©2001 west legal studies in business. all rights reserved. 1 chapter 22: remedies for breach of...

©2001 West Legal Studies in Business. All Rights Reserved.1

Chapter 22: Chapter 22: Remedies for Breach of Remedies for Breach of

Sales and Lease AgreementsSales and Lease Agreements

Chapter 22: Chapter 22: Remedies for Breach of Remedies for Breach of

Sales and Lease AgreementsSales and Lease Agreements


RemediesRemediesRemediesRemedies

§2: Buyer’s§2: Buyer’s§1:Seller’s§1:Seller’s

Proceed to Section 3Proceed to Section 3If Goods in

Buyer’s PossessionIf Goods in

Buyer’s Possession

If Seller delivers non-conforming goods

If Seller delivers non-conforming goods

If Goods in Carrier’s PossessionIf Goods in Carrier’s Possession

If Goods in Seller’s Possession

If Goods in Seller’s Possession

If Goods in Seller’s PossessionIf Goods in Seller’s Possession

Click on the Links Below


§3: §3: Contractual Provisions Contractual Provisions Affecting RemediesAffecting Remedies

§3: §3: Contractual Provisions Contractual Provisions Affecting RemediesAffecting 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.

• Case 22.3: Transport Corp of America v. IBM (1994).


§4: §4: Lemon LawsLemon Laws§4: §4: Lemon LawsLemon 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 Remedies for Breach of International SalesInternational Sales

§5: §5: Remedies for Breach of Remedies for Breach of International SalesInternational 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 Goods in Seller’s Possession [1][1]Goods in Seller’s Possession Goods in Seller’s Possession [1][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.



• Seller may rescind the contract.• Seller may identify the goods to the

contract.• Seller may sell raw materials for scrap or

finish production.

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• 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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• 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.


Goods in Transit Goods in Transit [1][1]Goods in Transit Goods in Transit [1][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.

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Goods in Transit Goods in Transit [2][2]Goods in Transit Goods in Transit [2][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 PossessionGoods in Buyer’s PossessionGoods in Buyer’s PossessionGoods 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.


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Goods in Seller’s PossessionGoods in Seller’s PossessionGoods in Seller’s PossessionGoods 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 22.1: KGM Harvesting v. Fresh Network (1995).


Seller Delivers Seller Delivers Nonconforming Goods Nonconforming Goods [1][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.

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• If Buyer has accepted non-conforming goods, she may:– Sue for breach of warranty.– Sue for ordinary damages.– Deduct damages from purchase price.– Case 22.2: Yates v. Pitman Manufacturing

(1999).


§§ 3: Contractual Provisions 3: Contractual Provisions Affecting RemediesAffecting Remedies

§§ 3: Contractual Provisions 3: Contractual Provisions Affecting RemediesAffecting Remedies

• Limitation of Damages.• Limitation of Remedies.• Waiver of Defenses.


§§ 4: Lemon Laws 4: Lemon Laws§§ 4: Lemon Laws 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.


§§ 5: Remedies for Breach of 5: Remedies for Breach of International Sales ContractsInternational Sales Contracts§§ 5: Remedies for Breach of 5: Remedies for Breach of International Sales ContractsInternational 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.


Law on the WebLaw on the WebLaw on the WebLaw on the Web

• Discussion of Lemon Law basics.• Example of Excusive Warranty Remedy.

• Legal Research Exercises on the Web.

©2001 west legal studies in business. all rights reserved. 1 chapter 22: remedies for breach of...

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