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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

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.

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

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

used the correct measure of damages, and (2) whether the superior court properly awarded

attorneys’ fees to Williams.

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 buyer’s 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 seller’s

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 buyer’s breach, he or

she rightfully elects not to acquire them after the buyer’s 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

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.

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 Buyer’s 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

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

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

[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 Seller’s 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

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