1. (a) Subject to section 42a-2A-403, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer and, except as otherwise provided in subsection (b) of this section and in subsection (e) of section 42a-2A-727, takes subject to the existing lease contract.

2. (b) A lessee with a voidable leasehold interest acquired in a lease transaction from a lessor has power to transfer a good leasehold interest to a good faith subsequent lessee for value to which the goods have been delivered. Under this subsection, a voidable leasehold interest is acquired when the goods have been delivered under the lease contract even if:

   1. (1) The lessor was deceived as to the identity of the lessee;
   2. (2) The delivery was in exchange for a check later dishonored; or
   3. (3) The delivery was procured through fraud punishable under criminal law.
3. (c) A buyer in the ordinary course of business or a sublessee in the ordinary course of business from a lessee that is a merchant dealing in goods of that kind to which the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the rights of the lessor and lessee to the goods and takes free of the existing lease contract.
4. (d) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and 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 both by this section and by the certificate of title statute.

(P.A. 02-131, S. 32.)