§ 10511 Lessee Disposal Of Rejected Goods

This law explains what a business must do when it rejects rented goods and how it can get paid back for costs related to those goods.

Key Takeaways

•A lessee must follow reasonable instructions from the lessor or supplier when rejecting goods, or try to sell the goods quickly if no instructions are given.
•The lessee can be reimbursed for reasonable expenses of caring for and disposing of the goods, including a commission up to 10% of proceeds if no commission was paid.
•Acting in good faith protects the lessee from being sued for damages, and a buyer who purchases the goods in good faith gets clear ownership even if the lessee didn't follow every rule.

Example

A grocery store rents a refrigerated truck to bring in fresh fruit. The fruit arrives spoiled, so the store rejects it. Because the truck's owner has no office nearby, the store follows the owner's instructions to sell the fruit quickly or, if none are given, tries to sell it fast to avoid losing value. The store then wants to be reimbursed for the cost of handling and selling the fruit.

The store can ask the truck owner or the fruit supplier to reimburse the expenses it incurred for caring for and selling the fruit. If no commission was paid, the store can receive a commission that is typical in the trade or up to 10% of the money earned from selling the fruit.

(a) Subject to any security interest of a lessee (subdivision (e) of Section 10508), if a lessor or a supplier has no agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in his or her possession or control, shall follow any reasonable instructions received from the lessor or the supplier with respect to the goods. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor’s account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming. (b) If a merchant lessee (subdivision (a)) or any other lessee (Section 10512) disposes of goods, he or she is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses include no disposition commission, to such commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding 10 percent of the gross proceeds. (c) In complying with this section or Section 10512, the lessee is held only to good faith. Good faith conduct hereunder is neither acceptance or conversion nor the basis of an action for damages. (d) A purchaser who purchases in good faith from a lessee pursuant to this section or Section 10512 takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one or more of the requirements of this division. (Amended by Stats. 1991, Ch. 111, Sec. 49. Effective July 15, 1991.)

This law explains what a business must do when it rejects rented goods and how it can get paid back for costs related to those goods.

Key Takeaways

•A lessee must follow reasonable instructions from the lessor or supplier when rejecting goods, or try to sell the goods quickly if no instructions are given.
•The lessee can be reimbursed for reasonable expenses of caring for and disposing of the goods, including a commission up to 10% of proceeds if no commission was paid.
•Acting in good faith protects the lessee from being sued for damages, and a buyer who purchases the goods in good faith gets clear ownership even if the lessee didn't follow every rule.

Key Takeaways

Example

Key Terms

References

§ 10511 Lessee Disposal Of Rejected Goods

Key Takeaways

Example

Key Terms

References

Key Takeaways

Example

Key Terms

Related Statutes

References

Key Takeaways

Example

Key Terms

Related Statutes

References