# Title 41 — Uniform Commercial Code

## Chapter 41-02.1 — Leases

### § 41-02.1-01. (2A-101) Short title.

This chapter may be cited as the Uniform Commercial Code - Leases.
### § 41-02.1-02. (2A-102) Scope.

1. This chapter applies to any transaction, regardless of form, that creates a lease and, in
the case of a hybrid lease, it applies to the extent provided in subsection 2.
2. In a hybrid lease:
a. If the lease-of-goods aspects do not predominate:
(1) Only the provisions of this chapter which relate primarily to the lease-of-
goods aspects of the transaction apply, and the provisions that relate
primarily to the transaction as a whole do not apply;
(2) Section 41-02.1-18 applies if the lease is a finance lease; and
(3) Section 41-02.1-48 applies to the promises of the lessee in a finance lease
to the extent the promises are consideration for the right to possession and
use of the leased goods; and
b. If the lease-of-goods aspects predominate, this chapter applies to the transaction,
but does not preclude application in appropriate circumstances of other law to
aspects of the lease which do not relate to the lease of goods.
### § 41-02.1-03. (2A-103) Definitions and index of definitions.

1. In this chapter unless the context otherwise requires:
a. "Buyer in ordinary course of business" means a person who in good faith and
without knowledge that the sale is in violation of the ownership rights or security
interest or leasehold interest of a third party in the goods buys in 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 pre-existing 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 is 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 twenty-five thousand dollars.
f. "Fault" means wrongful act, omission, breach, or default.
g. "Finance lease" means a lease in which:
(1) The lessor does not select, manufacture, or supply the goods;
(2) The lessor acquires the goods or the right to possession and use of the
goods in connection with the lease; and
(3) (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 any 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) Only if the lease is not a consumer lease, before the lessee signs the
lease contract the lessor informs the lessee in writing 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, that the
lessee is entitled under this chapter 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 that the lessee may contact 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 41-02.1-39), but the term does not include
money, documents, instruments, accounts, chattel paper, general intangibles, or
minerals or the like, including oil and gas, before extraction. The term also
includes the unborn young of animals.
i. "Hybrid lease" means a single transaction involving a lease of goods and:
(1) The provision of services;
(2) A sale of other goods; or
(3) 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 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 or usage of trade or course of
performance (as provided in this chapter). 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 chapter 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 ordinary course of business" means a person who, in good faith and
without knowledge that the lease is in violation of the ownership rights or security
interest or leasehold interest of a third party in the goods, leases in 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 pre-existing 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, regardless of whether 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 under a power created by agreement or
law puts an end to the lease contract otherwise than for default.
2. Other definitions applying to this chapter and the sections in which they appear are:
a. "Accessions". Subsection 1 of section 41-02.1-40.
b. "Construction mortgage". Subdivision d of subsection 1 of section 41-02.1-39.
c. "Encumbrance". Subdivision e of subsection 1 of section 41-02.1-39.
d. "Fixture filing". Subdivision b of subsection 1 of section 41-02.1-39.
e. "Fixtures". Subdivision a of subsection 1 of section 41-02.1-39.
f. "Purchase money lease". Subdivision c of subsection 1 of section 41-02.1-39.
3. The following definitions also apply to this chapter:
a. "Account". Section 41-09-02.
b. "Between merchants". Subsection 1 of section 41-02-04.
c. "Buyer". Subdivision a of subsection 1 of section 41-02-03.
d. "Chattel paper". Section 41-09-02.
e. "Consumer goods". Section 41-09-02.
f. "Document". Section 41-09-02.
g. "Entrusting". Subsection 3 of section 41-02-48.
h. "General intangible". Section 41-09-02.
i. "Instrument". Section 41-09-02.
j. "Merchant". Subsection 3 of section 41-02-04.
k. "Mortgage". Section 41-09-02.

l. "Pursuant to commitment". Section 41-09-02.
m. "Receipt". Subdivision c of subsection 1 of section 41-02-03.
n. "Sale". Subdivision d of subsection 1 of section 41-02-06.
o. "Sale on approval". Subdivision a of subsection 1 of section 41-02-43.
p. "Sale or return". Subdivision b of subsection 1 of section 41-02-43.
q. "Seller". Subdivision d of subsection 1 of section 41-02-03.
4. In addition, chapter 41-01 contains general definitions and principles of construction
and interpretation applicable throughout this chapter.
### § 41-02.1-04. (2A-104) Leases subject to other laws.

1. A lease, although subject to this chapter, is also subject to any applicable:
a. Certificate of title statute of this state;
b. Certificate of title statute of another jurisdiction (section 41-02.1-05); or
c. Consumer protection law of this state, both decisional and statutory.
2. In case of conflict between the provisions of this chapter, other than section 41-02.1-05
or subsection 3 of section 41-02.1-34 or subsection 3 of section 41-02.1-35, and any
statute or decision referred to in subsection 1, the provisions of that statute control.
3. Failure to comply with any applicable law has only the effect specified therein.
### § 41-02.1-05. (2A-105) Territorial application of article to goods covered by certificate of

title.
Subject to subsection 3 of section 41-02.1-34 and subsection 3 of section 41-02.1-35, with
respect to goods covered by a certificate of title issued under a statute of this state or of another
jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title
statute are governed by the law, including the conflict of laws rules, of the jurisdiction issuing the
certificate until the earlier of surrender of the certificate or four months after the goods are
removed from that jurisdiction and thereafter until a new certificate of title is issued by another
jurisdiction.
### § 41-02.1-06. (2A-106) Limitation on power of parties to consumer lease to choose

applicable law and judicial forum.
1. If the law chosen by the parties to a consumer lease is that of a jurisdiction other than
a jurisdiction in which the lessee resides at the time the lease agreement becomes
enforceable or within thirty days thereafter or in which the goods are to be used, the
choice is not enforceable.
2. If the judicial forum chosen by the parties to a consumer lease is a forum that would
not otherwise have jurisdiction over the lessee, the choice is not enforceable.
### § 41-02.1-07. (2A-107) Waiver or renunciation of claim or right after default.

Any claim or right arising out of an alleged default or breach of warranty may be discharged
in whole or in part without consideration by a waiver or renunciation in a signed record delivered
by the aggrieved party.
### § 41-02.1-08. (2A-108) Unconscionability.

1. If the court as a matter of law finds a lease contract or any clause of a lease contract
to have been unconscionable at the time it was made, the court may refuse to enforce
the lease contract, or it may enforce the remainder of the lease contract without the
unconscionable clause, or it may so limit the application of any unconscionable clause
as to avoid any unconscionable result.
2. With respect to a consumer lease, if the court as a matter of law finds that a lease
contract or any clause of a lease contract has been induced by unconscionable
conduct or that unconscionable conduct has occurred in the collection of a claim
arising from a lease contract, the court may grant appropriate relief.
3. Before making a finding of unconscionability under subsection 1 or 2, the court, on its
own motion or that of a party, shall afford the parties a reasonable opportunity to

present evidence as to the setting, purpose, and effect of the lease contract or clause
thereof, or of the conduct.
4. In an action in which the lessee claims unconscionability with respect to a consumer
lease:
a. If the court finds unconscionability under subsection 1 or 2, the court shall award
reasonable attorney's fees to the lessee.
b. If the court does not find unconscionability and the lessee claiming
unconscionability has brought or maintained an action the claimant knew to be
groundless, the court shall award reasonable attorney's fees to the party against
whom the claim is made.
c. In determining attorney's fees, the amount of the recovery on behalf of the
claimant under subsections 1 and 2 is not controlling.
### § 41-02.1-09. (2A-109) Option to accelerate at will.

1. A term providing that one party or that party's successor in interest may accelerate
payment or performance or require collateral or additional collateral "at will" or "when
he or she deems himself or herself insecure" or in words of similar import must be
construed to mean that the party has power to do so only if the party in good faith
believes that the prospect of payment or performance is impaired.
2. With respect to a consumer lease, the burden of establishing good faith under
subsection 1 is on the party who exercised the power. Otherwise, the burden of
establishing lack of good faith is on the party against whom the power has been
exercised.
### § 41-02.1-10. (2A-201) Statute of frauds.

1. A lease contract is not enforceable by way of action or defense unless:
a. The total payments to be made under the lease contract, excluding payments for
options to renew or buy, are less than one thousand dollars; or
b. There is a record, signed by the party against whom enforcement is sought or by
that party's authorized agent, sufficient to indicate that a lease contract has been
made between the parties and to describe the goods leased and the lease term.
2. Any description of leased goods or of the lease term is sufficient and satisfies
subdivision b of subsection 1, whether or not it is specific, if it reasonably identifies
what is described.
3. A record is not insufficient because it omits or incorrectly states a term agreed upon,
but the lease contract is not enforceable under subdivision b of subsection 1 beyond
the lease term and the quantity of goods shown in the record.
4. A lease contract that does not satisfy the requirements of subsection 1, but which is
valid in other respects, is enforceable:
a. If the goods are to be specially manufactured or obtained for the lessee and are
not suitable for lease or sale to others in the ordinary course of the lessor's
business, and the lessor, before notice of repudiation is received and under
circumstances that reasonably indicate that the goods are for the lessee, has
made either a substantial beginning of their manufacture or commitments for their
procurement;
b. If the party against whom enforcement is sought admits in that party's pleading,
testimony, or otherwise in court that a lease contract was made, but the lease
contract is not enforceable under this provision beyond the quantity of goods
admitted; or
c. With respect to goods that have been received and accepted by the lessee.
5. The lease term under a lease contract referred to in subsection 4 is:
a. If there is a record signed by the party against whom enforcement is sought or by
that party's authorized agent specifying the lease term, the term so specified;
b. If the party against whom enforcement is sought admits in that party's pleading,
testimony, or otherwise in court a lease term, the term so admitted; or
c. A reasonable lease term.

### § 41-02.1-11. (2A-202) Final expression - Parol or extrinsic evidence.

Terms with respect to which the confirmatory memoranda of the parties agree or which are
otherwise set forth in a record intended by the parties as a final expression of their agreement
with respect to such terms as are included therein may not be contradicted by evidence of any
prior agreement or of a contemporaneous oral agreement but may be explained or
supplemented by:
1. Course of dealing or usage of trade or by course of performance; and
2. Evidence of consistent additional terms unless the court finds the record to have been
intended also as a complete and exclusive statement of the terms of the agreement.
### § 41-02.1-12. (2A-203) Seals inoperative.

The affixing of a seal to a record evidencing a lease contract or an offer to enter into a lease
contract does not render the record a sealed instrument and the law with respect to sealed
instruments does not apply to the lease contract or offer.
### § 41-02.1-13. (2A-204) Formation in general.

1. A lease contract may be made in any manner sufficient to show agreement, including
conduct by both parties which recognizes the existence of a lease contract.
2. An agreement sufficient to constitute a lease contract may be found although the
moment of its making is undetermined.
3. Although one or more terms are left open, a lease contract does not fail for
indefiniteness if the parties have intended to make a lease contract and there is a
reasonably certain basis for giving an appropriate remedy.
### § 41-02.1-14. (2A-205) Firm offers.

An offer by a merchant to lease goods to or from another person in a signed record that by
its terms gives assurance it will be held open is not revocable, for lack of consideration, during
the time stated or, if no time is stated, for a reasonable time, but in no event may the period of
irrevocability exceed three months. Any such term of assurance on a form supplied by the
offeree must be separately signed by the offeror.
### § 41-02.1-15. (2A-206) Offer and acceptance in formation of lease contract.

1. Unless otherwise unambiguously indicated by the language or circumstances, an offer
to make a lease contract must be construed as inviting acceptance in any manner and
by any medium reasonable in the circumstances.
2. If the beginning of a requested performance is a reasonable mode of acceptance, an
offeror who is not notified of acceptance within a reasonable time may treat the offer
as having lapsed before acceptance.
### § 41-02.1-16. (2A-207) Course of performance or practical construction.

Repealed by S.L. 2007, ch. 354, § 29.
### § 41-02.1-17. (2A-208) Modification, rescission, and waiver.

1. An agreement modifying a lease contract needs no consideration to be binding.
2. A signed lease agreement that excludes modification or rescission except by a signed
record may not be otherwise modified or rescinded, but, except as between
merchants, such a requirement on a form supplied by a merchant must be separately
signed by the other party.
3. Although an attempt at modification or rescission does not satisfy the requirements of
subsection 2, it may operate as a waiver.
4. A party who has made a waiver affecting an executory portion of a lease contract may
retract the waiver by reasonable notification received by the other party that strict
performance will be required of any term waived, unless the retraction would be unjust
in view of a material change of position in reliance on the waiver.

### § 41-02.1-18. (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
subject to the terms of the warranty and of the supply contract and all of the supplier's
defenses or claims arising therefrom.
2. The extension of the benefit of the supplier's promises and warranties to the lessee
(subsection 1 of section 41-02.1-09) does not modify the rights and obligations of the
parties to the supply contract or 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. Whenever a modification or rescission of the
supply contract is effective between the supplier and the lessee, the lessor, in addition
to the obligations of the lessor under the lease contract, is treated as having assumed
all obligations of the supplier and warranties which were so modified or rescinded as
they existed or were available to the lessee prior to 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, the lessee retains all rights that the lessee may have
against the supplier which arise from any agreement between the lessee and the
supplier or from any other law.
### § 41-02.1-19. (2A-210) Express warranties.

1. Express warranties by the lessor are created as follows:
a. Any affirmation of fact or promise made by the lessor to the lessee which relates
to the goods and becomes part of the basis of the bargain creates an express
warranty that the goods will conform to the affirmation or promise.
b. Any description of the goods which is made part of the basis of the bargain
creates an express warranty that the goods will conform to the description.
c. Any sample or model that is made part of the basis of the bargain creates an
express warranty that the whole of the goods will conform to the sample or
model.
2. It is not necessary to the creation of an express warranty that the lessor use formal
words, such as "warrant" or "guarantee", or that the lessor have a specific intention to
make a warranty, but an affirmation merely of the value of the goods or a statement
purporting to be merely the lessor's opinion or commendation of the goods does not
create a warranty.
### § 41-02.1-20. (2A-211) Warranties against interferences and against infringement -

Lessee's obligation against infringement.
1. There is in a lease contract a warranty that for the lease term no person holds a claim
to or interest in the goods that arose from an act or omission of the lessor, other than a
claim by way of infringement or the like, which will interfere with the lessee's
enjoyment of its leasehold interest.
2. Except in a finance lease, there is in a lease contract by a lessor who is a merchant
regularly dealing in goods of the kind a warranty that the goods are delivered free of
the rightful claim of any person by way of infringement or the like.
3. A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and
the supplier harmless against any claim by way of infringement or the like that arises
out of compliance with the specifications.

### § 41-02.1-21. (2A-212) Implied warranty of merchantability.

1. Except in a finance lease, a warranty that the goods will be merchantable is implied in
a lease contract if the lessor is a merchant with respect to goods of that kind.
2. Goods to be merchantable must:
a. Pass without objection in the trade under the description in the lease agreement;
b. In the case of fungible goods, be of fair average quality within the description;
c. Be fit for the ordinary purposes for which goods of that type are used;
d. Run, within the variation permitted by the lease agreement, of even kind, quality,
and quantity within each unit and among all units involved;
e. Be adequately contained, packaged, and labeled as the lease agreement may
require; and
f. Conform to any promises or affirmations of fact made on the container or label.
3. Other implied warranties may arise from course of dealing or usage of trade.
### § 41-02.1-22. (2A-213) Implied warranty of fitness for particular purpose.

Except in a finance lease, if the lessor at the time the lease contract is made has reason to
know of any particular purpose for which the goods are required and that the lessee is relying
on the lessor's skill or judgment to select or furnish suitable goods, there is in the lease contract
an implied warranty that the goods will be fit for that purpose.
### § 41-02.1-23. (2A-214) Exclusion or modification of warranties.

1. Words or conduct relevant to the creation of an express warranty and words or
conduct tending to negate or limit a warranty must be construed wherever reasonable
as consistent with each other but, subject to the provisions of section 41-02.1-11 on
parol or extrinsic evidence, negation or limitation is inoperative to the extent that the
construction is unreasonable.
2. Subject to subsection 3, to exclude or modify the implied warranty of merchantability or
any part of it the language must mention "merchantability", be by a writing, and be
conspicuous. Subject to subsection 3, to exclude or modify any implied warranty of
fitness the exclusion must be by a writing and be conspicuous. Language to exclude
all implied warranties of fitness is sufficient if it is in writing, is conspicuous and states,
for example, "There is no warranty that the goods will be fit for a particular purpose".
3. Notwithstanding subsection 2, but subject to subsection 4:
a. Unless the circumstances indicate otherwise, all implied warranties are excluded
by expressions like "as is", or "with all faults", or by other language that in
common understanding calls the lessee's attention to the exclusion of warranties
and makes plain that there is no implied warranty, if in writing and conspicuous;
b. If the lessee before entering into the lease contract has examined the goods or
the sample or model as fully as desired or has refused to examine the goods,
there is no implied warranty with regard to defects that an examination ought in
the circumstances to have revealed; and
c. An implied warranty may also be excluded or modified by course of dealing,
course of performance, or usage of trade.
4. To exclude or modify a warranty against interference or against infringement (section
41-02.1-20) or any part of it, the language must be specific, be by a writing, and be
conspicuous, unless the circumstances, including course of performance, course of
dealing, or usage of trade, give the lessee reason to know that the goods are being
leased subject to a claim or interest of any person.
### § 41-02.1-24. (2A-215) Cumulation and conflict of warranties express or implied.

Warranties, whether express or implied, must be construed as consistent with each other
and as cumulative, but if that construction is unreasonable, the intention of the parties
determines which warranty is dominant. In ascertaining that intention, the following rules apply:
1. Exact or technical specifications displace an inconsistent sample or model or general
language of description.

2. A sample from an existing bulk displaces inconsistent general language of description.
3. Express warranties displace inconsistent implied warranties other than an implied
warranty of fitness for a particular purpose.
### § 41-02.1-25. (2A-216) Third-party beneficiaries of express and implied warranties.

A warranty to or for the benefit of a lessee under this chapter, whether express or implied,
extends to any person who may reasonably be expected to use, consume, or be affected by the
goods and who is injured by breach of the warranty. The operation of this section may not be
excluded, modified, or limited with respect to injury to the person of an individual to whom the
warranty extends, but an exclusion, modification, or limitation of the warranty, including any with
respect to rights and remedies, effective against the lessee is also effective against the
beneficiary designated under this section.
### § 41-02.1-26. (2A-217) Identification.

Identification of goods as goods to which a lease contract refers may be made at any time
and in any manner explicitly agreed to by the parties. In the absence of explicit agreement,
identification occurs:
1. When the lease contract is made, if the lease contract is for a lease of goods that are
existing and identified.
2. When the goods are shipped, marked, or otherwise designated by the lessor as goods
to which the lease contract refers, if the lease contract is for a lease of goods that are
not existing and identified.
3. When the young are conceived, if the lease contract is for a lease of unborn young of
animals.
### § 41-02.1-27. (2A-218) Insurance and proceeds.

1. A lessee obtains an insurable interest when existing goods are identified to the lease
contract even though the goods identified are nonconforming and the lessee has an
option to reject them.
2. If a lessee has an insurable interest only by reason of the lessor's identification of the
goods, the lessor, until default or insolvency or notification to the lessee that
identification is final, may substitute other goods for those identified.
3. Notwithstanding a lessee's insurable interest under subsections 1 and 2, the lessor
retains an insurable interest until an option to buy has been exercised by the lessee
and risk of loss has passed to the lessee.
4. Nothing in this section impairs any insurable interest recognized under any other
statute or rule of law.
5. The parties by agreement may determine that one or more parties have an obligation
to obtain and pay for insurance covering the goods and by agreement may determine
the beneficiary of the proceeds of the insurance.
### § 41-02.1-28. (2A-219) Risk of loss.

1. Except in the case of a finance lease, risk of loss is retained by the lessor and does
not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee.
2. Subject to section 41-02.1-29, if risk of loss is to pass to the lessee and the time of
passage is not stated, the following rules apply:
a. If the lease contract requires or authorizes the goods to be shipped by carrier:
(1) And it does not require delivery at a particular destination, the risk of loss
passes to the lessee when the goods are duly delivered to the carrier; but
(2) If it does require delivery at a particular destination and the goods are there
duly tendered while in the possession of the carrier, the risk of loss passes
to the lessee when the goods are there duly so tendered as to enable the
lessee to take delivery.

b. If the goods are held by a bailee to be delivered without being moved, the risk of
loss passes to the lessee on acknowledgment by the bailee of the lessee's right
to possession of the goods.
c. In any case not within subdivision a or b, the risk of loss passes to the lessee on
the lessee's receipt of the goods if the lessor, or, in the case of a finance lease,
the supplier, is a merchant. Otherwise, the risk passes to the lessee on tender of
delivery.
### § 41-02.1-29. (2A-220) Effect of default on risk of loss.

1. If risk of loss is to pass to the lessee and the time of passage is not stated:
a. If a tender or delivery of goods so fails to conform to the lease contract as to give
a right of rejection, the risk of loss remains with the lessor, or, in the case of a
finance lease, the supplier, until cure or acceptance.
b. If the lessee rightfully revokes acceptance, the lessee, to the extent of any
deficiency in the lessee's effective insurance coverage, may treat the risk of loss
as having remained with the lessor from the beginning.
2. Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming
goods already identified to a lease contract repudiates or is otherwise in default under
the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the
extent of any deficiency in lessor's or supplier's effective insurance coverage may treat
the risk of loss as resting on the lessee for a commercially reasonable time.
### § 41-02.1-30. (2A-221) Casualty to identified goods.

If a lease contract requires goods identified when the lease contract is made, and the goods
suffer casualty without fault of the lessee, the lessor or the supplier before delivery, or the goods
suffer casualty before risk of loss passes to the lessee under the lease agreement or section
41-02.1-28, then:
1. If the loss is total, the lease contract is avoided.
2. If the loss is partial or the goods have so deteriorated as to no longer conform to the
lease contract, the lessee may nevertheless demand inspection and at the lessee's
option either treat the lease contract as avoided or, except in a finance lease that is not
a consumer lease, accept the goods with due allowance from the rent payable for the
balance of the lease term for the deterioration or the deficiency in quantity but without
further right against the lessor.
### § 41-02.1-31. (2A-301) Enforceability of lease contract.

Except as otherwise provided in this chapter, a lease contract is effective and enforceable
according to its terms between the parties against purchasers of the goods and against
creditors of the parties.
### § 41-02.1-32. (2A-302) Title to and possession of goods.

Except as otherwise provided in this chapter, each provision of this chapter applies whether
the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third
party has possession of the goods, notwithstanding any statute or rule of law that possession or
the absence of possession is fraudulent.
### § 41-02.1-33. (2A-303) Alienability of party's interest under lease contract or of lessor's

residual interest in goods - Delegation of performance - Transfer of rights.
1. Except as provided in subsection 3 and section 41-09-69, a provision in a lease
agreement that prohibits the voluntary or involuntary transfer, including a transfer by
sale, sublease, creation or enforcement of a security interest, or attachment, levy, or
other judicial process, of an interest of a party under the lease contract or of the
lessor's residual interest in the goods, or that makes such a transfer an event of
default, is enforceable as provided in subsection 3, but a transfer that is prohibited or
is an event of default under the lease agreement is otherwise effective. "Creation of a

security interest" as used in this section includes the sale of a lease contract that is
subject to chapter 41-09.
2. A transfer of a right to damages for default with respect to the whole lease contract or
a transfer of a right to payment arising out of the transferor's due performance of the
transferor's entire obligation, which includes the creation of a security interest in the
right to future payment under a lease contract that is granted by a lessor who has no
remaining performance under the lease contract, may not be prohibited or made an
event of default and is not a transfer that materially impairs the prospect of obtaining
return performance by, materially changes the duty of, or materially increases the
burden or risk imposed on the other party to the lease contract within subsection 3.
3. Subject to subsection 2 and section 41-09-69, if a transfer is made that is prohibited or
is an event of default under a lease agreement, or if a transfer is made that materially
impairs the prospect of obtaining return performance by, materially changes the duty
of, or materially increases the burden or risk imposed on the other party to the lease
contract, unless the party prejudiced by the transfer agrees at any time to the transfer
in the lease contract or otherwise, then that party has, if the transfer is made an event
of default, the rights and remedies provided under subsection 2 of section 41-02.1-48.
In all other cases, except as limited by contract, the transferor is liable to the
prejudiced party for damages caused by the transfer to the extent the damages could
not reasonably be prevented by the prejudiced party. A court having jurisdiction may
grant other appropriate relief, including cancellation of the lease contract or an
injunction against the transfer.
4. A transfer of "the lease" or of "all my rights under the lease" or a transfer in similar
general terms is a transfer of rights, and unless the language or the circumstances, as
in a transfer for security, indicate the contrary, the transfer is a delegation of duties by
the transferor to the transferee and acceptance by the transferee constitutes a promise
by the transferee to perform those duties. This promise is enforceable by either the
transferor or the other party to the lease contract.
5. Unless otherwise agreed by the lessor and the lessee, no delegation of performance
relieves the transferor as against the other party of any duty to perform or any liability
for default.
6. To prohibit the transfer of an interest of a party under a consumer lease contract or to
make a transfer an event of default, the language must be specific, by a writing, and
conspicuous.
### § 41-02.1-34. (2A-304) Subsequent lease of goods by lessor.

1. Subject to section 41-02.1-33, a subsequent lessee from a lessor of goods under an
existing lease contract obtains, to the extent of the leasehold interest transferred, the
leasehold interest in the goods that the lessor had or had power to transfer, and except
as provided in subsections 2 and 4 of section 41-02.1-75, takes subject to the existing
lease contract. A lessor with voidable title has power to transfer a good leasehold
interest to a good-faith subsequent lessee for value, but only to the extent set forth in
the preceding sentence. When goods have been delivered under a transaction of
purchase, the lessor has that power even though any of the following are met:
a. The lessor's transferor was deceived as to the identity of the lessor.
b. The delivery was in exchange for a check which is later dishonored.
c. It was agreed that the transaction was to be a "cash sale".
d. The delivery was procured through fraud punishable as larcenous under the
criminal law.
2. A subsequent lessee in the ordinary course of business from a lessor who is a
merchant dealing in goods of that kind to whom the goods were entrusted by the
existing lessee of that lessor before the interest of the subsequent lessee became
enforceable against that lessor obtains, to the extent of the leasehold interest
transferred, all of the lessor's and the existing lessee's rights to the goods, and takes
free of the existing lease contract.

3. A subsequent lessee from the lessor of goods that are subject to an existing lease
contract and are covered by a certificate of title issued under a statute of this state or
of another jurisdiction takes no greater rights than those provided both by this section
and by the certificate of title statute.
### § 41-02.1-35. (2A-305) Sale or sublease of goods by lessee.

1. Subject to section 41-02.1-33, a buyer or sublessee from the lessee of goods under an
existing lease contract obtains, to the extent of the interest transferred, the leasehold
interest in the goods that the lessee had or had power to transfer, and except as
provided in subsections 2 and 4 of section 41-02.1-59, takes subject to the existing
lease contract. A lessee with a voidable leasehold interest has power to transfer a
good leasehold interest to a good-faith buyer for value or a good-faith sublessee for
value, but only to the extent set forth in the preceding sentence. When goods have
been delivered under a transfer of lease, the lessee has that power even though any
of the following are met:
a. The lessor was deceived as to the identity of the lessee.
b. The delivery was in exchange for a check which is later dishonored.
c. The delivery was procured through fraud punishable as larcenous under the
criminal law.
2. A buyer in the ordinary course of business or a sublessee in the ordinary course of
business from a lessee who is a merchant dealing in goods of that kind to whom the
goods were entrusted by the lessor obtains, to the extent of the interest transferred, all
of the lessor's and lessee's rights to the goods, and takes free of the existing lease
contract.
3. A buyer or sublessee from the lessee of goods that are subject to an existing lease
contract and are covered by a certificate of title issued under a statute of this state or
of another jurisdiction takes no greater rights than those provided both by this section
and by the certificate of title statute.
### § 41-02.1-36. (2A-306) Priority of certain liens arising by operation of law.

If a person in the ordinary course of business furnishes services or materials with respect to
goods subject to a lease contract, a lien upon those goods in the possession of that person
given by statute or rule of law for those materials or services takes priority over any interest of
the lessor or lessee under the lease contract or this chapter unless the lien is created by statute
and the statute provides otherwise or unless the lien is created by rule of law and the rule of law
provides otherwise.
### § 41-02.1-37. (2A-307) Priority of liens arising by attachment or levy on, security

interests in, and other claims to goods.
1. Except as otherwise provided in section 41-02.1-36, a creditor of a lessee takes
subject to the lease contract.
2. Except as otherwise provided in subsection 3 and in sections 41-02.1-36 and
41-02.1-38, a creditor of a lessor takes subject to the lease contract unless the creditor
holds a lien that attached to the goods before the lease contract became enforceable.
3. Except as otherwise provided in sections 41-09-37, 41-09-41, and 41-09-43, a lessee
takes a leasehold interest subject to a security interest held by a creditor of the lessor.
### § 41-02.1-38. (2A-308) Special rights of creditors.

1. A creditor of a lessor in possession of goods subject to a lease contract may treat the
lease contract as void if as against the creditor retention of possession by the lessor is
fraudulent under any statute or rule of law, but retention of possession in good faith
and current course of trade by the lessor for a commercially reasonable time after the
lease contract becomes enforceable is not fraudulent.
2. Nothing in this chapter impairs the rights of creditors of a lessor if the lease contract
becomes enforceable, not in current course of trade but in satisfaction of or as security

for a pre-existing claim for money, security, or the like, and the lease contract is made
under circumstances which under any statute or rule of law apart from this chapter
would constitute a fraudulent transfer or voidable preference.
3. A creditor of a seller may treat a sale or an identification of goods to contract for sale
as void if as against the creditor retention of possession by the seller is fraudulent
under any statute or rule of law, but retention of possession of the goods under a lease
contract entered into by the seller as lessee and the buyer as lessor in connection with
the sale or identification of the goods is not fraudulent if the buyer bought for value and
in good faith.
### § 41-02.1-39. (2A-309) Lessor's and lessee's rights when goods become fixtures.

1. In this section:
a. Goods are "fixtures" when they become so related to particular real estate that an
interest in them arises under real estate law.
b. A "fixture filing" is the filing, in the office where a record of a mortgage on the real
estate would be recorded, of a financing statement covering goods that are or are
to become fixtures and conforming to the requirements of subsections 1 and 2 of
section 41-09-73.
c. A lease is a "purchase money lease" unless the lessee has possession or use of
the goods or the right to possession or use of the goods before the lease
agreement is enforceable.
d. A mortgage is a "construction mortgage" to the extent it secures an obligation
incurred for the construction of an improvement on land, including the acquisition
cost of the land, if the recorded writing so indicates.
e. "Encumbrance" includes real estate mortgages and other liens on real estate and
all other rights in real estate that are not ownership interests.
2. Under this chapter a lease may be of goods that are fixtures or may continue in goods
that become fixtures, but no lease exists under this chapter of ordinary building
materials incorporated into an improvement on land.
3. This chapter does not prevent creation of a lease of fixtures under real estate law.
4. The perfected interest of a lessor of fixtures has priority over a conflicting interest of an
encumbrancer or owner of the real estate if either of the following exists:
a. The lease is a purchase money lease, the conflicting interest of the
encumbrancer or owner arises before the goods become fixtures, the interest of
the lessor is perfected by a fixture filing before the goods become fixtures or
within ten days thereafter, and the lessee has an interest of record in the real
estate or is in possession of the real estate.
b. The interest of the lessor is perfected by a fixture filing before the interest of the
encumbrancer or owner is of record, the lessor's interest has priority over any
conflicting interest of a predecessor in title of the encumbrancer or owner, and the
lessee has an interest of record in the real estate or is in possession of the real
estate.
5. The interest of a lessor of fixtures has priority over the conflicting interest of an
encumbrancer or owner of the real estate if any of the following are met:
a. The fixtures are readily removable factory or office machines, readily removable
equipment that is not primarily used or leased for use in the operation of the real
estate, or readily removable replacements of domestic appliances that are goods
subject to a consumer lease, and before the goods become fixtures the lease
contract is enforceable.
b. The conflicting interest is a lien on the real estate obtained by legal or equitable
proceedings after the lease contract is enforceable.
c. The encumbrancer or owner has consented in writing to the lease or has
disclaimed an interest in the goods as fixtures.
d. The lessee has a right to remove the goods as against the encumbrancer or
owner. If the lessee's right to remove terminates, the priority of the interest of the
lessor continues for a reasonable time.

6. Notwithstanding subdivision a of subsection 4 but otherwise subject to subsections 4
and 5, the interest of a lessor of fixtures including the lessor's residual interest is
subordinate to the conflicting interest of an encumbrance of the real estate under a
construction mortgage recorded before the goods become fixtures if the goods
become fixtures before the completion of the construction. To the extent given to
refinance a construction mortgage, the conflicting interest of an encumbrancer of the
real estate under a mortgage has this priority to the same extent as the encumbrancer
of the real estate under the construction mortgage.
7. In cases not within the preceding subsections, priority between the interest of a lessor
of fixtures including the lessor's residual interest and the conflicting interest of an
encumbrancer or owner of the real estate who is not the lessee is determined by the
priority rules governing conflicting interests in real estate.
8. If the interest of a lessor of fixtures including the lessor's residual interest has priority
over all conflicting interests of all owners and encumbrancers of the real estate, the
lessor or the lessee may on default, expiration, termination, or cancellation of the lease
agreement by the other party but subject to the provisions of the lease agreement and
this chapter, or if necessary to enforce other rights and remedies under this chapter of
the lessor or the lessee, remove the goods from the real estate, free and clear of all
conflicting interests of all owners and encumbrancers of the real estate, but the party
removing the goods must reimburse any encumbrancer or owner of the real estate
who is not the lessee and who has not otherwise agreed for the cost of repair of any
physical injury, but not for any diminution in value of the real estate caused by the
absence of the goods removed or by any necessity of replacing them. A person
entitled to reimbursement may refuse permission to remove until the party seeking
removal gives adequate security for the performance of this obligation.
9. Even though the lease agreement does not create a security interest, the interest of a
lessor of fixtures including the lessor's residual interest is perfected by filing a financing
statement as a fixture filing for leased goods that are or are to become fixtures in
accordance with the relevant provisions of the chapter on secured transactions
(chapter 41-09).
### § 41-02.1-40. (2A-310) Lessor's and lessee's rights when goods become accessions.

1. Goods are "accessions" when they are installed in or affixed to other goods.
2. The interest of a lessor or a lessee under a lease contract entered into before the
goods became accessions is superior to all interests in the whole except as stated in
subsection 4.
3. The interest of a lessor or a lessee under a lease contract entered into at the time or
after the goods became accessions is superior to all subsequently acquired interests
in the whole except as stated in subsection 4 but is subordinate to interests in the
whole existing at the time the lease contract was made unless the holders of such
interests in the whole have in writing consented to the lease or disclaimed an interest
in the goods as part of the whole.
4. The interest of a lessor or a lessee under a lease contract described in subsection 2 or
3 is subordinate to the interest of:
a. A buyer in the ordinary course of business or a lessee in the ordinary course of
business of any interest in the whole acquired after the goods became
accessions.
b. A creditor with a security interest in the whole perfected before the lease contract
was made to the extent that the creditor makes subsequent advances without
knowledge of the lease contract.
5. When under subsection 2 or 3 a lessor or a lessee of accessions holds an interest that
is superior to all interests in the whole, the lessor or the lessee may on default,
expiration, termination, or cancellation of the lease contract by the other party, but
subject to the provisions of the lease contract and this chapter, or if necessary to
enforce the lessor's or lessee's other rights and remedies under this chapter, remove
the goods from the whole, free and clear of all interests in the whole. However, the

lessor or the lessee must reimburse any holder of an interest in the whole, who is not
the lessee and who has not otherwise agreed, for the cost of repair of any physical
injury but not for any diminution in value of the whole caused by the absence of the
goods removed or by any necessity for replacing them. A person entitled to
reimbursement may refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
### § 41-02.1-41. (2A-311) Priority subject to subordination.

Nothing in this chapter prevents subordination by agreement by any person entitled to
priority.
### § 41-02.1-42. (2A-401) Insecurity - Adequate assurance of performance.

1. A lease contract imposes an obligation on each party that the other's expectation of
receiving due performance will not be impaired.
2. If reasonable grounds for insecurity arise with respect to the performance of either
party, the insecure party may demand in writing adequate assurance of due
performance. Until the insecure party receives that assurance, if commercially
reasonable the insecure party may suspend any performance for which the insecure
party has not already received the agreed return.
3. A repudiation of the lease contract occurs if assurance of due performance adequate
under the circumstances of the particular case is not provided to the insecure party
within a reasonable time, not to exceed thirty days after receipt of a demand by the
other party.
4. Between merchants, the reasonableness of grounds for insecurity and the adequacy
of any assurance offered must be determined according to commercial standards.
5. Acceptance of any nonconforming delivery or payment does not prejudice the
aggrieved party's right to demand adequate assurance of future performance.
### § 41-02.1-43. (2A-402) Anticipatory repudiation.

If either party repudiates a lease contract with respect to a performance not yet due under
the lease contract, the loss of which performance will substantially impair the value of the lease
contract to the other, the aggrieved party may:
1. For a commercially reasonable time, await retraction of repudiation and performance
by the repudiating party.
2. Make demand under section 41-02.1-42 and await assurance of future performance
adequate under the circumstances of the particular case.
3. Resort to any right or remedy upon default under the lease contract or this chapter,
even though the aggrieved party has notified the repudiating party that the aggrieved
party would await the repudiating party's performance and assurance and has urged
retraction.
In addition, the aggrieved party may suspend performance or, if the aggrieved party is the
lessor, proceed in accordance with the provisions of this chapter on the lessor's right to identify
goods to the lease contract notwithstanding default or to salvage unfinished goods (section
41-02.1-71).
### § 41-02.1-44. (2A-403) Retraction of anticipatory repudiation.

1. Until the repudiating party's next performance is due, the repudiating party can retract
the repudiation unless the aggrieved party has canceled the lease contract or
materially changed the aggrieved party's position or otherwise indicated that the
aggrieved party considers the repudiation final.
2. Retraction may be by any method that clearly indicates to the aggrieved party that the
repudiating party intends to perform under the lease contract and includes any
assurance demanded under section 41-02.1-42.

3. Retraction reinstates a repudiating party's rights under a lease contract with due
excuse and allowance to the aggrieved party for any delay occasioned by the
repudiation.
### § 41-02.1-45. (2A-404) Substituted performance.

1. If without fault of the lessee, the lessor, or the supplier, the agreed berthing, loading, or
unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed
manner of delivery otherwise becomes commercially impracticable, but a commercially
reasonable substitute is available, the substitute performance must be tendered and
accepted.
2. If the agreed means or manner of payment fails because of domestic or foreign
governmental regulation:
a. The lessor may withhold or stop delivery or cause the supplier to withhold or stop
delivery unless the lessee provides a means or manner of payment that is
commercially a substantial equivalent.
b. If delivery has already been taken, payment by the means or in the manner
provided by the regulation discharges the lessee's obligation unless the
regulation is discriminatory, oppressive, or predatory.
### § 41-02.1-46. (2A-405) Excused performance.

Subject to section 41-02.1-45 on substituted performance, the following rules apply:
1. Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who
complies with subsections 2 and 3 is not a default under the lease contract if
performance as agreed has been made impracticable by the occurrence of a
contingency the nonoccurrence of which was a basic assumption on which the lease
contract was made or by compliance in good faith with any applicable foreign or
domestic governmental regulation or order, regardless of whether the regulation or
order later proves to be invalid.
2. If the causes mentioned in subsection 1 affect only part of the lessor's or the supplier's
capacity to perform, the lessor or supplier shall allocate production and deliveries
among its customers but at its option may include regular customers not then under
contract for sale or lease as well as its own requirements for further manufacture. The
lessor or supplier may so allocate in any manner that is fair and reasonable.
3. The lessor seasonably shall notify the lessee and, in the case of a finance lease, the
supplier seasonably shall notify the lessor and the lessee, if known, that there will be
delay or nondelivery and, if allocation is required under subsection 2, of the estimated
quote thus made available for the lessee.
### § 41-02.1-47. (2A-406) Procedure on excused performance.

1. If the lessee receives notification of a material or indefinite delay or an allocation
justified under section 41-02.1-46, the lessee may by written notification to the lessor
as to any goods involved, and with respect to all of the goods if under an installment
lease contract the value of the whole lease contract is substantially impaired (section
41-02.1-58), either:
a. Terminate the lease contract (subsection 2 of section 41-02.1-53).
b. Except in a finance lease that is not a consumer lease, modify the lease contract
by accepting the available quote in substitution, with due allowance from the rent
payable for the balance of the lease term for the deficiency but without further
right against the lessor.
2. If, after receipt of a notification from the lessor under section 41-02.1-46, the lessee
fails so to modify the lease agreement within a reasonable time not exceeding thirty
days, the lease contract lapses with respect to any deliveries affected.

### § 41-02.1-48. (2A-407) Irrevocable promises - Finance leases.

1. In the case of a finance lease that is not a consumer lease, the lessee's promises
under the lease contract become irrevocable and independent upon the lessee's
acceptance of the goods.
2. A promise that has become irrevocable and independent under subsection 1:
a. Is effective and enforceable between the parties and by or against third parties,
including assignees of the parties.
b. Is not subject to cancellation, termination, modification, repudiation, excuse, or
substitution without the consent of the party to whom the promise runs.
3. This section does not affect the validity under any other law of a covenant in any lease
contract making the lessee's promises irrevocable and independent upon the lessee's
acceptance of the goods.
### § 41-02.1-49. (2A-501) Default - Procedure.

1. Whether the lessor or the lessee is in default under a lease contract is determined by
the lease agreement and this chapter.
2. If the lessor or the lessee is in default under the lease contract, the party seeking
enforcement has rights and remedies as provided in this chapter and, except as
limited by this chapter, as provided in the lease agreement.
3. If the lessor or the lessee is in default under the lease contract, the party seeking
enforcement may reduce the party's claim to judgment, or otherwise enforce the lease
contract by self-help or any available judicial procedure or nonjudicial procedure,
including administrative proceeding, arbitration, or the like, under this chapter.
4. Except as otherwise provided under subsection 1 of section 41-01-19, this chapter, or
the lease agreement, the rights and remedies referred to in subsections 2 and 3 are
cumulative.
5. If the lease agreement covers both real property and goods, the party seeking
enforcement may proceed under this part as to the goods, or under other applicable
law as to both the real property and the goods in accordance with the party's rights
and remedies in respect of the real property, in which case this part does not apply.
### § 41-02.1-50. (2A-502) Notice after default.

Except as otherwise provided in this chapter or the lease agreement, the lessor or lessee in
default under the lease contract is not entitled to notice of default or notice of enforcement from
the other party to the lease agreement.
### § 41-02.1-51. (2A-503) Modification or impairment of rights and remedies.

1. Except as otherwise provided in this chapter, the lease agreement may include rights
and remedies for default in addition to or in substitution for those provided in this
chapter and may limit or alter the measure of damages recoverable under this chapter.
2. Resort to a remedy provided under this chapter or in the lease agreement is optional
unless the remedy is expressly agreed to be exclusive. If circumstances cause an
exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive
remedy is unconscionable, remedy may be had as provided in this chapter.
3. Consequential damages may be liquidated under section 41-02.1-52, or may
otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion
is unconscionable. Limitation, alteration, or exclusion of consequential damages for
injury to the person in the case of consumer goods is prima facie unconscionable but
limitation, alteration, or exclusion of damages if the loss is commercial is not prima
facie unconscionable.
4. Rights and remedies on default by the lessor or the lessee with respect to any
obligation or promise collateral or ancillary to the lease contract are not impaired by
this chapter.

### § 41-02.1-52. (2A-504) Liquidation of damages.

1. Damages payable by either party for default, or any other act or omission, including
indemnity for loss or diminution of anticipated tax benefits or loss or damage to a
lessor's residual interest, may be liquidated in the lease agreement but only at an
amount or by a formula that is reasonable in light of the then anticipated harm caused
by the default or other act or omission.
2. If the lease agreement provides for liquidation of damages, and the provision does not
comply with subsection 1, or the provision is an exclusive or limited remedy that
circumstances cause to fail of its essential purpose, remedy may be had as provided
in this chapter.
3. If the lessor justifiably withholds or stops delivery of goods because of the lessee's
default or insolvency (section 41-02.1-73 or 41-02.1-74), the lessee is entitled to
restitution of any amount by which the sum of the lessee's payments exceeds:
a. The amount to which the lessor is entitled by virtue of terms liquidating the
lessor's damages under subsection 1; or
b. In the absence of those terms, twenty percent of the then present value of the
total rent the lessee was obligated to pay for the balance of the lease term, or, in
the case of a consumer lease, the lesser of that amount or five hundred dollars.
4. A lessee's right to restitution under subsection 3 is subject to offset to the extent the
lessor establishes:
a. A right to recover damages under the provisions of this chapter other than
subsection 1; and
b. The amount or value of any benefits received by the lessee directly or indirectly
by reason of the lease contract.
### § 41-02.1-53. (2A-505) Cancellation and termination and effect of cancellation,

termination, rescission, or fraud on rights and remedies.
1. On cancellation of the lease contract, all obligations that are still executory on both
sides are discharged, but any right based on prior default or performance survives,
and the canceling party also retains any remedy for default of the whole lease contract
or any unperformed balance.
2. On termination of the lease contract, all obligations that are still executory on both
sides are discharged but any right based on prior default or performance survives.
3. Unless the contrary intention clearly appears, expressions of "cancellation",
"rescission", or the like of the lease contract may not be construed as a renunciation or
discharge of any claim in damages for an antecedent default.
4. Rights and remedies for material misrepresentation or fraud include all rights and
remedies available under this chapter for default.
5. Neither rescission nor a claim for rescission of the lease contract nor rejection or
return of the goods may bar or be deemed inconsistent with a claim for damages or
other right or remedy.
### § 41-02.1-54. (2A-506) Statute of limitations.

1. An action for default under a lease contract, including breach of warranty or indemnity,
must be commenced within four years after the cause of action accrued. By the
original lease contract the parties may reduce the period of limitation to not less than
one year.
2. A cause of action for default accrues when the act or omission on which the default or
breach of warranty is based is or should have been discovered by the aggrieved party,
or when the default occurs, whichever is later. A cause of action for indemnity accrues
when the act or omission on which the claim for indemnity is based is or should have
been discovered by the indemnified party, whichever is later.
3. If an action commenced within the time limited by subsection 1 is so terminated as to
leave available a remedy by another action for the same default or breach of warranty
or indemnity, the other action may be commenced after the expiration of the time
limited and within six months after the termination of the first action unless the

termination resulted from voluntary discontinuance or from dismissal for failure or
neglect to prosecute.
4. This section does not alter the law on tolling of the statute of limitations nor does it
apply to causes of action that have accrued before this chapter becomes effective.
### § 41-02.1-55. (2A-507) Proof of market rent - Time and place.

1. Damages based on market rent (section 41-02.1-67 or 41-02.1-76) are determined
according to the rent for the use of the goods concerned for a lease term identical to
the remaining lease term of the original lease agreement and prevailing at the time of
the default.
2. If evidence of rent for the use of the goods concerned for a lease term identical to the
remaining lease term of the original lease agreement and prevailing at the times or
places described in this chapter is not readily available, the rent prevailing within any
reasonable time before or after the time described or at any other place or for a
different lease term which in commercial judgment or under usage of trade would
serve as a reasonable substitute for the one described may be used, making any
proper allowance for the difference, including the cost of transporting the goods to or
from the other place.
3. Evidence of a relevant rent prevailing at a time or place or for a lease term other than
the one described in this chapter offered by one party is not admissible unless and
until the party has given the other party notice that the court finds sufficient to prevent
unfair surprise.
4. If the prevailing rent or value of any goods regularly leased in any established market
is in issue, reports in official publications or trade journals or in newspapers or
periodicals of general circulation published as the reports of that market are admissible
in evidence. The circumstances of the preparation of the report may be shown to affect
its weight but not its admissibility.
### § 41-02.1-56. (2A-508) Lessee's remedies.

1. If a lessor fails to deliver the goods in conformity to the lease contract (section
41-02.1-57) or repudiates the lease contract (section 41-02.1-43), or a lessee rightfully
rejects the goods (section 41-02.1-57) or justifiably revokes acceptance of the goods
(section 41-02.1-65), then with respect to any goods involved, and with respect to all of
the goods if under an installment lease contract the value of the whole lease contract
is substantially impaired (section 41-02.1-58), the lessor is in default under the lease
contract and the lessee may:
a. Cancel the lease contract (subsection 1 of section 41-02.1-53).
b. Recover so much of the rent and security as has been paid as is just under the
circumstances.
c. Cover and recover damages as to all goods affected whether or not they have
been identified to the lease contract (sections 41-02.1-66 and 41-02.1-68), or
recover damages for nondelivery (sections 41-02.1-67 and 41-02.1-68).
d. Exercise any other rights or remedies provided in the lease contract.
2. If a lessor fails to deliver the goods in conformity to the lease contract or repudiates
the lease contract, the lessee may also:
a. If the goods have been identified, recover them (section 41-02.1-70); or
b. In a proper case, obtain specific performance or replevy the goods (section
41-02.1-80).
3. If a lessor is otherwise in default under a lease contract, the lessee may exercise the
rights and remedies provided in the lease contract, which may include a right to cancel
the lease, and under subsection 3 of section 41-02.1-67.
4. If a lessor has breached a warranty, whether express or implied, the lessee may
recover damages (subsection 4 of section 41-02.1-67).
5. On rightful rejection or justifiable revocation of acceptance, a lessee has a security
interest in goods in the lessee's possession or control for any rent and security that
has been paid and any expenses reasonably incurred in their inspection, receipt,

transportation, and care and custody and may hold those goods and dispose of them
in good faith and in a commercially reasonable manner, subject to the provisions of
subsection 5 of section 41-02.1-75.
6. Subject to the provisions of section 41-02.1-48, a lessee, on notifying the lessor of the
lessee's intention to do so, may deduct all or any part of the damages resulting from
any default under the lease contract from any part of the rent still due under the same
lease contract.
### § 41-02.1-57. (2A-509) Lessee's rights on improper delivery - Rightful rejection.

1. Subject to the provisions of section 41-02.1-58 on default in installment lease
contracts, if the goods or the tender or delivery fail in any respect to conform to the
lease contract, the lessee may reject or accept the goods or accept any commercial
unit or units and reject the rest of the goods.
2. Rejection of goods is ineffective unless it is within a reasonable time after tender or
delivery of the goods and the lessee seasonably notifies the lessor.
### § 41-02.1-58. (2A-510) Installment lease contracts - Rejection and default.

1. Under an installment lease contract, a lessee may reject any delivery that is
nonconforming if the nonconformity substantially impairs the value of that delivery and
cannot be cured or the nonconformity is a defect in the required documents. If,
however, the nonconformity does not fall within subsection 2 and the lessor or the
supplier gives adequate assurance of its cure, the lessee must accept that delivery.
2. Whenever nonconformity or default with respect to one or more deliveries substantially
impairs the value of the installment lease contract as a whole, there is a default with
respect to the whole. But, the aggrieved party reinstates the installment lease contract
as a whole if the aggrieved party accepts a nonconforming delivery without seasonably
notifying of cancellation or brings an action with respect only to past deliveries or
demands performance as to future deliveries.
### § 41-02.1-59. (2A-511) Merchant lessee's duties as to rightfully rejected goods.

1. Subject to any security interest of a lessee (subsection 5 of section 41-02.1-56), if a
lessor or a supplier has no agent or place of business at the market of rejection, a
merchant lessee, after rejection of goods in the merchant lessee's possession or
control, shall follow any reasonable instructions received from the lessor or the
supplier with respect to the goods. In the absence of those instructions, a merchant
lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods
for the lessor's account if they threaten to decline in value speedily. Instructions are not
reasonable if on demand indemnity for expenses is not forthcoming.
2. If a merchant lessee or any other lessee (section 41-02.1-60) disposes of goods, the
lessee is entitled to reimbursement either from the lessor or the supplier or out of the
proceeds for reasonable expenses of caring for and disposing of the goods and, if the
expenses include no disposition commission, to such commission as is usual in the
trade, or if there is none, to a reasonable sum not exceeding ten percent of the gross
proceeds.
3. In complying with this section or section 41-02.1-60, the lessee is held only to good
faith. Good-faith conduct hereunder is neither acceptance or conversion nor the basis
of an action for damages.
4. A purchaser who purchases in good faith from a lessee under this section or section
though the lessee fails to comply with one or more of the requirements of this chapter.
### § 41-02.1-60. (2A-512) Lessee's duties as to rightfully rejected goods.

1. Except as otherwise provided with respect to goods that threaten to decline in value
speedily (section 41-02.1-59) and subject to any security interest of a lessee
(subsection 5 of section 41-02.1-56):

a. The lessee, after rejection of goods in the lessee's possession, shall hold them
with reasonable care at the lessor's or the supplier's disposition for a reasonable
time after the lessee's seasonable notification of rejection;
b. If the lessor or the supplier gives no instructions within a reasonable time after
notification of rejection, the lessee may store the rejected goods for the lessor's
or the supplier's account or ship them to the lessor or the supplier or dispose of
them for the lessor's or the supplier's account with reimbursement in the manner
provided in section 41-02.1-59; but
c. The lessee has no further obligations with regard to goods rightfully rejected.
2. Action by the lessee pursuant to subsection 1 is not acceptance or conversion.
### § 41-02.1-61. (2A-513) Cure by lessor of improper tender or delivery - Replacement.

1. If any tender or delivery by the lessor or the supplier is rejected because
nonconforming and the time for performance has not yet expired, the lessor or the
supplier may seasonably notify the lessee of the lessor's or the supplier's intention to
cure and may then make a conforming delivery within the time provided in the lease
contract.
2. If the lessee rejects a nonconforming tender that the lessor or the supplier had
reasonable grounds to believe would be acceptable with or without money allowance,
the lessor or the supplier may have a further reasonable time to substitute a
conforming tender if the lessor or the supplier seasonably notifies the lessee.
### § 41-02.1-62. (2A-514) Waiver of lessee's objections.

1. In rejecting goods, a lessee's failure to state a particular defect that is ascertainable by
reasonable inspection precludes the lessee from relying on the defect to justify
rejection or to establish default:
a. If, stated seasonably, the lessor or the supplier could have cured it (section
41-02.1-61); or
b. Between merchants if the lessor or the supplier after rejection has made a
request in writing for a full and final written statement of all defects on which the
lessee proposes to rely.
2. A lessee's failure to reserve rights when paying rent or other consideration against
documents precludes recovery of the payment for defects apparent in the documents.
### § 41-02.1-63. (2A-515) Acceptance of goods.

1. Acceptance of goods occurs after the lessee has had a reasonable opportunity to
inspect the goods and:
a. The lessee signifies or acts with respect to the goods in a manner that signifies to
the lessor or the supplier that the goods are conforming or that the lessee will
take or retain them in spite of their nonconformity; or
b. The lessee fails to make an effective rejection of the goods (subsection 2 of
section 41-02.1-57).
2. Acceptance of a part of any commercial unit is acceptance of that entire unit.
### § 41-02.1-64. (2A-516) Effect of acceptance of goods - Notice of default - Burden of

establishing default after acceptance - Notice of claim or litigation to person answerable
over.
1. A lessee must pay rent for any goods accepted in accordance with the lease contract,
with due allowance for goods rightfully rejected or not delivered.
2. A lessee's acceptance of goods precludes rejection of the goods accepted. In the case
of a finance lease, if made with knowledge of a nonconformity, acceptance cannot be
revoked because of it. In any other case, if made with knowledge of a nonconformity,
acceptance cannot be revoked because of it unless the acceptance was on the
reasonable assumption that the nonconformity would be seasonably cured.

Acceptance does not of itself impair any other remedy provided by this chapter or the
lease agreement for nonconformity.
3. If a tender has been accepted:
a. Within a reasonable time after the lessee discovers or should have discovered
any default, the lessee shall notify the lessor and the supplier, if any, or be barred
from any remedy against the party not notified;
b. Except in the case of a consumer lease, within a reasonable time after the lessee
receives notice of litigation for infringement or the like (section 41-02.1-20) the
lessee shall notify the lessor or be barred from any remedy over for liability
established by the litigation; and
c. The burden is on the lessee to establish any default.
4. If a lessee is sued for breach of a warranty or other obligation for which a lessor or a
supplier is answerable over:
a. The lessee may give the lessor or the supplier written notice of the litigation. If the
notice states that the lessor or the supplier may come in and defend and that if
the lessor or the supplier does not do so, the lessor or the supplier will be bound
in any action by the lessee by any determination of fact common to the two
litigations, then unless the lessor or the supplier after seasonable receipt of the
notice does come in and defend the lessor or the supplier is so bound.
b. The lessor or the supplier may demand in writing that the lessee turn over control
of the litigation including settlement if the claim is one for infringement or the like
(section 41-02.1-20) or else be barred from any remedy over. If the demand
states that the lessor or the supplier agrees to bear all expense and to satisfy any
adverse judgment, then unless the lessee after seasonable receipt of the demand
does turn over control the lessee is so barred.
5. The provisions of subsections 3 and 4 apply to any obligation of a lessee to hold the
lessor or the supplier harmless against infringement or the like (section 41-02.1-20).
### § 41-02.1-65. (2A-517) Revocation of acceptance of goods.

1. A lessee may revoke acceptance of a lot or commercial unit whose nonconformity
substantially impairs its value to the lessee if:
a. Except in the case of a finance lease, on the reasonable assumption that its
nonconformity would be cured and it has not been seasonably cured; or
b. Without discovery of the nonconformity if the lessee's acceptance was
reasonably induced either by the lessor's assurances or, except in the case of a
finance lease, by the difficulty of discovery before acceptance.
2. Except in the case of a finance lease that is not a consumer lease, a lessee may
revoke acceptance of a lot or commercial unit if the lessor commits a default under the
lease contract which substantially impairs the value of that lot or commercial unit to the
lessee.
3. If the lease agreement so provides, the lessee may revoke acceptance of a lot or
commercial unit for other defaults by the lessor.
4. Revocation of acceptance must occur within a reasonable time after the lessee
discovers or should have discovered the ground for it and before any substantial
change in condition of the goods which is not caused by the nonconformity.
Revocation is not effective until the lessee notifies the lessor.
5. A lessee who so revokes has the same rights and duties with regard to the goods
involved as if the lessee had rejected them.
### § 41-02.1-66. (2A-518) Cover - Substitute goods.

1. After default by a lessor under the lease contract as described in subsection 1 of
section 41-02.1-56 or, if agreed, after other default by the lessor, the lessee may cover
by making any purchase or lease of or contract to purchase or lease goods in
substitution for those due from the lessor.
2. Except as otherwise provided with respect to damages liquidated in the lease
agreement (section 41-02.1-52) or determined by agreement of the parties (sections

similar to the original lease agreement and the new lease agreement is made in good
faith and in a commercially reasonable manner, the lessee may recover from the
lessor as damages the present value, as of the date of the commencement of the term
of the new lease agreement, of the rent under the new lease agreement applicable to
that period of the new lease term which is comparable to the then remaining term of
the original lease agreement minus the present value as of the same date of the total
rent for the then remaining lease term of the original lease agreement, and any
incidental or consequential damages, less expenses saved in consequence of the
lessor's default.
3. If a lessee's cover is by lease agreement that for any reason does not qualify for
treatment under subsection 2, or is by purchase or otherwise, the lessee may recover
from the lessor as if the lessee had elected not to cover and section 41-02.1-67
governs.
### § 41-02.1-67. (2A-519) Lessee's damages for nondelivery, repudiation, default, and

breach of warranty in regard to accepted goods.
1. Except as otherwise provided with respect to damages liquidated in the lease
agreement (section 41-02.1-52) or determined by agreement of the parties (sections
and the cover is by lease agreement that for any reason does not qualify for treatment
under subsection 2 of section 41-02.1-66, or is by purchase or otherwise, the measure
of damages for nondelivery or repudiation by the lessor or for rejection or revocation of
acceptance by the lessee is the present value, as of the date of the default, of the then
market rent minus the present value as of the same date of the original rent, computed
for the remaining lease term of the original lease agreement together with incidental
and consequential damages, less expenses saved in consequence of the lessor's
default.
2. Market rent is to be determined as of the place for tender or, in cases of rejection after
arrival or revocation of acceptance, as of the place of arrival.
3. If the lessee has accepted goods and given notification (subsection 3 of section
41-02.1-64), the measure of damages for nonconforming tender or delivery or other
default by a lessor is the loss resulting in the ordinary course of events from the
lessor's default as determined in any manner that is reasonable together with
incidental and consequential damages, less expenses saved in consequence of the
lessor's default.
4. The measure of damages for breach of warranty is the present value at the time and
place of acceptance of the difference between the value of the use of the goods
accepted and the value if they had been as warranted for the lease term, unless
special circumstances show proximate damages of a different amount, together with
incidental and consequential damages, less expenses saved in consequence of the
lessor's default or breach of warranty.
### § 41-02.1-68. (2A-520) Lessee's incidental and consequential damages.

1. Incidental damages resulting from a lessor's default include expenses reasonably
incurred in inspection, receipt, transportation, and care and custody of goods rightfully
rejected or goods the acceptance of which is justifiably revoked, any commercially
reasonable charges, expenses, or commissions in connection with effecting cover, and
any other reasonable expense incident to the default.
2. Consequential damages resulting from a lessor's default include:
a. Any loss resulting from general or particular requirements and needs of which the
lessor at the time of contracting had reason to know and which could not
reasonably be prevented by cover or otherwise; and
b. Injury to person or property proximately resulting from any breach of warranty.

### § 41-02.1-69. (2A-521) Lessee's right to specific performance or replevin.

1. Specific performance may be decreed if the goods are unique or in other proper
circumstances.
2. A decree for specific performance may include any terms and conditions as to
payment of the rent, damages, or other relief that the court deems just.
3. A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like
for goods identified to the lease contract if after reasonable effort the lessee is unable
to effect cover for those goods or the circumstances reasonably indicate that the effort
will be unavailing.
### § 41-02.1-70. (2A-522) Lessee's right to goods on lessor's insolvency.

1. Subject to subsection 2 and even though the goods have not been shipped, a lessee
who has paid a part or all of the rent and security for goods identified to a lease
contract (section 41-02.1-26) on making and keeping good a tender of any unpaid
portion of the rent and security due under the lease contract may recover the goods
identified to a lease contract only if they conform to the lease contract.
2. A lessee acquires the right to recover goods identified to a lease contract only if they
conform to the lease contract.
### § 41-02.1-71. (2A-523) Lessor's remedies.

1. If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a
payment when due or repudiates with respect to a part or the whole, then, with respect
to any goods involved, and with respect to all of the goods if under an installment
lease contract the value of the whole lease contract is substantially impaired (section
41-02.1-58), the lessee is in default under the lease contract and the lessor may:
a. Cancel the lease contract (subsection 1 of section 41-02.1-53).
b. Proceed respecting goods not identified to the lease contract (section
41-02.1-72).
c. Withhold delivery of the goods and take possession of goods previously delivered
(section 41-02.1-73).
d. Stop delivery of the goods by any bailee (section 41-02.1-74).
e. Dispose of the goods and recover damages (section 41-02.1-75), or retain the
goods and recover damages (section 41-02.1-76), or in a proper case recover
rent (section 41-02.1-77).
f. Exercise any other rights or remedies provided in the lease contract.
2. If a lessor does not exercise the rights to which the lessor is entitled under
subsection 1, the lessor may recover the loss resulting in the ordinary course of events
from the lessee's default as determined in any manner which is reasonable, together
with incidental damages, less expenses saved in consequence of the lessee's default.
3. If a lessee is otherwise in default under a lease contract, the lessor may exercise the
rights and remedies provided in the lease contract, which may include a right to cancel
the lease, and unless otherwise provided in the lease contract:
a. If the default substantially impairs the value of the lease contract to the lessor, the
lessor may exercise the rights and remedies provided under subsection 1 or 2.
b. If the default does not substantially impair the value of the lease contract to the
lessor, the lessor may recover under subsection 2.
### § 41-02.1-72. (2A-524) Lessor's right to identify goods to lease contract.

1. A lessor aggrieved under subsection 1 of section 41-02.1-70 may:
a. Identify to the lease contract conforming goods not already identified if at the time
the lessor learned of the default they were in the lessor's or the supplier's
possession or control; and
b. Dispose of goods (subsection 1 of section 41-02.1-74) that demonstrably have
been intended for the particular lease contract even though those goods are
unfinished.

2. If the goods are unfinished, in the exercise of reasonable commercial judgment for the
purposes of avoiding loss and of effective realization, an aggrieved lessor or the
supplier may either complete manufacture and wholly identify the goods to the lease
contract or cease manufacture and lease, sell, or otherwise dispose of the goods for
scrap or salvage value or proceed in any other reasonable manner.
### § 41-02.1-73. (2A-525) Lessor's right to possession of goods.

1. If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the
goods.
2. The lessor has on a default by the lessee under the lease contract described in
subsection 1 of section 41-02.1-71 or in subdivision a of subsection 3 of section
the lessor may require the lessee to assemble the goods and make them available to
the lessor at a place to be designated by the lessor which is reasonably convenient to
both parties. Without removal, the lessor may render unusable any goods employed in
trade or business and may dispose of goods on the lessee's premises (section
41-02.1-75).
3. The lessor may proceed under subsection 2 without judicial process if that can be
done without breach of the peace or the lessor may proceed by action.
### § 41-02.1-74. (2A-526) Lessor's stoppage of delivery in transit or otherwise.

1. A lessor may stop delivery of goods in the possession of a carrier or other bailee if the
lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload,
planeload, or larger shipments of express or freight if the lessee repudiates or fails to
make a payment due before delivery, whether for rent, security, or otherwise under the
lease contract, or for any other reason that the lessor has a right to withhold or take
possession of the goods.
2. In pursuing its remedies under subsection 1, the lessor may stop delivery until:
a. Receipt of the goods by the lessee;
b. Acknowledgment to the lessee by any bailee of the goods, except a carrier, that
the bailee holds the goods for the lessee; or
c. Such an acknowledgment to the lessee by a carrier via reshipment or as a
warehouse.
3. a. To stop delivery, a lessor shall so notify as to enable the bailee by reasonable
diligence to prevent delivery of the goods.
b. After notification, the bailee shall hold and deliver the goods according to the
directions of the lessor, but the lessor is liable to the bailee for any ensuing
charges or damages.
c. A carrier who has issued a non-negotiable bill of lading is not obliged to obey a
notification to stop received from a person other than the consignor.
### § 41-02.1-75. (2A-527) Lessor's rights to dispose of goods.

1. After a default by a lessee under the lease contract described in subsection 1 of
section 41-02.1-71 or in subdivision a of subsection 3 of section 41-02.1-71 or after the
lessor refuses to deliver or takes possession of goods (section 41-02.1-73 or
41-02.1-74), the lessor may dispose of the goods concerned or the undelivered
balance thereof by lease, sale, or otherwise.
2. Except as otherwise provided with respect to damages liquidated in the lease
agreement (section 41-02.1-52) or determined by agreement of the parties (sections
to the original lease agreement and the lease agreement is made in good faith and in
a commercially reasonable manner, the lessor may recover from the lessee as
damages accrued and unpaid rent as of the date of the commencement of the new
term of the new lease agreement, the present value, as of the same date, of the total
rent for the remaining lease term of the original lease agreement minus the present

value, as of the same date, of the rent under the new lease agreement applicable to
that period of the new lease term which is comparable to the then remaining term of
the original lease agreement, and any incidental damages allowed under section
41-02.1-78, less expenses saved in consequence of the lessee's default.
3. If the lessor's disposition is by lease agreement that for any reason does not qualify for
treatment under subsection 2, or is by sale or otherwise, the lessor may recover from
the lessee as if the lessor had elected not to dispose of the goods and section
4. A subsequent buyer or lessee who buys or leases from the lessor in good faith for
value as a result of a disposition under this section takes the goods free of the original
lease contract and any rights of the original lessee even though the lessor fails to
comply with one or more of the requirements of this chapter.
5. The lessor is not accountable to the lessee for any profit made on any disposition. A
lessee who has rightfully rejected or justifiably revoked acceptance shall account to
the lessor for any excess over the amount of the lessee's security interest
(subsection 5 of section 41-02.1-56).
### § 41-02.1-76. (2A-528) Lessor's damages for nonacceptance, failure to pay, repudiation,

or other default.
1. Except as otherwise provided with respect to damages liquidated in the lease
agreement (section 41-02.1-52) or determined by agreement of the parties (sections
dispose of the goods and disposition is by lease agreement that for any reason does
not qualify for treatment under subsection 2 of section 41-02.1-75, or is by sale or
otherwise, the lessor may recover from the lessee as damages for a default described
in subsection 1 of section 41-02.1-71 or in subdivision a of subsection 3 of section
41-02.1-71, or, if agreed, for other default of the lessee accrued and unpaid rent as of
the date of default if the lessee has never taken possession of the goods, or if the
lessee has taken possession of the goods, as of the date the lessor repossesses the
goods or an earlier date on which the lessee makes a tender of the goods to the
lessor; the present value, as of the same date, of the total rent for the then remaining
lease term of the original lease agreement minus the present value, as of the same
date, of the rent under the new lease agreement applicable to that period of the new
lease term which is comparable to the then remaining term of the original lease
agreement; and any incidental damages allowed under section 41-02.1-78, less
expenses saved in consequence of the lessee's default.
2. If the measure of damages provided in subsection 1 is inadequate to put a lessor in as
good a position as performance would have, the measure of damages is the profit,
including reasonable overhead, the lessor would have made from full performance by
the lessee, together with any incidental damages allowed under section 41-02.1-78,
due allowance for costs reasonably incurred and due credit for payments or proceeds
of disposition.
### § 41-02.1-77. (2A-529) Lessor's action for the rent.

1. After default by the lessee under the lease contract as described in subsection 1 of
section 41-02.1-71 or subdivision a of subsection 3 of section 41-02.1-71 or, if agreed,
after other default by the lessee, if the lessor complies with subsection 2, the lessor
may recover from the lessee as damages:
a. For goods accepted by the lessee and not repossessed by or tendered to the
lessor, and for conforming goods lost or damaged within a commercially
reasonable time after risk of loss passes to the lessee (section 41-02.1-28),
accrued and unpaid rent as of the date of entry of judgment in favor of the lessor
the present value as of the same date of the rent for the then remaining lease
term of the lease agreement, and any incidental damages allowed under section
41-02.1-78, less expenses saved in consequence of the lessee's default; and

b. For goods identified to the lease contract if the lessor is unable after reasonable
effort to dispose of them at a reasonable price or the circumstances reasonably
indicate that effort will be unavailing, accrued and unpaid rent as of the date of
entry of judgment in favor of the lessor, the present value as of the same date of
the rent for the then remaining lease term of the lease agreement, and any
incidental damages allowed under section 41-02.1-78, and the lessor will cause
an appropriate credit to be provided against any judgment for damages to the
extent that the amount of the judgment exceeds the recovery available under
section 41-02.1-75 or 41-02.1-76, less expenses saved in consequence of the
lessee's default.
2. Except as provided in subsection 3, the lessor shall hold for the lessee for the
remaining lease term of the lease agreement any goods that have been identified to
the lease contract and are in the lessor's control.
3. The lessor may dispose of the goods at any time before collection of the judgment for
damages obtained under subsection 1. If the disposition is before the end of the
remaining lease term of the lease agreement, the lessor's recovery against the lessee
for damages will be governed by section 41-02.1-75 or 41-02.1-76.
4. Payment of the judgment for damages obtained under subsection 1 entitles the lessee
to use and possession of the goods not then disposed of for the remaining lease term
of and in accordance with the lease agreement.
5. After a lessee has wrongfully rejected or revoked acceptance of goods, has failed to
pay rent then due, or has repudiated (section 41-02.1-42), a lessor who is held not
entitled to rent under this section must nevertheless be awarded damages for
nonacceptance under sections 41-02.1-75 and 41-02.1-76.
### § 41-02.1-78. (2A-530) Lessor's incidental damages.

Incidental damages to an aggrieved lessor include any commercially reasonable charges,
expenses, or commissions incurred in stopping delivery, in the transportation, care, and custody
of goods after the lessee's default, in connection with return or disposition of the goods, or
otherwise resulting from the default.
### § 41-02.1-79. (2A-531) Standing to sue third parties for injury to goods.

1. If a third party so deals with goods that have been identified to a lease contract as to
cause actionable injury to a party to the lease contract, the lessor has a right of action
against the third party, and the lessee also has a right of action against the third party
if the lessee:
a. Has a security interest in the goods;
b. Has an insurable interest in the goods; or
c. Bears the risk of loss under the lease contract or has since the injury assumed
that risk as against the lessor and the goods have been converted or destroyed.
2. If at the time of the injury the party plaintiff did not bear the risk of loss as against the
other party to the lease contract and there is no arrangement between them for
disposition of the recovery, the plaintiff's suit or settlement, subject to the plaintiff's own
interest, is as a fiduciary for the other party to the lease contract.
3. Either party with the consent of the other may sue for the benefit of whom it may
concern.
### § 41-02.1-80. (2A-532) Lessor's rights to residual interest.

In addition to any other recovery permitted by this chapter or other law, the lessor is entitled
to recover from the lessee an amount that will fully compensate the lessor for any loss of or
damage to the lessor's residual interest in the goods caused by the default of the lessee.
