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TITLE 11 COMMERCIAL CODE

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

ARTICLE 2A LEASES

11-2A-504. Liquidation of damages.

  1. Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor's residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.
  2. If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (1), or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this article.
  3. If the lessor justifiably withholds or stops delivery of goods because of the lessee's default or insolvency (Code Section 11-2A-525 or 11-2A-526), the lessee is entitled to restitution of any amount by which the sum of his payments exceeds:
  1. The amount to which the lessor is entitled by virtue of terms liquidating the lessor's damages in accordance with subsection (1); or
  2. In the absence of those terms, 20 percent of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or $500.

A lessee's right to restitution under subsection (3) is subject to offset to the extent the lessor establishes:

a right to recover damages under the provisions of this article other than subsection (1); and

the amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

(Code 1981, §11-2A-504, enacted by Ga. L. 1993, p. 633, § 1.)

JUDICIAL DECISIONS

Where a lease agreement provided for liquidated damages and set forth a formula to calculate such damages, O.C.G.A. §§ 11-2A-527 and11-2A-528, regarding damages available upon default, did not apply; rather, the more general directives of O.C.G.A. § 11-2A-504 were controlling. Carter v. Tokai Fin. Servs., Inc., 231 Ga. App. 755, 500 S.E.2d 638 (1998).

Enforceable liquidated damages provision.

- A lease clause which required the reduction of the accelerated rent to present value tended to establish a reasonable estimate of probable loss and constituted an enforceable liquidated damages provision. Jamsky v. HPSC, Inc., 238 Ga. App. 447, 519 S.E.2d 246 (1999).

The liquidated damages provision of the personal property lease did not act as a penalty and was enforceable under Georgia law where it used a formula in compliance with both the UCC drafter's formula and the provisions enacted by the Georgia General Assembly. Summerhill Neighborhood Dev. Corp. v. Telerent Leasing Corp., 242 Ga. App. 142, 528 S.E.2d 889 (2000).

Undisputed early termination charge formula in car lease.

- Summary judgment was granted in favor of the defendants, a leasing corporation and a bank, on the plaintiff's, a car lessee, challenge to the legality of the early termination charge formula used by the bank under O.C.G.A. § 11-2A-504(1) because the early termination charge formula did not violate the statute where there was no dispute as to the terms, mechanics, or the results produced in the transaction. Torres v. Banc One Leasing Corp., 226 F. Supp. 1345 (N.D. Ga. 2002).

Cited in Sun v. Mercedes Benz Credit Corp., 254 Ga. App. 463, 562 S.E.2d 714 (2002); Torres v. Banc One Leasing Corp., F. Supp. 2d (N.D. Ga. Jan. 30, 2002); Baez v. Banc One Leasing Corp., 348 F.3d 972 (11th Cir. 2003).

RESEARCH REFERENCES

U.L.A.

- Uniform Commercial Code (U.L.A.) § 2A-504.