Statutes > Illinois Statutes > CHAPTER 810 COMMERCIAL CODE > 810 ILCS 5/ Uniform Commercial Code. > Part 2 - Formation And Construction Of Lease Contract

Part 2 - Formation And Construction Of Lease Contract


      (810 ILCS 5/Art. 2A Pt. 2 heading)
PART 2. FORMATION AND CONSTRUCTION OF LEASE CONTRACT

    (810 ILCS 5/2A‑201) (from Ch. 26, par. 2A‑201)
    Sec. 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 $1,000; or
        (b) there is a writing, 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 subsection (1)(b), whether or not it is specific, if it reasonably identifies what is described.
    (3) A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under subsection (1)(b) beyond the lease term and the quantity of goods shown in the writing.
    (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 writing 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑202) (from Ch. 26, par. 2A‑202)
    Sec. 2A‑202. Final written 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 writing 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:
        (a) by course of dealing or usage of trade or by
     course of performance; and
        (b) by evidence of consistent additional terms
     unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑203) (from Ch. 26, par. 2A‑203)
    Sec. 2A‑203. Seals inoperative. The affixing of a seal to a writing evidencing a lease contract or an offer to enter into a lease contract does not render the writing a sealed instrument and the law with respect to sealed instruments does not apply to the lease contract or offer.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑204) (from Ch. 26, par. 2A‑204)
    Sec. 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑205) (from Ch. 26, par. 2A‑205)
    Sec. 2A‑205. Firm offers. An offer by a merchant to lease goods to or from another person in a signed writing 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 3 months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑206) (from Ch. 26, par. 2A‑206)
    Sec. 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑207)(from Ch. 26, par. 2A‑207)
    Sec. 2A‑207. (Blank).
(Source: P.A. 95‑895, eff. 1‑1‑09.)

    (810 ILCS 5/2A‑208) (from Ch. 26, par. 2A‑208)
    Sec. 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 writing 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑209) (from Ch. 26, par. 2A‑209)
    Sec. 2A‑209. Lessee under finance lease as beneficiary of supply contract.
    (1) The benefit of a 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 is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom.
    (2) The extension of the benefit of a supplier's promises and of warranties to the lessee (Section 2A‑209(1)) does not: (i) modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or (ii) 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. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before 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 an agreement between the lessee and the supplier or under other law.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑210) (from Ch. 26, par. 2A‑210)
    Sec. 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑211) (from Ch. 26, par. 2A‑211)
    Sec. 2A‑211. Warranties against interference 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑212) (from Ch. 26, par. 2A‑212)
    Sec. 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 be at least such as:
        (a) pass without objection in the trade under the
     description in the lease agreement;
        (b) in the case of fungible goods, are of fair
     average quality within the description;
        (c) are 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) are 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑213) (from Ch. 26, par. 2A‑213)
    Sec. 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑214) (from Ch. 26, par. 2A‑214)
    Sec. 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 2A‑202 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 2A‑211) 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑215) (from Ch. 26, par. 2A‑215)
    Sec. 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:
        (a) Exact or technical specifications displace an
     inconsistent sample or model or general language of description.
        (b) A sample from an existing bulk displaces
     inconsistent general language of description.
        (c) Express warranties displace inconsistent implied
     warranties other than an implied warranty of fitness for a particular purpose.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑216) (from Ch. 26, par. 2A‑216)
    Sec. 2A‑216. Third‑party beneficiaries of express and implied warranties. A warranty to or for the benefit of a lessee under this Article, 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑217) (from Ch. 26, par. 2A‑217)
    Sec. 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:
        (a) when the lease contract is made if the lease
     contract is for a lease of goods that are existing and identified;
        (b) 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; or
        (c) when the young are conceived, if the lease
     contract is for a lease of unborn young of animals.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑218) (from Ch. 26, par. 2A‑218)
    Sec. 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.
(Source: P.A. 87‑493.)

    (810 ILCS 5/2A‑219) (from Ch. 26, par. 2A‑219)
    Sec. 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 the provisions of this Article on the effect of default on risk of loss (Section 2A‑220), 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
            (i) 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
            (ii) 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 paragraph (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.
(Source: P.A. 87‑493.)