Printable Format84-2a-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; and
(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.
History: L. 1991, ch. 295, ยง 48; February 1, 1992.
KANSAS COMMENT, 1996
1. This section is the "price" paid for the third party beneficiary status of finance lessees to warranty and other protections under the supply contract. See 84-2a-209 and Official Comment 3 to that section. Under subsection (1), once a finance lessee accepts the goods under a non-consumer finance lease, the lessee's promises under the lease contract become "irrevocable and independent." This statutory "hell or high water clause" requires the finance lessee to continue making payments and otherwise performing its obligations under the lease once it accepts the goods, regardless of subsequent occurrences. The finance lessee has a cause of action for damages for any breach of the lease contract, and may have a claim against the supplier, but its obligation to perform is independent of the lessor's performance. Thus, the lessee may not stop paying rent or set-off its claimed damages against the rent. See Official Comment 5 to this section.
2. Although the lessee's obligations are stated to be "irrevocable" after acceptance, the lessee still retains the right, under limited circumstances, to revoke acceptance under section 84-2a-517. See 1996 Kansas Comments to 84-2a-517.
3. Subsection (2) extends the effect of this section to third parties, including any assignee of the lessor. It also makes clear that any promise enforceable under this section may not be canceled or modified without the consent of the party to whom the promise runs.
4. This section does not apply to any finance lease that is also a consumer lease. Official Comment 2 explains that obligating a consumer to pay despite defects in the goods "is a principle that is not tenable under case law." The section does not, however, outlaw "hell or high water" clauses in consumer finance leases, thus leaving the validity of those clauses to "continue to be determined by the facts of each case and other law which this section does not affect." See Official Comment 6 to this section; cf. Kansas Consumer Lease-Purchase Agreement Act, K.S.A. 50-685(5) (providing that consumer lease-purchase agreement may not contain waiver by consumer of claims or defenses). In non-consumer cases courts generally have enforced "hell or high water" clauses, declining to find such clauses to be unconscionable. See Benedictine College, Inc. v. Century Office Prods., Inc., 853 F.Supp. 1315 (D. Kan. 1994).