Comprehensive Volume, 18th Edition

Chapter 29: Remedies for Breach of Sales Contracts

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Remedies for Breach

The law provides a number of remedies for the breach of a sales contract.

Remedies based on UCC theories are subject to a four-year statute of limitations.

If the remedy sought is based on a non-UCC theory, a tort or contract statute of limitations established by state statute will apply.

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Remedies of the SellerRemedies of the seller may include:

(1) a lien on the goods until the seller is paid, (2) the right to resell the goods, (3) the right to cancel the sales contract, and (4) the right to bring an action for damages (including lost profits) or, in some cases, for the full purchase price.

The seller may also recover reasonable incidental damages. In secured transactions, the buyer may have pledged some other property to the seller in case of default by the buyer.

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Remedies of the SellerBreach/Action of Buyer Remedy/Reaction of Seller

Buyer has not paid for goods. Seller’s Lien

Buyer wrongfully rejects goods,wrongfully revokes acceptance,fails to pay, or repudiates contract.

Resale by Seller

Buyer wrongfully rejects goods,wrongfully revokes acceptance, orrepudiates contracts.

Cancellation by Seller

Buyer wrongfully rejects goods orrepudiates contract.

Seller’s Action for Damages

Buyer accepts goods and does notrightfully revoke acceptance;addit ionally, conforming goodsdamaged or destroyed after risk ofloss passed to buyer; or afterbuyer’s breach, goods notresellable.

Seller’s Action for the PurchasePrice

(Unusual Remedy)

Buyer fails to pay amount owedunder secured transaction.

Seller Takes Possession of Goods

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Sellers’ Remedies Under Article 2

*Misrepresentation of insolvency (3 mos/10 day rules)

Name ofRemedy

Stop Delivery Resale Price Market Price Action forPrice

Lost Profit

SectionNumber

2-702 2-7092-710

2-7092-710

2-7092-708

2-708(2)

WhenAvailable

Insolvency*

Advancebreach bybuyer

Buyer fails totake goods

Buyer fails totake goods

Specialmanufacturedgoods

Anticp.Repud.

Nature ofRemedy

Stop deliveryof any sizeshipment orrecover goodsif solvent; stopdelivery oflargeshipments forother reasons

K price –resale price +inciden.Damages –expensesaved

K price –Market price +Inciden.Damages –expensesaved

K price +Inciden.Damages –Expensesaved

Profits +Inciden.Damages –Salvagevalue

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Remedies of the BuyerRemedies of the buyer may include:

(1) rejection of nonconforming goods; (2) revocation of acceptance; (3) an action for damages for nondelivery -- both incidental and consequential damages; (4) an action for breach of warranty; (5) cancellation of the sales contract; (6) the right to resell the goods; (7) the right to bring an action for conversion, recovery of goods, or specific performance; and (8) the right to sue for damages and cancel if the seller has been negligent or fraudulent.

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Remedies of the BuyerBreach Remedy

Tender or goods do notconform to the contract.

Rejection of ImproperTender or Delivery

Tender or goods do notconform to the contract tosuch an extent that theirvalue to buyer issubstantially impaired.

Revocation of Acceptance

Cancel Contract Insist on delivery ofconforming goods

Seller fails to deliver goodsor goods delivered are non-conforming

Buyer’s Action for Damages fornondelivery

Accepted goods do notconform.

Action for Damages for Breach ofWarranty (after giving notice of breach)

Seller fails to deliver goodsor repudiates contract; orbuyer rightfully rejectsgoods or rightfully revokesacceptance.

Cancellation by Buyer

Buyer rightfully rejectsgoods or rightfully revokesacceptance of goods.

Resale of Goods

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Buyer’s Remedies Under Article 2

Name ofRemedy

SpecificPerformance(Replevin)(Identification)

Cover Market

Section Number 2-711 2-7122-715

2-7132-715

When Available rare, uniquegoods

seller fails todeliver

seller fails todeliver

Nature ofRemedy

buyer getsgoods(incidentals)

cover price - Kprice+ incidentals +consequentialdamages -expenses saved

market price -K price +incidentals +consequentialdamages -expenses saved

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Limitations on Damages

The parties may agree on remedies through a contractual provision for liquidated damages, for limitations on statutory remedies, or for waiver of defenses.

When consumers are involved, this freedom of contract is to some extent limited for their protection.

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Remedies Under CISG

Under the CISG, if the buyer fails to perform any obligation, the seller may require the buyer to pay the price, take delivery, and perform other obligations under the contract.Under the CISG, a buyer may reject goods only if there is a fundamental breach of contract.

The buyer may reduce the price of nonconforming goods.