UCC Remedies for Breach of a Contract - Romano Law

UCC Remedies for Breach of a Contract

UCC Remedies for Breach of a Contract

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When parties enter into a contract for the purchase and sales of goods, different rules may apply than for other types of contracts. The Uniform Commercial Code (UCC) was developed to try to standardize state laws with respect to certain types of transactions. All states have adopted some, but not necessarily all, of the UCC provisions. The UCC applies to contracts for the sale of movable goods, which includes shipments of goods between merchants and between merchants and consumers. Contracts subject to the UCC must meet its requirements to be enforceable. In addition, the UCC sets forth specific remedies for breach.

Seller breaches the contract

Where a seller repudiates the contract and/or fails to deliver the goods, the buyer can sue for breach of contract. Under the UCC, the buyer can get damages for the breach equal to the difference between the contract price and the market price at the time the buyer learned of the breach plus any incidental and consequential damages permitted by the UCC. To obtain consequential damages, the seller is required to be aware of or have reasonably foreseen the specific needs or requirements of the buyer at the time of contracting, which led to such damages. Any expenses saved because of the seller’s breach must be deducted from the damages. The market price is determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

Note that in a contract that does not fall under the UCC, a buyer can also sue for damages, which are measured in similar, but not identical terms to the UCC. Essentially, damages under “common law” contract law are based on making the buyer whole – i.e., paying the buyer enough money to get what they were promised in the contract. Common law contract law also provides for restitution, which allows the buyer to get back any money paid to the seller and puts the buyer in the position as if the promise had never been made. Specific performance of the contract may also be awarded in certain cases as discussed in a previous post.

Buyer breaches the contract

Where a buyer refuses to accept or pay for goods from the seller, the seller may sue for breach. In this case, the UCC provides for damages equal to “the difference between the market price at the time and place for tender and the unpaid contract price” together with any incidental damages permitted by the UCC, but fewer expenses saved in consequence of the buyer’s breach. Incidental damages in connection with a buyer’s breach could include any commercially reasonable charges incurred in the process of stopping delivery, whether related to shipping, care or other expenses related to the control of the goods.

In addition, if such damages are not sufficient to compensate the seller, the seller may receive as damages the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages, but with due allowance for costs reasonably incurred, and due credit for payments or proceeds of resale.

The UCC permits the seller to also take other steps with respect to the goods directly affected or if the whole contract was breached, with respect to the whole undelivered balance of the contract. These remedies include withholding or stopping the delivery of the goods, reselling the goods and canceling the contract.

Under common law contract law, the seller can also obtain compensatory damages to cover any loss directly connected to the breach of contract as well as special damages, which cover any loss which was incurred because of special circumstances or conditions which the breaching party knew about when the contract was made. The seller does have a duty to mitigate damages, and therefore, should attempt to sell its goods elsewhere to recoup their loss. As with the buyer’s remedies, the seller can also seek restitution or the return of any money or property the buyer received from the seller.

Actions upon breach

If the other party to your contract has breached, it is important to document your communications and the circumstances surrounding the breach as well as comply with any contract requirements related to providing the other party with written notice and an opportunity to cure the breach. In addition, detail any steps you take to mitigate your damages. Finally, consult an experienced attorney about protecting and enforcing your rights.

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Notice

This Blog is made available by Romano Law PLLC for general informational and educational purposes only, not to provide specific legal advice. By using this Blog you understand that there is no attorney client relationship between you and Romano Law PLLC or any individual contributor. You should consult a licensed professional attorney for individual advice regarding your own situation.

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