Chapter 411

411.305(2) (2) A buyer in ordinary course of business or a sublessee in 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.

411.305(3) (3) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and that 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 by this section and by the certificate of title statute.

411.305 History History: 1991 a. 148.

411.306 411.306 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 chapter 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.

411.306 History History: 1991 a. 148.

411.307 411.307 Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

411.307(1) (1) Except as provided in s. 411.306, a creditor of a lessee takes subject to the lease contract.

411.307(2) (2) Except as provided in sub. (3) and ss. 411.306 and 411.308, 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.

411.307(3) (3) Except as otherwise provided in ss. 409.317, 409.321, and 409.323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.

411.307 History History: 1991 a. 148; 2001 a. 10.

411.308 411.308 Special rights of creditors.

411.308(1) (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.

411.308(2) (2) Nothing in this chapter impairs the rights of a creditor of a lessor if all of the following occur:

411.308(2)(a) (a) The lease contract becomes enforceable, not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like.

411.308(2)(b) (b) The lease contract is made under circumstances that under any statute or rule of law apart from this chapter would constitute the transaction a fraudulent or voidable transfer or voidable preference.

411.308(3) (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 under 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.

411.308 History History: 1991 a. 148; 2023 a. 246.

411.309 411.309 Lessor’s and lessee’s rights when goods become fixtures.

411.309(1) (1) In this section:

411.309(1)(a) (a) “Construction mortgage” means a mortgage that 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.

411.309(1)(b) (b) “Encumbrance” includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests.

411.309(1)(c) (c) “Fixture filing” means a filing, in the office where a record of a mortgage on 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 s. 409.502 (1) and (2).

411.309(1)(d) (d) “Fixtures” means goods that become so related to particular real estate that an interest in them arises under real estate law.

411.309(1)(e) (e) “Purchase money lease” means a 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.

411.309(2) (2) Under this chapter a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this chapter of ordinary building materials incorporated into an improvement on land.

411.309(3) (3) This chapter does not prevent creation of a lease of fixtures under real estate law.

411.309(4) (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 any of the following occurs:

411.309(4)(a) (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.

411.309(4)(b) (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.

411.309(5) (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 any of the following applies:

411.309(5)(a) (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.

411.309(5)(b) (b) The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable.

411.309(5)(c) (c) The encumbrancer or owner consents in writing to the lease or disclaims an interest in the goods as fixtures.

411.309(5)(d) (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.

411.309(6) (6) Notwithstanding sub. (4) (a) but otherwise subject to subs. (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.

411.309(7) (7) In cases not within subs. (2) to (6), 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.

411.309(8) (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 on default, expiration, termination, or cancellation of the lease agreement, but subject to the lease agreement and this chapter, or, if necessary to enforce other rights and remedies of the lessor or lessee under this chapter, remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate. The lessor or lessee shall 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.

411.309(9) (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 under ch. 409.

411.309 History History: 1991 a. 148; 2001 a. 10.

411.310 411.310 Lessor’s and lessee’s rights when goods become accessions.

411.310(1) (1) In this section, “accessions” means goods that are installed in or affixed to other goods.

411.310(2) (2) The interest of a lessor or a lessee under a lease contract entered into before the goods become accessions is superior to all interests in the whole except as provided in sub. (4).

411.310(3) (3) The interest of a lessor or a lessee under a lease contract entered into when or after the goods become accessions is superior to all subsequently acquired interests in the whole except as provided in sub. (4) but is subordinate to interests in the whole existing when the lease contract was made unless the holders of such interests in the whole consent in writing to the lease or disclaim in writing an interest in the goods as part of the whole.

411.310(4) (4) The interest of a lessor or a lessee under a lease contract described in sub. (2) or (3) is subordinate to the interest of any of the following:

411.310(4)(a) (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 become accessions.

411.310(4)(b) (b) A creditor with a security interest in the whole perfected before the lease contract is made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.

411.310(5) (5) When under subs. (2) and (4) or under subs. (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 on default, expiration, termination or cancellation of the lease contract by the other party but subject to the lease contract and this chapter, or if necessary to enforce his or her other rights and remedies under this chapter, remove the goods from the whole, free and clear of all interests in the whole, but he or she shall 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.

411.310 History History: 1991 a. 148.

411.311 411.311 Priority subject to subordination. Nothing in this chapter prevents subordination by agreement by any person entitled to priority.

411.311 History History: 1991 a. 148.

subch. IV of ch. 411 SUBCHAPTER IV

PERFORMANCE OF LEASE CONTRACT:
REPUDIATED, SUBSTITUTED AND EXCUSED

411.401 411.401 Insecurity: adequate assurance of performance.

411.401(1) (1) A lease contract imposes an obligation on each party that the other’s expectation of receiving due performance shall not be impaired.

411.401(2) (2) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable the insecure party may suspend any performance for which he or she has not already received the agreed return.

411.401(3) (3) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed 30 days after receipt of a demand by the other party.

411.401(4) (4) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

411.401(5) (5) Acceptance of a nonconforming delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.

411.401 History History: 1991 a. 148.

411.402 411.402 Anticipatory repudiation. If either party repudiates a lease contract with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may do any of the following:

411.402(1) (1) For a commercially reasonable time, await retraction of repudiation and performance by the repudiating party.

411.402(2) (2) Make demand under s. 411.401 and await assurance of future performance adequate under the circumstances of the particular case.

411.402(3) (3) Resort to any right or remedy upon default under the lease contract or this chapter, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party’s performance and assurance and has urged retraction. In addition, whether or not the aggrieved party is pursuing one of the foregoing remedies, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed in accordance with s. 411.524.

411.402 History History: 1991 a. 148.

411.403 411.403 Retraction of anticipatory repudiation.

411.403(1) (1) Until the repudiating party’s next performance is due, the repudiating party may retract the repudiation unless the aggrieved party has, since the repudiation, canceled the lease contract or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final.

411.403(2) (2) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance demanded under s. 411.401.

411.403(3) (3) Retraction reinstates a repudiating party’s rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

411.403 History History: 1991 a. 148.

411.404 411.404 Substituted performance.

411.404(1) (1) If without fault of the lessee, the lessor and the supplier, the agreed berthing, loading or unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable, but a commercially reasonable substitute is available, the substitute performance shall be tendered and accepted.

411.404(2) (2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, all of the following apply:

411.404(2)(a) (a) The lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent.

411.404(2)(b) (b) If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee’s obligation unless the regulation is discriminatory, oppressive or predatory.

411.404 History History: 1991 a. 148.

411.405 411.405 Excused performance. Subject to s. 411.404 on substituted performance, the following apply:

411.405(1) (1) Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with subs. (2) and (3) is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid.

411.405(2) (2) If the causes mentioned in sub. (1) affect only part of the lessor’s or the supplier’s capacity to perform, he or she shall allocate production and deliveries among his or her customers but at his or her option may include regular customers not then under contract for sale or lease as well as his or her own requirements for further manufacture. He or she may allocate in any manner that is fair and reasonable.

411.405(3) (3) The lessor seasonably shall notify the lessee and in the case of a finance lease the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under sub. (2), of the estimated quota available for the lessee.

411.405 History History: 1991 a. 148.

411.406 411.406 Procedure on excused performance.

411.406(1) (1) If the lessee receives notification of a material or indefinite delay or an allocation justified under s. 411.405, the lessee may by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired, do any of the following:

411.406(1)(a) (a) Terminate the lease contract.

411.406(1)(b) (b) Except in a finance lease that is not a consumer lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor.

411.406(2) (2) If after receipt of a notification from the lessor under s. 411.405 the lessee fails to modify the lease agreement within a reasonable time not exceeding 30 days, the lease contract lapses with respect to any deliveries affected.

411.406 History History: 1991 a. 148.

411.407 411.407 Irrevocable promises: finance leases.

411.407(1) (1) In the case of a finance lease that is not a consumer lease, the lessee’s promises under the lease contract become irrevocable and independent upon the lessee’s acceptance of the goods.

411.407(2) (2) A promise that becomes irrevocable and independent under sub. (1) is effective and enforceable between the parties, and by or against 3rd parties including assignees of the parties, and is not subject to cancellation, termination, modification, repudiation, excuse or substitution without the consent of the party to whom the promise runs.