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La. Rev. Stat. § 10:1-203 (2026)

Lease distinguished from security interest

✓ current as of May 2026
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§1-203. Lease distinguished from security interest

(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; 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.

(c) A transaction in the form of a lease does not create a security interest merely because :

(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, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs ;

(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 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 must be determined with reference to the facts and circumstances at the time the transaction is entered into.

Acts 1988, No. 306, §1; Acts 2006, No. 533, §1.

Notes of Decisions
Cited in 14 cases, 1983–2017 · leading case: Par. Nat. Bank v. Ott, 841 So. 2d 749 (La. 2003).
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Par. Nat. Bank v. Ott, 841 So. 2d 749 (La. 2003). · cites it 2× “R.S. 10:1-203, which provides "[e]very contract or duty within this Title imposes an obligation of good faith in its performance or enforcement.”
Brill v. Catfish Shaks of Am., Inc., 727 F. Supp. 1035 (E.D. La. 1989). · cites it 5× “” See La.Rev.Stat.Ann. § 10:1-203 (West 1983). In 1984, the Commercial Laws defined good faith as “honesty in fact in the conduct or transaction concerned,” see La.”
Philadelphia Gear Corp. v. Cent. Bank, 717 F.2d 230 (5th Cir. 1983). · cites it 2× “R.S. 10:1-203. That standard requires honesty in fact in the conduct or transaction concerned.”
Louisiana Ag Credit v. Livestock Producers, 954 So. 2d 883 (La. Ct. App. 2007). · cites it 2× “At the time this action was filed, LSA-R.S. 10:1-203 provided: Every contract or duty within this Title imposes an obligation of good faith in its performance and enforcement.”
Com. NAT. BANK IN SHREVEPORT v. Audubon Meadow P'ship, 566 So. 2d 1136 (La. Ct. App. 1990). · cites it 2× “1983) and LSA-R.S. 10:1-203, mandates the good faith performance of contracts, and that the petition sufficiently alleged factually that the guarantors did not receive such implementation.”
Auto. Leasing Specialists, L.L.C. v. Little, 392 B.R. 222 (W.D. La. 2008). · cites it 12× “La Rev. Stat. § 10:1-203 (West 2006) (comments).”
Bespress, Inc. v. Capital Bank of Delhi, 616 So. 2d 795 (La. Ct. App. 1993). · cites it 2× “[2] Relying upon the directive of LSA-R.S. 10:1-203 that commercial transaction contracts be performed in "good faith," plaintiff also argues that the presently pled facts are actionable as disclosing a "bad faith" exercise of contractual discretion.”
Greene v. Gulf Coast Bank, 580 So. 2d 712 (La. Ct. App. 1991). · cites it 2× “R.S. 10:1-203. Plaintiff contends that the jury instructions were inadequate because they failed to instruct the jury on unilateral error.”
Henning Const. v. First E. Bank, 635 So. 2d 273 (La. Ct. App. 1994). · cites it 2× “The court stated, "In our view, the decision to request payment of such an instrument simply does not fall within the good faith connotations of LSA-R.S. 10:1-203 and 1-208." Id. The court in Bespress also held that a bank's actions in continuing to fund a borrower's operations…”
Sanderson v. First Nat. Bank of Com., 723 So. 2d 1036 (La. Ct. App. 1998). · cites it 2× “rred $44,000 from Sanderson's savings account into his corporate account; 4) FNBC's transfer of funds from his savings account to a corporate account was illegal, unauthorized, and a breach of warranty; 5) FNBC breached its warranty and contractual duty to maintain and safe-keep…”
Graham v. Strother, 684 So. 2d 1088 (La. Ct. App. 1996). “LSA-R.S. 10:1-203 is identical to Sec. 1-203.”
Cable Cast Magazine v. Premier Bank, 729 So. 2d 1165 (La. Ct. App. 1999). “10:1-201(19) defines good faith as honesty in fact in the conduct or transaction concerned, except as provided in R.S. 10:1-203. According to Cablecast, because Bank One had notice of Pennington's breach of fiduciary duty to Cablecast, this notice defeats the application of…”
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