TITLE 11 COMMERCIAL CODE

2A. Leases, 11-2A-101 through 11-2A-532.

ARTICLE 2A LEASES

11-2A-103. Definitions and index of definitions.

In this article unless the context otherwise requires:

"Buyer in ordinary course of business" means a person who, in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind, but does not include a pawnbroker. "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale, but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
"Cancellation" occurs when either party puts an end to the lease contract for default by the other party.
"Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole.
"Conforming" goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.
"Consumer lease" means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose.
"Fault" means wrongful act, omission, breach, or default.
"Finance lease" means a lease with respect to which:
"Goods" means all things that are movable at the time of identification to the lease contract, or are fixtures (Code Section 11-2A-309), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction.The term also includes the unborn young of animals.
"Installment lease contract" means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause "each delivery is a separate lease" or its equivalent.
"Lease" means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease.Unless the context clearly indicates otherwise, the term includes a sublease.
"Lease agreement" means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this article.Unless the context clearly indicates otherwise, the term includes a sublease agreement.
"Lease contract" means the total legal obligation that results from the lease agreement as affected by this article and any other applicable rules of law.Unless the context clearly indicates otherwise, the term includes a sublease contract.
"Leasehold interest" means the interest of the lessor or the lessee under a lease contract.
"Lessee" means a person who acquires the right to possession and use of goods under a lease.Unless the context clearly indicates otherwise, the term includes a sublessee.
"Lessee in ordinary course of business" means a person who, in good faith and without knowledge that the lease to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, leases in ordinary course from a person in the business of selling or leasing goods of that kind, but does not include a pawnbroker. "Leasing" may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract, but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
"Lessor" means a person who transfers the right to possession and use of goods under a lease.Unless the context clearly indicates otherwise, the term includes a sublessor.
"Lessor's residual interest" means the lessor's interest in the goods after expiration, termination, or cancellation of the lease contract.
"Lien" means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.
"Lot" means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.
"Merchant lessee" means a lessee that is a merchant with respect to goods of the kind subject to the lease.
"Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain.The discount is determined by the interest rate specified by the partiesif the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.
"Purchase" includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods.
"Sublease" means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.
"Supplier" means a person from whom a lessor buys or leases goods to be leased under a finance lease.
"Supply contract" means a contract under which a lessor buys or leases goods to be leased.
"Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.
"Accessions." Code Section 11-2A-310(1).

"Construction mortgage." Code Section 11-2A-309(1)(d).

"Encumbrance." Code Section 11-2A-309(1)(e).

"Fixtures." Code Section 11-2A-309(1)(a).

"Fixture filing." Code Section 11-2A-309(1)(b).

"Purchase money lease." Code Section 11-2A-309(1)(c).

"Account." Code Section 11-9-102(a).

"Between merchants." Code Section 11-2-104(3).

"Buyer." Code Section 11-2-103(1)(a).

"Chattel paper." Code Section 11-9-102(a).

"Consumer goods." Code Section 11-9-102(a).

"Document." Code Section 11-9-102(a).

"Entrusting." Code Section 11-2-403(3).

"General intangible." Code Section 11-9-102(a).

"Instrument." Code Section 11-9-102(a).

"Merchant." Code Section 11-2-104(1).

"Mortgage." Code Section 11-9-102(a).

"Pursuant to commitment." Code Section 11-9-102(a).

"Receipt." Code Section 11-2-103(1)(c).

"Sale." Code Section 11-2-106(1).

"Sale on approval." Code Section 11-2-326.

"Sale or return." Code Section 11-2-326.

"Seller." Code Section 11-2-103(1)(d).

The lessor does not select, manufacture, or supply the goods;

The lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and

One of the following occurs:

The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;

The lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;

The lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or

If the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this article to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.

Other definitions applying to this article and the sections in which they appear are:

The following definitions in other articles of this title apply to this article:

In addition, Article 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this article.

(Code 1981, §11-2A-103, enacted by Ga. L. 1993, p. 633, § 1; Ga. L. 2001, p. 362, § 9; Ga. L. 2010, p. 481, § 2-13/HB 451; Ga. L. 2013, p. 141, § 11/HB 79; Ga. L. 2015, p. 996, § 3B-4/SB 65.)

The 2001 amendment, effective July 1, 2001, in subsection (3), substituted "Code Section 11-9-102(a)" for "Code Section 11-9-106" in the provisions regarding account, substituted "Code Section 11-9-102(a)" for "Code Section 11-9-105(1)(b)" in the provisions regarding chattel paper, substituted "Code Section 11-9-102(a)" for "Code Section 11-9-109(1)" in the provisions regarding consumer goods, substituted "Code Section 11-9-102(a)" for "Code Section 11-9-105(1)(f)" in the provisions regarding document, in the provisions regarding general intangible, substituted "intangible" for "intangibles" and substituted "Code Section 11-9-102(a)" for "Code Section 11-9-106", substituted "Code Section 11-9-102(a)" for "Code Section 11-9-105(1)(i)" in the provisions regarding instrument, substituted "Code Section 11-9-102(a)" for "Code Section 11-9-105(1)(j)" in the provisions regarding mortgage, and substituted "Code Section 11-9-102(a)" for "Code Section 11-9-105(1)(k)" in the provisions regarding pursuant to commitment.

The 2010 amendment, effective May 27, 2010, in paragraphs (1)(a) and (1)(o), inserted "or her" in the first sentence, inserted commas throughout, and substituted "acquiring" for "receiving" in the middle of the second sentence. See the Editor's notes for applicability.

The 2013 amendment, effective April 24, 2013, part of an Act to revise, modernize, and correct the Code, revised punctuation in paragraphs (1)(a) and (1)(o).

The 2015 amendment, effective January 1, 2016, in paragraph (3), deleted the definition which read: " 'Good faith.' Code Section 11-2-103(1)(b)."

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 1993, the period was moved to appear inside the quotation marks in each entry of the lists in subsections (2) and (3).

Editor's notes.

- Ga. L. 2010, p. 481, § 3-1, not codified by the General Assembly, provides that: "This Act applies to a document of title that is issued or a bailment that arises on or after the effective date of this Act. This Act does not apply to a document of title that is issued or a bailment that arises before the effective date of this Act even if the document of title or bailment would be subject to this Act if the document of title had been issued or bailment had arisen on or after the effective date of this Act. This Act does not apply to a right of action that has accrued before the effective date of this Act." This Act became effective May 27, 2010.

Ga. L. 2010, p. 481, § 3-2, not codified by the General Assembly, provides that: "A document of title issued or a bailment that arises before the effective date of this Act and the rights, documents, and interests flowing from that document or bailment are governed by any statute or other rule amended or repealed by this Act as if such amendment or repeal had not occurred and may be terminated, completed, consummated, or enforced under that statute or other rule." This Act became effective May 27, 2010.

Ga. L. 2015, p. 996, § 1-1/SB 65, not codified by the General Assembly, provides: "(a) This Act shall be known and may be cited as the 'Debtor-Creditor Uniform Law Modernization Act of 2015.'

"(b) To promote consistency among the states, it is the intent of the General Assembly to modernize certain existing uniform laws promulgated by the Uniform Law Commission affecting debtor and creditor rights, responsibilities, and relationships and other federally recognized laws affecting such rights, responsibilities, and relationships."

JUDICIAL DECISIONS

Lease.

- A lease-purchase agreement meeting the requirements of O.C.G.A. § 10-1-681 constituted a true lease, not a security agreement, and was subject to § 365 of the Bankruptcy Code, 11 U.S.C.S. § 365. Central Rents, Inc. v. Johnson, 203 Bankr. 498 (Bankr. S.D. Ga. 1996).

Creditor's unqualified right to require the debtor to repurchase equipment during or at termination of a purported lease, coupled with a letter agreement that was intended to insure the return of the creditor's investment and a return on the investment of a certain percentage indicated that the lease was a disguised security agreement. Moore v. Emery (In re Am. Steel Prod., Inc.), 203 Bankr. 504 (Bankr. S.D. Ga. 1996).

Claimant's unwritten agreement with an individual concerning a vehicle was not a lease because the claimant offered no evidence that the individual had the right to voluntarily terminate the individual's payment obligation under the agreement, i.e., to pay less than the full amount of consideration under the lease, or that the individual could purchase the vehicle only after paying additional consideration. United States v. Bushay, 34 F. Supp. 3d 1260 (N.D. Ga. Aug. 5, 2014).

RESEARCH REFERENCES

Status as "Buyer in Ordinary Course of Business," 2 POF2d 165.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 2A-103.