Law 2 - Chapter 25
What are the 3 different ways a seller may default?
-May repudiate -May fail to deliver the goods -May deliver or tender goods that do not conform to the contract
If a seller fails to deliver what are the buyer's remedies in regards to goods-oriented?
-Recover identified goods is seller is insolvent -Replevy goods -Obtain specific performance
If a seller repudiates, what are the buyer's remedies in regards to goods-oriented?
-Recover identified goods is seller is insolvent -Replevy goods -Obtain specific performance
If a buyer justifiably revokes acceptance what are the buyer's remedies in regards to money-oriented?
-Recover payments made -Cover and recover damages -Recover damages for nondelivery
If a buyer rightfully rejects goods what are the buyer's remedies in regards to money-oriented?
-Recover payments made -Cover and recover damages -Recover damages for nondelivery
If a seller fails to deliver what are the buyer's remedies in regards to money-oriented?
-Recover payments made -Cover and recover damages -Recover damages for nondelivery
If a seller repudiates, what are the buyer's remedies in regards to money-oriented?
-Recover payments made -Cover and recover damages -Recover damages for nondelivery
If a buyer fails to make payment what are the seller's remedies in regards to money-oriented?
-Resell and recover damages -Recover differences bw unpaid contract and market prices or lost profits -Recover price
If a buyer repudiates what are the seller's remedies in regards to money-oriented?
-Resell and recover damages -Recover differences bw unpaid contract and market prices or lost profits -Recover price
If a buyer wrongfully rejects goods what are the seller's remedies in regards to money-oriented?
-Resell and recover damages -Recover differences bw unpaid contract and market prices or lost profits -Recover price
If a buyer wrongfully revokes acceptance what are the seller's remedies in regards to money-oriented?
-Resell and recover damages -Recover differences bw unpaid contract and market prices or lost profits -Recover price
What are the remedies of the buyer?
-To cancel the contract -To recover payments made -To cover -To recover damages for nondelivery or repudiation -To recover identified goods on the seller's insolvency -To sue for replevin -To sue for specific performance -To enforce a security interest -To recover incidental damages -To recover damages for breach in regard to accepted goods -To recover consequential damages
What are the only 3 situations in which the Code permits the seller to recover the price plus incidental damages?
-Where the buyer has accepted the goods -Where conforming goods have been lost or damaged after the risk of loss has passed to buyer -Where the goods have been identified to the contract and there is no ready market available for their resale at a reasonable price
If a buyer repudiates what are the seller's remedies in regards to goods-oriented?
-Withhold delivery of goods -Stop delivery of large shipment in transit -Identify conforming goods to the contract
If a buyer wrongfully rejects goods what are the seller's remedies in regards to goods-oriented?
-Withhold delivery of goods -Stop delivery of large shipment in transit -Identify conforming goods to the contract
If a buyer wrongfully revokes acceptance what are the seller's remedies in regards to goods-oriented?
-Withhold delivery of goods -Stop delivery of large shipment in transit -Identify conforming goods to the contract
If a buyer fails to make payment what are the seller's remedies in regards to goods-oriented?
-Withhold delivery of goods -Stop delivery of large shipment in transit or of any shipment if the buyer is insolvent -Identify conforming goods to the contract -Reclaim goods upon buyer's insolvency
What are the remedies of the seller?
-Withhold delivery of goods -Stop delivery of the goods by carrier or other bailee -Identify to the contract conforming goods not already identified -Resell the goods and recover damages -Recover damages for nonacceptance of the goods or repudiation of the contract -Recover the price -Recover incidental damages -Cancel the contact; and -Reclaim the goods on the buyer's insolvency
When does the seller's right to stop delivery cease?
1. The buyer receives the goods 2. The bailee of the goods, except the carrier, acknowledges to the buyer that he holds them for the buyer 3. The carrier acknowledges to the buyer that he holds them for the buyer by reshipment or as warehouseman 4. A negotiable doc of title covering the goods is negotiated by the buyer
To Enforce a Security Interest
A buyer who has rightfully rejected or justifiably revoked acceptance of goods that remain in her possession has a security interest in these goods for any payments that she has made on their price and for any expenses she has reasonably incurred
For example, Supreme Machine, a manufacturer, contracts to sell Allied Sales, a dealer in used machinery, a used machine that Allied plans to resell. When Supreme repudiates and Allied is unable to obtain a similar machine elsewhere, what happens under recovery of consequential damages?
Allied damages include the net profit that it would have made on resale of the machine. A buyer may not however recover consequential damages that could have been prevented by cover.
Replevin
An action at law to recover from a defendant's possession specific goods that are being unlawfully withheld from the plaintiff.
Statue of limitations for breach of contract
Any action for breach of a sales contract must be begun within 4 years after the cause of the action has accrued.
Incidental Damages
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.
For example, Janet, in Portland, agrees to sell goods to Laura, in Minneapolis, for $7,000 COD (collect on delivery) with delivery by Nov. 15. Janet delivers nonconforming goods that Laura rejected, where would market price be determined?
At Laura's place of business in Minneapolis
For example, Janet, in Portland, agrees to sell goods to Laura, in Minneapolis, for $7,000 COD (collect on delivery) with delivery by Nov. 15. Janet fails to deliver. As a consequence, Laura suffers incidental damages of $1,500 and consequential damages of $1,000. Where is market price determined?
At the place of tender because COD is a shipment contract, the place of tender would be the seller's city. Therefore, the market price must be the market price in Portland, on Nov. 15, the date when Laura learned of the breach.
When does the 10 day limitation to reclaim the goods upon buyer's insolvency not apply?
Buyer has committed fraud by misrepresenting her solvency to the seller in writing within 3 months prior to delivery of the goods, the limitation does not apply.
For example, Jonas and Sally enter into a contract for a sale of goods for a contract price of $3,000, and Sally, the buyer, has made a down payment of $600. Jonas delivers nonconforming goods to Sally, who rightfully rejects them. What remedies does Sally have?
Cancel the contract and recover the $600 plus whatever other damages she can prove.
Which remedy is obligation-oriented and why?
Cancel the contract because it allows the seller to avoid his obligation under the contract
For example, the buyer of a racehorse who justifiably revokes acceptance because the horse does not conform to the contract receives what incidental damages?
Cost of caring for the horse from the date the horse was delivered until the buyer returns it to the seller.
The Cover
Cover means that the buyer may in good faith and without unreasonable delay to purchase substitute goods; the buyer may recover the difference between the cost of cover and the contract price, plus any incidental and consequential damages, less expenses saved.
For example, Max agrees to sell Stanley for $1,000. The value of the goods accepted is only $800; had they been as warranted, their value would have been $1,200. What are Stanley's options?
Damages for beach of warranty are $400, which he may deduct from any unpaid balance due on the purchase price upon notice to Max of his intention to do so.
Under a recover damages for nondelivery or repudiation remedy, if the market price is $8,000, the contract price is $7,000, incidental damages is $1,500, consequential damages are $1,000; what is the formula and total?
Difference bw market price ($8,000) and contract price ($7,000), plus incidental damages ($1,500), plus consequential damages ($1,000), minus expenses saved ($0). $3,500
Under 'recover damages for nondelivery or repudiation' how is market price determined?
Either as of the place for tender or, in the event that the buyer has rightfully rejected the goods or has justifiably revoked his acceptance of them, as of the place of arrival.
For example, Kelly, in accordance with her agreement with Sally, prints 10,000 letterheads and envelopes with Sally's name and address on them. Sally wrongfully rejects the stationery, which Kelly is unable to resell at a reasonable price. What happens now?
Entitled to recover the price plus incidental damages from Sally
If a buyer justifiably revokes acceptance what are the buyer's remedies in regards to goods-oriented?
Have a security interest
If a buyer rightfully rejects goods what are the buyer's remedies in regards to good-oriented?
Have a security interest
For example, Floyd agrees to sell goods to Beverly for a contract price of $8,000 due on delivery. Beverly wrongfully rejects the goods and refuses to pay Floyd anything. What remedies can Floyd use?
He can resell the goods for $6,000, incurring incidental damages for sales commissions of $500 but saving $200 in transportation costs. He would then recover the difference bw the contract price ($8000) and the resale price ($6,000), plus incidental damanges ($500) minus expenses saved ($200) which equals $2,300
For example, Green, an automobile dealer, enters into a contract to sell a large car to Holland for $22,000. The price of gas increases 20%. Holland repudiates. The market of the car is still $22,000, but because Green cannot sell as many cars as he can obtain, his sales volume decreased by one as a result of Holland's breach. What can Green do?
He would be permitted to recover the profits he lost on the sale to Holland. Contract price minus what the car cost Green, plus allocation of overhead, plus any incidental damages
If recovery of damages for nonacceptance or repudiation will not place the seller in as good a position as performance would have, the what is the measure of damages?
Loss profit; this is, the profit, including reasonable overhead, that the seller would have realized from full performance by the buyer, plus incidental damages, minus expenses saved.
If seller discovers buyer's insolvency what can seller do?
May refuse to deliver the goods except for cash, including payment for all goods previously under the contract.
For example, Supreme Machine contracts for $10,000 to sell Capital, a used machine to be delivered at Capital's factory by June 1. Supreme repudiates the contract on May 1. By reasonable efforts, Capital could buy a similar machine from United Machinery for $11,000 in time for a June 1 delivery. Capital fails to do so, thereby losing a $5,000 profit that it would have made from the resale of the machine. What can Capital recover?
Only $1,000 from Supreme, its damages do not include the loss of $5,000 profit.
If a buyer accepts nonconforming goods, what are the buyer's remedies in regards to money-oriented?
Recover damages for breach of warranty
Ace Motors sells a pickup truck to Brenda, a consumer. The contract of sales excludes liability for all consequential damages. The next day the truck explodes, causing Brenda serious personal injury. What can Brenda get?
Recovery for her personal injuries unless Ace could prove that the exclusion of consequential damages was not unconscionable.
To Recover Incidental Damages
Reimbursement for the buyer who incurs reasonable expenses in handling rightfully rejected goods or in effecting cover.
Money-oriented
Remedies that provide the seller with the opportunity to recover monetary damages
Goods-oriented
Remedies that relate to the seller's exercising control over the goods
For example, if a buyer, after depositing $1,500 with the seller on a $10,000 contract for goods, breaches the contract and the seller withholds delivery, in the absence of a provision for liquid damages and in the absence of the seller's establishing greater actual damages resulting from the breach. The buyer is entitled to?
Restitution of $1,000 ($1,500 minus $500). If the deposit were $250 on a $500 contract, the buyer would be entitled to $150 (250 minus $100, which is 20% of the price)
If the seller justifiably withholds delivery of the goods because of the buyer's breach, and the buyer has made payments on the price. The buyer is entitled to?
Restitution of the amount by which the sum of his payments exceeds the amount of liquid damages to which the seller is entitled under the contract.
To Recover Identified Goods on the Seller's Insolvency
The Code gives the buyer a right, which does not exist at common law, to recover from an insolvent seller the goods in which the buyer has a special property interest and for which he has paid all or part of the price.
For example, Sterling Cabinetry contracts to build and install shelves and cabinets for an office building being constructed by Baron Construction. The contract price is $120,000 and the contract provides that Sterling would be liable for $100 per day every day's delay beyond the completion date specified in the contract. Is this amount reasonable why or why not?
The amount is reasonable and commensurate with the anticipated loss. Therefore, it is enforceable as liquid damages. If, instead, the sum stipulated had been $5,000 per day, it would be unreasonably large and therefore would be void as a penalty.
To Sue for Specific Performance
The buyer may obtain specific performance where the goods are unique or in other proper circumstances ex. heirloom, work of art
To Recover Consequential Damages
The buyer may recover consequential damages resulting from the seller's breach, including (1)any loss resulting from the buyer's requirements and needs of which the seller at the time of contracting had reason to know and which the buyer could not reasonably prevent by cover or otherwise, and (2)injury to person or property proximately resulting from any breach of warranty
To Recover Damages for Breach in Regard to Accepted Goods
The buyer may recover damages resulting in the ordinary course of events from the seller's breach; in the case of breach of warranty,such recovery is the difference between the value the goods would have had if they had been as warranted and the value of the nonconforming goods that have been accepted
To Sue for Replevin
The buyer may recover goods identified to the contract if (1) the buyer is unable to obtain cover or (2) the goods have been shipped under reservation of a security interest in the seller
If the seller justifiably withholds delivery of the goods because of the buyer's breach, and the buyer has made payments on the price. But there is no provision for liquid damages what happens?
The buyer may recover the difference bw the amounts that he has paid on the price and 20% of the value of the total performance for which he is obligated under the contract, or $500, whichever is smaller.
To Recover Damages for Nondelivery or Repudiation
The buyer may recover the difference bw the market price at the time the buyer learned of the breach and the contract price, together with any incidental and consequential damages, less expenses saved.
Seller's Default
The buyer's remedies arise where the seller defaults in 3 different ways
Modification or Limitation of Remedy by Agreement
The contract between the parties may expressly provide for remedies in addition to those in the Code, or it may limit or change the measure of damages recoverable for breach.
Under recovery of incidental damages, a breach of warranty, how do we measure the damages?
The difference at the time and place of accepted bw the value of the goods that have been accepted and the value of the goods would have had if they had been as warranted.
For example, Doug, whose factory is in Oakland, agrees to sell goods to Valerie, in Atlanta, for $22,000 FOB Oakland. Doug fails to deliver and Valerie covers by purchasing substitute goods in Atlanta for $25,000, incurring $700 in sales commissions but suffering no other damages as a consequence of Doug's breach. Shipping costs from Oakland to Atlanta for the goods are $1,300. What would Valerie recover?
The difference bw the cost of cover ($25,000) and the contract price ($22,000) plus incidental damages ($700 sales commission) plus consequential damages ($0 in this example) minus expenses saved ($1,300 in shipping costs that Velda need not pay under the contract of cover), which equals $2,400.
Insolvency
The inability of a person to pay his debts in the ordinary course of business or as they become due
Liquidation or Limitation of Damages
The parties may specify the amount or measure of damages that may be recovered in the vent of a breach if the amount is reasonable
This remedy 'recover damages for nondelivery or repudiation' is a alternative to?
The remedy of cover and, as such, is available only to the extent the buyer has not covered.
Resell the Goods
The seller may resell the goods concerned or the undelivered balance of the goods and recover the difference bw the contract price and the resale price, together with any incidental damages, less expenses saved.
A buyer's default triggers what?
The seller's remedies
Buyer's Default
The seller's remedies are triggered by the buyer's wrongful actions
The remedy 'to recover identified goods on the seller's insolvency' exists only when?
The seller, who is in possession or control of the goods, becomes insolvent within 10 days after receiving the first installment of the price. To exercise this right, the buyer must tender to the seller any unpaid portion of the price
What's unique about the Code's remedies?
They are cumulative
What remedy is an alternative to resale of goods?
To recover damages for nonacceptance or repudiation
When does the cause of action accrue in regards to statue of limitations ?
When the breach occurs without regard to the injured party's knowledge of a breach
How many days does the seller have to reclaim the goods upon the buyer's insolvency?
Within 10 days after the buyer has received the goods.
Default by the buyer involves what kinds of acts?
Wrongfully rejecting or revoking acceptance of the goods, failing to make payment due on or before delivery, or in repudiating the contract