Colorado Revised Statutes

Colo. Rev. Stat. § 4-1-203 (2026)

Lease distinguished from security interest

✓ current as of July 2026

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(a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.

(b) A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:

(1) The original term of the lease is equal to or greater than the remaining economic life of the goods;

(2) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;

(3) The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or

(4) The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.

(1) The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;

(2) The lessee assumes risk of loss of the goods;

(3) The lessee agrees to pay taxes, insurance, filing, recording, or registration fees, or service or maintenance costs, with respect to the goods;

(4) The lessee has an option to renew the lease or to become the owner of the goods;

(5) The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or

(6) The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

(d) Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:

(1) When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or

(2) When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.

(e) The "remaining economic life of the goods" and "reasonably predictable" fair market rent, fair market value, or cost of performing under the lease agreement shall be determined with reference to the facts and circumstances at the time the transaction is entered into.

Source: L. 2006: Entire article R&RE, p. 464, § 1, effective September 1.

Editor's note: This section is similar to former § 4-1-201 (37) as it existed prior to 2006.

Notes of Decisions

Cited in 17 cases (2 in the last 5 years), 1978–2025 · leading case: Amoco Oil Co. v. Ervin, 908 P.2d 493 (Colo. 1996).

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Amoco Oil Co. v. Ervin, 908 P.2d 493 (Colo. 1996). · cites it 4× “§ 4-1-203, 2 C.R.S. (1992) ("Every contract or duty within this title imposes an obligation of good faith in its performance or enforcement.”

City of Golden v. Parker, 138 P.3d 285 (Colo. 2006). · cites it 4× “The court of appeals characterized the Developers' interest as a "mere expectation or hope" of payment, completely dependent on an uncertain event. Parker, 119 P.3d at 562 .”

Transamerica Premier Ins. Co. v. Brighton Sch. Dist. 27J, 940 P.2d 348 (Colo. 1997). · cites it 4× “The court of appeals held that the trial court did not err in submitting the school district's bad faith claim to the jury.”

Master Palletizer Sys., Inc. v. T.S. Ragsdale Co., 725 F. Supp. 1525 (D. Colo. 1989). · cites it 4× “C.R.S. § 4-1-203 requires that “[e]very contract or duty within this title imposes an obligation of good faith in its performance or enforcement.”

Pittman v. Larson Distrib. Co., 724 P.2d 1379 (Colo. Ct. App. 1986). · cites it 2× “, § 4-1-203, C.R.S., to employment contracts as well.”

Cary v. United of Omaha Life Ins. Co., 68 P.3d 462 (Colo. 2003). “1995) (citing § 4-1-203, 2 C.R.S. (1992)). In typical commercial contracts, a breach of the duty merely results in damages for breach of contract, not independent tort liability.”

Wells Fargo Realty Advisors Funding, Inc. v. Uioli, Inc., 872 P.2d 1359 (Colo. Ct. App. 1994). “See also § 4-1-203 and § 4-1-201(19), C.R.S. (1992 Repl.”

Bd. OF CTY. COM'RS, ETC. v. Berkeley Vill., 580 P.2d 1251 (Colo. Ct. App. 1978). · cites it 2× “It asserts this violates § 4-1-203, C.R.S.1973, which provides that every duty within the Uniform Commercial Code "imposes an obligation of good faith in its performance.”

Price v. Fed. Express Corp., 660 F. Supp. 1388 (D. Colo. 1987). · cites it 2× “Plaintiff also argues Colorado recognizes the statutory obligation of good faith contained in the Uniform Commercial Code, Colo.Rev.Stat. § 4-1-203 (1986). 1 See Layne v.”

Cassidy v. Millers Cas. Ins. Co. of Texas, 1 F. Supp. 2d 1200 (D. Colo. 1998). · cites it 2× “C.R.S. § 4-1-203 (1997 Repl.Vol. 2); Amoco Oil Co.”

Silverberg v. Colantuno, 991 P.2d 280 (Colo. Ct. App. 1999). · cites it 2× “Defendants next argue that, by a letter they sent, they were tendering fulfillment of their obligations as debtors on the note and that, contrary to the good faith requirement of § 4-1-203, C.R.S.1997, Ten-enbaum did not permit redemption of the collateral, ie.”

Layne v. Fort Carson Nat'l Bank, 655 P.2d 856 (Colo. Ct. App. 1982). · cites it 3× “” Section 4-1-203, C.R.S.1973. “Good faith” is defined as “honesty in fact in the conduct or transaction concerned.”

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