Chapter 21

Remedies for Breach of

Sales and Lease Agreements
 Remedies of the Seller
and Buyer
Click on the Links Below

§1:Seller §2: Buyer

If Goods in Seller’s Posse If Goods in Seller’s Posse
ssion ssion
If Goods in Carrier’s Pos If Seller delivers non-con
session forming goods
If Goods in Buyer’s Poss
ession Proceed to Section 3

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 §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.

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 §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.
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 §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.
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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
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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
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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.

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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.

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 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
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 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.

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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
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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
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 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
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 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.

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

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 § 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.

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 § 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.
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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.

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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.”

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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.

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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.

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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.

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 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 Yates activated the
outrigger.
Yates sued Pitman for breach of warranty.
Did Yates have to give notice to Pitman of its breach of
warranty?

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 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.”

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