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McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
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Sales
Formation and Terms of Sales Contracts
Product Liability
Performance of Sales Contracts
Remedies for Breach of Sales Contracts

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C H A P T E R

Remedies for Breach of


22
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 [2719(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 [2719(3)]

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Sellers Remedies

If buyer breaches the contract and


seller has goods, seller has several
remedies:
Cancel the contract [2703(f)] and
withhold delivery of goods [2703(a)]
Resell manufactured goods and
recover damages (difference between
resale price and price buyer agreed to
pay by contract [2706])
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More Sellers 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 [2708]
See Jewish Federation of Greater Des Moines
v. Cedar Forrest Products Co.

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More Sellers 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 [2704(2)]
Example: Madsen v. Murrey & Sons
Co., Inc.
Seller, who did not complete manufacture
of goods on buyers 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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Sellers Remedies & The CISG

Under the (CISG), aggrieved seller has


five potential remedies when a buyer
breaches the contract:
1. suspension of sellers performance
2. avoidance of the contract
3. reclamation of goods in buyers
possession
4. an action for the price
5. an action for damages
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Buyers 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 [2712]

Example: KGM
Harvesting Co. v.
Fresh Network

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More Buyers Remedies

Recover damages based on difference


between contract price and current
market price of goods [2713]
Recover damages for any
nonconforming goods accepted by
buyer based on difference in value
between what buyer received and what
buyer should have received [2714]

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More Buyers Remedies

Obtain specific performance of


the contract where goods are
unique and cannot be obtained
elsewhere [2716]
Recover damages on basis-of-
the-bargain calculation for fraud
and misrepresentation [2-721]
See Green Wood Industrial Co. v.
Forceman Intl Development
Group, Inc.

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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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