Okla. Stat. tit. 12A § 2A-209

Current through Laws 2024, c. 453.

Section 2A-209 - Lessee Under Finance Lease as Beneficiary of Supply Contract

(1) The benefit of the supplier's promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of any third party provided in connection with or as part of the supply contract, extends to the lessee to the extent of the lessee's leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom.

(2) The extension of the benefit of a supplier's promises and of warranties to the lessee (subsection (1) of this section) does not:

(i) modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or

(ii) impose any duty or liability under the supply contract on the lessee.

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to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.

(4) In addition to the extension of the benefit of the supplier's promises and of warranties to the lessee under subsection (1) of this section, the lessee retains all rights that the lessee may have against the supplier which arise from an agreement between the lessee and the supplier or under other law.

Okla. Stat. tit. 12A, § 2A-209

Added by Laws 1988, HB 1683, c. 86, § 18, eff. 11/1/1988. Amended by Laws 1991, SB 25, c. 117, § 5, eff. 1/1/1991.

Oklahoma Code Comment

A finance lease (See § 2A-103(1)(g)) is a lease in which the lessor does not select, manufacture or supply the goods and first acquires the goods or the right to possession and use of them from a supplier (See § 2A-103(1)(x)) in connection with the lease under a supply contract (see § 2A-103(1)(y)). See also Oklahoma Comment to § 2A-103(1)(g). To illustrate, suppose a person interested in acquiring a piece of equipment selects it from a seller and then arranges to have the equipment sold to a bank and then the bank to lease it to him. That lease qualifies as a "finance lease."

In a finance lease, the lessor does not occupy a position like that of a person who acquires and then sells or leases goods as the person's business. Rather a finance lessor primarily serves to supply funds to enable the acquisition of the goods. For this reason, financial institutions such as banks commonly make finance leases. See 6 Oklahoma Statutes § 419. The fact such a lease may be a full payout lease does not itself make it a secured transaction under 12A Oklahoma Statutes § 1-201(37) as amended.

Because the lessor in a finance lease remains outside the selection, manufacture and supply of the goods, a finance lessor under Article 2A, in line with most present authority (See Oklahoma Comment to §2A-103(1)(g)), does not make implied warranties against infringement ( §2A-211(2)) or of merchantability ( §2A-212) or fitness ( § 2A-213). The lessee in a finance lease instead for the most part looks to the supplier of the goods for assurances that the goods will conform to the use for them the lessee contemplated.

In short, a finance lease is the product of a three party transaction. The supplier manufactures or supplies the goods pursuant to the lessee's specification, perhaps even pursuant to a purchase order, sales agreement or lease agreement between the supplier and the lessee. After the prospective finance lease is negotiated, a purchase order, sales agreement, or lease agreement is entered into by the lessor (as buyer or prime lessee), or an existing order, agreement or lease is assigned by the lessee to the lessor. The lessor and the lessee then enter into a lease or sublease of the goods; the "finance Thus, a finance lessee may make its deal with the supplier of the goods, and that deal may be assigned to the finance lessor. In this instance, the finance lessor as buyer, or as prime lessee under a non-finance ("merchant") lease, gets whatever express warranties the finance lessee negotiated with the supplier, and the implied warranties and remedies a buyer or non-finance lessee normally obtains under Article 2 or Article 2A, as the case may be, subject to any disclaimers, limitations of remedy, and 80 on in the supply contract. To the extent the finance lessee does not first conclude a deal with the supplier and instead the sale or non-finance lease is first concluded between the supplier and the finance lessor, the resulting deal will carry only what is determined by the supplier and the finance lessor (which may, of course, reflect the finance lessee's requirements) as to warranties, disclaimers and the like, in accordance with Article 2 or Article 2A depending on whether the deal takes the form of a sale or a non-finance lease. But the finance lessee must under § 2A-103(1)(g)(iii) either receive a copy of the supply contract or approve it before signing the finance lease as a condition to the effectiveness of the finance lease contract or otherwise receive appropriate information.

At this point, the finance lessee may have rights under the supply contract between the supplier and the finance lessor in accordance with UCC § 2-318 or § 2A-216 and case law, as applicable. But that is an uncertain proposition dependent on the version of the section enacted by the jurisdiction and how courts have construed it. To provide certainty, particularly when the finance lessee will have minimum rights against the finance lessor under the finance lease and Article 2A (see Official Comments to §§ 2A-211 and 2A-407), this section statutorily provides that, to the extent of the finance lessee's leasehold interest, the warranty and other rights under the supply contract extend to the finance lessee without regard to the vagaries of privity. The operation of this provision cannot be thwarted by contrary agreement. Thus the relationship between the supplier and a finance lessee with respect to warranties, remedies, and other matters is controlled, as the case may be, by Article 2 or Article 2A in conjunction with § 2A-209 . It is not left to contract, except as the supply contract may include disclaimers, limitations of remedy and similar, or to case law development, except as Article 2 and Article 2A do not clearly speak on all issues, such as the rights of a person not in privity with a seller or lessor to particular remedies against the seller or lessor in connection with breach of obligation owed to that person.

The 1991 amendments make modest changes in the details of this section. See the Supplementary Commentary.