Chapter 21 Remedies for Breach of Sales and Lease Agreements

1. Chapter 21 Remedies for Breach of Sales and Lease Agreements

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

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.

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.

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.

6. 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. Next

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

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

9. 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. Return

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

11. 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. Return

12. 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. Return

13. 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. Return

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

15. 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. Return

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

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.

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.

19. Case 21.1: KGM v. FreshNetwork(Remedies of the Buyer/Lessee) • FACTS: • KGM Harvesting agreed to deliver fourteen loads of lettuce each week to Fresh Network. Fresh Network sold the lettuce to Castellini which sold it to Club Chef. • The 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. • Fresh Network refused to pay KGM for previous shipments and KGM sued.

20. Case 21.1: KGM v. FreshNetwork(Remedies of the Buyer/Lessee) • HELD: DAMAGES FOR FRESH. • The 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. • “[T]he object of contract damages is to give the aggrieved party as nearly as possible the equivalent of the benefits of performance.”

21. Case 21.2: China National v. Apex(Remedies of the Buyer) • FACTS: • Apex 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. • China National is a corporation based in Beijing, China that facilitates the import and export of goods between Chinese and foreign companies. • Apex imported more than 300,000 DVD players under several contracts with Chinese companies through China National.

22. Case 21.2: China National v. Apex(Remedies of the Buyer) • FACTS (cont’d) • Apex 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. • The parties submitted their dispute to arbitration. • China National sued Apex to obtain a writ of attachment (an order to seize Apex’s property to secure payment for the DVD players). • Apex argued it was not liable under the contracts because it had rejected the goods by withholding payment for them.

23. Case 21.2: China National v. Apex(Remedies of the Buyer) • HELD: FOR CHINA NATIONAL. • The court granted China National’s request for a writ of attachment in an amount of more than $18 million. • When Apex received complaints, it had the right to reject the DVD players. • Buyers can also accept non-conforming goods if the buyer does nothing after receiving goods it learns are non-conforming. Once the non-conforming goods are accepted, the buyer is under a duty to pay for them. • Apex waived its right to reject by continuing to order players and selling them to retailers.

24. Case 21.3: Yates v. Pitman(Remedies of the Buyer) • FACTS: • Pitman 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. • Eddie Yates, a Baldwin employee, was injured when a Koch employee who could not see Yatesactivated the outrigger. • Yates sued Pitman for breach of warranty. • Did Yates have to give notice to Pitman of its breach of warranty?

25. Case 21.3: Yates v. Pitman(Remedies of the Buyer) • HELD: NO. FOR YATES. • The 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. • The statute “is unambiguous and clearly states that ‘the buyer must *  *  * notify the seller of [the] breach.’ • Thus, 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.”