Chapter 21 Remedies for Breach of Sales and

Chapter 21 Remedies for Breach of Sales and Lease Agreements

Remedies of the Seller and Buyer Click on the Links Below § 1: Seller § 2: Buyer If Goods in Seller’s Possession If Goods in Carrier’s Possession If Goods in Buyer’s Possession If Goods in Seller’s Possession If Seller delivers nonconforming goods Proceed to Section 3 2

§ 3: Contractual Provisions Affecting Remedies Parties to a contract can vary their rights and duties that preempt UCC provisions. Parties can stipulate whether contractual provisions are “exclusive”. However, provisions limiting consumer rights may be unconscionable. 3

§ 4: Lemon Laws Automobile under warranty possesses significant defect that affects vehicles use or value that cannot be fixed within statutory period. Buyer’s remedies include: üA new car; üReplacement of defective parts; üOr full refund. 4

§ 5: Remedies for Breach of International Sales CISG provides remedies similar to the UCC: üMonetary damages that are foreseeable, consequential damages. üDamages are difference between contract price and market price. Parties can agree to what law they will use. 5

Goods in Seller’s Possession [1] Seller may withhold delivery of the goods: üIf material breach by Buyer, Seller can withhold delivery of all goods. üIf non-material breach, Seller can withhold delivery of this installment. Seller can withhold delivery of all goods if Buyer is insolvent. Next 6

Goods in Seller’s Possession [2] Seller may rescind the contract. Seller may identify the goods to the contract. Seller may sell raw materials for scrap or finish production. Next 7

Goods in Seller’s Possession [3] Seller may resell the goods; and üRecover damages: the difference between the contract price and the resale price + incidental damages+ damages = the market price at the time & place of tender + incidental damages expenses saved. üIf No Damages, Seller can sue for lost profits. Next 8

Goods in Seller’s Possession [4] Seller may sue Buyer for breach of contract. üRecover Damages = the market price at the time & place of tender + incidental damages. • if there are no damages, Seller can sue for lost profits. Return 9

Goods in Transit [1] Goods are “in transit” when Seller has tendered goods to Carrier. Goods are in transit until: üBuyer is given negotiable document of title to goods. üBuyer is given non-negotiable document of title or Bailee has acknowledged Buyer’s right to have the goods. üBuyer has had a reasonable time to pick up the goods. Next 10

Goods in Transit [2] Seller has the right to stop the goods in transit if: üBuyer is insolvent - Seller can stop entire shipment of goods. üBuyer is in breach - Seller may stop a whole truckload or whole container. Return 11

Goods in Buyer’s Possession Seller may sue for the purchase price. üSeller may also sue Buyer if goods were “specially-made” which Seller cannot resell. üSeller may also sue for the purchase price if the goods were destroyed and the risk had already passed to the Buyer. Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt. Return 12

Goods in Seller’s Possession Buyer Wants Goods üSpecific performance or replevin. üRecover goods from Seller if Seller becomes insolvent within 10 days after receiving first payment. Buyer Does Not Want Goods üRescind contract. üCover or do not cover and sue for breach of contract. Return 13

Seller Delivers Nonconforming Goods [1] If Seller does not make perfect tender Buyer has the right to reject all or part of goods. üBuyer must timely notify Seller of rejection and reasons and follow Seller’s directions. üBuyer is entitled to commission for selling perishable goods. üBuyer may store the goods and retain a security interest in the goods for his costs. Next 14

Seller Delivers Nonconforming Goods [2] If Buyer has accepted non-conforming goods, she may: üSue for breach of warranty. üSue for ordinary damages. üDeduct damages from purchase price. Return 15

§ 3: Contractual Provisions Affecting Remedies Limitation of Damages. Limitation of Remedies. Waiver of Defenses. 16

§ 4: Lemon Laws The majority of the states have enacted lemon laws in regard to automobile sales. Seller’s limitations were too “good. ” Buyer must: üGive notice. üSeller gets four chances to fix. üArbitration: decision binding on manufacturer, not on Buyer. 17

§ 5: Remedies for Breach of International Sales Contracts CISG provides remedies similar to the UCC. Article 74 provides for money damages, foreseeable consequential damages. üDamages are difference between contract price and market price. Article 28 provides for specific performance where a country would normally grant it in their own law. Parties can agree to what law they will use. 18

Case 21. 1: KGM v. Fresh. Network (Remedies of the Buyer/Lessee) FACTS: üKGM Harvesting agreed to deliver fourteen loads of lettuce each week to Fresh Network sold the lettuce to Castellini which sold it to Club Chef. üThe market price of lettuce rose dramatically and KGM chose not to sell to Fresh Network. Fresh had to buy the lettuce on the open market at a higher price. Castellini agreed to pay the difference. üFresh Network refused to pay KGM for previous shipments and KGM sued. 19

Case 21. 1: KGM v. Fresh. Network (Remedies of the Buyer/Lessee) HELD: DAMAGES FOR FRESH. üThe court awarded Fresh Network the difference between the contract price and the price it had paid for the substitute lettuce, less the amount that it owed KGM. ü“[T]he object of contract damages is to give the aggrieved party as nearly as possible the equivalent of the benefits of performance. ” 20

Case 21. 2: China National v. Apex (Remedies of the Buyer) FACTS: üApex imports consumer electronic goods and distributes them under the “Apex Digital” brand name to national retailers, such as Circuit City Stores, Inc. , Best Buy Company, and Kmart Corporation. Apex is based in California. üChina National is a corporation based in Beijing, China that facilitates the import and export of goods between Chinese and foreign companies. üApex imported more than 300, 000 DVD players under several contracts with Chinese companies through China National. 21

Case 21. 2: China National v. Apex (Remedies of the Buyer) FACTS (cont’d) üApex began to receive many return DVD players based on customer dissatisfaction. Apex continued to order DVD players through China National and sell them to retail outlet chains, but Apex refused to pay for them. üThe parties submitted their dispute to arbitration. üChina National sued Apex to obtain a writ of attachment (an order to seize Apex’s property to secure payment for the DVD players). üApex argued it was not liable under the contracts because it had rejected the goods by withholding payment for them. 22

Case 21. 2: China National v. Apex (Remedies of the Buyer) HELD: FOR CHINA NATIONAL. üThe court granted China National’s request for a writ of attachment in an amount of more than $18 million. üWhen Apex received complaints, it had the right to reject the DVD players. üBuyers can also accept non-conforming goods if the buyer does nothing after receiving goods it learns are non-conforming. Once the nonconforming goods are accepted, the buyer is under a duty to pay for them. üApex waived its right to reject by continuing to order players and selling them to retailers. 23

Case 21. 3: Yates v. Pitman (Remedies of the Buyer) FACTS: üPitman Manufacturing made and sold a construction cranes. Nine years later, Koch Carbon bought a crane and was using it to deliver equipment to Baldwin Coal Corp. üEddie Yates, a Baldwin employee, was injured when a Koch employee who could not see Yates activated the outrigger. üYates sued Pitman for breach of warranty. üDid Yates have to give notice to Pitman of its breach of warranty? 24

Case 21. 3: Yates v. Pitman (Remedies of the Buyer) HELD: NO. FOR YATES. üThe Virginia Supreme Court ruled that Yates was not a “buyer” and did not have to give notice under UCC 2– 607(3) to recover for his injuries. üThe statute “is unambiguous and clearly states that ‘the buyer must * * * notify the seller of [the] breach. ’ üThus, accepting the statute’s plain meaning, it is apparent that the notice of breach is required from the ‘buyer’ of the goods. In the present case, Yates was not the buyer of the crane unit. ” 25