1. (a) 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. (b) If under the lease contract risk of loss will pass to the lessee but the agreement does not specify when the risk passes, except as otherwise provided in subsection (c) of this section, risk of loss passes to the lessee, regardless of the conformity of the goods to the lease contract, as follows:

   1. (1) Subject to this subsection, the risk of loss passes to a lessee upon receipt of the goods. If the lessee does not intend to take possession, risk of loss passes to the lessee when the lessee receives control of the goods.

   2. (2) If the lease contract requires or authorizes a lessor to ship goods by carrier, the following rules apply:

      1. (A) If the lease contract 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.
      2. (B) If the lease contract requires delivery at a particular destination and the goods arrive there in the possession of the carrier, the risk of loss passes to the lessee when the goods are so tendered as to enable the lessee to take delivery.
   3. (3) If 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 to the lessee of the lessee's right to possession of the goods.

3. (c) A default under the lease contract by either party affects the risk of loss only in the following cases:

   1. (1) If the lessee rightfully rejects the goods or justifiably revokes acceptance of the goods, the lessor has the risk of loss from the time that the rejection or revocation is effective.
   2. (2) If the lessor has tendered nonconforming goods so that the lessee would have the right to reject the goods or revoke acceptance of the goods, the goods are damaged or lost before the lessee effectively rejects or revokes acceptance, and the risk of loss would have otherwise passed to the lessee under subsection (b) or (c) of this section, the lessor has the risk of loss to the extent the nonconformity of the goods caused the damage or loss.
   3. (3) If conforming goods are identified to the lease contract when the lessee repudiates or is otherwise in breach and the risk of loss has not otherwise passed to the lessee, the lessee has the risk of loss for such goods for a commercially reasonable time after the breach or repudiation.

(P.A. 02-131, S. 25.)