When entering into a contract for the purchase and sale of goods, different rules may apply than for other types of contracts. Article 2 of the Uniform Commercial Code (UCC) was developed to try to standardize state laws with respect these types of transactions. All states have adopted some, but not necessarily all, of the UCC provisions. Article 2 of the UCC applies to contracts for the sale of movable goods, which includes shipments of goods between merchants, between merchants and consumers, and between non-merchants. Contracts subject to the UCC must meet its requirements to be enforceable. In addition, the UCC sets forth specific remedies for breach of contract, which are different from the remedies for common law contracts.
Seller breaches the contract
Where a seller repudiates the contract and/or fails to deliver the goods, the buyer can sue for breach of contract. Under the UCC, the buyer has several options to recover damages for the breach:
- Damages for Non-Delivery
The damages for non-delivery are equal to the difference between the contract price and the market price at the time the buyer learned of the breach, plus any incidental and consequential damages permitted by the UCC, less any expenses saved. To obtain consequential damages, the seller is required to be aware of or have reasonably foreseen the specific needs or requirements of the buyer at the time of contracting, which led to such damages. The market price is determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
- Cover
Cover is when the buyer immediately seeks to substitute the non-delivered goods by purchasing, in good-faith, similar goods from another seller. The damages the buyer may pursue for cover are equal to the difference between the price of the contract and the price of cover, plus any incidental and consequential damages permitted by the UCC, less any expenses saved.
- Specific Performance
Under the UCC, a buyer may be entitled to specific performance if the goods are unique.
Buyer breaches the contract
Where a buyer refuses to accept or pay for goods from the seller, the seller may sue for breach of contract. In this case, the seller has several options to recover damages from the buyer:
- Damages for Non-Acceptance
The UCC provides for damages equal to “the difference between the market price at the time and place for tender and the unpaid contract price” together with any incidental damages permitted by the UCC, but less expenses saved in consequence of the buyer’s breach. Incidental damages in connection with a buyer’s breach could include any commercially reasonable charges incurred in the process of stopping delivery, whether related to shipping, care or other expenses related to the control of the goods.
In addition, if such damages are not sufficient to compensate the seller, the seller may receive as damages the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages, but with due allowance for costs reasonably incurred, and due credit for payments or proceeds of resale.
- Resale Damages
If the seller decides to resell the unaccepted goods, the seller may, in good faith, pursue damages for resale. These damages are equal to the difference between the contract price and the resale price of the goods, plus any incidental damages, less expenses saved.
- Damages for the Price
If the seller cannot reasonably resell the goods identified in the contract, or the buyer has accepted or lost the goods, the seller may pursue damages for the price of the goods. This is equal to the price of any goods lost or accepted by the buyer or goods identified in the contract, plus incidental damages, less any expenses saved. If the seller pursues this remedy, the seller must hold goods identified for the buyer, and give them to the buyer in return for the damages.
- Additional Remedies
The UCC permits the seller to also take other steps with respect to the goods directly affected or if the whole contract was breached, with respect to the whole undelivered balance of the contract. These remedies include withholding delivery of the goods, stopping the delivery of the goods or canceling the contract.
Actions upon breach
If the other party to your contract has breached, it is important to document your communications and the circumstances surrounding the breach as well as comply with any contract requirements related to providing the other party with written notice and an opportunity to cure the breach. In addition, detail any steps you take to mitigate your damages. Finally, Contact us to speak with a member of our team about protecting and enforcing your rights.
