Wisconsin Statutes
Wis. Stat. § 401.203 (2026)
Lease distinguished from security interest
✓ current as of July 2026
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401.203(1)(1) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
401.203(2)(2) 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 if any of the following apply:
401.203(2)(a)(a) The original term of the lease is equal to or greater than the remaining economic life of the goods.
401.203(2)(b)(b) 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.
401.203(2)(c)(c) 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.
401.203(2)(d)(d) 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.
401.203(3)(3) A transaction in the form of a lease does not create a security interest merely because of any of the following:
401.203(3)(a)(a) 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.
401.203(3)(c)(c) The lessee agrees to pay taxes, insurance, filing, recording, or registration fees, or service or maintenance costs with respect to the goods.
401.203(3)(e)(e) 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.
401.203(3)(f)(f) 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.
401.203(4)(4) 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 any of the following apply:
401.203(4)(a)(a) 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.
401.203(4)(b)(b) 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.
401.203(5)(5) The “remaining economic life of the goods” and “reasonably predictable” fair market rent, fair market value, or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into.
Notes of Decisions
Cited in 21
cases (2 in the last 5 years), 1970–2023 · leading case: Hauer v. Union State Bank of Wautoma, 532 N.W.2d 456 (Wis. Ct. App. 1995).
Hauer v. Union State Bank of Wautoma, 532 N.W.2d 456 (Wis. Ct. App. 1995). “Because we conclude on other grounds that Hauer cannot recover based upon an independent cause of action under § 401.203, Stats., we decline to address this issue.”
Fed. Deposit Ins. v. First Mortg. Investors, 485 F. Supp. 445 (E.D. Wis. 1980). “Looking first at the issue of good faith, this defense arises out of Wis.Stat. § 401.203 which imposes a duty of good faith on the parties to a promissory note.”
Crown Life Ins. v. LaBonte, 330 N.W.2d 201 (Wis. 1983). “LaBonte contends that Crown breached the duty of good faith imposed on it pursuant to sec. 401.203, Stats., which provides: "401.”
State v. Frankwick, 599 N.W.2d 893 (Wis. Ct. App. 1999). “See § 401.203, Stats. Here, the basis for the trial court's finding of bad faith is not clear.”
Wurtz v. Fleischman, 278 N.W.2d 266 (Wis. Ct. App. 1979). “Section 401.203, Stats., imposes *305 an obligation of good faith in the performance or enforcement of a contract or duty.”
Flambeau Prods. Corp. v. Honeywell Info. Sys., Inc., 341 N.W.2d 655 (Wis. 1984). “1-203, UCC; sec. 401.203, Stats. 1981-82. The doctrine of accord and satisfaction includes safeguards designed to protect a creditor from an overreaching debtor: there must be a good faith dispute about the debt; the creditor must have reasonable notice that the check is…”
Fleming Companies, Inc. v. Krist Oil Co., 324 F. Supp. 2d 933 (W.D. Wis. 2004). “I will disregard as well defendant’s reference to Wis. Stat. § 401.203 , which requires parties to perform their contractual obligations in good faith.”
State Bank of Hartland v. Arndt, 385 N.W.2d 219 (Wis. Ct. App. 1986). “They rely on sec. 401.203, Stats., which provides: "Every contract or duty within chs.”
Schaller v. Marine Nat'l Bank of Neenah, 388 N.W.2d 645 (Wis. Ct. App. 1986). “Sec. 401.203, Stats. The issue of good faith is generally for the jury but may in a proper case be decided as a matter of law.”
Chayka v. Santini, 176 N.W.2d 561 (Wis. 1970). “See also: *108 Sec. 401.203, Stats., providing as part of the Uniform Commercial Code, “Every contract or duty within this code imposes an obligation of good faith in its performance or enforcement;” and sec.”
Creditbox.com, LLC v. Antjuan Weathers, 2023 WI App 37 (Wis. Ct. App. 2023). “§ 401.203, and observing that “[t]he issue of good faith is generally for the jury but may in a proper case be decided as a matter of law” in addressing appeal from grant of summary judgment).”
Nw. Nat'l Ins. Co. of Milwaukee v. Midland Nat'l Bank, 292 N.W.2d 591 (Wis. 1980). “Sec. 401.203, Stats. Good faith means honesty in fact in the conduct or transaction concerned.”
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