Leases vs. Security Agreement

Question 1

1-203 (b) : Security Agreement

Answer 1

1. Lessee cannot terminate the lease
   AND
2. term is greater than or equal to remaining economic life of the good OR
   lessee bound to renew OR
   option to renew for nominal consideration

Question 2

1-203(c) : Lease

Answer 2

1. consideration paid is greater than FMV of goods
   2-3. Lessee assumes the risk of loss for goods, taxes, insurance, maintenance, etc.
   4-6. Lessee has option to renew or buy greater than fair market value (FMV)
   * can terminate the lease

Question 3

Right to terminate nominal

Answer 3

in name only

the amount to break the lease is extremely high

Question 4

Economic Life after term

Answer 4

Lease

Question 5

No Economic Life after

Answer 5

Security Agreement

Question 6

Price for Lease

Answer 6

can be high and just be a bad lease doesn’t mean a security agreement