KRS 355.2A-305: Sale or sublease of goods by lessee.

(1) Subject to the provisions of KRS 355.2A -303, 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 provided in subsection (2) of this section and subsection (4)

of KRS 355.2A -511, takes subject to the existing lease contract. A lessee with a

voidable leasehold interest has power to transfer a good leasehold interest to a good

faith buyer for value or a good faith sublessee for value, but only to the extent set

forth in the preceding sentence. When goods have been delivered under a

transaction of lease, the lessee has that power even though:

(a) The lessor was deceived as to the identity of the lessee;

(b) The delivery was in exchange for a check which is later dishonored; or

(c) The delivery was procured through fraud punishable as larcenous under the

criminal law.

(2) A buyer in the ordinary course of business or a sublessee in the ordina ry 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 t he existing lease

contract.

(3) 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 t han those provided both by this

section and by the certificate of title statute.