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84-2a-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) After a default by the lessee under the lease contract of the type described in K.S.A. 84-2a-523(1) or (3)(a) or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract so provides, 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 (K.S.A. 84-2a-527.)

(3) The lessor may proceed under subsection (2) without judicial process if it can be done without breach of the peace or the lessor may proceed by action.

History: L. 1991, ch. 295, ยง 73; February 1, 1992.

KANSAS COMMENT, 1996

1. Subsection (1) is derived from section 84-2-702(1), and permits a lessor that discovers the lessee to be insolvent to refuse to deliver the goods. Since insolvency is not itself a default, unless the parties agree otherwise, the lessor will not have the remedies provided in 84-2a-523. Instead, the lessor may rely on this section and section 84-2a-526, which gives it the right to stop delivery of goods in the possession of a bailee. In addition, the lessor may demand adequate assurances of performance under section 84-2a-401. For the definition of "insolvent," see 84-1-201(23). Official Comment 1 states that section 84-2-702(2) was not incorporated into Article 2A because it was unnecessary in light of subsection (2), although that is true only if the lease defines insolvency as an event of default. In addition, the provision of 84-2-702(1) for proceeding with delivery for cash was omitted, presumably because of the ongoing nature of a lease.

2. Subsection (2) gives a lessor the right to take possession of the goods from the lessee in the event of statutory default or other default if material or if the lease contract so provides. This subsection is based on a secured creditor's right to take possession of goods on default as provided in section 84-9-503, although its purpose is to protect the lessor's ownership interest in the goods rather than to enable a creditor to satisfy an outstanding debt of the debtor. Like a secured creditor under Article 9, a lessor on default may (1) if the lease contract so provides, require the lessee to assemble the goods and make them available at a convenient place; (2) render unusable goods used in a trade or business; and (3) dispose of goods on the lessee's premises. Subsection (3) permits a lessor to use self-help to take possession of the goods, provided it can be done without breach of the peace. If self-help repossession cannot be done, or the lessor prefers to use the courts, it may proceed by judicial action. For further discussion, see 1996 Kansas Comments to 84-9-503.

3. In the case of a consumer lease, the Uniform Consumer Credit Code requires notice of the consumer's right to cure and an opportunity to cure before the lessor can repossess goods. See K.S.A. 16a-5-110 & 16a-5-111. In addition, in a consumer lease, the lessor can use self-help to repossess the goods "only if possession can be taken without entry into a dwelling and without the use of force or other breach of peace." See K.S.A. 16a-5-112; see also Official Comment 3 to 84-2a-104.


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