Business Law Chapter 25 Homework The aggrieved party must take reasonable measure

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Chapter 25
SALES REMEDIES
A. Remedies of the Seller
1. To Withhold Delivery of the Goods
2. To Stop Delivery of the Goods
3. To Identify Goods to the Contract
4. To Resell the Goods and Recover Damages
5. To Recover Damages for Nonacceptance
or Repudiation
6. To Recover the Price
7. To Recover Incidental Damages
8. To Cancel the Contract
9. To Reclaim the Goods upon the Buyer’s
Insolvency
B. Remedies of the Buyer
1. To Cancel the Contract
2. To Recover Payments Made
3. To Cover
4. To Recover Damages for Nondelivery
or Repudiation
5. To Recover Identified Goods upon the
Seller’s Insolvency
6. To Sue for Replevin
7. To Sue for Specific Performance
8. To Enforce a Security Interest in Goods
9. To Recover Damages for Breach in
Regard to Accepted Goods
10. To Recover Incidental Damages
11. To Recover Consequential Damages
C. Contractual Provisions Affecting Remedies
1. Liquidation or Limitation of Damages
2. Modification or Limitation of Remedy
by Agreement
3. Statute of Limitations
Cases in This Chapter
Kenco Homes, Inc. v. Williams.
Bigelow-Sanford, Inc. v. Gunny Corp.
Midwest Hatchery v. Doorenbos Poultry
Coastal Leasing Corporation v. T-Bar S Corporation
Chapter Outcomes
After reading and studying this chapter, the student should be able to:
Identify and explain the goods-oriented remedies of the seller and the
buyer.
Identify and explain the obligation-oriented remedies of the seller and the
buyer.
Identify and explain the money-oriented damages of the seller and the
buyer.
TEACHING NOTES
At any stage of a contract for the sale of goods, either party may breach or
repudiate the contract; the seller may deliver defective goods, too few (or too
many) goods, the wrong goods, or no goods; the buyer may refuse to accept
conforming goods or fail to pay for conforming goods. Breach may occur when
the goods are in the possession of the seller, in the possession of a bailee of the
buyer, in transit to the buyer, or in the possession of the buyer.
Remedies, therefore, need to address both the type of breach of contract and
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the location of the goods. Consequently, the Code provides separate and
distinct remedies for the seller and for the buyer, each specifically keyed to the
type of breach and the situation of the goods.
In all events, the purpose of the Code is to put the aggrieved party in a position
as good as the one he would have been in, had the other party fully performed,
*** Chapter Outcome (part 1)***
Identify and explain the goods-oriented remedies of the seller.
Identify and explain the obligation-oriented remedies of the seller.
Identify and explain the money-oriented damages of the seller.
Identify and explain the “specific performance” remedies of the seller.
A. REMEDIES OF THE SELLER
The buyer’s breach may consist of any of the following acts:
wrongfully rejecting the goods
wrongfully revoking acceptance of the goods
failing to make a payment due on or before delivery
repudiating (indicating an intention not to perform) the contract in whole
or in part
The first three and the ninth of the remedies described below are goods-oriented
— that is, they relate to the seller’s exercising control over the goods. The fourth
through seventh remedies are money-oriented because they provide the seller
with the opportunity to recover monetary damages. The eighth remedy is
obligation-oriented because it allows the seller to avoid his obligation under the
contract.
NOTE: A summary of these remedies of the seller may be found in Figure 25-1.
CISG — If buyer fails to perform, seller may require buyer to pay the price or may
fix an additional period of time in which buyer must perform. Unless buyer
To Withhold Delivery of the Goods
A breach by the buyer will permit the seller to withhold the goods. In an
installment contract a buyer’s breach as to any separate delivery which impairs
the value of the entire contract will permit the seller to withhold the rest.
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To Stop Delivery of the Goods
A seller may stop goods in transit if the buyer is insolvent or repudiates the
contract. This right is terminated if a) the buyer receives the goods, b) a bailee
of the goods (not a common carrier) informs the buyer that the goods are being
To Identify Goods to the Contract
Upon buyer’s breach seller may identify goods to the contract. Any unfinished
goods may be either (1) completed and identified to the contract or (2) not
completed and sold as scrap.
To Resell the Goods and Recover Damages
A proper resale of goods made in good faith and in a commercially reasonable
manner will permit the seller to recover from the buyer the difference between
the resale price and the contract price plus incidental damages less expenses
saved. Resale may be public or private; seller must give the buyer notification of
CISG — if contract is avoided and seller has resold goods in a reasonable manner
and time, he may recover difference between contract price and resale price,
plus consequential damages.
To Recover Damages for Nonacceptance or Repudiation
As an alternative to selling the goods the seller may recover as damages the
difference between the market price at the time and place of tender and the
unpaid contract price. Incidental damages are also available minus any
expenses saved. Lost profits plus reasonable overhead may be recovered if the
previous recovery formula will not put the seller in as good a position as
performance would have.
CASE 25-1
KENCO HOMES, INC. v. WILLIAMS
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Court of Appeals of Washington, Division Two, 1999
94Wn.App.219, 972 P.2d 125
http://scholar.google.com/scholar_case?case=2280470166169778873&q=972+p.2d+125&hl=en&as_sdt=2,34
Morgan, J.
Kenco Homes, Inc., sued Dale E. Williams and Debi A. Williams, husband and wife, for
breaching a contract to purchase a mobile home. After a bench trial, the trial court ruled
primarily for Williams. Kenco appealed, claiming the trial court used an incorrect measure of
damages. We reverse.
Kenco buys mobile homes from the factory and sells them to the public. Sometimes, it
contracts to sell a home that the factory has not yet built. It has “a virtually unlimited supply of
product,” * * *
On September 27, 1994, Kenco and Williams signed a written contract whereby Kenco
agreed to sell, and Williams agreed to buy, a mobile home that Kenco had not yet ordered from
the factory. The contract called for a price of $39,400, with $500 down.
On or about October 12, Williams gave Kenco a $600 check so Kenco could order an
appraisal of the land on which the mobile home would be located. Before Kenco could act,
however, Williams stopped payment on the check and repudiated the entire transaction. His
reason * * * was that he “had found a better deal elsewhere.” When Williams repudiated, Kenco
had not yet ordered the mobile home from the factory. After Williams repudiated, Kenco simply
did not place the order. As a result, Kenco’s only out-of pocket expense was a minor amount of
office overhead. On November 1, 1994, Kenco sued Williams for lost profits. After a bench trial,
the superior court found that Williams had breached the contract; that Kenco was entitled to
damages; and that Kenco had lost profits in the amount of $11,133 ($6,720 on the mobile home,
and $4,413 on the site improvements). The court further found, however, that Kenco would be
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used the correct measure of damages, and (2) whether the superior court properly awarded
attorneys’ fees to Williams.
I
Under the Uniform Commercial Code (UCC), a non-breaching seller may recover “damages for
non-acceptance” from a breaching buyer. [UCC §2–703(e)] The measure of such damages is as
follows:
(1) * * * 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 ([UCC §]
2–710), but less expenses saved inconsequence of the buyers breach.
* * * [T]he statute’s purpose is to put the nonbreaching seller in the position that he or she would
have occupied if the breaching buyer had fully performed (or, in alternative terms, to give the
nonbreaching seller the benefit of his or her bargain). [UCC §] 1–106(1). A party claiming
damages under subsection (2) bears the burden of showing that an award of damages under
subsection (1) would be inadequate. [Citation.] In general, the adequacy of damages under
subsection (1) depends on whether the nonbreaching seller has a readily available market on
which he or she can resell the goods that the breaching buyer should have taken. [Citation.]
When a buyer breaches before either side has begun to perform, the amount needed to give the
seller the benefit of his or her bargain is the difference between the contract price and the sellers
expected cost of performance. Using market price, this difference can, in turn, be subdivided into
two smaller differences: (a) the difference between the contract price and the market price, and
The cases illustrate at least three specific situations in which a nonbreaching seller cannot
reasonably resell on the open market. In the first, the seller never comes into possession of the
breached goods; although he or she plans to acquire such goods before the buyers breach, he or
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she rightfully elects not to acquire them after the buyers breach. [Citation.] In the second, the
seller possesses some or all of the breached goods, but they are of such an odd or peculiar nature
that the seller lacks a post-breach market on which to sell them; they are, for example,
unfinished, obsolete, or highly specialized. [Citations.] In the third situation, the seller again
possesses some or all of the breached goods, but because the market is already oversupplied with
such goods (i.e., the available supply exceeds demand), he or she cannot resell the breached
goods without displacing another sale. [Citations.] [Court’s footnote: In passing, we observe that
this lost volume situation can be described in several ways. Focusing on the breached unit, one
can say that due to a market in which supply exceeds demand, the lost volume seller cannot
II
The second issue is whether Kenco is entitled to reasonable attorneys’ fees. The parties’ contract
provided that the prevailing party would be entitled to such fees. Kenco is the prevailing party.
On remand, the trial court shall award Kenco reasonable attorneys’ fees incurred at trial and on
appeal.
Reversed with directions to enter an amended judgment awarding Kenco its lost profit of
$11,133; reasonable attorneys’ fees incurred at trial and on appeal; and any ancillary amounts
required by law.
To Recover the Price
A seller may recover the price (1) upon the buyer’s acceptance, (2) where
conforming goods are lost or damaged after the risk of loss has passed to the
buyer, and (3) where identification has occurred and there is no ready resale
market. The seller must hold identified goods for the buyer.
CISG — seller may require buyer to pay the price, take delivery or perform other
obligations unless the seller has resorted to a remedy that is inconsistent with
this requirement.
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To Recover Incidental Damages
Recoverable on buyer’s breach and includes commercially reasonable charges,
expenses or commissions directly resulting from the breach.
To Cancel the Contract
Where the buyer wrongfully rejects or revokes acceptance of the goods, fails to
make a payment due on or before delivery, or repudiates the contract in whole
or in part, the seller may cancel the part of the contract that concerns the goods
directly affected. Cancellation effects a discharge of contract duties while
preserving the right to any appropriate remedies.
To Reclaim the Goods upon the Buyers Insolvency
The seller may demand return of the goods if the buyer is insolvent and the
request is made within ten days of the date that the buyer received the goods.
In cases where the buyer perpetrated a fraud as to her insolvency in writing and
within three months of delivery, the ten day rule is inapplicable. Reclaiming
goods excludes a seller from any other remedies with respect to those goods.
NOTE: See Figure 25-1: Remedies of the Seller.
*** Chapter Outcome (part 2)***
Identify and explain the goods-oriented remedies of the buyer.
Identify and explain the obligation-oriented remedies of the buyer.
B. REMEDIES OF THE BUYER
A seller’s breach may consist of:
repudiation of the contract
failure to deliver the goods
delivery or tender of goods that do not conform to the contract
Some remedies are available for all three types of breaches, but others are
available for only one type.
The first remedy listed below is obligation-oriented; the second through fourth
and ninth through eleventh are money-oriented; and the fifth through eighth are
goods-oriented.
NOTE: A summary of these remedies of the buyer may be found in Figure 25-2: Remedies of the Buyer.
CISG — If the seller fails to perform, buyer may require seller to perform or fix an
additional period of time for the seller to perform. Unless the seller informs
buyer that he will not perform during this time, buyer may not resort to any
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To Cancel the Contract
The buyer may cancel the contract with respect to the goods involved if the
seller repudiates, or fails to deliver, or if the buyer rightfully rejects or justifiably
revokes acceptance of the goods. If a breach by the seller concerns the whole
contract, the buyer may cancel the entire contract. The buyer must give the
seller notice of his cancellation, and is then excused from further performance or
tender on his part.
CISG — buyer may declare the contract avoided if seller commits fundamental
To Recover Payments Made
If seller breaches the contract, buyer may recover as much of the price as he has
already paid.
To Cover
Permits the buyer to purchase substitute goods following seller’s breach. The
buyer must act in good faith and without unreasonable delay. Cover is an
elective choice and is not required of the buyer, but the buyer may not recover
consequential damages if they could have prevented by cover. The buyer may
recover the difference between the cost of cover and the contract price, plus
incidental and consequential damages less expenses saved.
CASE 25-2
BIGELOW-SANFORD, INC. v. GUNNY CORP.
Kravitch, J.
[The plaintiff, Bigelow-Sanford, Inc., contracted with defendant Gunny Corp. for the purchase of
100,000 linear yards of jute at $0.64 per yard. Gunny delivered 22,228 linear yards in January
1979. The February and March deliveries required under the contract were S not made, though 8
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rolls (each roll containing 66.7 linear yards) were delivered in April. With 72,265 linear yards
undelivered, Gunny told Bigelow-Sanford that no more would be delivered. In mid-March,
Bigelow-Sanford turned to the jute spot market to replace the balance of the order at a price of
$1.21 per linear yard. Since several other companies had also defaulted on their jute contracts
with Bigelow-Sanford, the plaintiff purchased a total of 164,503 linear yards on the spot market.
Plaintiff sues defendant to recover losses sustained as a result of the breach of contract.]
* * *
UCC §2–712 defines cover:
(1) After a breach * * * the buyer may “cover” by making in good faith and without
unreasonable delay any reasonable purchase of or contract to purchase goods in
substitution for those due from the seller.
(2) The buyer may recover from the seller as damages the difference between the cost of
cover and the contract price together with any incidental or consequential damages * * *,
* * *
Most importantly, “whether a plaintiff has made his cover purchases in a reasonable manner
poses a classic jury issue.” [Citation.] The district court thus acted properly in submitting the
question of cover damages to the jury, which found that Gunny had breached, appellee had
covered, and had done so in good faith without unreasonable delay by making reasonable
purchases, and was therefore entitled to damages under §2–712. Gunny argues Bigelow is not
entitled to such damages on the ground that it failed to make cover purchases without undue
delay and that the jury should not have been permitted to average the cost of Bigelow’s spot
market purchases totalling 164,503 linear yards in order to arrive at the cost of cover for the
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[Judgment for Bigelow is affirmed.]
To Recover Damages for Nondelivery or Repudiation
Available if the buyer doesn’t cover. Damages are difference between the
market price at the time when the buyer learned of the breach and the contract
price, plus incidentals and consequential damages less expenses saved. (May
not recover consequential damages if they could have avoided by cover.)
CISG — if the contract is avoided and seller has not replaced goods, he may
To Recover Identified Goods on the Sellers Insolvency
If some or all of the purchase price has been prepaid, a buyer acquires a special
property interest in identified goods and may recover the goods from a seller
who has become insolvent within ten days following receipt of the first
To Sue for Replevin
Allows buyer to recover specific identified goods being held unlawfully by the
seller. The buyer must have been unable to cover or the goods must have been
To Sue for Specific Performance
Specific performance is an equitable remedy compelling the party in breach to
perform the contract according to its terms. Specific performance is available if
legal remedies are inadequate, where goods are unique, or in other proper
circumstances.
CISG — buyer may require seller to perform; if goods do not conform and
nonconformity constitutes a fundamental breach, buyer may require substitute
To Enforce a Security Interest in the Goods
A buyer having possession of goods following a rightful rejection or revocation
will have a security interest in the goods adequate to the extent of any expenses
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To Recover Damages for Breach in Regard to Accepted Goods
Damages are available to the buyer who accepts the goods and then gives
timely notification of breach due to non-conforming goods or breach of warranty.
In breach of warranty the measure of damages is the difference at the time and

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