(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
(2) A buyer in the ordinary course of business or a sublessee in the ordinary 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 the existing
(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 than those provided
both by this section and by the certificate of title statute.
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