Lease v. Security Interest Flashcards
1
Q
True lease or security interest?
A
If a transaction is characterized as a lease but is intended to have effect as a security, it will be governed by Article 9 as a security interest. Whether a lease is intended for security depends on the economic realities of the transaction. A transaction will be deemed to create a security interest rather than a lease if the rental obligation is not terminable by the lessee and, at the end of the lease, the lessee has an option to purchase the goods for no or nominal consideration. When a seller delivers goods to a buyer and attempts to reserve title in the delivered goods until they are paid for, the seller’s interest will be treated only as a security interest.
