©2001 West Legal Studies in Business. All Rights Reserved. 1 Chapter 22: Remedies for Breach of Sales and Lease Agreements

©2001 West Legal Studies in Business. All Rights Reserved. 2 RemediesRemedies §2: Buyer’s §1:Seller’s Proceed to Section 3 If Goods in Buyer’s Possession If Goods in Buyer’s Possession If Seller delivers non- conforming goods If Seller delivers non- conforming goods If Goods in Carrier’s Possession If Goods in Carrier’s Possession If Goods in Seller’s Possession If Goods in Seller’s Possession If Goods in Seller’s Possession If Goods in Seller’s Possession Click on the Links Below

©2001 West Legal Studies in Business. All Rights Reserved. 3 §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. Case 22.3: Transport Corp of America v. IBM (1994).

©2001 West Legal Studies in Business. All Rights Reserved. 4 §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: –A new car; –Replacement of defective parts; –Or full refund.

©2001 West Legal Studies in Business. All Rights Reserved. 5 §5: Remedies for Breach of International Sales CISG provides remedies similar to the UCC: –Monetary damages that are foreseeable, consequential damages. –Damages are difference between contract price and market price. Parties can agree to what law they will use.

©2001 West Legal Studies in Business. All Rights Reserved. 6 Next Goods in Seller’s Possession [1] Seller may withhold delivery of the goods: –If material breach by Buyer, Seller can withhold delivery of all goods. –If non-material breach, Seller can withhold delivery of this installment. Seller can withhold delivery of all goods if Buyer is insolvent.

©2001 West Legal Studies in Business. All Rights Reserved. 7 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

©2001 West Legal Studies in Business. All Rights Reserved. 8 Goods in Seller’s Possession [3] Seller may resell the goods; and –Recover 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. –If No Damages, Seller can sue for lost profits. Next

©2001 West Legal Studies in Business. All Rights Reserved. 9 Return Goods in Seller’s Possession [4] Seller may sue Buyer for breach of contract. –Recover Damages = the market price at the time & place of tender + incidental damages. »if there are no damages, Seller can sue for lost profits.

©2001 West Legal Studies in Business. All Rights Reserved. 10 Goods in Transit [1] Goods are “in transit” when Seller has tendered goods to Carrier. Goods are in transit until: –Buyer is given negotiable document of title to goods. –Buyer is given non-negotiable document of title or Bailee has acknowledged Buyer’s right to have the goods. –Buyer has had a reasonable time to pick up the goods. Next

©2001 West Legal Studies in Business. All Rights Reserved. 11 Return Goods in Transit [2] Seller has the right to stop the goods in transit if: –Buyer is insolvent - Seller can stop entire shipment of goods. –Buyer is in breach - Seller may stop a whole truckload or whole container.

©2001 West Legal Studies in Business. All Rights Reserved. 12 Return Goods in Buyer’s Possession Seller may sue for the purchase price. –Seller may also sue Buyer if goods were “specially-made” which Seller cannot resell. –Seller 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.

©2001 West Legal Studies in Business. All Rights Reserved. 13 Return Goods in Seller’s Possession Buyer Wants Goods –Specific performance or replevin –Recover goods from Seller if Seller becomes insolvent within 10 days after receiving first payment. Buyer Does Not Want Goods –Rescind contract. –Cover or do not cover and sue for breach of contract. Case 22.1: KGM Harvesting v. Fresh Network (1995).

©2001 West Legal Studies in Business. All Rights Reserved. 14 Seller Delivers Nonconforming Goods [1] If Seller does not make perfect tender Buyer has the right to reject all or part of goods. –Buyer must timely notify Seller of rejection and reasons and follow Seller’s directions. –Buyer is entitled to commission for selling perishable goods. –Buyer may store the goods and retain a security interest in the goods for his costs. Next

©2001 West Legal Studies in Business. All Rights Reserved. 15 Return Seller Delivers Nonconforming Goods [2] If Buyer has accepted non-conforming goods, she may: –Sue for breach of warranty. –Sue for ordinary damages. –Deduct damages from purchase price. –Case 22.2: Yates v. Pitman Manufacturing (1999).Yates v. Pitman Manufacturing

©2001 West Legal Studies in Business. All Rights Reserved. 16 § 3: Contractual Provisions Affecting Remedies Limitation of Damages. Limitation of Remedies. Waiver of Defenses.

©2001 West Legal Studies in Business. All Rights Reserved. 17 § 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: –Give notice. –Seller gets four chances to fix. –Arbitration: decision binding on manufacturer, not on Buyer.

©2001 West Legal Studies in Business. All Rights Reserved. 18 § 5: Remedies for Breach of International Sales Contracts CISG provides remedies similar to the UCC. Article 74 provides for money damages, foreseeable consequential damages. –Damages 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.

©2001 West Legal Studies in Business. All Rights Reserved. 19 Law on the Web Discussion of Lemon Law basics.Discussion of Lemon Law basics Example of Excusive Warranty Remedy.Example of Excusive Warranty Remedy Legal Research Exercises on the Web.