PromptA transaction involves a lease of equipment where the lessee has no right to terminate early and will become the owner at the end of the lease term for $1 more. Does Article 9 apply to this transaction?
Click to flip AnswerYes, Article 9 applies to a lease intended as security. The economic realities test provides that a transaction creates a security interest if the lessee cannot terminate the obligation and has the option to become the owner for no or nominal additional consideration. Such a transaction is governed by Article 9, regardless of its form.
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