(810 ILCS 5/Art. 2A Pt. 3 heading)
PART 3.
EFFECT OF LEASE CONTRACT
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(810 ILCS 5/2A-301) (from Ch. 26, par. 2A-301)
Sec. 2A-301.
Enforceability of lease contract.
Except as otherwise provided in this Article, a lease contract
is effective and enforceable according to its terms between the
parties, against purchasers of the goods and against creditors
of the parties.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-302) (from Ch. 26, par. 2A-302)
Sec. 2A-302.
Title to and possession of goods.
Except as otherwise provided in this Article, each provision
of this Article applies whether the lessor or a third party has
title to the goods, and whether the lessor, the lessee, or a third
party has possession of the goods, notwithstanding any statute
or rule of law that possession or the absence of possession is
fraudulent.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303)
Sec. 2A-303.
Alienability of party's interest under
lease contract or of lessor's residual interest in
goods; delegation of performance; transfer of
rights.
(1) As used in this Section, "creation of a security interest" includes
the sale of a lease contract that is subject to Article 9, Secured
Transactions, by reason of Section 9-109(a)(3).
(2) Except as provided in subsection (3) and Section
9-407, a provision in a
lease agreement which (i) prohibits the voluntary or involuntary transfer,
including a transfer by sale, sublease, creation or enforcement of a
security interest, or attachment, levy, or other judicial process, of an
interest of a party under the lease contract or of the lessor's residual
interest in the goods, or (ii) makes such a transfer an event of default,
gives rise to the rights and remedies provided in subsection (4),
but a
transfer that is prohibited or is an event of default under the lease
agreement is otherwise effective.
(3) A provision in a lease agreement which (i) prohibits a transfer of a
right to damages for default with respect to the whole lease contract or of
a right to payment arising out of the transferor's due performance of the
transferor's entire obligation, or (ii) makes such a transfer an event of
default, is not enforceable, and such a transfer is not a transfer that
materially impairs the prospect of obtaining return performance by,
materially changes the duty of, or materially increases the burden or risk
imposed on, the other party to the lease contract within the purview of
subsection (4).
(4) Subject to subsection (3) and Section
9-407:
(a) if a transfer is made which is made an event of
| | default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies described in Section 2A-501(2);
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(b) if paragraph (a) is not applicable and if a
| | transfer is made that (i) is prohibited under a lease agreement or (ii) materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden of risk imposed on, the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, (i) the transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.
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(5) A transfer of "the lease" or of "all my rights
under the lease", or a transfer in similar general terms, is a
transfer of rights and, unless the language or the
circumstances, as in a transfer for security, indicate the
contrary, the transfer is a delegation of duties by the
transferor to the transferee. Acceptance by the transferee
constitutes a promise by the transferee to perform those duties.
The promise is enforceable by either the transferor or the other
party to the lease contract.
(6) Unless otherwise agreed by the lessor and the lessee,
a delegation of performance does not relieve the transferor as against the
other party of any duty to perform or of any liability for default.
(7) In a consumer lease, to prohibit the transfer of an
interest of a party under the lease contract or to make a transfer an event of
default, the language must be specific, by a writing, and conspicuous.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/2A-304) (from Ch. 26, par. 2A-304)
Sec. 2A-304.
Subsequent lease of goods by lessor.
(1) Subject to Section 2A-303, 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
subsection (2) and Section 2A-527(4), 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:
(a) the lessor's transferor was deceived as to the
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(b) the delivery was in exchange for a check which is
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(c) it was agreed that the transaction was to be a
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(d) the delivery was procured through fraud
| | punishable as larcenous under the criminal law.
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(2) 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.
(3) 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.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-305) (from Ch. 26, par. 2A-305)
Sec. 2A-305.
Sale or sublease of goods by lessee.
(1) Subject to the provisions of Section 2A-303, a buyer
or sublessee from the lessee of goods under an existing lease
contract obtains, to the extent of the interest transferred, the
leasehold interest in the goods that the lessee had or had power
to transfer and, except as provided in subsection (2) and
Section 2A-511(4), takes subject to the existing lease contract.
A lessee with a voidable leasehold interest has power to transfer
a good leasehold interest to a good faith buyer for value or a
good faith sublessee for value, but only to the extent set forth
in the preceding sentence. When goods have been delivered
under a transaction of lease the lessee has that power even
though:
(a) the lessor was deceived as to the identity of the
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(b) the delivery was in exchange for a check which is
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(c) the delivery was procured through fraud
| | punishable as larcenous under the criminal law.
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(2) A buyer in the ordinary course of business or a
sublessee in the ordinary course of business from a lessee who
is a merchant dealing in goods of that kind to whom the goods
were entrusted by the lessor obtains, to the extent of the
interest transferred, all of the lessor's and lessee's rights to the
goods, and takes free of the existing lease contract.
(3) A buyer or sublessee from the lessee 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.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-306) (from Ch. 26, par. 2A-306)
Sec. 2A-306.
Priority of certain liens arising by operation of law.
If a person in the ordinary course of his or her business
furnishes services or materials with respect to goods subject to a
lease contract, a lien upon those goods in the possession of that
person given by statute or rule of law for those materials or
services takes priority over any interest of the lessor or lessee under the
lease contract or this Article unless the lien is created by statute and
the statute provides otherwise or unless the lien is created by rule of law
and the rule of law provides otherwise.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307)
Sec. 2A-307.
Priority of liens arising by attachment
or levy on, security interests in, and other claims to goods.
(1) Except as otherwise provided in Section 2A-306, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and in Sections 2A-306
and 2A-308, a creditor
of a lessor takes subject to the lease contract unless the creditor holds a
lien that attached to the
goods before the lease contract became enforceable.
(3) Except as otherwise provided in Sections 9-317, 9-321, and
9-323, a lessee takes a leasehold interest subject to a security interest held
by a creditor of the lessor.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/2A-308) (from Ch. 26, par. 2A-308)
Sec. 2A-308.
Special rights of creditors.
(1) A creditor of a lessor in possession of goods subject
to a lease contract may treat the lease contract as void if as
against the creditor retention of possession by the lessor is
fraudulent under any statute or rule of law, but retention of
possession in good faith and current course of trade by the
lessor for a commercially reasonable time after the lease contract
becomes enforceable is not fraudulent.
(2) Nothing in this Article impairs the rights of creditors
of a lessor if the lease contract (a) becomes enforceable, not in
current course of trade but in satisfaction of or as security for
a pre-existing claim for money, security, or the like, and (b) is
made under circumstances which under any statute or rule of law
apart from this Article would constitute the transaction a
fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an
identification of goods to a contract for sale as void if as against
the creditor retention of possession by the seller is fraudulent
under any statute or rule of law, but retention of possession of
the goods pursuant to a lease contract entered into by the seller
as lessee and the buyer as lessor in connection with the sale or
identification of the goods is not fraudulent if the buyer bought
for value and in good faith.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309)
Sec. 2A-309.
Lessor's and lessee's rights when goods become fixtures.
(1) In this Section:
(a) goods are "fixtures" when they become so related
| | to particular real estate that an interest in them arises under real estate law;
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(b) a "fixture filing" is the filing, in the office
| | where a mortgage on the real estate would be filed or recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of Section 9-502(a) and (b);
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(c) a lease is a "purchase money lease" unless the
| | lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable;
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(d) a mortgage is a "construction mortgage" to the
| | extent it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates; and
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(e) "encumbrance" includes real estate mortgages and
| | other liens on real estate and all other rights in real estate that are not ownership interests.
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(2) Under this Article a lease may be of goods that are
fixtures or may continue in goods that become fixtures, but no
lease exists under this Article of ordinary building materials
incorporated into an improvement on land.
(3) This Article does not prevent creation of a lease of
fixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has
priority over a conflicting interest of an encumbrancer or owner
of the real estate if:
(a) the lease is a purchase money lease, the
| | conflicting interest of the encumbrancer or owner arises before the goods become fixtures, the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within 10 days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate; or
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(b) the interest of the lessor is perfected by a
| | fixture filing before the interest of the encumbrancer or owner is of record, the lessor's interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate.
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(5) The interest of a lessor of fixtures, whether or not
perfected, has priority over the conflicting interest of an
encumbrancer or owner of the real estate if:
(a) the fixtures are readily removable factory or
| | office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease, and before the goods become fixtures the lease contract is enforceable; or
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(b) the conflicting interest is a lien on the real
| | estate obtained by legal or equitable proceedings after the lease contract is enforceable; or
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(c) the encumbrancer or owner has consented in
| | writing to the lease or has disclaimed an interest in the goods as fixtures; or
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(d) the lessee has a right to remove the goods as
| | against the encumbrancer or owner. If the lessee's right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.
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(6) Notwithstanding subsection (4)(a) but
otherwise subject to subsections (4) and (5), the interest of a
lessor of fixtures, including the lessor's residual interest, is
subordinate to the conflicting interest of an
encumbrancer of the real estate under a construction mortgage
recorded before the goods become fixtures if the goods become
fixtures before the completion of the construction. To the
extent given to refinance a construction mortgage, the
conflicting interest of an encumbrancer of the real estate under
a mortgage has this priority to the same extent as the
encumbrancer of the real estate under the construction
mortgage.
(7) In cases not within the preceding subsections, priority between the
interest of a lessor of fixtures, including the lessor's residual interest,
and the conflicting interest of an encumbrancer or owner of the real estate
who is not the lessee is determined by the priority rules governing
conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's
residual interest, has priority over all conflicting interests of all
owners and encumbrancers of the real estate, the lessor or the lessee may
(i) on default, expiration, termination, or cancellation of the lease
agreement but subject to the lease agreement and this Article, or (ii) if
necessary to enforce other rights and remedies of the lessor or lessee
under this Article, remove the goods from the real estate, free and clear
of all conflicting interests of all owners and encumbrancers of the real
estate, but the lessor or lessee must reimburse any encumbrancer or owner
of the real estate who is not the lessee and who has not otherwise agreed
for the cost of repair of any physical injury, but not for any diminution
in value of the real estate caused by the absence of the goods removed or
by any necessity of replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives adequate
security for the performance of this obligation.
(9) Even though the lease agreement does not create a security interest,
the interest of a lessor of fixtures, including the lessor's residual
interest, is perfected by filing a financing statement as a fixture filing
for leased goods that are or are to become fixtures in accordance with the
relevant provisions of the Article on Secured Transactions (Article 9).
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/2A-310) (from Ch. 26, par. 2A-310)
Sec. 2A-310.
Lessor's and lessee's rights when goods
become accessions.
(1) Goods are "accessions" when they are installed in or
affixed to other goods.
(2) The interest of a lessor or a lessee under a lease
contract entered into before the goods became accessions is
superior to all interests in the whole except as stated in
subsection (4).
(3) The interest of a lessor or a lessee under a lease
contract entered into at the time or after the goods became
accessions is superior to all subsequently acquired interests in
the whole except as stated in subsection (4) but is subordinate
to interests in the whole existing at the time the lease contract
was made unless the holders of such interests in the whole have
in writing consented to the lease or disclaimed an interest in the
goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease
contract described in subsection (2) or (3) is subordinate to the
interest of:
(a) a buyer in the ordinary course of business or a
| | lessee in the ordinary course of business of any interest in the whole acquired after the goods became accessions; or
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(b) a creditor with a security interest in the whole
| | perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.
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(5) When under subsections (2) or (3) and (4) a lessor
or a lessee of accessions holds an interest that is superior to all
interests in the whole, the lessor or the lessee may (a) on
default, expiration, termination, or cancellation of the lease
contract by the other party but subject to the provisions of the
lease contract and this Article, or (b) if necessary to enforce
his or her other rights and remedies under this Article,
remove the goods from the whole, free and clear of all interests
in the whole, but he or she must reimburse any holder of an
interest in the whole who is not the lessee and who has not
otherwise agreed for the cost of repair of any physical injury
but not for any diminution in value of the whole caused by the
absence of the goods removed or by any necessity for replacing
them. A person entitled to reimbursement may refuse permission
to remove until the party seeking removal gives adequate
security for the performance of this obligation.
(Source: P.A. 87-493.)
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(810 ILCS 5/2A-311) (from Ch. 26, par. 2A-311)
Sec. 2A-311.
Priority subject to subordination.
Nothing in this
Article prevents subordination by agreement by any person entitled to
priority.
(Source: P.A. 87-493.)
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