HD40 - Modifications to the Uniform Commercial Code
Executive Summary: During the 1988 and 1989 Interim, the Joint Subcommittee received testimony on proposed reviews to five areas of the Uniform Commercial Code, all of which were offered by the National Conference of Commissioners on Uniform State Laws. House Document No. 48 reports on the Joint Subcommittee's findings and recommendations covering that two-year period. In 1990, the Virginia Commissioners to the conference proposed that a new Article be added to the existing Articles of the U.C.C. to cover commercial law in the area of Leases (Article 2A or Title 8.2A of the Code of Virginia). In 1990, the Joint Subcommittee received testimony from Mr. Carlyle C. Ring, Jr., one of Virginia's Commissioners to the National Conference of Commissioners on Uniform State Laws, and John W. Edmonds III, Esquire, representing he Virginia Bankers Associations. The Joint Subcommittee also received correspondence from the business law sections of the Virginia State Bar and the Virginia Bar Association. All were in favor of the addition to the U.C.C. of a new Article 2A (Title 8.2A) on Leases. The Joint Subcommittee found a need to codify a comprehensive law with respect to leases of goods which addresses a type of business transaction, the leasing of goods, that has long existed. It found that under present law, transactions of this type are governed partly by common law principles relating to personal property, partly be principles relating to real estate leases, and partly by reference to Titles 8.2 and 8.9, dealing with sales and secured transactions, respectively. It also found that the legal rules and concepts derived from these sources imperfectly fit a transaction that involves personal property or goods rather than realty, and a lease rather than either a sale or a security interest as such. New Article 2A as recommended by the Joint Subcommittee will apply to transactions involving a consumer's rental of automobiles or do-it-yourself equipment and to leases of such items as commercial aircraft and industrial machinery. It recognizes the difference between consumer and business leasing, while resting upon concepts that apply generally to any leasing of goods transaction. The scope to the new title is limited to leases; leases intended as security interests are not included, i.e., security interests disguised as leases, since they are addressed in Title 8.9. The lessor is not required to file a financing statement against the lessee or take any other action to protect the lessor's interest in the goods. All of the express and implied warranties of Title 8.2 on sales were included, but revised to reflect differences in lease transactions. This new title provides for leasing transactions involving goods subject to certificate of title statutes to be subject to them. To avoid conflict with consumer protection statutes, this new title makes its provisions subject to such statutes. Many consumer protections have been incorporated in the new title. Finance leases are defined and addressed under the new title. Sale and leaseback transactions having become common are treated under the new title, and a balanced position as to creditor's rights is advanced where the buyer retains possession of goods pursuant to a lease contract if the buyer bought for value and in good faith. The new title not only provides for lessor's remedies upon default by the lessee but also the lessee's remedies upon default by the lessor. Finally, the bill, consistent with the common-law emphasis upon freedom to contract, has created a liquidation of damages rule that allows flexibility with respect to leases of goods. |
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