McGraw-Hill/Irwin
22-1
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
P
A
R
T
Sales
4
• Formation and Terms of Sales Contracts
• Product Liability
• Performance of Sales Contracts
• Remedies for Breach of Sales Contracts
22-2
C H A P
T
E R
22
Remedies for Breach of
Sales Contracts
Every great mistake has a
halfway moment, a split second
when it can be recalled and
perhaps remedied.
Pearl S. Buck, novelist
What America Means to Me
(1943)
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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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Agreements as to Remedies
• Parties may agree to
remedies in the contract
– Agreed remedy applied
in the event of a breach
of contract to reduce risk
– Example: “If delivery is
not made by September
1, Seller will pay Buyer
$1,000 as liquidated
damages.”
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Liquidated Damages
• In a liquidated damages clause, parties
agree on the amount of damages to be
paid to the injured party
– Enforced if reasonable amount and actual
damages would be difficult to prove
• Example: Baker v. International Record
Syndicate, Inc.
– If not enforceable because amount is a
penalty or unconscionable, injured party
may recover the actual damages suffered
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Limitation or Exclusion
• In 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 damages
– Attempt to limit consequential damages
for injury to a person by consumer goods
is prima facie unconscionable [2–719(3)]
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Seller’s Remedies
• If 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])
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More Seller’s Remedies
• Recover purchase price of goods (must
hold goods for buyer)
• Recover damages for rejection or
repudiation
1. difference between contract price and
current market price for the goods and
2. “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.
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More Seller’s Remedies
• If buyer is insolvent and
has the goods, seller may:
– Recover purchase price
– Reclaim goods in
possession of buyer
• If goods are in transit, seller
may stop shipment
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Duty to Mitigate Damages
• Seller 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 manner
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Seller’s Remedies & The CISG
• Under the (CISG), aggrieved seller has
five potential remedies when a buyer
breaches the contract:
1. suspension of seller’s performance
2. “avoidance” of the contract
3. reclamation of goods in buyer’s
possession
4. an action for the price
5. an action for damages
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Buyer’s Remedies
• If 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]
Example: KGM
Harvesting Co. v.
Fresh Network
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More Buyer’s Remedies
• Recover 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]
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More Buyer’s Remedies
• Obtain specific performance of
the contract where goods are
unique and cannot be obtained
elsewhere [2–716]
• Recover damages on basis-ofthe-bargain calculation for fraud
and misrepresentation [2-721]
– See Green Wood Industrial Co. v.
Forceman Int’l Development
Group, Inc.
22-15
Thought Question
• Assume 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?
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