© 2004 West Legal Studies in Business A Division of Thomson Learning 1 Chapter 22 Remedies for Breach of Sales and Lease Contracts Chapter 22 Remedies for Breach of Sales and Lease Contracts

© 2004 West Legal Studies in Business A Division of Thomson Learning 2 Remedies §2: Buyer §1:Seller Proceed to Section 3 Goods in Buyer’s Possession Goods in Buyer’s Possession Seller delivers non- conforming goods Seller delivers non- conforming goods Goods are in Transit Goods are in Transit Goods in Seller’s Possession Goods in Seller’s Possession Goods in Seller’s Possession Goods in Seller’s Possession Click on the Links Below

© 2004 West Legal Studies in Business A Division of Thomson Learning 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 6 Next Seller- Goods in Seller’s Possession 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 7 Seller- Goods in Seller’s Possession Seller may rescind the contract. Seller may identify the goods to the contract. Seller may sell raw materials for scrap or finish production. Seller may rescind the contract. Seller may identify the goods to the contract. Seller may sell raw materials for scrap or finish production. Next

© 2004 West Legal Studies in Business A Division of Thomson Learning 8 Seller-Goods in Seller’s Possession 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. Case 22.1: Brandeis Machinery v. Capital Crane Rental (2002). 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. Case 22.1: Brandeis Machinery v. Capital Crane Rental (2002). Next

© 2004 West Legal Studies in Business A Division of Thomson Learning 9 Return Seller-Goods in Seller’s Possession 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 10 Seller-Goods in Transit 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. 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

© 2004 West Legal Studies in Business A Division of Thomson Learning 11 Seller-Goods in Transit 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. 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. Return

© 2004 West Legal Studies in Business A Division of Thomson Learning 12 Seller-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. 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. Return

© 2004 West Legal Studies in Business A Division of Thomson Learning 13 Buyer-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 22.2: KGM Harvesting v. Fresh Network (1995). 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 22.2: KGM Harvesting v. Fresh Network (1995). Return

© 2004 West Legal Studies in Business A Division of Thomson Learning 14 Buyer-Seller Delivers Nonconforming Goods 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. 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

© 2004 West Legal Studies in Business A Division of Thomson Learning 15 If Buyer has accepted non-conforming goods, she may:  Sue for breach of warranty.  Sue for ordinary damages.  Deduct damages from purchase price. Case 22.3: China National Metal Products v. Apex Digital (2001). If Buyer has accepted non-conforming goods, she may:  Sue for breach of warranty.  Sue for ordinary damages.  Deduct damages from purchase price. Case 22.3: China National Metal Products v. Apex Digital (2001). Return Buyer-Seller Delivers Nonconforming Goods

© 2004 West Legal Studies in Business A Division of Thomson Learning 16 § 3: Contractual Provisions Affecting Remedies Limitation of Damages. Limitation of Remedies. Waiver of Defenses. Limitation of Damages. Limitation of Remedies. Waiver of Defenses.

© 2004 West Legal Studies in Business A Division of Thomson Learning 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 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. 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.

© 2004 West Legal Studies in Business A Division of Thomson Learning 19 Law on the Web Discussion of Lemon Law basics. Discussion of Lemon Law basics Example of 3M Excusive Warranty Remedy. Example of 3M Excusive Warranty Remedy Legal Research Exercises on the Web. Discussion of Lemon Law basics. Discussion of Lemon Law basics Example of 3M Excusive Warranty Remedy. Example of 3M Excusive Warranty Remedy Legal Research Exercises on the Web.