Leases and Consignments

Question 1

Leases v ST.

Answer 1

Article 9 does not apply to true lease but will apply if the economic reality of the transaction is that its a secured transaction

Question 2

Bright line test for lease

Answer 2

The lessee of property is obligated to pay the entire obligation under the whether they terminate the lease early; and

One of the following outcomes is present

1. The original term of the lease is equal to or grated than the remaining economic life

Question 3

Bright Line Test

Answer 3

The lessee of the property is obligated to pay the entire obligation under the lease whether or not they terminate the lease early; and

One of the following outcomes is present

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 lease of the goods
The lessee has the option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal additional consideration.

3) The lessee has the option to become the owner of the goods for no or nominal additional consideration

Question 4

For a consignment to be subject to article 9

Answer 4

1) The consignor must delivery goods to a merchant who deals in goods if the kind for the merchant to sell

2) The merchant is not generally known by its creditors to be substantially engaged in the business of selling the goods of others

3) The value of the goods must be at least 1,000 in each delivery

4) The goods must not be consumer goods immediately before delivery