Explain in detail the risk of loss in lease contracts
What will be an ideal response?
The parties to a lease contract are the party who leases the goods (the lessor) and the party who receives the goods (the lessee). The lessor and the lessee may agree as to who will bear the risk of loss of the goods if they are lost or destroyed. If the parties do not so agree, the UCC provides the following risk of loss rules:
1. In the case of an ordinary lease, if the lessor is a merchant, the risk of loss passes to the lessee on the receipt of the goods.
2. If the lease is a finance lease and the supplier is a merchant, the risk of loss passes to the lessee on the receipt of the goods. A finance lease is a three-party transaction consisting of a lessor, a lessee, and a supplier (or vendor).
3. If a tender of delivery of goods fails to conform to the lease contract, the risk of loss remains with the lessor or supplier until cure or acceptance.
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