Commercial LawClass 10Remedies (Part 2)

Professor RoweSpring 2015

Broad Course Overview• Article 2 (Sales)

– Scope– The UCC Take on General Contract Principles– Property Interests– Warranties– Performance– Remedies– Rights of Third Parties

• Article 9 (Secured Transactions)– Introduction– Perfection– Priorities– Default

2-708: OVERVIEW: When Buyer Repudiates or Does Not Accept• 2-708(1) – S’s damages when B does not accept or

repudiates is – Traditional “market value differential” (MVD) of unpaid

contract price minus market price at the time and place for tender

– IMPT: 2-708(2) – if MVD is inadequate to put S in as good a position as performance» S may recover the profit he would have made had the B

fully performed, including reasonable overhead, together with costs incurred for performance, and incidental Ds, minus the payments or proceeds of resale

§ 2-708(1): Seller’s Damages for Non-Acceptance or Repudiation

Subject to subsection (2) and to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this Article (Section 2-710), but less expenses saved in consequence of the buyer’s breach.

FORMULA: [(unpaid K price - market price) + incidental Ds] – expenses saved

§ 2-708(2): Lost ProfitsIf the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article (Section 2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

FORMULA: Profits + overhead + incidental Ds + costs – proceeds of resale

Kenco Homes, Inc. v. Williams

3 situations where seller cannot be made whole under 2-708(1)

• Seller can’t resell goods on open market due to

– Seller never comes into possession of goods (See Kenco)

– Seller has sufficiently unique or specially manufactured goods so that there is no market in which to sell them

– Lost volume seller (LVS): seller has sufficient inventory that it could have sold two units instead of one but for buyer’s breach (See R.E. Davis and handout on LVSs)

R.E. Davis Chem. Corp. v. Diasonics

§ 2-709(1): Action for the Price• When the buyer fails to pay the price as it

becomes due the seller may recover, along with any incidental damages, (a) the price of goods accepted, or (b) of conforming goods lost or damaged within a commercially reasonable time after risk of loss has passed to the buyer. (§ 2-709(1)(a))

– The seller may also recover the price of goods identified to the contract if he is unable after reasonable effort to resell them at a reasonable price, or the circumstances reasonably indicate that such effort will be unavailing. (§ 2-709(1)(b))

2-709(2): Action for the Price

• Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control. (§ 2-709(2))

– If resale becomes possible, the seller may resell the goods at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold. (§ 2-709(2))

2-709(3): Action for the Price

• After the buyer has breached (wrongful rejection or revocation), a seller who is held not entitled to the price under § 2-709 can still recover damages for non-acceptance under § 2-708. (§ 2-709(3))

Siemans Energy & Automation, Inc. v. Coleman Elec. Supply Co.

Siemens Energy & Automation

• HELD: When Seller sues for price for accepted goods, it does not have to mitigate by accepting return of the goods for resale.

§ 2-710: Seller’s Incidental Damages

Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in:

•Stopping delivery

•In the transportation, care and custody of goods after the buyer’s breach

•In connection with return or resale of the goods or

•“Otherwise resulting from the breach” (query, can we sneak in consequential here?)

Jelen & Son, Inc. v. Bandimere

Jelen & Son v. Bandimere

• KEY: For seller to recover incidental damages, it must be damages incurred with respect to the transaction between the parties to the contract. Incidental damages do NOT include damages Seller incurs with third parties. That would be consequential damages.

• HELD: Fines that Bandimere incurred were from the State (a third party), and were not proper incidental damages.

2-702: Seller’s Right of Reclamation

• Seller may refuse delivery except for cash

• If seller discovers buyer has received goods on credit while insolvent, he may reclaim the goods upon demand made within 10 days after receipt, but 10-day limit doesn’t apply if buyer made representation of solvency in writing within three months before delivery

• Seller’s right to reclaim may be cut off by a good faith purchaser for value. See 2-403.