BUL EXAM 2 STUDYGUIDE CHAPTER 25 SALES REMEDIES with respect to the goods Remedies of the Seller Buyer s Default Remedies need to address the type of breach of contract and the situation Purpose of Remedies compensation punitive damages not available the seller s remedies are triggered by the buyer s actions in wrongfully rejecting or revoking acceptance of the goods in failing to make payment due on or before delivery or in repudiating the contract Seller delivers goods on credit and the buyer fails to pay the seller s sole remedy to sue for the unpaid price unless buyer insolvent If the buyer received the goods on credit while in solvent seller may be able to reclaim the goods Insolvency includes both equity and bankruptcy o Equity of Insolvency the inability of a person to pay its debts in the ordinary course of business or as they become due o Bankruptcy of Insolvency total liabilities total assets Codes s remedies are cumulative an aggrieved seller may 1 identify goods to a contract and 2 withhold delivery and 3 resell or recover damages for nonacceptance or recover the price and 4 recover incidental damages and 5 cancel the contract 1 3 9 goods oriented seller exercising control over the goods 4 7 money oriented provide the seller with the opportunity to recover monetary damages 8 obligation oriented the seller can avoid obligation under the contract 1 To Withhold Delivery o The seller can withhold or discontinue performance because of the buyer s breach o Installments any breach of installment that impairs the whole value of the contract will permit the seller to withhold the entire undelivered balance of the goods o Buyer Insolvency seller may refuse to deliver goods except CASH including payment for all goods previously delivered under the contract 2 To Stop Delivery if the buyer is insolvent one who is unable to pay his debts as they become due or one whose total liabilities exceed his total assets the seller may stop any delivery if the buyer repudiates or otherwise breaches the seller may stop carload truckload planeload or larger shipments o Seller must notify carrier bailee soon enough to prevent delivery o Carrier bailee must hold goods according to seller s directions seller is liable to carrier bailee for any charges incurred o If negotiable document issued the bailee need not obey the notification until the document is provided o Seller loses right to stop delivery when Buyer receive the goods Bailee of the goods acknowledges to buyer they will hold Carrier acknowledges to the buyer they will hold for reshipment or as warehouseman Negotiable document title cover the goods is negotiated to the 3 To Identify Goods buyer o Enable the seller to exercise the remedy of resale of goods o Seller may resell any unfinished goods demonstrably intended to fufill the particular contract o Seller can 1 complete the manufacturing of the unfinished goods and identify them to a contract or 2 cease manufacture and resell the unfinished goods for scrap or salvage value 4 To Resell the Goods the seller may resell the goods concerned or the undelivered balance of the goods and recover the difference between the contract price and the resale price together with any incidental damages less expenses saved o Type of Resale public or private o Manner of Resale must be made in good faith and in a commercially reasonable manner o Ex Floyd agrees to sell goods to Beverly for a contract price of 8 000 due on delivery Beverly wrongfully rejects and refuses to pay Floyd anything Floyd resells the goods in strict compliance with the Code for 6 000 incurring incidental damages for sales commissions 500 but saving transportation costs 200 Floyd will recover the contract price the resale price incidental damages exps saved o Ex 8 000 6 000 500 200 2 300 5 To Recover Damages for Nonacceptance or Repudiation o Market Price Differential the seller may recover damages from the buyer measured by the difference between the unpaid contract price and the market price at the time and place of tender of the goods plus incidental damages less expenses saved Ex Joan in Seattle agrees to sell goods to Nelson in Chicago for 20 000 F O B Chicago delivery 6 15 Nelson wrongfully rejects Market price would be ascertained at of 6 15 b c destination contract and that is where the tender occurs Market price is 15 000 Joan incurred incidental damages 1 000 and saved 500 in expenses Joan would recover 20 000 15 000 1 000 500 5 500 o Loss Profit in the alternative the seller may recover the lost profit including reasonable overhead plus incidental damages less expenses saved Ex Green auto dealer enters into a contract to sell a large fuel inefficient luxury car to Holland for 22 000 The price of gas increases 20 Holland repudiates Market value of the car still 22 000 but b c Green cannot sell as many cars as he can obtain his sales volume has decreased by one as a result of Holland s breach Green permitted to recover the profits he lost on the sale to Holland Contract price Car cost Overhead incidental damages o If an action based on anticipatory repudiation any damages based on market price should be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation 6 To Recover the Price the seller may recover the price o 1 Where the buyer has accepted the goods o 2 Where the goods have been lost or damaged after the risk of loss has passed to the buyer o 3 Where the goods have been identified to the contract and there is no ready market available for their resale Ex Kelly in accordance with her agreement with Sally prints 10 000 letterheads and envelops with Sally s name and address on them Sally wrongfully rejects the stationery which Kelly is unable to resell at a reasonable price Kelly is entitled to recover the price any incidental damages from Sally o Seller who sues for price must hold goods identified to the contract o If resale becomes possible seller may resell at any time prior to the collection of judgment and the net proceeds of such resale must be credited to the buyer 7 To Recover Incidental Damages incidental damages include any commercially reasonable charges expenses or commissions directly resulting from the breach 8 To Cancel the Contract o Installment Contract impairs the whole contract the seller may o Cancellation cancel the entire contract breach by the other one party s putting an end to the contract by reason of a o Cancelling party