Code Section Group

Commercial Code - COM

DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600]

  ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. )

CHAPTER 5. Default [10501 - 10532]

  ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. )

ARTICLE 1. In General [10501 - 10507]
  ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )

10501.
  

(a) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this division.

(b) 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 division and, except as limited by this division, as provided in the lease agreement.

(c) 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, in accordance with this division.

(d) Except as otherwise provided in subdivision (a) of Section 1305 or this division or the lease agreement, the rights and remedies referred to in subdivisions (b) and (c) are cumulative.

(e) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this chapter as to the goods, or under other applicable law as to both the real property and the goods in accordance with that party’s rights and remedies in respect of the real property, in which case this chapter does not apply.

(Amended by Stats. 2006, Ch. 254, Sec. 66. Effective January 1, 2007.)

10502.
  

Except as otherwise provided in this division 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.

(Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.)

10503.
  

(a) Except as otherwise provided in this division, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this division and may limit or alter the measure of damages recoverable under this division.

(b) Resort to a remedy provided under this division 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 division.

(c) Consequential damages may be liquidated under Section 10504, 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 where the loss is commercial is not prima facie unconscionable.

(d) 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 division.

(Amended by Stats. 1991, Ch. 111, Sec. 41. Effective July 15, 1991.)

10504.
  

(a) 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 the lessor’s residual interest, may be liquidated in the lease agreement subject to and in compliance with Section 1671 of the Civil Code.

(b) If the lease agreement provides for liquidation of damages, and such provision does not comply with subdivision (a), remedy may be had as provided in this division.

(c) If the lessor justifiably withholds or stops delivery of goods because of the lessee’s default or insolvency (Section 10525 or 10526), the lessee is entitled to restitution of any amount by which the sum of his or her payments exceeds:

(1) The amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages in accordance with subdivision (a); or

(2) In the absence of those terms, 20 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 such amount or five hundred dollars ($500).

(d) A lessee’s right to restitution under subdivision (c) is subject to offset to the extent the lessor establishes:

(1) A right to recover damages under the provisions of this division other than subdivision (a); and

(2) The amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

(Amended by Stats. 1991, Ch. 111, Sec. 42. Effective July 15, 1991.)

10505.
  

(a) 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.

(b) 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.

(c) 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.

(d) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this division for default.

(e) 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.

(Amended by Stats. 1991, Ch. 111, Sec. 43. Effective July 15, 1991.)

10506.
  

(a) 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. In a lease contract that is not a consumer lease, by the original lease contract the parties may reduce the period of limitation to not less than one year.

(b) 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.

(c) If an action commenced within the time limited by subdivision (a) 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.

(d) 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 the operative date of this division.

(Amended by Stats. 1991, Ch. 111, Sec. 44. Effective July 15, 1991.)

10507.
  

(a) Damages based on market rent (Section 10519 or 10528) 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 times specified in Sections 10519 and 10528.

(b) 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 division 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.

(c) Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this division offered by one party is not admissible unless and until he or she has given the other party notice the court finds sufficient to prevent unfair surprise.

(d) 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.

(Amended by Stats. 1991, Ch. 111, Sec. 45. Effective July 15, 1991.)

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