(a) Subject to Section 10303, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and, except as provided in subdivision (b) of this section and subdivision (d) of Section 10527, takes subject to the existing lease contract. A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set forth in the preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that power even though:

(1) The lessor’s transferor was deceived as to the identity of the lessor;

Terms Used In California Commercial Code 10304

  • contract: means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1303. See California Commercial Code 1201
  • Contract: A legal written agreement that becomes binding when signed.
  • Fraud: Intentional deception resulting in injury to another.
  • Goods: means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 10309), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. See California Commercial Code 10103
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Lease: means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. See California Commercial Code 10103
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Lease contract: means the total legal obligation that results from the lease agreement as affected by this division and any other applicable rules of law. See California Commercial Code 10103
  • Leasehold interest: means the interest of the lessor or the lessee under a lease contract. See California Commercial Code 10103
  • Lessee: means a person who acquires the right to possession and use of goods under a lease. See California Commercial Code 10103
  • Lessor: means a person who transfers the right to possession and use of goods under a lease. See California Commercial Code 10103
  • Purchase: includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods. See California Commercial Code 10103
  • State: means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. See California Commercial Code 1201
  • Statute: A law passed by a legislature.

(2) The delivery was in exchange for a check which is later dishonored;

(3) It was agreed that the transaction was to be a “cash sale”; or

(4) The delivery was procured through fraud punishable as larcenous under the criminal law.

(b) A subsequent lessee in the ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor’s and the existing lessee’s rights to the goods, and takes free of the existing lease contract.

(c) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

(Amended by Stats. 1991, Ch. 111, Sec. 26. Effective July 15, 1991.)

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