10508-10522

COMMERCIAL CODE
SECTION 10508-10522




10508.  (a) If a lessor fails to deliver the goods in conformity to
the lease contract (Section 10509) or repudiates the lease contract
(Section 10402), or a lessee rightfully rejects the goods (Section
10509) or justifiably revokes acceptance of the goods (Section
10517), then with respect to any goods involved, and with respect to
all of the goods if under an installment lease contract the value of
the whole lease contract is substantially impaired (Section 10510),
the lessor is in default under the lease contract and the lessee may:
   (1) Cancel the lease contract (subdivision (a) of Section 10505);
   (2) Recover so much of the rent and security as has been paid and
is just under the circumstances;
   (3) Cover and recover damages as to all goods affected whether or
not they have been identified to the lease contract (Sections 10518
and 10520), or recover damages for nondelivery (Sections 10519 and
10520);
   (4) Exercise any other rights or pursue any other remedies
provided in the lease contract.
   (b) If a lessor fails to deliver the goods in conformity to the
lease contract or repudiates the lease contract, the lessee may also:
   (1) If the goods have been identified, recover them (Section
10522); or
   (2) In a proper case, obtain specific performance or replevy the
goods (Section 10521).
   (c) If a lessor is otherwise in default under a lease contract,
the lessee may exercise the rights and pursue the remedies provided
in the lease contract, which may include a right to cancel the lease,
and in subdivision (c) of Section 10519.
   (d) If a lessor has breached a warranty, whether express or
implied, the lessee may recover damages(subdivision (d) of Section
10519).
   (e) On rightful rejection or justifiable revocation of acceptance,
a lessee has a security interest in goods in the lessee's possession
or control for any rent and security that has been paid and any
expenses reasonably incurred in their inspection, receipt,
transportation, and care and custody, and may hold those goods and
dispose of them in good faith and in a commercially reasonable
manner, subject to subdivision (e) of Section 10527.
   (f) Subject to the provisions of Section 10407, a lessee, on
notifying the lessor of the lessee's intention to do so, may deduct
all or any part of the damages resulting from any default under the
lease contract from any part of the rent still due under the same
lease contract.



10509.  (a) Subject to the provisions of Section 10510 on default in
installment lease contracts, if the goods or the tender or delivery
fail in any respect to conform to the lease contract, the lessee may
reject or accept the goods or accept any commercial unit or units and
reject the rest of the goods.
   (b) Rejection of goods is ineffective unless it is within a
reasonable time after tender or delivery of the goods and the lessee
seasonably notifies the lessor.


10510.  (a) Under an installment lease contract, a lessee may reject
any delivery that is nonconforming if the nonconformity
substantially impairs the value of that delivery and cannot be cured
or the nonconformity is a defect in the required documents; but if
the nonconformity does not fall within subdivision (b) and the lessor
or the supplier gives adequate assurance of its cure, the lessee
must accept that delivery.
   (b) Whenever nonconformity or default with respect to one or more
deliveries substantially impairs the value of the installment lease
contract as a whole there is a default with respect to the whole.
But, the aggrieved party reinstates the installment lease contract as
a whole if the aggrieved party accepts a nonconforming delivery
without seasonably notifying of cancellation or brings an action with
respect only to past deliveries or demands performance as to future
deliveries.



10511.  (a) Subject to any security interest of a lessee
(subdivision (e) of Section 10508), if a lessor or a supplier has no
agent or place of business at the market of rejection, a merchant
lessee, after rejection of goods in his or her possession or control,
shall follow any reasonable instructions received from the lessor or
the supplier with respect to the goods. In the absence of those
instructions, a merchant lessee shall make reasonable efforts to
sell, lease, or otherwise dispose of the goods for the lessor's
account if they threaten to decline in value speedily. Instructions
are not reasonable if on demand indemnity for expenses is not
forthcoming.
   (b) If a merchant lessee (subdivision (a)) or any other lessee
(Section 10512) disposes of goods, he or she is entitled to
reimbursement either from the lessor or the supplier or out of the
proceeds for reasonable expenses of caring for and disposing of the
goods and, if the expenses include no disposition commission, to such
commission as is usual in the trade, or if there is none, to a
reasonable sum not exceeding 10 percent of the gross proceeds.
   (c) In complying with this section or Section 10512, the lessee is
held only to good faith. Good faith conduct hereunder is neither
acceptance or conversion nor the basis of an action for damages.
   (d) A purchaser who purchases in good faith from a lessee pursuant
to this section or Section 10512 takes the goods free of any rights
of the lessor and the supplier even though the lessee fails to comply
with one or more of the requirements of this division.



10512.  (a) Except as otherwise provided with respect to goods that
threaten to decline in value speedily (Section 10511) and subject to
any security interest of a lessee (subdivision (e) of Section 10508):
   (1) The lessee, after rejection of goods in the lessee's
possession, shall hold them with reasonable care at the lessor's or
the supplier's disposition for a reasonable time after the lessee's
seasonable notification of rejection;
   (2) If the lessor or the supplier gives no instructions within a
reasonable time after notification of rejection, the lessee may store
the rejected goods for the lessor's or the supplier's account or
ship them to the lessor or the supplier or dispose of them for the
lessor's or the supplier's account with reimbursement in the manner
provided in Section 10511; but
   (3) The lessee has no further obligations with regard to goods
rightfully rejected.
   (b) Action by the lessee pursuant to subdivision (a) is not
acceptance or conversion.



10513.  (a) If any tender or delivery by the lessor or the supplier
is rejected because it is nonconforming and the time for performance
has not yet expired, the lessor or the supplier may seasonably notify
the lessee of the lessor's or the supplier's intention to cure and
may then make a conforming delivery within the time provided in the
lease contract.
   (b) If the lessee rejects a nonconforming tender that the lessor
or the supplier had reasonable grounds to believe would be acceptable
with or without money allowance, the lessor or the supplier may have
a further reasonable time to substitute a conforming tender if he or
she seasonably notifies the lessee.



10514.  (a) In rejecting goods, a lessee's failure to state a
particular defect that is ascertainable by reasonable inspection
precludes the lessee from relying on the defect to justify rejection
or to establish default:
   (1) If, stated seasonably, the lessor or the supplier could have
cured it (Section 10513); or
   (2) Between merchants if the lessor or the supplier after
rejection has made a request in writing for a full and final written
statement of all defects on which the lessee proposes to rely.
   (b) A lessee's failure to reserve rights when paying rent or other
consideration against documents precludes recovery of the payment
for defects apparent in the documents.



10515.  (a) Acceptance of goods occurs after the lessee has had a
reasonable opportunity to inspect the goods and
   (1) The lessee signifies or acts with respect to the goods in a
manner that signifies to the lessor or the supplier that the goods
are conforming or that the lessee will take or retain them in spite
of their nonconformity; or
   (2) The lessee fails to make an effective rejection of the goods
(subdivision (b) of Section 10509).
   (b) Acceptance of a part of any commercial unit is acceptance of
that entire unit.


10516.  (a) A lessee must pay rent for any goods accepted in
accordance with the lease contract, with due allowance for goods
rightfully rejected or not delivered.
   (b) A lessee's acceptance of goods precludes rejection of the
goods accepted. In the case of a finance lease, other than a consumer
lease in which the supplier assisted in the preparation of the lease
contract or participated in negotiating the terms of the lease
contract with the lessor, if made with knowledge of a nonconformity,
acceptance cannot be revoked because of it. In any other case, if
made with knowledge of a nonconformity, acceptance cannot be revoked
because of it unless the acceptance was on the reasonable assumption
that the nonconformity would be seasonably cured. Acceptance does not
of itself impair any other remedy provided by this division or the
lease agreement for nonconformity.
   (c) If a tender has been accepted:
   (1) Within a reasonable time after the lessee discovers or should
have discovered any default, the lessee shall notify the lessor and
the supplier, if any, or be barred from any remedy against the party
not notified;
   (2) Within a reasonable time after the lessee receives notice of
litigation for infringement or the like (Section 10211) the lessee
shall notify the lessor or be barred from any remedy over for
liability established by the litigation; and
   (3) The burden is on the lessee to establish any default.
   (d) If a lessee is sued for breach of a warranty or other
obligation for which a lessor or a supplier is answerable over the
following apply:
   (1) The lessee may give the lessor or the supplier, or both,
written notice of the litigation. If the notice states that the
person notified may come in and defend and that if the person
notified does not do so that person will be bound in any action
against that person by the lessee by any determination of fact common
to the two litigations, then unless the person notified after
seasonable receipt of the notice does come in and defend that person
is so bound.
   (2) The lessor or the supplier may demand in writing that the
lessee turn over control of the litigation including settlement if
the claim is one for infringement or the like (Section 10211) or else
be barred from any remedy over. If the demand states that the lessor
or the supplier agrees to bear all expense and to satisfy any
adverse judgment, then unless the lessee after seasonable receipt of
the demand does turn over control the lessee is so barred.
   (e) Subdivisions (c) and (d) apply to any obligation of a lessee
to hold the lessor or the supplier harmless against infringement or
the like (Section 10211).
   (f) Subdivision (c) shall not apply to a consumer lease.




10517.  (a) A lessee may revoke acceptance of a lot or commercial
unit whose nonconformity substantially impairs its value to the
lessee if the lessee has accepted it:
   (1) Except in the case of a finance lease, on the reasonable
assumption that its nonconformity would be cured and it has not been
seasonably cured; or
   (2) Without discovery of the nonconformity if the lessee's
acceptance was reasonably induced either by the lessor's assurances
or, except in the case of a finance lease, by the difficulty of
discovery before acceptance.
   (b) A lessee may revoke acceptance of a lot or commercial unit if
the lessor defaults under the lease contract and the default
substantially impairs the value of that lot or commercial unit to the
lessee.
   (c) If the lease agreement so provides, the lessee may revoke
acceptance of a lot or commercial unit because of other defaults by
the lessor.
   (d) Revocation of acceptance must occur within a reasonable time
after the lessee discovers or should have discovered the ground for
it and before any substantial change in condition of the goods which
is not caused by the nonconformity. Revocation is not effective until
the lessee notifies the lessor.
   (e) A lessee who so revokes has the same rights and duties with
regard to the goods involved as if the lessee had rejected them.



10518.  (a) After a default by a lessor under the lease contract of
the type described in subdivision (a) of Section 10508, or, if
agreed, after other default by the lessor, the lessee may cover by
making any purchase or lease of or contract to purchase or lease
goods in substitution for those due from the lessor.
   (b) Except as otherwise provided with respect to damages
liquidated in the lease agreement (Section 10504) or otherwise
determined pursuant to agreement of the parties (Sections 1302 and
10503), if a lessee's cover is by a lease agreement substantially
similar to the original lease agreement and the new lease agreement
is made in good faith and in a commercially reasonable manner, the
lessee may recover from the lessor as damages (1) the present value,
as of the date of the commencement of the term of the new lease
agreement, of the rent under the new lease agreement applicable to
that period of the new lease term which is comparable to the then
remaining term of the original lease agreement minus the present
value as of the same date of the total rent for the then remaining
lease term of the original lease agreement, and (2) any incidental or
consequential damages, less expenses saved in consequence of the
lessor's default.
   (c) If a lessee's cover is by lease agreement that for any reason
does not qualify for treatment under subdivision (b), or is by
purchase or otherwise, the lessee may recover from the lessor as if
the lessee had elected not to cover and Section 10519 governs.




10519.  (a) Except as otherwise provided with respect to damages
liquidated in the lease agreement (Section 10504) or otherwise
determined pursuant to agreement of the parties (Sections 1302 and
10503), if a lessee elects not to cover or a lessee elects to cover
and the cover is by lease agreement that for any reason does not
qualify for treatment under subdivision (b) of Section 10518, or is
by purchase or otherwise, the measure of damages for nondelivery or
repudiation by the lessor or for rejection or revocation of
acceptance by the lessee is the present value, as of the date of the
default, of the then market rent minus the present value as of the
same date of the original rent, computed for the remaining lease term
of the original lease agreement, together with incidental and
consequential damages, less expenses saved in consequence of the
lessor's default.
   (b) Market rent is to be determined as of the place for tender or,
in cases of rejection after arrival or revocation of acceptance, as
of the place of arrival.
   (c) Except as otherwise agreed, if the lessee has accepted goods
and given notification (subdivision (c) of Section 10516), the
measure of damages for nonconforming tender or delivery or other
default by a lessor is the loss resulting in the ordinary course of
events from the lessor's default as determined in any manner that is
reasonable together with incidental and consequential damages, less
expenses saved in consequence of the lessor's default.
   (d) Except as otherwise agreed, the measure of damages for breach
of warranty is the present value at the time and place of acceptance
of the difference between the value of the use of the goods accepted
and the value if they had been as warranted for the lease term,
unless special circumstances show proximate damages of a different
amount, together with incidental and consequential damages, less
expenses saved in consequence of the lessor's default or breach of
warranty.


10520.  (a) Incidental damages resulting from a lessor's default
include expenses reasonably incurred in inspection, receipt,
transportation, and care and custody of goods rightfully rejected or
goods the acceptance of which is justifiably revoked, any
commercially reasonable charges, expenses, or commissions in
connection with effecting cover, and any other reasonable expense
incident to the default.
   (b) Consequential damages resulting from a lessor's default
include:
   (1) Any loss resulting from general or particular requirements and
needs of which the lessor at the time of contracting had reason to
know and which could not reasonably be prevented by cover or
otherwise; and
   (2) Injury to person or property proximately resulting from any
breach of warranty.


10521.  (a) Specific performance may be decreed if the goods are
unique or in other proper circumstances.
   (b) A decree for specific performance may include any terms and
conditions as to payment of the rent, damages, or other relief that
the court deems just.
   (c) A lessee has a right of replevin, detinue, sequestration,
claim and delivery, or the like for goods identified to the lease
contract if after reasonable effort the lessee is unable to effect
cover for those goods or the circumstances reasonably indicate that
the effort will be unavailing.



10522.  (a) Subject to subdivision (b) and even though the goods
have not been shipped, a lessee who has paid a part or all of the
rent and security for goods identified to a lease contract (Section
10217) on making and keeping good a tender of any unpaid portion of
the rent and security due under the lease contract may recover the
goods identified from the lessor if the lessor becomes insolvent
within 10 days after receipt of the first installment of rent and
security.
   (b) A lessee acquires the right to recover goods identified to a
lease contract only if they conform to the lease contract.