P A R T P A R T Sales Formation & Terms Product Liability Performance of Sales Contract Remedies for Breach of Sales Contracts 4 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Remedies for Breach of Sales Contracts PA E TR HC 22 “Every great mistake has a halfway moment, a split second when it can be recalled and perhaps remedied.” Pearl S. Buck, novelist, What America Means to Me (1943)

Learning Objectives  Agreements as to remedies  Seller’s remedies  Buyer’s remedies

 Parties may agree contractually to remedies  Liquidated damages clause: parties agree on amount of damages to pay to injured party  Limitation or exclusion clause: parties agree to limit either the remedies available by law or the damages that can be covered [2–719(1)]  See Star-Shadow Productions, Inc. v. Super 8 Sync Sound System Agreements as to Remedies

 If buyer breaches contract and seller has manufactured goods, seller may:  Cancel contract [2–703(f)] and withhold delivery of goods [2–703(a)]  Resell goods, recover damages [2–706]  Recover purchase price of goods  Recover damages for rejection/repudiation  If goods in transit, seller may stop shipment UCC Seller’s Remedies

 Under the CISG, a seller has five remedies when buyer breaches the contract: suspend seller’s performance, avoid the contract, reclaim the goods from buyer, an action for the price, or an action for damages  Under the CISG, a buyer has four remedies: avoid contract, adjust price, obtain specific performance, an action for damages The CISG and Remedies

 Buy other goods (cover) and recover added expense damages from seller [2–712]  Recover damages for difference between contract and current market price [2–713]  Recover damages for nonconforming goods accepted; difference in value between received and expected goods [2–714]  Obtain specific performance for unique goods not available elsewhere [2–716] UCC Buyer’s Remedies

Test Your Knowledge  True=A, False = B  If buyer refuses to accept conforming goods, seller may recover damages, such as lost profit  If an insolvent buyer has the goods, the seller may reclaim the goods from buyer  If seller breaches the contract by failing to deliver the goods, buyer may “cover” and recover damages

Test Your Knowledge  Multiple Choice  Widgets agreed to deliver 500 cases of grommets to ToyCo by Sept. 1. Widgets knew ToyCo needed the grommets to make toys for delivery by Dec. 1. Widgets delivered the order Nov. 29. ToyCo may:  (a) buy grommets elsewhere to cover  (b) sue for damages  (c) obtain specific performance  (d) both A and B  (e) all of the above

Thought Questions  Nancy had a car to sell that she knew had been in an accident and repaired. Is it ethical to sell a damaged and repaired car without telling the potential buyer? Does your answer change if Nancy owned a car dealership or a specialty car manufacturing company?