Printable Format84-2a-304. Subsequent lease of goods by lessor. (1) Subject to K.S.A. 84-2a-303, 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 subsection (2) and K.S.A. 84-2a-527(4), 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. If goods have been delivered under a transaction of purchase, the lessor has that power even though:
(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"; or
(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 that 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.
History: L. 1991, ch. 295, ยง 34; February 1, 1992.
KANSAS COMMENT, 1996
1. This section governs the rights of the parties when the lessor leases goods subject to an existing lease. It is based on section 84-2-403, which applies when the lessor sells goods subject to an existing lease. Note that this section by its terms is subject to section 84-2a-303, which more generally deals with transfers of duties and rights under a lease.
2. Subsection (1) provides that a subsequent lessee obtains the leasehold interest the lessor had or had power to transfer, but takes subject to the existing lease. A lessor with voidable title has the power to transfer a good leasehold interest to a good faith purchaser for value, but the lessee likewise takes subject to the existing lease. For discussion of the statutory analogue of this provision, see 1996 Kansas Comment 2 to 84-2-403. Paragraphs (1)(a)-(1)(d) are based on comparable paragraphs in section 84-2-403; for further discussion, see 1996 Kansas Comment 3 to 84-2-403.
3. Subsection (1) is subject to two exceptions under which the subsequent lessee does not take subject to the original lease. First, under section 84-2a-527(4), when a lessor is disposing of the goods following default by the lessee, a subsequent lessee in good faith and for value takes free of the original lease. See 1996 Kansas Comment 5 to 84-2a-527. Second, under subsection (2), when the existing lessee has entrusted the goods to a merchant dealing in goods of the kind, a subsequent lessee in the ordinary course of business that leases the goods from the lessor takes free of the original lease. Official Comment 6 explains that this subsection treats a lessee that entrusts goods to a merchant the same as any other entruster. The subsection requires that the entrustment must have occurred before the subsequent lessee's interest became enforceable against the lessor. The definition of "entrusting" in Article 2 applies to this Article as well. See 84-2a-103(3) (incorporating 84-2-403(3)); see also 1996 Kansas Comment 4 to 84-2-403.
4. Subsection (3) integrates the operation of this section with state certificate of title statutes. See K.S.A. 8-135; see also Official Comment 7 to this section.