Statute of limitations in contracts for sale

4-2-725. Statute of limitations in contracts for sale. (1) An action for breach of any contract for sale must be commenced within the time period prescribed in section 13-80-101, C.R.S. This period of limitation may not be varied by agreement of the parties. (2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made; except, that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance, the cause of action accrues when the breach is or should have been discovered. (3) Where an action commenced within the time limited by subsection (1) of this section is so terminated as to leave available a remedy by another action for the same breach, such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute. (4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this title becomes effective. Source: L. 65: p. 1344, � 1. C.R.S. 1963: � 155-2-725. L. 86: (1) amended, p. 702, � 5, effective July 1. Editor's note - Colorado legislative change: In subsection (1), Colorado substituted the three-year statute of limitations in � 13-80-101 for the four-year statute of limitations in the uniform act. The official text also provided that the parties could reduce the period of limitation to a minimum of one year, but they could not extend the period. Colorado has provided that the period of limitation may not be reduced or extended. ARTICLE 2.5 Leases Editor's note: (1) The National Conference of Commissioners on Uniform State Laws numbered this article as 2A. In C.R.S., it is numbered as article 2.5. References in the OFFICIAL COMMENTS to specific sections can be translated to C.R.S. numbers by changing 2A to 2.5 and, where necessary, adding the appropriate title of C.R.S. For example, a reference in an OFFICIAL COMMENT to section 2A-101 would translate to section 4-2.5-101. (2) The numbering and sequencing of C.R.S. subsections do not necessarily correspond with the numbering and sequencing of subsections in the uniform act. PART 1 GENERAL PROVISIONS 4-2.5-101. Short title. This article shall be known and may be cited as the Uniform Commercial Code - Leases. Source: L. 91: Entire article added, p. 272, � 1, effective July 1, 1992. 4-2.5-102. Scope. (1) This article 2.5 applies to any transaction, regardless of form, that creates a lease, and, in the case of a hybrid lease, this article 2.5 applies to the extent provided in subsection (2) of this section. (2) In a hybrid lease: (a) If the lease-of-goods aspects do not predominate: (i) Only the provisions of this article 2.5 which relate primarily to the lease-of-goods aspects of the transaction apply, and the provisions that relate primarily to the transaction as a whole do not apply; (ii) Section 4-2.5-209 applies if the lease is a finance lease; and (iii) Section 4-2.5-407 applies to the promises of the lessee in a finance lease to the extent the promises are consideration for the right to possession and use of the leased goods; and (b) If the lease-of-goods aspects predominate, this article 2.5 applies to the transaction but does not preclude application in appropriate circumstances of other law to aspects of the lease which do not relate to the lease of goods. Source: L. 91: Entire article added, p. 272, � 1, effective July 1, 1992. L. 2023: Entire section amended, (SB 23-090), ch. 136, p. 528, � 12, effective August 7. 4-2.5-103. Definitions and index of definitions. (1) In this article 2.5, unless the context otherwise requires: (a) Buyer in ordinary course of business means a person who in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. Buying may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt. (b) Cancellation occurs when either party puts an end to the lease contract for default by the other party. (c) Commercial unit means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole. (d) Conforming goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract. (e) Consumer lease means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed twenty-five thousand dollars. (f) Fault means wrongful act, omission, breach, or default. (g) Finance lease means a lease with respect to which: (i) The lessor does not select, manufacture or supply the goods; (ii) The lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and (iii) One of the following occurs: (A) The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract; (B) The lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract; (C) The lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, of liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or (D) If the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this article to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. (h) Goods means all things that are movable at the time of identification to the lease contract, or are fixtures (section 4-2.5-309), 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. The term also includes the unborn young of animals. (h.5) Hybrid lease means a single transaction involving a lease of goods and: (i) The provision of services; (ii) A sale of other goods; or (iii) A sale, lease, or license of property other than goods. (i) Installment lease contract means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause each delivery is a separate lease or its equivalent. (j) 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. Unless the context clearly indicates otherwise, the term includes a sublease. (k) Lease agreement means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this article. Unless the context clearly indicates otherwise, the term includes a sublease agreement. (l) Lease contract means the total legal obligation that results from the lease agreement as affected by this article and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract. (m) Leasehold interest means the interest of the lessor or the lessee under a lease contract. (n) Lessee means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee. (o) Lessee in ordinary course of business means a person who in good faith and without knowledge that the lease to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. Leasing may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt. (p) Lessor means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor. (q) Lessor's residual interest means the lessor's interest in the goods after expiration, termination, or cancellation of the lease contract. (r) Lien means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest. (s) Lot means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract. (t) Merchant lessee means a lessee that is a merchant with respect to goods of the kind subject to the lease. (u) Present value means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into. (v) Purchase includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods. (w) Sublease means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease. (x) Supplier means a person from whom a lessor buys or leases goods to be leased under a finance lease. (y) Supply contract means a contract under which a lessor buys or leases goods to be leased. (z) Termination occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default. (2) Other definitions applying to this article and the sections in which they appear are: Accessions.Section 4-2.5-310 (1). Construction mortgage.Section 4-2.5-309 (1)(d). Encumbrance.Section 4-2.5-309 (1)(e). Fixtures.Section 4-2.5-309 (1)(a). Fixture filing.Section 4-2.5-309 (1)(b). Purchase money lease.Section 4-2.5-309 (1)(c). (3) The following definitions in other articles apply to this article: Account.Section 4-9-102 (a)(2). Between merchants.Section 4-2-104 (3). Buyer.Section 4-2-103 (1)(a). Chattel paper.Section 4-9-102 (a)(11). Consumer goods.Section 4-9-102 (a)(23). Document.Section 4-9-102 (a)(30). Entrusting.Section 4-2-403 (3). General intangible.Section 4-9-102 (a)(42). Good faith.Section 4-2-103 (1)(b). Instrument.Section 4-9-102 (a)(47). Merchant.Section 4-2-104 (1). Mortgage.Section 4-9-102 (a)(55). Pursuant to commitment.Section 4-9-102 (a)(71). Receipt.Section 4-2-103 (1)(c). Sale.Section 4-2-106 (1). Sale on approval.Section 4-2-326. Sale or return.Section 4-2-326. Seller.Section 4-2-103 (1)(d). (4) In addition, article 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this article. Source: L. 91: Entire article added, p. 272, � 1, effective July 1, 1992. L. 2001: (3) amended, p. 1438, � 23, effective July 1. L. 2002: (3) amended, p. 1011, � 1, effective June 1. L. 2006: (1)(a) and (1)(o) amended, p. 493, � 16, effective September 1. L. 2023: IP(1) amended and (1)(h.5) added, (SB 23-090), ch. 136, p. 529, � 13, effective August 7. Editor's note - Colorado legislative change: Colorado inserted the amount of twenty-five thousand dollars in the definition of consumer lease in paragraph (e) of subsection (1) of this section. 4-2.5-104. Leases subject to other law. (1) A lease, although subject to this article, is also subject to any applicable: (a) Certificate of title statute of this state (including vessels under article 13 of title 33, C.R.S., snowmobiles under article 14 of title 33, C.R.S., mobile homes under article 29 of title 38, C.R.S., aircraft under article 2 of title 41, C.R.S., and motor vehicles under article 6 or 12 of title 42, C.R.S.); (b) Certificate of title statute of another jurisdiction (section 4-2.5-105); or (c) Consumer protection statute of this state, or final consumer protection decision of a court of this state existing on July 1, 1991. (2) In case of conflict between this article, other than sections 4-2.5-105, 4-2.5-304 (3) and 4-2.5-305 (3), and a statute or decision referred to in subsection (1) of this section, the statute or decision controls. (3) Failure to comply with an applicable law has only the effect specified therein. Source: L. 91: Entire article added, p. 277, � 1, effective July 1, 1992. L. 2011: (1)(a) amended, (SB 11-031), ch. 86, p. 242, � 2, effective August 10. 4-2.5-105. Territorial application of article to goods covered by certificate of title. Subject to the provisions of sections 4-2.5-304 (3) and 4-2.5-305 (3), with respect to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until the earlier of (a) surrender of the certificate, or (b) four months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction. Source: L. 91: Entire article added, p. 277, � 1, effective July 1, 1992. 4-2.5-106. Limitation on power of parties to consumer lease to choose applicable law and judicial forum. (1) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within thirty days thereafter or in which the goods are to be used, the choice is not enforceable. (2) If the judicial forum chosen by the parties to a consumer lease is a forum that would not otherwise have jurisdiction over the lessee, the choice is not enforceable. Source: L. 91: Entire article added, p. 278, � 1, effective July 1, 1992. 4-2.5-107. Waiver or renunciation of claim or right after default. Any claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a waiver or renunciation in a signed record delivered by the aggrieved party. Source: L. 91: Entire article added, p. 278, � 1, effective July 1, 1992. L. 2023: Entire section amended, (SB 23-090), ch. 136, p. 529, � 14, effective August 7. 4-2.5-108. Unconscionability. (1) If the court as a matter of law finds a lease contract or any clause of a lease contract to have been unconscionable at the time it was made the court may refuse to enforce the lease contract, or it may enforce the remainder of the lease contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) With respect to a consumer lease, if the court as a matter of law finds that a lease contract or any clause of a lease contract has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract, the court may grant appropriate relief. (3) Before making a finding of unconscionability under subsection (1) or (2) of this section, the court, on its own motion or that of a party, shall afford the parties a reasonable opportunity to present evidence as to the setting, purpose, and effect of the lease contract or clause thereof, or of the conduct. (4) In an action in which the lessee claims unconscionability with respect to a consumer lease: (a) If the court finds unconscionability under subsection (1) or (2) of this section, the court shall award reasonable attorney's fees to the lessee. (b) If the court does not find unconscionability and the lessee claiming unconscionability has brought or maintained an action he or she knew to be groundless, the court shall award reasonable attorney's fees to the party against whom the claim is made. (c) In determining attorney's fees, the amount of the recovery on behalf of the claimant under subsections (1) and (2) of this section is not controlling. Source: L. 91: Entire article added, p. 278, � 1, effective July 1, 1992. 4-2.5-109. Option to accelerate at will. (1) A term providing that one party or his or her successor in interest may accelerate payment or performance or require collateral or additional collateral at will or when he or she deems himself or herself insecure or in words of similar import must be construed to mean that he or she has power to do so only if he or she in good faith believes that the prospect of payment or performance is impaired. (2) With respect to a consumer lease, the burden of establishing good faith under subsection (1) of this section is on the party who exercised the power; otherwise the burden of establishing lack of good faith is on the party against whom the power has been exercised. Source: L. 91: Entire article added, p. 279, � 1, effective July 1, 1992. PART 2 FORMATION AND CONSTRUCTION OF LEASE CONTRACT 4-2.5-201. Statute of frauds. (1) A lease contract is not enforceable by way of action or defense unless: (a) The total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars; or (b) There is a record, signed by the party against whom enforcement is sought or by that party's authorized agent, sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the lease term. (2) Any description of leased goods or of the lease term is sufficient and satisfies subsection (1)(b) of this section, whether or not it is specific, if it reasonably identifies what is described. (3) A record is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under subsection (1)(b) of this section beyond the lease term and the quantity of goods shown in the record. (4) A lease contract that does not satisfy the requirements of subsection (1) of this section, but which is valid in other respects, is enforceable: (a) If the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor's business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement; (b) If the party against whom enforcement is sought admits in that party's pleading, testimony or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this provision beyond the quantity of goods admitted; or (c) With respect to goods that have been received and accepted by the lessee. (5) The lease term under a lease contract referred to in subsection (4) of this section is: (a) If there is a record signed by the party against whom enforcement is sought or by that party's authorized agent specifying the lease term, the term so specified; (b) If the party against whom enforcement is sought admits in that party's pleading, testimony, or otherwise in court a lease term, the term so admitted; or (c) A reasonable lease term. Source: L. 91: Entire article added, p. 279, � 1, effective July 1, 1992. L. 2023: (1)(b), (3), and (5)(a) amended, (SB 23-090), ch. 136, p. 529, � 15, effective August 7. 4-2.5-202. Final written expression: Parol or extrinsic evidence. (1) Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: (a) By course of dealing or usage of trade or by course of performance; and (b) By evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement. Source: L. 91: Entire article added, p. 280, � 1, effective July 1, 1992. L. 2023: IP(1) and (1)(b) amended, (SB 23-090), ch. 136, p. 530, � 16, effective August 7. 4-2.5-203. Seals inoperative. The affixing of a seal to a record evidencing a lease contract or an offer to enter into a lease contract does not render the record a sealed instrument and the law with respect to sealed instruments does not apply to the lease contract or offer. Source: L. 91: Entire article added, p. 280, � 1, effective July 1, 1992. L. 2023: Entire section amended, (SB 23-090), ch. 136, p. 530, � 17, effective August 7. 4-2.5-204. Formation in general. (1) A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a lease contract. (2) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined. (3) Although one or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy. Source: L. 91: Entire article added, p. 281, � 1, effective July 1, 1992. 4-2.5-205. Firm offers. An offer by a merchant to lease goods to or from another person in a signed record that by its terms gives assurance it will be held open is not revocable, for lack of consideration, during the time stated or, if no time is stated, for a reasonable time, but in no event may the period of irrevocability exceed three months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. Source: L. 91: Entire article added, p. 281, � 1, effective July 1, 1992. L. 2023: Entire section amended, (SB 23-090), ch. 136, p. 530, � 18, effective August 7. 4-2.5-206. Offer and acceptance in formation of lease contract. (1) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. (2) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. Source: L. 91: Entire article added, p. 281, � 1, effective July 1, 1992. 4-2.5-207. Course of performance or practical construction. (1) If a lease contract involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is relevant to determine the meaning of the lease agreement. (2) The express terms of a lease agreement and any course of performance, as well as any course of dealing and usage of trade, must be construed whenever reasonable as consistent with each other; but if that construction is unreasonable, express terms control course of performance, course of performance controls both course of dealing and usage of trade, and course of dealing controls usage of trade. (3) Subject to the provisions of section 4-2.5-208 on modification and waiver, course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance. Source: L. 91: Entire article added, p. 281, � 1, effective July 1, 1992. 4-2.5-208. Modification, rescission, and waiver. (1) An agreement modifying a lease contract needs no consideration to be binding. (2) A signed lease agreement that excludes modification or rescission except by a signed record may not be otherwise modified or rescinded, but, except as between merchants, such a requirement on a form supplied by a merchant must be separately signed by the other party. (3) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) of this section, it may operate as a waiver. (4) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver. Source: L. 91: Entire article added, p. 282, � 1, effective July 1, 1992. L. 2023: (2) amended, (SB 23-090), ch. 136, p. 530, � 19, effective August 7. 4-2.5-209. Lessee under finance lease as beneficiary of supply contract. (1) The benefit of the supplier's promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of any third party provided in connection with or as a part of the supply contract, extends to the lessee to the extent of the lessee's leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom. (2) The extension of the benefit of a supplier's promises and of warranties to the lessee (section 4-2.5-209 (1)) does not: (i) modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or (ii) impose any duty or liability under the supply contract on the lessee. (3) Any modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission. (4) In addition to the extension of the benefit of the supplier's promises and of warranties to the lessee under subsection (1) of this section, the lessee retains all rights that the lessee may have against the supplier which arise from an agreement between the lessee and the supplier or under other law. Source: L. 91: Entire article added, p. 282, � 1, effective July 1, 1992. 4-2.5-210. Express warranties. (1) Express warranties by the lessor are created as follows: (a) Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise. (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description. (c) Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model. (2) It is not necessary to the creation of an express warranty that the lessor use formal words, such as warrant or guarantee, or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor's opinion or commendation of the goods does not create a warranty. Source: L. 91: Entire article added, p. 283, � 1, effective July 1, 1992. 4-2.5-211. Warranties against interference and against infringement; lessee's obligation against infringement. (1) There is in a lease contract a warranty that for the lease term no person holds a claim to or interest in the goods that arose from an act or omission of the lessor, other than a claim by way of infringement or the like, which will interfere with the lessee's enjoyment of its leasehold interest. (2) Except in a finance lease there is in a lease contract by a lessor who is a merchant regularly dealing in goods of the kind a warranty that the goods are delivered free of the rightful claim of any person by way of infringement or the like. (3) A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and the supplier harmless against any claim by way of infringement or the like that arises out of compliance with the specifications. Source: L. 91: Entire article added, p. 283, � 1, effective July 1, 1992. 4-2.5-212. Implied warranty of merchantability. (1) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind. (2) Goods to be merchantable must be at least such as (a) pass without objection in the trade under the description in the lease agreement; (b) in the case of fungible goods, are of fair average quality within the description; (c) are fit for the ordinary purposes for which goods of that type are used; (d) run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved; (e) are adequately contained, packaged, and labeled as the lease agreement may require; and (f) conform to any promises or affirmations of fact made on the container or label. (3) Other implied warranties may arise from course of dealing or usage of trade. Source: L. 91: Entire article added, p. 284, � 1, effective July 1, 1992. 4-2.5-213. Implied warranty of fitness for particular purpose. Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor's skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose. Source: L. 91: Entire article added, p. 284, � 1, effective July 1, 1992. 4-2.5-214. Exclusion or modification of warranties. (1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty must be construed wherever reasonable as consistent with each other; but, subject to the provisions of section 4-2.5-202 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable. (2) Subject to subsection (3) of this section, to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability, be by a writing, and be conspicuous. Subject to subsection (3) of this section, to exclude or modify any implied warranty of fitness the exclusion must be by a writing and be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it is in writing, is conspicuous and states, for example, There is no warranty that the goods will be fit for a particular purpose. (3) Notwithstanding subsection (2) of this section, but subject to subsection (4) of this section, (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like as is, or with all faults, or by other language that in common understanding calls the lessee's attention to the exclusion of warranties and makes plain that there is no implied warranty, and if in writing conspicuous; (b) if the lessee before entering into the lease contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed; and (c) an implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade. (4) To exclude or modify a warranty against interference or against infringement (section 4-2.5-211) or any part of it, the language must be specific, be by a writing, and be conspicuous, unless the circumstances, including course of performance, course of dealing, or usage of trade, give the lessee reason to know that the goods are being leased subject to a claim or interest of any person. Source: L. 91: Entire article added, p. 284, � 1, effective July 1, 1992. 4-2.5-215. Cumulation and conflict of warranties express or implied. Warranties, whether express or implied, must be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply: (a) Exact or technical specifications displace an inconsistent sample or model or general language of description. (b) A sample from an existing bulk displaces inconsistent general language of description. (c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose. Source: L. 91: Entire article added, p. 285, � 1, effective July 1, 1992. 4-2.5-216. Third-party beneficiaries of express and implied warranties. A warranty to or for the benefit of a lessee under this article, whether express or implied, extends to any person who may reasonably be expected to use, consume, or be affected by the goods and who is injured by breach of the warranty. The operation of this section may not be excluded, modified, or limited with respect to injury to the person of an individual to whom the warranty extends, but an exclusion, modification, or limitation of the warranty, including any with respect to rights and remedies, effective against the lessee is also effective against the beneficiary designated under this section. Source: L. 91: Entire article added, p. 286, � 1, effective July 1, 1992. Editor's note - Colorado legislative change: The uniform act provides three alternatives for this section. Colorado chose ALTERNATIVE C to parallel the changes previously made by Colorado in section 4-2-318. 4-2.5-217. Identification. Identification of goods as goods to which a lease contract refers may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs: (a) When the lease contract is made if the lease contract is for a lease of goods that are existing and identified; (b) When the goods are shipped, marked, or otherwise designated by the lessor as goods to which the lease contract refers, if the lease contract is for a lease of goods that are not existing and identified; or (c) When the young are conceived, if the lease contract is for a lease of unborn young of animals. Source: L. 91: Entire article added, p. 286, � 1, effective July 1, 1992. 4-2.5-218. Insurance and proceeds. (1) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them. (2) If a lessee has an insurable interest only by reason of the lessor's identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified. (3) Notwithstanding a lessee's insurable interest under subsections (1) and (2) of this section, the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee. (4) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law. (5) The parties by agreement may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance. Source: L. 91: Entire article added, p. 286, � 1, effective July 1, 1992. 4-2.5-219. Risk of loss. (1) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee. (2) Subject to the provisions of this article on the effect of default on risk of loss (section 4-2.5-220), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply: (a) If the lease contract requires or authorizes the goods to be shipped by carrier (i) and it does not require delivery at a particular destination, the risk of loss passes to the lessee when the goods are duly delivered to the carrier; but (ii) if it does require delivery at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the lessee when the goods are there duly so tendered as to enable the lessee to take delivery. (b) If the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee's right to possession of the goods. (c) In any case not within paragraph (a) or (b) of this subsection (2), the risk of loss passes to the lessee on the lessee's receipt of the goods if the lessor, or, in the case of a finance lease, the supplier, is a merchant; otherwise the risk passes to the lessee on tender of delivery. Source: L. 91: Entire article added, p. 287, � 1, effective July 1, 1992. 4-2.5-220. Effect of default on risk of loss. (1) Where risk of loss is to pass to the lessee and the time of passage is not stated: (a) If a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection, the risk of their loss remains with the lessor, or, in the case of a finance lease, the supplier, until cure or acceptance. (b) If the lessee rightfully revokes acceptance, he or she, to the extent of any deficiency in his or her effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning. (2) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of any deficiency in his or her effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time. Source: L. 91: Entire article added, p. 287, � 1, effective July 1, 1992. 4-2.5-221. Casualty to identified goods. If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee pursuant to the lease agreement or section 4-2.5-219, then: (a) If the loss is total, the lease contract is avoided; and (b) If the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his or her option either treat the lease contract as avoided or, except in a finance lease that is not a consumer lease, accept the goods with due allowance from the rent payable for the balance of the lease term for the deterioration or the deficiency in quantity but without further right against the lessor. Source: L. 91: Entire article added, p. 288, � 1, effective July 1, 1992. PART 3 EFFECT OF LEASE CONTRACT 4-2.5-301. 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: L. 91: Entire article added, p. 288, � 1, effective July 1, 1992. 4-2.5-302. 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: L. 91: Entire article added, p. 288, � 1, effective July 1, 1992. 4-2.5-303. 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 of this title by reason of section 4-9-109 (a)(3). (2) Except as provided in subsection (3) of this section and section 4-9-407, a provision in a lease agreement that (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) of this section, 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 that (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) of this section. (4) Subject to subsection (3) of this section and section 4-9-407: (a) If a transfer is made that 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 4-2.5-501 (2); (b) If paragraph (a) of this subsection (4) 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 or 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. (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: L. 91: Entire article added, p. 288, � 1, effective July 1, 1992. L. 2001: Entire section R&RE, p. 1439, � 24, effective July 1. 4-2.5-304. Subsequent lease of goods by lessor. (1) Subject to section 4-2.5-303, 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) of this section and section 4-2.5-527 (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 identity of the lessor; (b) The delivery was in exchange for a check which is later dishonored; (c) It was agreed that the transaction was to be a cash sale; or (d) The delivery was procured through fraud punishable as larcenous under the criminal law. (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 take