Remedies

1
CHAPTER 21

• Remedies
• for Breach
• of Sales Contracts

2
Introduction

• Agreements As To Remedies or Damages
• Liquidated Damages
• By prior agreement
• Not as a punishment
• Question 2 at end of chapter.
• Yes. The court held that damages should be
  awarded to Baker and based on the liquidated
  damages clause. Citing Section 2-718 of the UCC,
  it said that under Texas law, a liquidated
  damages clause will be enforced when the court
  finds (1) the harm caused by the breach is
  incapable or difficult of estimation, and (2) the
  amount of liquidated damages is a reasonable
  forecast of just compensation. Here, in light of
  Timbuk-3s unknown potential for fame, along with
  the inherent difficulty in determining the value
  of a piece of art and the uncertain long-term
  earning power of the photographs, 1,500 was not
  an unreasonable estimate of Bakers actual
  damages. The court also noted that IRS was
  unable to present satisfactory evidence showing
  actual damage disproportionate to the claimed
  liquidated damages, and thus there was no basis
  for voiding them as a penalty. Baker v.
  International Record Syndicate, Inc., 812 S.W.2d
  53 (Ct. App. Tex. 1991).

3
Introduction

• Agreements As To Remedies or Damages
• Consequential Damages
• May be limited by agreement if not unconscionable
• Moore v. Coachman Industries, Inc., p.360
• Where a limited warranty limited a manufacturers
  liability to repair and replacement for a year or
  15,000 miles and excluded consequential and
  incidental damages, the buyer was barred from
  recovering damages when the vehicle was destroyed
  by fire outside the warranty period due to
  defects.
• Question 3 at end of chapter.
• Yes. Under section 2-719, consequential damages
  may be limited or excluded unless the limitation
  or exclusion is unconscionable. Here no injury
  to the person of Lobianco is involved, so the
  limitation is not prima facie unconscionable. At
  the same time the loss is not commercial and the
  loss is not presumptively conscionable. In
  analyzing this situation, it was noted that the
  alarm company had assumed some responsibilityrepa
  iring the alarm system so that it would workand
  Lobianco had assumed the risk of loss that the
  contract had left her with, a risk she could
  cover by insurance. Accordingly, the limitation
  of liability was not unconscionableand was
  enforced against Lobianco. Lobianco v. Property
  Protection, Inc., 437 A.2d 417 (Super. Ct. Pa.
  1981).

4
Introduction

• Statute of Limitations
• Normally 4 years
• Parties may limit to 1
• For warranty covering future performance, breach
  begins upon discovery
• Question 4 at end of chapter
• Painter v. General Motors Corp.
• Where an automobile covered by a three-year,
  50,000 mile bumper to bumper warranty was
  destroyed in a fire fifteen months after deliver,
  a lawsuit filed more than four years after the
  delivery of the vehicle but less than four years
  after the fire was barred by the four-year
  statute of limitations in the UCC. The court
  held that the warranty in this case did not
  extend to future performance of the vehicle and
  thus the statute of limitations began to toll on
  the delivery of the vehicle.
• Example Under the Code, a breach of warranty
  action for a warranty that extends to future
  performance accrues on the date the breach was
  discovered or should have been discovered. Here,
  because of the nature of insect infestationthat
  the insects might not appear until several years
  after infestationthe warranty extended to future
  performance. Here the infestation apparently
  occurred at delivery or shortly thereafterand
  the insects did not appear until several years
  later. The statute of limitations did not begin
  to run until the insects wereor could have
  beendiscovered. Parzek v. New England Log Homes,
  Inc., 460 N.Y.S.2d 698 (Sup. Ct. N.Y. 1983).

5
Introduction

• Statute of Limitations
• Normally 4 years
• Parties may limit to 1
• For warranty covering future performance, breach
  begins upon discovery
• Poli v. DaimlerChrysler Corp., p. 361
• Where a seven-year, 70,000 mile warranty on the
  powertrain was purchased in 1993 along with a new
  1992 model automobile, the warranty constituted a
  warranty of future performance when defects
  surfaced in 1997 and 1998. The buyers cause of
  action did not occur when the car was delivered
  in 1993 but rather when the persistent problems
  occurred. Thus a lawsuit filed in 1998 was
  timely filed and was not barred by the four year
  statute of limitations in the UCC. Note how
  different the result is in this case because the
  warranty was determined to be one that related to
  the future performance of the goods. If the
  warranty related only to the condition of the
  automobile at the time it was delivered, then the
  defect and the buyers cause of action would have
  had to occur when the car was delivered. The
  buyer would have had to file his lawsuit within
  four years of that time, or it would have been
  barred by the statute of limitations. In this
  case the buyer did not become aware of the defect
  until more than four years after it had been
  delivered however, the warranty provided that it
  was warranted for seven years or 70,000 miles and
  was in effect when the defect was discovered.

6
Sellers Remedies

• Injured Seller- Buyer Refusal To Accept
• Cancel Contract and Withhold Delivery
• Duty to Mitigate
• Madsen v. Murrey Sons Co., Inc., p. 363
• Where seller had largely completed assembly of
  100 specially ordered pool tables when buyer
  repudiated the contract, seller did not proceed
  in a commercially reasonably manner when it
  dismantled the pool tables, used salvageable
  materials to make other tables, and used much of
  the material for firewood.
• Note that while a court will give the
  manufacturer of specially manufactured some room
  to make what it believes to be a reasonable
  effort to mitigate damages, here the court found
  that the sellers actions were outside the bounds
  of reasonableness.

7
Sellers Remedies

• Injured Seller- Buyer Refusal To Accept
• Resell Goods
• In Good Faith Reasonable Commercial Manner
• If so, entitled to recover difference in price
• May recover incidental damages (e.g. storage
  charges)
• Example Mrs. Bechtel can claim that Pollack Furs
  must make an effort to resell the goods pursuant
  to Section 2-709(1)(B). She stands a good chance
  of winning on this argument. Even though the
  coat was specially made, it would probably not be
  so individualized so as to preclude resale.
  Furthermore, there is the possibility of someone
  buying the coat merely for the value of the fur.
  Therefore, Pollack Furs should be required to try
  to resell. S. Pollack, Inc. v. Bechtel, 8 UCC
  Rep. 1103 (Sup. Ct. Miss 1978)
• Question 7 at end of chapter.
• Yes. Cohn was awarded 1,679.50 as damages. The
  resale was made in good faith and in a
  commercially reasonable manner after giving
  notice of it to Fisher. Under these circumstances
  the seller is entitled to recover from the
  defaulting buyer the difference between the
  contract price and the resale price together with
  incidental damages. Cohn v. Fisher, 287 A.2d 222
  (Super. Ct. N.J. 1972).

8
Sellers Remedies

• Injured Seller- Buyer Refusal To Accept
• Recover Purchase
• Where accepted, conformed, or lost under buyers
  risk
• Lost Profit
• Difference Between Contract and Market Price
• Jewish Federation of Greater Des Moines v. Cedar
  Forrest Products Co., p. 365
• When the buyer cancelled a contract to
  manufacture a customized building, the seller was
  entitled to recover the profit it would have made
  from full performance of the contract even though
  it also had been able to resell some of the items
  it had acquired in anticipation of the contract
  for the same price as called for in the contract.
• Reclaim Goods
• Insolvent Buyer
• Withhold Delivery

9
Buyers Remedies

• Injured Buyer
• Cancel Contract Recover Damages
• Question 6 at end of chapter
• Baker v. Burlington Coat Factory Warehouse
• Where the seller breached the warranty of
  merchantability by selling a coat that was not
  suitable for use and the buyer returned the coat
  to the seller, the buyer was entitled to a refund
  of the purchase price paid for the goods despite
  the fact the seller had a no cash refunds policy.

10
Buyers Remedies

• Injured Buyer
• Buy Other Goods (Covering) Recover Damages
• KGB Harvesting Co. v. Fresh Network, p. 368
• Where the price of lettuce increased dramatically
  and the seller refused to fulfill its commitments
  to the buyer, the buyer was entitled to recoup as
  damages the difference between the cost of cover
  and the contract price, even though the buyer was
  able to recover some of the increased cost from
  its buyer.

11
Buyers Remedies

• Injured Buyer
• Extra Expense -Incidental/Consequential Damages
• Difference Between Contract and Market Price
• Question 9 at end of chapter
• Yes. The court held that in order to recover any
  losses it may have sustained as a result of
  Certinas breach, Migerobe had to show that
  Certina, at the time of contracting, had reason
  to know that such losses were possible and that
  the damages were proximately caused by the
  breach. Here, Certina knew that the watches were
  to be used as a loss leader. And, the historical
  data established the loss sustained by Migerobe
  when, as a result of Certinas breach ,shortly
  before its planned advertisement, it did not have
  Certina watches to use as a loss leader.
  Migerobe, Inc. v. Certina USA, Inc., 924 F.2d
  1330 (5th Cir. 1991).

12
Buyers Remedies

• Injured Buyer
• Lost Value
• Jetpac Group, Ltd. V. Bostek, Inc., p.369
• Where the seller breached the contract by
  delivering defective goods, the seller was
  entitled to recover not only damages for breach
  of warranty but also consequential damages in the
  form of lost profits from prospective future
  re-sales of computers as well as incidental
  expenses incurred as a result of the sellers
  breach of contract.

13
Buyers Remedies

• Injured Buyer
• Lost Value
• Question 8 at end of chapter.
• The court awarded Barr the difference between the
  market value the yacht would have had if it had
  been as warranted and represented (which it found
  to be 93,700) and its market value at the time
  of sale (50 per cent of that or 46,850). It
  also warded Barr 1,531 for repairs necessary to
  bring the yacht up to being worth 50 percent of
  the value as warranted. Barr v. S-2 Yachts,
  Inc., 7 UCC Rep.2d 1431 (E.D. Va. 1988).

14
Buyers Remedies

• Injured Buyer
• Specific Performance -where unique
• Question 10 at end of chapter.
• Yes. Schweber could get specific performance if
  he could show a breach of contract by Rallye
  Motors. Under the Code specific performance may
  be granted where the goods are unique or in
  other proper circumstances. Schweber v. Rallye
  Motors, Inc., 12 UCC Rep. 1154 (Sup. Ct. N.Y.
  1973).