year after the transfer was made <or the obligation was incurred>.
120-27 (b) A cause of action on behalf of a spouse, minor, or ward
121-1 with respect to a fraudulent transfer or <of> obligation under this
121-2 chapter is extinguished <as to a spouse, minor, or ward> unless the
121-3 action is brought:
121-4 (1) under Section 24.005(a) or 24.006(a) of this code,
121-5 within two years after the cause of action accrues, or if later,
121-6 within one year after the transfer or obligation was or could
121-7 reasonably have been discovered by the claimant; or
121-8 (2) under Section 24.006(b) of this code within one
121-9 year after the date the transfer was made<, subject to the
121-10 provisions relating to disabilities under Chapter 16, Civil
121-11 Practice and Remedies Code>.
121-12 (c) If a creditor entitled to bring an action under this
121-13 chapter is under a legal disability when a time period prescribed
121-14 by this section starts, the time of the disability is not included
121-15 in the period. A disability that arises after the period starts
121-16 does not suspend the running of the period. A creditor may not
121-17 tack one legal disability to another to extend the period. For the
121-18 purposes of this subsection, a creditor is under a legal disability
121-19 if the creditor is:
121-20 (1) younger than 18 years of age, regardless of
121-21 whether the person is married; or
121-22 (2) of unsound mind.
121-23 SECTION 13. Subchapter D, Chapter 35, Business & Commerce
121-24 Code, is amended by adding Sections 35.51 and 35.52 to read as
121-25 follows:
121-26 Sec. 35.51. RIGHTS OF PARTIES TO CHOOSE LAW APPLICABLE TO
121-27 CERTAIN TRANSACTIONS. (a) In this section:
122-1 (1) "Transaction" includes more than one substantially
122-2 similar or related transaction entered into contemporaneously and
122-3 having at least one common party.
122-4 (2) "Qualified transaction" means a transaction under
122-5 which a party:
122-6 (A) pays or receives, or is obligated to pay or
122-7 entitled to receive, consideration with an aggregate value of at
122-8 least $1,000,000; or
122-9 (B) lends, advances, borrows, or receives, or is
122-10 obligated to lend or advance or is entitled to borrow or receive,
122-11 funds or credit with an aggregate value of at least $1,000,000.
122-12 (b) Except as provided by Subsection (e) or (f) of this
122-13 section or Section 35.52 of this code, if the parties to a
122-14 qualified transaction agree in writing that the law of a particular
122-15 jurisdiction governs an issue relating to the transaction,
122-16 including the validity or enforceability of an agreement relating
122-17 to the transaction or a provision of the agreement, and the
122-18 transaction bears a reasonable relation to that jurisdiction, the
122-19 law, other than conflict of laws rules, of that jurisdiction
122-20 governs the issue regardless of whether the application of that law
122-21 is contrary to a fundamental or public policy of this state or of
122-22 any other jurisdiction.
122-23 (c) Except as provided by Subsection (f) of this section, if
122-24 the parties to a qualified transaction agree in writing that the
122-25 law of a particular jurisdiction governs the interpretation or
122-26 construction of an agreement relating to the transaction or a
122-27 provision of the agreement, the law, other than conflict of laws
123-1 rules, of that jurisdiction governs that issue regardless of
123-2 whether the transaction bears a reasonable relation to that
123-3 jurisdiction.
123-4 (d) For purposes of this section, a transaction bears a
123-5 reasonable relation to a particular jurisdiction if the
123-6 transaction, the subject matter of the transaction, or a party to
123-7 the transaction is reasonably related to that jurisdiction. A
123-8 transaction bears a reasonable relation to a particular
123-9 jurisdiction if:
123-10 (1) a party to the transaction is a resident of that
123-11 jurisdiction;
123-12 (2) a party to the transaction has its place of
123-13 business or, if that party has more than one place of business,
123-14 its chief executive office or an office from which it conducts a
123-15 substantial part of the negotiations relating to the transaction,
123-16 in that jurisdiction;
123-17 (3) all or part of the subject matter of the
123-18 transaction is located in that jurisdiction;
123-19 (4) a party to the transaction is required to perform
123-20 a substantial part of its obligations relating to the transaction,
123-21 such as delivering payments, in that jurisdiction; or
123-22 (5) a substantial part of the negotiations relating to
123-23 the transaction, and the signing of an agreement relating to the
123-24 transaction by a party to the transaction, occurred in that
123-25 jurisdiction.
123-26 (e) Except as provided by Subsection (f) of this section or
123-27 Section 35.52 of this code, if:
124-1 (1) the parties to a qualified transaction agree in
124-2 writing that the law of a particular jurisdiction governs the
124-3 validity or enforceability of an agreement relating to the
124-4 transaction or a provision of the agreement;
124-5 (2) the transaction bears a reasonable relation to
124-6 that jurisdiction; and
124-7 (3) a term of the agreement or of that provision is
124-8 invalid or unenforceable under the law, other than conflict of laws
124-9 rules, of that jurisdiction but is valid or enforceable under the
124-10 law, other than conflict of laws rules, of the jurisdiction that
124-11 has the most significant relation to the transaction, the subject
124-12 matter of the transaction, and the parties, then:
124-13 (A) the law, other than conflict of laws rules,
124-14 of the jurisdiction that has the most significant relation to the
124-15 transaction, the subject matter of the transaction, and the parties
124-16 governs the validity or enforceability of that term; and
124-17 (B) the law, other than conflict of laws rules,
124-18 of the jurisdiction that the parties agree would govern the
124-19 validity or enforceability of that agreement or of that provision
124-20 governs the validity or enforceability of the other terms of that
124-21 agreement or provision.
124-22 (f) Subsections (b)-(e) of this section do not apply to the
124-23 determination of the law that governs:
124-24 (1) whether a transaction transfers or creates an
124-25 interest in real property for security purposes or otherwise, the
124-26 nature of an interest in real property that is transferred or
124-27 created by a transaction, the method for foreclosure of a lien on
125-1 real property, the nature of an interest in real property that
125-2 results from foreclosure, or the manner and effect of recording or
125-3 failing to record evidence of a transaction that transfers or
125-4 creates an interest in real property;
125-5 (2) the validity of a marriage or an adoption, whether
125-6 a marriage has been terminated, or the effect of a marriage on
125-7 property owned by a spouse at the time of the marriage or acquired
125-8 by either spouse during the marriage;
125-9 (3) whether an instrument is a will, the rights of
125-10 persons under a will, or the rights of persons in the absence of a
125-11 will; or
125-12 (4) an issue that another statute of this state, or a
125-13 statute of the United States, provides is governed by the law of a
125-14 particular jurisdiction.
125-15 (g) Subsections (b)-(e) of this section apply to the
125-16 determination of the law that governs an issue relating to a
125-17 transaction involving real property other than those specified in
125-18 Subsection (f)(1) of this section, including the validity or
125-19 enforceability of an indebtedness incurred in consideration for the
125-20 transfer of, or the payment of which is secured by a lien on, real
125-21 property.
125-22 Sec. 35.52. LAW APPLICABLE TO CONSTRUCTION CONTRACTS. (a)
125-23 If a contract is principally for the construction or repair of
125-24 improvements to real property located in this state and the
125-25 contract contains a provision that makes the contract or any
125-26 conflict arising under it subject to the law of another state, to
125-27 litigation in the courts of another state, or to arbitration in
126-1 another state, that provision is voidable by the party that is
126-2 obligated by the contract to perform the construction or repair.
126-3 (b) A contract is principally for the construction or repair
126-4 of improvements to real property located in this state if the
126-5 contract obligates a party, as its principal obligation under the
126-6 contract, to construct or repair improvements to real property
126-7 located in this state as a general contractor or subcontractor.
126-8 (c) A contract is not principally for the construction or
126-9 repair of improvements to real property located in this state if:
126-10 (1) the contract is a partnership agreement or other
126-11 agreement governing an entity or trust;
126-12 (2) the contract provides for a loan or other
126-13 extension of credit and the party promising to construct or repair
126-14 improvements does so as part of its agreements with the lender or
126-15 other extender of credit; or
126-16 (3) the contract is for the management of real
126-17 property or improvements and the obligation to construct or repair
126-18 is part of that management.
126-19 (d) Subsections (b) and (c) of this section are not an
126-20 exclusive list of situations in which a contract is or is not
126-21 principally for the construction or repair of improvements to real
126-22 property located in this state.
126-23 SECTION 14. Section 35.53(a), Business & Commerce Code, is
126-24 amended to read as follows:
126-25 (a) This section applies to a contract<, other than a
126-26 contract for the construction or repair of improvements to real
126-27 property located in this state,> only if:
127-1 (1) the contract is for the sale, lease, exchange, or
127-2 other disposition for value of goods for the price, rental, or
127-3 other consideration of $50,000 or less; <and>
127-4 (2) any element of the execution of the contract
127-5 occurred in this state and a party to the contract is:
127-6 (A) an individual resident of this state; or
127-7 (B) an association or corporation created under
127-8 the laws of this state or having its principal place of business in
127-9 this state; and
127-10 (3) Section 1.105 of this code does not apply to the
127-11 contract.
127-12 SECTION 15. The following are repealed:
127-13 (1) Chapter 6, Business & Commerce Code;
127-14 (2) Section 9.111, Business & Commerce Code;
127-15 (3) Section 24.013, Business & Commerce Code; and
127-16 (4) Section 35.53(c), Business & Commerce Code.
127-17 SECTION 16. This Act takes effect September 1, 1993.
127-18 SECTION 17. The importance of this legislation and the
127-19 crowded condition of the calendars in both houses create an
127-20 emergency and an imperative public necessity that the
127-21 constitutional rule requiring bills to be read on three several
127-22 days in each house be suspended, and this rule is hereby suspended.