University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

165

Pages:

2
Author:

bratrochanter

Summary of Appendix B B-33 to B-36: Transfer, Priorities, and Performance in Lease Contracts Transfers of Leasehold Interests 1. Subsequent Lease of Goods by Lessor (§2A-304): o A lessor can transfer their leasehold interest to a new lessee. o The new lessee takes subject to the existing lease, except for:  Lessees in ordinary course of business who acquire free of prior claims.  Cases where goods are covered by a certificate of title, limiting rights to those provided by the title statute. 2. Sale or Sublease by Lessee (§2A-305): o Buyers or sublessees acquire the leasehold interest of the lessee, subject to the existing lease unless:  They act in good faith without knowledge of prior claims. o Lessees with voidable leasehold interests can still transfer rights under specific conditions (e.g., fraudulently obtained goods or dishonored payments). Priorities of Claims and Liens 1. Liens by Statute or Law (§2A-306): o Liens for services or materials provided in the ordinary course of business generally take priority over leasehold interests unless explicitly stated otherwise in statutes or rules. 2. Liens by Security Interests (§2A-307): o Creditors of lessors or lessees take subject to the lease contract unless:  The lien attached before the lease became enforceable.  The creditor holds a perfected security interest, or the lessee received goods without knowledge of the lien. 3. Special Rights of Creditors (§2A-308): o Creditors may void lease contracts if possession by the lessor or lessee is deemed fraudulent under applicable laws. o Retention of possession in the course of trade and for reasonable timeframes is not fraudulent. Fixtures and Accessions 1. Goods as Fixtures (§2A-309): o Goods becoming "fixtures" (integral to real estate) retain leasehold interest if:  The lease is a purchase money lease and properly perfected.  The fixtures are readily removable (e.g., office equipment, appliances).  The property owner consents or waives claims. Removal of fixtures must include compensation for physical repair, not diminished real estate value. 2. Goods as Accessions (§2A-310): o Goods attached to other goods (accessions) retain priority leasehold interest:  Over subsequent claims unless the whole was sold in ordinary course of business or a creditor made advances without knowledge of the lease. o Removal of accessions follows similar rules to fixtures, with a requirement for repair cost compensation. o Performance and Remedies 1. Adequate Assurance of Performance (§2A-401): o A party may demand written assurance if reasonable grounds for insecurity arise. o Failure to provide assurance within 30 days constitutes repudiation. 2. Anticipatory Repudiation (§2A-402): o If a party repudiates future performance, the aggrieved party may:  Await retraction for a reasonable period.  Demand assurance or pursue remedies for default.  Suspend performance or take actions to protect their interests. 3. Priority and Subordination (§2A-311): o Parties may agree to subordinate their priority interests.