Okla. Stat. tit. 12A § 2A-103

Current through Laws 2024, c. 328.

Section 2A-103 - [Effective 11/1/2024] Definitions and index of definitions

(1) In this article unless the context otherwise requires:

(a) "Buyer in the ordinary course of business" means a person who in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in the ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(b) "Cancellation" occurs when either party puts an end to the lease contract for default by the other party.

(c) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole.

(d) "Conforming" goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.

(e) "Consumer lease" means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed Forty-five Thousand Dollars ($45,000.00).

(f) "Fault" means wrongful act, omission, breach, or default.

(g) "Finance lease" means a lease with respect to which:

(i) the lessor does not select, manufacture or supply the goods;

(ii) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and

(iii) one of the following occurs:

(A) the lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;

(B) the lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;

(C) the lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or

(D) if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this article to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.

(h) "Goods" means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 2A-309 of this title). The term includes future goods, specially manufactured goods, and the unborn young of animals. The term does not include information, the money in which the price is to be paid, investment securities under Article 8 of the Uniform Commercial Code, minerals or the like, including oil and gas, before extraction, or choses in action.

(i) "Hybrid lease" means a single transaction involving a lease of goods and:

(i) the provision of services;

(ii) a sale of other goods; or

(iii) a sale, lease, or license of property other than goods.

(j) "Installment lease contract" means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause "each delivery is a separate lease" or its equivalent.

(k) "Lease" means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest or license of information is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease.

(l) "Lease agreement" means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing of usage of trade or course of performance as provided in this article. Unless the context clearly indicates otherwise, the term includes a sublease agreement.

(m) "Lease contract" means the total legal obligation that results from the lease agreement as affected by this article and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.

(n) "Leasehold interest" means the interest of the lessor or the lessee under a lease contract.

(o) "Lessee" means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee.

(p) "Lessee in the ordinary course of business" means a person who in good faith and without knowledge that the lease to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in the ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. "Leasing" may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(q) "Lessor" means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.

(r) "Lessor's residual interest" means the lessor's interest in the goods after expiration, termination, or cancellation of the lease contract.

(s) "Lien" means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.

(t) "Lot" means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.

(u) "Merchant lessee" means a lessee that is a merchant with respect to goods of the kind subject to the lease.

(v) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

(w) "Purchase" includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods.

(x) "Sublease" means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.

(y) "Supplier" means a person from whom a lessor buys or leases goods to be leased under a finance lease.

(z) "Supply contract" means a contract under which a lessor buys or leases goods to be leased.

(aa) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.

(2) Other definitions applying to this article and the sections in which they appear are:

"Accessions". Subsection (1) of Section 2A-310 of this title.

"Construction mortgage". Paragraph (d) of subsection (1) of Section 2A-309 of this title.

"Encumbrance". Paragraph (e) of subsection (1) of Section 2A-309 of this title.

"Fixtures". Paragraph (a) of subsection (1) of Section 2A-309 of this title.

"Fixture filing". Paragraph (b) of subsection (1) of Section 2A-309 of this title.

"Purchase money lease". Paragraph (c) of subsection (1) of Section 2A-309 of this title.

(3) The following definitions in other articles apply to this article:

"Account". Paragraph (2) of subsection (a) of Section 1-9-102 of this title.

"Between merchants". Subsection (3) of Section 2-104 of this title.

"Buyer". Paragraph (a) of subsection (1) of Section 2-103 of this title.

"Chattel paper". Paragraph (11) of subsection (a) of Section 1-9-102 of this title.

"Consumer goods". Paragraph (23) of subsection (a) of Section 1-9-102 of this title.

"Document". Paragraph (30) of subsection (a) of Section 1-9-102 of this title.

"Entrusting". Paragraph (3) of Section 2-403 of this title.

"General intangible". Paragraph (42) of subsection (a) of Section 1-9-102 of this title.

"Instrument". Paragraph (47) of subsection (a) of Section 1-9-102 of this title.

"Merchant". Subsection (1) of Section 2-104 of this title.

"Mortgage". Paragraph (55) of subsection (a) of Section 1-9-102 of this title.

"Pursuant to commitment". Paragraph (69) of subsection (a) of Section 1-9-102 of this title.

"Receipt". Subsection (c) of paragraph (1) of Section 2-103 of this title.

"Sale". Paragraph (1) of Section 2-106 of this title.

"Sale on approval". Section 2-326 of this title.

"Sale or return". Section 2-326 of this title.

"Seller". Subparagraph (c) of paragraph (1) of Section 2-103 of this title.

(4) In addition, Article 1 of this title, contains general definitions and principles of construction and interpretation applicable throughout this article.

Okla. Stat. tit. 12A, § 2A-103

Amended by Laws 2024, c. 13,s. 13, eff. 11/1/2024.

Amended by Laws 2015 , c. 374, s. 26, eff. 11/1/2015.

Added by Laws 1988, HB 1683, c. 86, § 3, eff. 11/1/1988; Amended by Laws 1991, HB 2237, c. 117, § 3, eff. 1/1/1992; Amended by Laws 2000 , SB 1519, c. 371, § 153, eff. 7/1/2001; Amended by Laws 2005 , HB 2028, c. 139, § 28, eff. 1/1/2006(repealed by Laws 2005 , SB 692, c. 473, § 3, emerg. eff. 6/9/2005); Amended by Laws 2005 , HB 2035, c. 140, § 53, eff. 1/1/2006.

Oklahoma Code Comment

In general. of these definitions are derived from or are dependent upon definitions in other Articles of the UCC.. For example, the definition of "commercial unit" is based on UCC § 2-106(6), and decisions under that section are relevant here. Applicable definitions appearing in other sections of Article 2A or in other Articles are listed in subsections (2) and (3) of this section. Note also the relevance of the general definitions and principles in UCC Article 1. & e subsection (4) of this section.

Consumer Lease ( § 2A-103(1)(e)). There are three differences between this definition and that of a consumer lease contained in the Oklahoma Uniform Consumer Credit Code (U3C), 14A Oklahoma Statutes § 2-106. The two most important are:

(1) a consumer lease under Article 2A can be for any term; under the U3C short term leases are not covered and "consumer leases" only include leases with a term exceeding 4 months. However, see Section 2 of H.B. 1261, to be codified at 69 Oklahoma Statutes § 1961, defining "rental-purchase agree meet". This legislation largely plugs the U3C gap and a consumer lease under Article 2A, as applicable, is subject to either of these other statutes.

(2) a consumer lease under Article 2A cannot involve payments in excess of $26,000; under the U3C the cutoff point is $45,000. The 1991 amendments bring Article 2A into line with the U3C at $46,000.

The third difference is that a consumer lease under the U3C must involve a lessor engaged in the leasing business; under Article 2A an automobile dealer, who only infrequently leases cars, also can make a consumer lease.

Finance Lease ( § 2A-IO3(1)(g)). A lease which qualifies as a statutory "finance lease" under Article 2A accords the finance lessor with different treatment from that accorded to other types of lessors. In particular, the lessor under a finance lease will not give implied warranties of quality with respect to the goods, even if the lessor is considered to be a merchant, and except in a consumer lease, the lessee's obligations under the lease are deemed to be "irrevocable and independent." In essence, Article 2A limits the finance lessee's recourse for defective goods to a claim against the supplier under the supply contract between the supplier and the lessor. The lessee's rights, therefore, arise under a combination of Article 2 and § 2A-209 of Article 2A (unless the supply contract itself is a lease). These rights may include rights under implied warranties of quality made by the supplier through the finance lessor to the finance lessee.

This structure reflects present Oklahoma law to the extent it exists. See Kubicek v. I.F.G. Leasing Co., Case No. 66909 (Okla.Ct.App., Okl.City Div., 1988), involving a true lease, and Citicorp Leasing, Inc. v. Allied Institutional Distrib., Inc., 464 F.Supp. 511 (W.D.Okla.1977), involving a lease intended as security. Overall, see Note, Commercial Law: Uniform Imposition of the Risk of Loss in Equipment Leasing, 37 Okla.L.Rev. 317 (1984).

Because a finance lessee is required to pursue the supplier in relation to remedies for breach of warranty, the lessee should be entitled to receive a copy of or approve the supply contract prior to becoming bound under the finance lease in order to know what its rights are. 12A Oklahoma Statutes §2A-103(1)(g)(iii) so provides. Some equipment lessors have argued that in many cases it may not be feasible or desirable for the lessor to supply the lessee with a copy of the supply contract. As a result, it is asserted that a lessor in such a case will not be able to qualify for finance lease treatment. This argument ignores the disjunctive "or" in subclause (iii); the transaction still may qualify, even where oral or computer placed supply orders are used, if the lessee approves the terms of the supply contract even if the lessee does not receive a copy of the contract. The argument also ignores the fact that the lessor may provide itself with exactly the same protection as the statute automatically provides by adequately disclaiming warranties and including a typical "hell or high water clause" in its lease. Virtually all "finance lessors" already include these types of provisions in their leases. Nonetheless, the 1991 amendment accommodate these concerns. See the Supplementary Commentary.

Supplier and Supply Contract ( § 2A-108(1)(2) and (y)). Note a supply contract can be either a sale or a lease and a supplier thus can be either a seller or a lessor. Accordingly, while subclause (iii) of the definition of finance lease in § 2A-103(1)(g) at first appears to be too narrow in only mentioning "purchases," it is necessary to note that "purchase" includes a sale or a lease.

See § 2A-103(1)(v). See also § 2A-103(1)(g), Official Comment.

This section is set out more than once due to postponed, multiple, or conflicting amendments.