Learning Objectives
Discuss meaning of liquidated damages and cover, and when UCC allows enforcement
List and describe UCC remedies for an injured buyer or seller
Describe damages available to injured buyer, including specific performance
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Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin4Formation and Terms of Sales ContractsProduct LiabilityPerformance of Sales ContractsRemedies for Breach of Sales ContractsSalesPARTRemedies for Breach of Sales ContractsPAETRHC22Every great mistake has a halfway moment, a split second when it can be recalled and perhaps remedied.Pearl S. Buck, novelistWhat America Means to Me (1943)Learning ObjectivesDiscuss meaning of liquidated damages and cover, and when UCC allows enforcementList and describe UCC remedies for an injured buyer or sellerDescribe damages available to injured buyer, including specific performanceParties may agree to remedies in the contractAgreed remedy applied in the event of a breach of contract to reduce riskExample: “If delivery is not made by September 1, Seller will pay Buyer $1,000 as liquidated damages.”Agreements as to RemediesIn a liquidated damages clause, parties agree on the amount of damages to be paid to the injured partyEnforced if reasonable amount and actual damages would be difficult to proveExample: Baker v. International Record Syndicate, Inc.If not enforceable because amount is a penalty or unconscionable, injured party may recover the actual damages sufferedLiquidated DamagesIn a limitation or exclusion clause, parties agree to limit either the remedies that the law makes available or the damages that can be covered [2–719(1)]Limitations commonly placed on liability for consequential damagesAttempt to limit consequential damages for injury to a person by consumer goods is prima facie unconscionable [2–719(3)]Limitation or ExclusionIf buyer breaches the contract and seller has goods, seller has several remedies: Cancel the contract [2–703(f)] and withhold delivery of goods [2–703(a)]Resell manufactured goods and recover damages (difference between resale price and price buyer agreed to pay by contract [2–706])Seller’s RemediesRecover purchase price of goods (must hold goods for buyer)Recover damages for rejection or repudiationdifference between contract price and current market price for the goods and “profit” that seller lost when buyer did not go through with the contract [2–708]See Jewish Federation of Greater Des Moines v. Cedar Forrest Products Co.More Seller’s RemediesIf buyer is insolvent and has the goods, seller may:Recover purchase priceReclaim goods in possession of buyerIf goods are in transit, seller may stop shipmentMore Seller’s RemediesSeller should select alternative that will minimize loss [2–704(2)]Example: Madsen v. Murrey & Sons Co., Inc. Seller, who did not complete manufacture of goods on buyer’s repudiation, but rather dismantled and largely scrapped the existing goods, was held not to have acted in a commercially reasonable mannerDuty to Mitigate DamagesUnder the (CISG), aggrieved seller has five potential remedies when a buyer breaches the contract:suspension of seller’s performance“avoidance” of the contractreclamation of goods in buyer’s possessionan action for the pricean action for damagesSeller’s Remedies & The CISGIf seller breaches the contract, the buyer has several remedies: Buy other goods (cover) and recover damages from seller based on any additional expense that buyer incurs in obtaining the goods [2–712]Buyer’s RemediesExample: KGM Harvesting Co. v. Fresh NetworkRecover damages based on difference between contract price and current market price of goods [2–713]Recover damages for any nonconforming goods accepted by buyer based on difference in value between what buyer received and what buyer should have received [2–714]More Buyer’s RemediesObtain specific performance of the contract where goods are unique and cannot be obtained elsewhere [2–716]Recover damages on basis-of-the-bargain calculation for fraud and misrepresentation [2-721]See Green Wood Industrial Co. v. Forceman Int’l Development Group, Inc.More Buyer’s RemediesThought QuestionAssume Naomi had a car to sell that she knew had been in an accident and repaired. Is it ethical to sell a damaged and repaired car without telling the potential buyer?