Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this article.
(Dec. 30, 1963, 77 Stat. 664, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
Whether a claim for breach of an obligation collateral to the contract for sale requires separate trial to avoid confusion of issues is beyond the scope of this Article; but contractual arrangements which as a business matter enter vitally into the contract should be considered a part thereof in so far as cross-claims or defenses are concerned.
Definitional Cross References
"Contract for sale". Section 2-106.
"Remedy". Section 1-201.
Prior Codifications
1981 Ed., § 28:2-701.
1973 Ed., § 28:2-701.
(1) Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this article (section 28:2-705).
(2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the ten day limitation does not apply. Except as provided in this subsection, the seller may not base a right to reclaim goods on the buyer's fraudulent or innocent misrepresentation of solvency or of intent to pay.
(3) The seller's right to reclaim under subsection (2) is subject to the rights of a buyer in ordinary course or other good faith purchaser under this article (section 28:2-403). Successful reclamation of goods excludes all other remedies with respect to them.
(Dec. 30, 1963, 77 Stat. 664, Pub. L. 88-243, § 1; Mar. 16, 1982, D.C. Law 4-85, § 5, 29 DCR 309.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Subsection (1)--Sections 53(1)(b), 54(1)(c) and 57, Uniform Sales Act; Subsection (2)--none; Subsection (3)--Section 76(3), Uniform Sales Act.Changes
Rewritten, the protection given to a seller who has sold on credit and has delivered goods to the buyer immediately preceding his insolvency being extended.Purposes of Changes and New Matter
To make it clear that:
1. The seller's right to withhold the goods or to stop delivery except for cash when he discovers the buyer's insolvency is made explicit in subsection (1) regardless of the passage of title, and the concept of stoppage has been extended to include goods in the possession of any bailee who has not yet attorned to the buyer.
2. Subsection (2) takes as its base line the proposition that any receipt of goods on credit by an insolvent buyer amounts to a tacit business misrepresentation of solvency and therefore is fraudulent as against the particular seller. This Article makes discovery of the buyer's insolvency and demand within a ten day period a condition of the right to reclaim goods on this ground. The ten day limitation period operates from the time of receipt of the goods.
An exception to this time limitation is made when a written misrepresentation of solvency has been made to the particular seller within three months prior to the delivery. To fall within the exception the statement of solvency must be in writing, addressed to the particular seller and dated within three months of the delivery.
3. Because the right of the seller to reclaim goods under this section constitutes preferential treatment as against the buyer's other creditors, subsection (3) provides that such reclamation bars all his other remedies as to the goods involved. As amended 1966.
Cross References
Point 1: Sections 2-401 and 2-705.
Compare Section 2-502.
Definitional Cross References
"Buyer". Section 2-103.
"Buyer in ordinary course of business". Section 1-201.
"Contract". Section 1-201.
"Good faith". Section 1-201.
"Goods". Section 2-105.
"Insolvent". Section 1-201.
"Person". Section 1-201.
"Purchaser". Section 1-201.
"Receipt" of goods. Section 2-103.
"Remedy". Section 1-201.
"Rights". Section 1-201.
"Seller". Section 2-103.
"Writing". Section 1-201.
Prior Codifications
1981 Ed., § 28:2-702.
1973 Ed., § 28:2-702.
Legislative History of Laws
For legislative history of D.C. Law 4-85, see Historical and Statutory Notes following § 28:2-107.
Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (section 28:2-612), then also with respect to the whole undelivered balance, the aggrieved seller may
(a) withhold delivery of such goods;
(b) stop delivery by any bailee as hereafter provided (section 28:2-705);
(c) proceed under the next section respecting goods still unidentified to the contract;
(d) resell and recover damages as hereafter provided (section 28:2-706);
(f) cancel.
(Dec. 30, 1963, 77 Stat. 664, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
No comparable index section. See Section 53, Uniform Sales Act.Purposes
1. This section is an index section which gathers together in one convenient place all of the various remedies open to a seller for any breach by the buyer. This Article rejects any doctrine of election of remedy as a fundamental policy and thus the remedies are essentially cumulative in nature and include all of the available remedies for breach. Whether the pursuit of one remedy bars another depends entirely on the facts of the individual case.
2. The buyer's breach which occasions the use of the remedies under this section may involve only one lot or delivery of goods, or may involve all of the goods which are the subject matter of the particular contract. The right of the seller to pursue a remedy as to all the goods when the breach is as to only one or more lots is covered by the section on breach in installment contracts. The present section deals only with the remedies available after the goods involved in the breach have been determined by that section.
3. In addition to the typical case of refusal to pay or default in payment, the language in the preamble, "fails to make a payment due," is intended to cover the dishonor of a check on due presentment, or the non-acceptance of a draft, and the failure to furnish an agreed letter of credit.
4. It should also be noted that this Act requires its remedies to be liberally administered and provides that any right or obligation which it declares is enforceable by action unless a different effect is specifically prescribed (Section 1-106).
Cross References
Point 2: Section 2-612.
Point 3: Section 2-325.
Point 4: Section 1-106.
Definitional Cross References
"Aggrieved party". Section 1-201.
"Buyer". Section 2-103.
"Cancellation". Section 2-106.
"Contract". Section 1-201.
"Goods". Section 2-105.
"Remedy". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-703.
1973 Ed., § 28:2-703.
(1) An aggrieved seller under the preceding section may
(a) identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control;
(b) treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.
(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.
(Dec. 30, 1963, 77 Stat. 665, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Sections 63(3) and 64(4), Uniform Sales Act.Changes
Rewritten, the seller's rights being broadened.Purposes of Changes
1. This section gives an aggrieved seller the right at the time of breach to identify to the contract any conforming finished goods, regardless of their resalability, and to use reasonable judgment as to completing unfinished goods. It thus makes the goods available for resale under the resale section, the seller's primary remedy, and in the special case in which resale is not practicable, allows the action for the price which would then be necessary to give the seller the value of his contract.
2. Under this Article the seller is given express power to complete manufacture or procurement of goods for the contract unless the exercise of reasonable commercial judgment as to the facts as they appear at the time he learns of the breach makes it clear that such action will result in a material increase in damages. The burden is on the buyer to show the commercially unreasonable nature of the seller's action in completing manufacture.
Cross References
Sections 2-703 and 2-706.Definitional Cross References
"Aggrieved party". Section 1-201.
"Conforming". Section 2-106.
"Contract". Section 1-201.
"Goods". Section 2-105.
"Rights". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-704.
1973 Ed., § 28:2-704.
(1) The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (section 28:2-702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
(2) As against such buyer the seller may stop delivery until
(a) receipt of the goods by the buyer; or
(b) acknowledgement to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
(c) such acknowledgment to the buyer by a carrier by reshipment or as warehouseman; or
(d) negotiation to the buyer of any negotiable document of title covering the goods.
(3)(a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(b) After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.
(c) If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of the document.
(d) A carrier who has issued a non-negotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
(Dec. 30, 1963, 77 Stat. 665, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Sections 57-59, Uniform Sales Act; see also Sections 12, 14 and 42, Uniform Bills of Lading Act and Sections 9, 11 and 49, Uniform Warehouse Receipts Act.Changes
This section continues and develops the above sections of the Uniform Sales Act in the light of the other uniform statutory provisions noted.Purposes
To make it clear that:
1. Subsection (1) applies the stoppage principle to other bailees as well as carriers.
It also expands the remedy to cover the situations, in addition to buyer's insolvency, specified in the subsection. But since stoppage is a burden in any case to carriers, and might be a very heavy burden to them if it covered all small shipments in all these situations, the right to stop for reasons other than insolvency is limited to carload, truckload, planeload or larger shipments. The seller shipping to a buyer of doubtful credit can protect himself by shipping C.O.D.
Where stoppage occurs for insecurity it is merely a suspension of performance, and if assurances are duly forthcoming from the buyer the seller is not entitled to resell or divert.
Improper stoppage is a breach by the seller if it effectively interferes with the buyer's right to due tender under the section on manner of tender of delivery. However, if the bailee obeys an unjustified order to stop he may also be liable to the buyer. The measure of his obligation is dependent on the provisions of the Documents of Title Article (Section 7-303). Subsection 3(b) therefore gives him a right of indemnity as against the seller in such a case.
2. "Receipt by the buyer" includes receipt by the buyer's designated representative, the subpurchaser, when shipment is made direct to him and the buyer himself never receives the goods. It is entirely proper under this Article that the seller, by making such direct shipment to the sub-purchaser, be regarded as acquiescing in the latter's purchase and as thus barred from stoppage of the goods as against him.
As between the buyer and the seller, the latter's right to stop the goods at any time until they reach the place of final delivery is recognized by this section.
Under subsection (3)(c) and (d), the carrier is under no duty to recognize the stop order of a person who is a stranger to the carrier's contract. But the seller's right as against the buyer to stop delivery remains, whether or not the carrier is obligated to recognize the stop order. If the carrier does obey it, the buyer cannot complain merely because of that circumstance; and the seller becomes obligated under subsection (3)(b) to pay the carrier any ensuing damages or charges.
3. A diversion of a shipment is not a "reshipment" under subsection (2)(c) when it is merely an incident to the original contract of transportation. Nor is the procurement of "exchange bills" of lading which change only the name of the consignee to that of the buyer's local agent but do not alter the destination of a reshipment.
Acknowledgment by the carrier as a "warehouseman" within the meaning of this Article requires a contract of a truly different character from the original shipment, a contract not in extension of transit but as a warehouseman.
4. Subsection (3)(c) makes the bailee's obedience of a notification to stop conditional upon the surrender of any outstanding negotiable document.
5. Any charges or losses incurred by the carrier in following the seller's orders, whether or not he was obligated to do so, fall to the seller's charge.
6. After an effective stoppage under this section the seller's rights in the goods are the same as if he had never made a delivery.
Cross References
Sections 2-702 and 2-703.
Point 1: Sections 2-503 and 2-609, and Article 7.
Point 2: Section 2-103 and Article 7.
Definitional Cross References
"Buyer". Section 2-103.
"Contract for sale". Section 2-106.
"Document of title". Section 1-201.
"Goods". Section 2-105.
"Insolvent". Section 1-201.
"Notification". Section 1-201.
"Receipt" of goods. Section 2-103.
"Rights". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-705.
1973 Ed., § 28:2-705.
(1) Under the conditions stated in section 28:2-703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this article (section 28:2-710), but less expenses saved in consequence of the buyer's breach.
(2) Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.
(3) Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.
(4) Where the resale is at public sale
(a) only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and
(b) it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and
(c) if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and
(d) the seller may buy.
(5) A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.
(6) The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (section 28:2-707) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined (subsection (3) of section 28:2-711).
(Dec. 30, 1963, 77 Stat. 665, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 60, Uniform Sales Act.Changes
Rewritten.Purposes of Changes
To simplify the prior statutory provision and to make it clear that:
1. The only condition precedent to the seller's right of resale under subsection (1) is a breach by the buyer within the section on the seller's remedies in general or insolvency. Other meticulous conditions and restrictions of the prior uniform statutory provision are disapproved by this Article and are replaced by standards of commercial reasonableness. Under this section the seller may resell the goods after any breach by the buyer. Thus, an anticipatory repudiation by the buyer gives rise to any of the seller's remedies for breach, and to the right of resale. This principle is supplemented by subsection (2) which authorizes a resale of goods which are not in existence or were not identified to the contract before the breach.
2. In order to recover the damages prescribed in subsection (1) the seller must act "in good faith and in a commercially reasonable manner" in making the resale. This standard is intended to be more comprehensive than that of "reasonable care and judgment" established by the prior uniform statutory provision. Failure to act properly under this section deprives the seller of the measure of damages here provided and relegates him to that provided in Section 2-708.
Under this Article the seller resells by authority of law, in his own behalf, for his own benefit and for the purpose of fixing his damages. The theory of a seller's agency is thus rejected.
3. If the seller complies with the prescribed standard of duty in making the resale, he may recover from the buyer the damages provided for in subsection (1). Evidence of market or current prices at any particular time or place is relevant only on the question of whether the seller acted in a commercially reasonable manner in making the resale.
The distinction drawn by some courts between cases where the title had not passed to the buyer and the seller had resold as owner, and cases where the title had passed and the seller had resold by virtue of his lien on the goods, is rejected.
4. Subsection (2) frees the remedy of resale from legalistic restrictions and enables the seller to resell in accordance with reasonable commercial practices so as to realize as high a price as possible in the circumstances. By "public" sale is meant a sale by auction. A "private" sale may be effected by solicitation and negotiation conducted either directly or through a broker. In choosing between a public and private sale the character of the goods must be considered and relevant trade practices and usages must be observed.
5. Subsection (2) merely clarifies the common law rule that the time for resale is a reasonable time after the buyer's breach, by using the language "commercially reasonable." What is such a reasonable time depends upon the nature of the goods, the condition of the market and the other circumstances of the case; its length cannot be measured by any legal yardstick or divided into degrees. Where a seller contemplating resale receives a demand from the buyer for inspection under the section of preserving evidence of goods in dispute, the time for resale may be appropriately lengthened.
On the question of the place for resale, subsection (2) goes to the ultimate test, the commercial reasonableness of the seller's choice as to the place for an advantageous resale. This Article rejects the theory that the seller is required to resell at the agreed place for delivery and that a resale elsewhere can be permitted only in exceptional cases.
6. The purpose of subsection (2) being to enable the seller to dispose of the goods to the best advantage, he is permitted in making the resale to depart from the terms and conditions of the original contract for sale to any extent "commercially reasonable" in the circumstances.
7. The provision of subsection (2) that the goods need not be in existence to be resold applies when the buyer is guilty of anticipatory repudiation of a contract for future goods, before the goods or some of them have come into existence. In such a case the seller may exercise the right of resale and fix his damages by "one or more contracts to sell" the quantity of conforming future goods affected by the repudiation. The companion provision of subsection (2) that resale may be made although the goods were not identified to the contract prior to the buyer's breach, likewise contemplates an anticipatory repudiation by the buyer but occurring after the goods are in existence. If the goods so identified conform to the contract, their resale will fix the seller's damages quite as satisfactorily as if they had been identified before the breach.
8. Where the resale is to be by private sale, subsection (3) requires that reasonable notification of the seller's intention to resell must be given to the buyer. The length of notification of a private sale depends upon the urgency of the matter. Notification of the time and place of this type of sale is not required.
Subsection (4)(b) requires that the seller give the buyer reasonable notice of the time and place of a public resale so that he may have an opportunity to bid or to secure the attendance of other bidders. An exception is made in the case of goods "which are perishable or threaten to decline speedily in value."
9. Since there would be no reasonable prospect of competitive bidding elsewhere, subsection (4) requires that a public resale "must be made at a usual place or market for public sale if one is reasonably available;" i.e., a place or market which prospective bidders may reasonably be expected to attend. Such a market may still be "reasonably available" under this subsection, though at a considerable distance from the place where the goods are located. In such a case the expense of transporting the goods for resale is recoverable from the buyer as part of the seller's incidental damages under subsection (1). However, the question of availability is one of commercial reasonableness in the circumstances and if such "usual" place or market is not reasonably available, a duly advertised public resale may be held at another place if it is one which prospective bidders may reasonably be expected to attend, as distinguished from a place where there is no demand whatsoever for goods of the kind.
Paragraph (a) of subsection (4) qualifies the last sentence of subsection (2) with respect to resales of unidentified and future goods at public sale. If conforming goods are in existence the seller may identify them to the contract after the buyer's breach and then resell them at public sale. If the goods have not been identified, however, he may resell them at public sale only as "future" goods and only where there is a recognized market for public sale of futures in goods of the kind.
The provisions of paragraph (c) of subsection (4) are intended to permit intelligent bidding.
The provision of paragraph (d) of subsection (4) permitting the seller to bid and, if course, to become the purchaser, benefits the original buyer by tending to increase the resale price and thus decreasing the damages he will have to pay.
10. This Article departs in subsection (5) from the prior uniform statutory provision in permitting a good faith purchaser at resale to take a good title as against the buyer even though the seller fails to comply with the requirements of this section.
11. Under subsection (6), the seller retains profit, if any, without distinction based on whether or not he had a lien since this Article divorces the question of passage of title to the buyer from the seller's right of resale or the consequences of its exercise. On the other hand, where "a person in the position of a seller" or a buyer acting under the section on buyer's remedies, exercises his right of resale under the present section he does so only for the limited purpose of obtaining cash for his "security interest" in the goods. Once that purpose has been accomplished any excess in the resale price belongs to the seller to whom an accounting must be made as provided in the last sentence of subsection (6).
Cross References
Point 1: Sections 2-610, 2-702 and 2-703.
Point 2: Section 1-201.
Point 3: Sections 2-708 and 2-710.
Point 4: Section 2-328.
Point 8: Section 2-104.
Point 9: Section 2-710.
Point 11: Sections 2-401, 2-707 and 2-711(3).
Definitional Cross References
"Buyer". Section 2-103.
"Contract". Section 1-201.
"Contract for sale". Section 2-106.
"Good faith". Section 2-103.
"Goods". Section 2-105.
"Merchant". Section 2-104.
"Notification". Section 1-201.
"Person in position of seller". Section 2-707.
"Purchase". Section 1-201.
"Rights". Section 1-201.
"Sale". Section 2-106.
"Security interest". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-706.
1973 Ed., § 28:2-706.
(1) A "person in the position of a seller" includes as against a principal an agent who has paid or become responsible for the price of goods on behalf of his principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.
(Dec. 30, 1963, 77 Stat. 666, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 52(2), Uniform Sales Act.Changes
Rewritten.Purposes of Changes
To make it clear that:
In addition to following in general the prior uniform statutory provision, the case of a financing agency which has acquired documents by honoring a letter of credit for the buyer or by discounting a draft for the seller has been included in the term "a person in the position of a seller."
Cross Reference
Article 5, Section 2-506.
Definitional Cross References
"Consignee". Section 7-102.
"Consignor". Section 7-102.
"Goods". Section 2-105.
"Security interest". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-707.
1973 Ed., § 28:2-707.
(1) Subject to subsection (2) and to the provisions of this article with respect to proof of market price (section 28:2-723), the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this article (section 28:2-710), but less expenses saved in consequence of the buyer's breach.
(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this article (section 28:2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.
(Dec. 30, 1963, 77 Stat. 666, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 64, Uniform Sales Act.Changes
Rewritten.Purposes of Changes
To make it clear that:
1. The prior uniform statutory provision is followed generally in setting the current market price at the time and place for tender as the standard by which damages for non-acceptance are to be determined. The time and place of tender is determined by reference to the section on manner of tender of delivery, and to the sections on the effect of such terms as FOB, FAS, CIF, C & F, Ex Ship and No Arrival, No Sale.
In the event that there is no evidence available of the current market price at the time and place of tender, proof of a substitute market may be made under the section on determination and proof of market price. Furthermore, the section on the admissibility of market quotations is intended to ease materially the problem of providing competent evidence.
2. The provision of this section permitting recovery of expected profit including reasonable overhead where the standard measure of damages is inadequate, together with the new requirement that price actions may be sustained only where resale is impractical, are designed to eliminate the unfair and economically wasteful results arising under the older law when fixed price articles were involved. This section permits the recover of lost profits in all appropriate cases, which would include all standard priced goods. The normal measure there would be list price less cost to the dealer or list price less manufacturing cost to the manufacturer. It is not necessary to a recovery of "profit" to show a history of earnings, especially if a new venture is involved.
3. In all cases the seller may recover incidental damages.
Cross References
Point 1: Sections 2-319 through 2-324, 2-503, 2-723 and 2-724.
Point 2: Section 2-709.
Point 3: Section 2-710.
Definitional Cross References
"Buyer". Section 2-103.
"Contract". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-708.
1973 Ed., § 28:2-708.
(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price
(a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and
(b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
(2) Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
(3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (section 28:2-610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section.
(Dec. 30, 1963, 77 Stat. 666, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 63, Uniform Sales Act.Changes
Rewritten, important commercially needed changes being incorporated.Purposes of Changes
To make it clear that:
1. Neither the passing of title to the goods nor the appointment of a day certain for payment is now material to a price action.
2. The action for the price is now generally limited to those cases where resale of the goods is impracticable except where the buyer has accepted the goods or where they have been destroyed after risk of loss has passed to the buyer.
3. This section substitutes an objective test by action for the former "not readily resalable" standard. An action for the price under subsection (1)(b) can be sustained only after a "reasonable effort to resell" the goods "at reasonable price" has actually been made or where the circumstances "reasonably indicate" that such an effort will be unavailing.
4. If a buyer is in default not with respect to the price, but on an obligation to make an advance, the seller should recover not under this section for the price as such, but for the default in the collateral (though coincident) obligation to finance the seller. If the agreement between the parties contemplates that the buyer will acquire, on making the advance, a security interest in the goods, the buyer on making the advance has such an interest as soon as the seller has rights in the agreed collateral. See Section 9-204.
5. "Goods accepted" by the buyer under subsection (1)(a) include only goods as to which there has been no justified revocation of acceptance, for such a revocation means that there has been a default by the seller which bars his rights under this section. "Goods lost or damaged" are covered by the section on risk of loss. "Goods identified to the contract" under subsection (1)(b) are covered by the section on identification and the section on identification notwithstanding breach.
6. This section is intended to be exhaustive in its enumeration of cases where an action for the price lies.
7. If the action for the price fails, the seller may nonetheless have proved a case entitling him to damages for non-acceptance. In such a situation, subsection (3) permits recovery of those damages in the same action.
Cross References
Point 4: Section 1-106.
Point 5: Sections 2-501, 2-509, 2-510 and 2-704.
Point 7: Section 2-708.
Definitional Cross References
"Action". Section 1-201.
"Buyer". Section 2-103.
"Conforming". Section 2-106.
"Contract". Section 1-201.
"Goods". Section 2-105.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-709.
1973 Ed., § 28:2-709.
Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.
(Dec. 30, 1963, 77 Stat. 667, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
See Sections 64 and 70, Uniform Sales Act.Purposes
To authorize reimbursement of the seller for expenses reasonably incurred by him as a result of the buyer's breach. The section sets forth the principal normal and necessary additional elements of damage flowing from the breach but intends to allow all commercially reasonable expenditures made by the seller.Definitional Cross References
"Aggrieved party". Section 1-201.
"Buyer". Section 2-103.
"Goods". Section 2-105.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-710.
1973 Ed., § 28:2-710.
(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole of the breach goes to the whole contract (section 28:2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid
(a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or
(b) recover damages for non-delivery as provided in this article (section 28:2-713).
(2) Where the seller fails to deliver or repudiates the buyer may also
(a) if the goods have been identified recover them as provided in this article (section 28:2-502); or
(b) in a proper case obtain specific performance or replevy the goods as provided in this article (section 28:2-716).
(3) On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (section 28:2-706).
(Dec. 30, 1963, 77 Stat. 667, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
No comparable index section; Subsection (3)--Section 69(5), Uniform Sales Act.Changes
The prior uniform statutory provision is generally continued and expanded in Subsection (3).Purposes of Changes and New Matter
1. To index in this section the buyer's remedies, subsection (1) covering those remedies permitting the recovery of money damages, and subsection (2) covering those which permit reaching the goods themselves. The remedies listed here are those available to a buyer who has not accepted the goods or who has justifiably revoked his acceptance. The remedies available to a buyer with regard to goods finally accepted appear in the section dealing with breach in regard to accepted goods. The buyer's right to proceed as to all goods when the breach is as to only some of the goods is determined by the section on breach in installment contracts and by the section on partial acceptance.
Despite the seller's breach, proper retender of delivery under the section on cure of improper tender or replacement can effectively preclude the buyer's remedies under this section, except for any delay involved.
2. To make it clear is subsection (3) that the buyer may hold and resell rejected goods if he has paid a part of the price or incurred expenses of the type specified. "Paid" as used here includes acceptance of a draft or other time negotiable instrument or the signing of a negotiable note. His freedom of resale is coextensive with that of a seller under this Article except that the buyer may not keep any profit resulting from the resale and is limited to retaining only the amount of the price paid and the costs involved in the inspection and handling of the goods. The buyer's security interest in the goods is intended to be limited to the items listed in subsection (3), and the buyer is not permitted to retain such funds as he might believe adequate for his damages. The buyer's right to cover, or to have damages for non-delivery, is not impaired by his exercise of his right of resale.
3. It should also be noted that this Act requires its remedies to be liberally administered and provides that any right or obligation which it declares is enforceable by action unless a different effect is specifically prescribed (Section 1-106).
Cross References
Point 1: Sections 2-508, 2-601(c), 2-608, 2-612 and 2-714.
Point 2: Section 2-706.
Point 3: Section 1-106.
Definitional Cross References
"Aggrieved party". Section 1-201.
"Buyer". Section 2-103.
"Cancellation". Section 2-106.
"Contract". Section 1-201.
"Cover". Section 2-712.
"Goods". Section 2-105.
"Notifies". Section 1-201.
"Receipt" of goods. Section 2-103.
"Remedy". Section 1-201.
"Security interest". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-711.
1973 Ed., § 28:2-711.
(1) After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
(2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (section 28:2-715), but less expenses saved in consequence of the seller's breach.
(3) Failure of the buyer to effect cover within this section does not bar him from any other remedy.
(Dec. 30, 1963, 77 Stat. 667, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
1. This section provides the buyer with a remedy aimed at enabling him to obtain the goods he needs thus meeting his essential need. This remedy is the buyer's equivalent of the seller's right to resell.
2. The definition of "cover" under subsection (1) envisages a series of contracts or sales, as well as a single contract or sale; goods not identical with those involved but commercially usable as reasonable substitutes under the circumstances of the particular case; and contracts on credit or delivery terms differing from the contract in breach, but again reasonable under the circumstances. The test of proper cover is whether at the time and place the buyer acted in good faith and in a reasonable manner, and it is immaterial that hindsight may later prove that the method of cover used was not the cheapest or most effective.
The requirement that the buyer must cover "without unreasonable delay" is not intended to limit the time necessary for him to look around and decide as to how he may best effect cover. The test here is similar to that generally used in this Article as to reasonable time and seasonable action.
3. Subsection (3) expresses the policy that cover is not a mandatory remedy for the buyer. The buyer is always free to choose between cover and damages for non-delivery under the next section.
However, this subsection must be read in conjunction with the section which limits the recovery of consequential damages to such as could not have been obviated by cover. Moreover, the operation of the section on specific performance of contracts for "unique" goods must be considered in this connection for availability of the goods to the particular buyer for his particular needs is the test for that remedy and inability to cover is made an express condition to the right of the buyer to replevy the goods.
4. This section does not limit cover to merchants, in the first instance. It is the vital and important remedy for the consumer buyer as well. Both are free to use cover: the domestic or non-merchant consumer is required only to act in normal good faith while the merchant buyer must also observe all reasonable commercial standards of fair dealing in the trade, since this falls within the definition of good faith on his part.
Cross References
Point 1: Section 2-706.
Point 2: Section 1-204.
Point 3: Sections 2-713, 2-715 and 2-716.
Point 4: Section 1-203.
Definitional Cross References
"Buyer". Section 2-103.
"Contract". Section 1-201.
"Good faith". Section 2-103.
"Goods". Section 2-105.
"Purchase". Section 1-201.
"Remedy". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-712.
1973 Ed., § 28:2-712.
(1) Subject to the provisions of this article with respect to proof of market price (section 28:2-723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this article (section 28:2-715), but less expenses saved in consequence of the seller's breach.
(2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
(Dec. 30, 1963, 77 Stat. 668, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 67(3), Uniform Sales Act.Changes
Rewritten.Purposes of Changes
To clarify the former rule so that:
1. The general baseline adopted in this section uses as a yardstick the market in which the buyer would have obtained cover had he sought that relief. So the place for measuring damages is the place of tender (or the place of arrival if the goods are rejected or their acceptance is revoked after reaching their destination) and the crucial time is the time at which the buyer learns of the breach.
2. The market or current price to be used in comparison with the contract price under this section is the price for goods of the same kind and in the same branch of trade.
3. When the current market price under this section is difficult to prove the section on determination and proof of market price is available to permit a showing of a comparable market price or, where no market price is available, evidence of spot sale prices is proper. Where the unavailability of a market price is caused by a scarcity of goods of the type involved, a good case is normally made for specific performance under this Article. Such scarcity conditions, moreover, indicate that the price has risen and under the section providing for liberal administration of remedies, opinion evidence as to the value of the goods would be admissible in the absence of a market price and a liberal construction of allowable consequential damages should also result.
4. This section carries forward the standard rule that the buyer must deduct from his damages any expenses saved as a result of the breach.
5. The present section provides a remedy which is completely alternative to cover under the preceding section and applies only when and to the extent that the buyer has not covered.
Cross References
Point 3: Sections 1-106, 2-716 and 2-723.
Point 5: Section 2-712.
Definitional Cross References
"Buyer". Section 2-103.
"Contract". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-713.
1973 Ed., § 28:2-713.
(1) Where the buyer has accepted goods and given notification (subsection (3) of section 28:2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.
(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
(3) In a proper case any incidental and consequential damages under the next section may also be recovered.
(Dec. 30, 1963, 77 Stat. 668, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 69(6) and (7), Uniform Sales Act.Changes
Rewritten.Purposes of Changes
1. This section deals with the remedies available to the buyer after the goods have been accepted and the time for revocation of acceptance has gone by. In general this section adopts the rule of the prior uniform statutory provision for measuring damages where there has been a breach of warranty as to goods accepted, but goes further to lay down an explicit provision as to the time and place for determining the loss.
The section on deduction of damages from price provides an additional remedy for a buyer who still owes part of the purchase price, and frequently the two remedies will be available concurrently. The buyer's failure to notify of his claim under the section on effects of acceptance, however, operates to bar his remedies under either that section or the present section.
2. The "non-conformity" referred to in subsection (1) includes not only breaches of warranties but also any failure of the seller to perform according to his obligations under the contract. In the case of such non-conformity, the buyer is permitted to recover for his loss "in any manner which is reasonable."
3. Subsection (2) describes the usual, standard and reasonable method of ascertaining damages in the case of breach of warranty but it is not intended as an exclusive measure. It departs from the measure of damages for non-delivery in utilizing the place of acceptance rather than the place of tender. In some cases the two may coincide, as where the buyer signifies his acceptance upon the tender. If, however, the non-conformity is such as would justify revocation of acceptance, the time and place of acceptance under this section is determined as of the buyer's decision not to revoke.
4. The incidental and consequential damages referred to in subsection (3), which will usually accompany an action brought under this section, are discussed in detail in the comment on the next section.
Cross References
Point 1: Compare Section 2-711; Sections 2-607 and 2-717.
Point 2: Section 2-106.
Point 3: Sections 2-608 and 2-713.
Point 4: Section 2-715.
Definitional Cross References
"Buyer". Section 2-103.
"Conform". Section 2-106.
"Goods". Section 1-201.
"Notification". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-714.
1973 Ed., § 28:2-714.
(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
(2) Consequential damages resulting from the seller's breach include
(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting has reason to know and which could not reasonably be prevented by cover or otherwise; and
(b) injury to person or property proximately resulting from any breach of warranty.
(Dec. 30, 1963, 77 Stat. 668, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provisions
Subsection (2)(b)--Sections 69(7) and 70, Uniform Sales Act.Changes
Rewritten.Purposes of Changes and New Matter
1. Subsection (1) is intended to provide reimbursement for the buyer who incurs reasonable expenses in connection with the handling of rightfully rejected goods or goods whose acceptance may be justifiably revoked, or in connection with effecting cover where the breach of the contract lies in non-conformity or non-delivery of the goods. The incidental damages listed are not intended to be exhaustive but are merely illustrative of the typical kinds of incidental damage.
2. Subsection (2) operates to allow the buyer, in an appropriate case, any consequential damages which are the result of the seller's breach. The "tacit agreement" test for the recovery of consequential damages is rejected. Although the older rule at common law which made the seller liable for all consequential damages of which he had "reason to know" in advance is followed, the liberality of that rule is modified by refusing to permit recovery unless the buyer could not reasonably have prevented the loss by cover or otherwise. Subparagraph (2) carries forward the provisions of the prior uniform statutory provision as to consequential damages resulting from breach of warranty, but modifies the rule by requiring first that the buyer attempt to minimize his damages in good faith, either by cover or otherwise.
3. In the absence of excuse under the section on merchant's excuse by failure of presupposed conditions, the seller is liable for consequential damages in all cases where he had reason to know of the buyer's general or particular requirements at the time of contracting. It is not necessary that there be a conscious acceptance of an insurer's liability on the seller's part, nor is his obligation for consequential damages limited to cases in which he fails to use due effort in good faith.
Particular needs of the buyer must generally be made known to the seller while general needs must rarely be made known to charge the seller with knowledge.
Any seller who does not wish to take the risk of consequential damages has available the section on contractual limitation of remedy.
4. The burden of proving the extent of loss incurred by way of consequential damage is on the buyer, but the section on liberal administration of remedies rejects any doctrine of certainty which requires almost mathematical precision in the proof of loss. Loss may be determined in any manner which is reasonable under the circumstances.
5. Subsection (2)(b) states the usual rule as to breach of warranty, allowing recovery for injuries "proximately" resulting from the breach. Where the injury involved follows the use of goods without discovery of the defect causing the damage, the question of "proximate" cause turns on whether it was reasonable for the buyer to use the goods without such inspection as would have revealed the defects. If it was not reasonable for him to do so, or if he did in fact discover the defect prior to his use, the injury would not proximately result from the breach of warranty.
6. In the case of sale of wares to one in the business of reselling them, resale is one of the requirements of which the seller has reason to know within the meaning of subsection (2)(a).
Cross References
Point 1: Section 2-608.
Point 3: Sections 1-203, 2-615 and 2-719.
Point 4: Section 1-106.
Definitional Cross References
"Cover". Section 2-712.
"Goods". Section 1-201.
"Person". Section 1-201.
"Receipt" of goods. Section 2-103.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-715.
1973 Ed., § 28:2-715.
(1) Specific performance may be decreed where the goods are unique or in other proper circumstances.
(2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer's right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
(Dec. 30, 1963, 77 Stat. 668, Pub. L. 88-243, § 1; Oct. 26, 2000, D.C. Law 13-201, § 201(c)(5), 47 DCR 7576.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
Section 68, Uniform Sales Act.Changes
Rephrased.Purposes of Changes
To make it clear that:
1. The present section continues in general prior policy as to specific performance and injunction against breach. However, without intending to impair in any way the exercise of the court's sound discretion in the matter, this Article seeks to further a more liberal attitude than some courts have shown in connection with the specific performance of contracts of sale.
2. In view of this Article's emphasis on the commercial feasibility of replacement, a new concept of what are "unique" goods is introduced under this section. Specific performance is no longer limited to goods which are already specific or ascertained at the time of contracting. The test of uniqueness under this section must be made in terms of the total situation which characterizes the contract. Output and requirements contracts involving a particular or peculiarly available source or market present today the typical commercial specific performance situation, as contrasted with contracts for the sale of heirlooms or priceless works of art which were usually involved in the older cases. However, uniqueness is not the sole basis of the remedy under this section for the relief may also be granted "in other proper circumstances" and inability to cover is strong evidence of "other proper circumstances".
3. The legal remedy of replevin is given to the buyer in cases in which cover is reasonably unavailable and goods have been identified to the contract. This is in addition to the buyer's right to recover identified goods under Section 2-502. For consumer goods, the buyer's right to replevin vests upon the buyer's acquisition of a special property, which occurs upon identification of the goods to the contract. See Section 2-501. Inasmuch as a secured party normally acquires no greater rights in its collateral that its debtor had or had power to convey, see Section 2-403(1) (first sentence), a buyer who acquires a right to replevin under subsection (3) will take free of a security interest created by the seller if it attaches to the goods after the goods have been identified to the contract. The buyer will take free, even if the buyer does not buy in ordinary course and even if the security interest is perfected. Of course, to the extent that the buyer pays the price after the security interest attaches, the payments will constitute proceeds of the security interest.
4. This section is intended to give the buyer rights to the goods comparable to the seller's rights to the price.
5. If a negotiable document of title is outstanding, the buyer's right of replevin relates of course to the document not directly to the goods. See Article 7, especially Section 7-602.
Cross References
Point 3: Section 2-502.
Point 4: Section 2-709.
Point 5: Article 7.
Definitional Cross References
"Buyer". Section 2-103.
"Goods". Section 1-201.
"Rights." Section 1-201.
Prior Codifications
1981 Ed., § 28:2-716.
1973 Ed., § 28:2-716.
Effect of Amendments
D.C. Law 13-201, enacting a new Article 9 of the Uniform Commercial Code applicable July 1, 2001, made conforming amendments to this section applicable upon the same date.
Legislative History of Laws
For Law 13-201, see notes following § 28:2-103.
The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.
(Dec. 30, 1963, 77 Stat. 668, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
See Section 69(1)(a), Uniform Sales Act.Purposes
1. This section permits the buyer to deduct from the price damages resulting from any breach by the seller and does not limit the relief to cases of breach of warranty as did the prior uniform statutory provision. To bring this provision into application the breach involved must be of the same contract under which the price in question is claimed to have been earned.
2. The buyer, however, must give notice of his intention to withhold all or part of the price if he wishes to avoid a default within the meaning of the section on insecurity and right to assurances. In conformity with the general policies of this Article, no formality of notice is required and any language which reasonably indicates the buyer's reason for holding up his payment is sufficient.
Cross Reference
Point 2: Section 2-609.
Definitional Cross References
"Buyer". Section 2-103.
"Notifies". Section 1-201.
Prior Codifications
1981 Ed., § 28:2-717.
1973 Ed., § 28:2-717.
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds
(a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or
(b) in the absence of such terms, twenty percent of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.
(3) The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes
(a) a right to recover damages under the provisions of this article other than subsection (1), and
(b) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.
(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this article on resale by an aggrieved seller (section 28:2-706).
(Dec. 30, 1963, 77 Stat. 669, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
1. Under subsection (1) liquidated damage clauses are allowed where the amount involved is reasonable in the light of the circumstances of the case. The subsection sets forth explicitly the elements to be considered in determining the reasonableness of a liquidated damage clause. A term fixing unreasonably large liquidated damages is expressly made void as a penalty. An unreasonably small amount would be subject to similar criticism and might be stricken under the section on unconscionable contracts or clauses.
2. Subsection (2) refuses to recognize a forfeiture unless the amount of the payment so forfeited represents a reasonable liquidation of damages as determined under subsection (1). A special exception is made in the case of small amounts (20% of the price or $500, whichever is smaller) deposited as security. No distinction is made between cases in which the payment is to be applied on the price and those in which it is intended as security for performance. Subsection (2) is applicable to any deposit or down or part payment. In the case of a deposit or turn in of goods resold before the breach, the amount actually received on the resale is to be viewed as the deposit rather than the amount allowed the buyer for the trade in. However, if the seller knows of the breach prior to the resale of the goods turned in, he must make reasonable efforts to realize their true value, and this is assured by requiring him to comply with the conditions laid down in the section on resale by an aggrieved seller.
Cross References
Point 1: Section 2-302.
Point 2: Section 2-706.
Definitional Cross References
"Aggrieved party". Section 1-201.
"Agreement". Section 1-201.
"Buyer". Section 2-103.
"Goods". Section 2-105.
"Notice". Section 1-201.
"Party". Section 1-201.
"Remedy". Section 1-201.
"Seller". Section 2-103.
"Term". Section 1-201.
Prior Codifications
1981 Ed., § 28:2-718.
1973 Ed., § 28:2-718.
(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,
(a) the agreement may provide for remedies in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and
(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this subtitle.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.
(Dec. 30, 1963, 77 Stat. 669, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
1. Under this section parties are left free to shape their remedies to their particular requirements and reasonable agreements limiting or modifying remedies are to be given effect.
However, it is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract. Thus any clause purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed. Similarly, under subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article.
2. Subsection (1)(b) creates a presumption that clauses prescribing remedies are cumulative rather than exclusive. If the parties intend the term to describe the sole remedy under the contract, this must be clearly expressed.
3. Subsection (3) recognizes the validity of clauses limiting or excluding consequential damages but makes it clear that they may not operate in an unconscionable manner. Actually such terms are merely an allocation of unknown or undeterminable risks. The seller in all cases is free to disclaim warranties in the manner provided in Section 2-316.
Cross References
Point 1: Section 2-302.
Point 3: Section 2-316.
Definitional Cross References
"Agreement". Section 1-201.
"Buyer". Section 2-103.
"Conforming". Section 2-106.
"Contract". Section 1-201.
"Goods". Section 2-105.
"Remedy". Section 1-201.
"Seller". Section 2-103.
Prior Codifications
1981 Ed., § 28:2-719.
1973 Ed., § 28:2-719.
Unless the contrary intention clearly appears, expressions of "cancellation" or "rescission" of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.
(Dec. 30, 1963, 77 Stat. 669, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purpose
This section is designed to safeguard a person holding a right of action from any unintentional loss of rights by the ill-advised use of such terms as "cancellation", "rescission", or the like. Once a party's rights have accrued they are not to be lightly impaired by concessions made in business decency and without intention to forego them. Therefore, unless the cancellation of a contract expressly declares that it is "without reservation of rights", or the like, it cannot be considered to be a renunciation under this section.
Cross Reference
Section 1-107.
Definitional Cross References
"Cancellation". Section 2-106.
"Contract". Section 1-201.
Prior Codifications
1981 Ed., § 28:2-720.
1973 Ed., § 28:2-720.
Remedies for material misrepresentation or fraud include all remedies available under this article for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.
(Dec. 30, 1963, 77 Stat. 670, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
To correct the situation by which remedies for fraud have been more circumscribed than the more modern and mercantile remedies for breach of warranty. Thus the remedies for fraud are extended by this section to coincide in scope with those for non-fraudulent breach. This section thus makes it clear that neither rescission of the contract for fraud nor rejection of the goods bars other remedies unless the circumstances of the case make the remedies incompatible.Definitional Cross References
"Contract for sale". Section 2-106.
"Goods". Section 1-201.
"Remedy", Section 1-201.
Prior Codifications
1981 Ed., § 28:2-721.
1973 Ed., § 28:2-721.
Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract
(a) a right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and if the goods have been destroyed or converted a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other;
(b) if at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the contract for sale and there is no arrangement between them for disposition of the recovery, his suit or settlement is, subject to his own interest, as a fiduciary for the other party to the contract;
(c) either party may with the consent of the other sue for the benefit of whom it may concern.
(Dec. 30, 1963, 77 Stat. 670, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
To adopt and extend somewhat the principle of the statutes which provide for suit by the real party in interest. The provisions of this section apply only after identification of the goods. Prior to that time only the seller has a right of action. During the period between identification and final acceptance (except in the case of revocation of acceptance) it is possible for both parties to have the right of action. Even after final acceptance both parties may have the right of action if the seller retains possession or otherwise retains an interest.Definitional Cross References
"Action". Section 1-201.
"Buyer". Section 2-103.
"Contract for sale". Section 2-106.
"Goods". Section 2-105.
"Party". Section 1-201.
"Rights". Section 1-201.
"Security interest". Section 1-201.
Prior Codifications
1981 Ed., § 28:2-722.
1973 Ed., § 28:2-722.
(1) If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price (section 28:2-708 or section 28:2-713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.
(2) If evidence of a price prevailing at the times or places described in this article is not readily available the price prevailing within any reasonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.
(3) Evidence of a relevant price prevailing at a time or place other than the one described in this article offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.
(Dec. 30, 1963, 77 Stat. 670, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
To eliminate the most obvious difficulties arising in connection with the determination of market price, when that is stipulated as a measure of damages by some provision of this Article. Where the appropriate market price is not readily available the court is here granted reasonable leeway in receiving evidence of prices current in other comparable markets or at other times comparable to the one in question. In accordance with the general principle of this Article against surprise, however, a party intending to offer evidence of such a substitute price must give suitable notice to the other party.
This section is not intended to exclude the use of any other reasonable method of determining market price or of measuring damages if the circumstances of the case make this necessary.
Definitional Cross References
"Action". Section 1-201.
"Aggrieved party". Section 1-201.
"Goods". Section 2-105.
"Notifies". Section 1-201.
"Party". Section 1-201.
"Reasonable time". Section 1-204.
"Usage of trade". Section 1-205.
Prior Codifications
1981 Ed., § 28:2-723.
1973 Ed., § 28:2-723.
Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.
(Dec. 30, 1963, 77 Stat. 670, Pub. L. 88-243, § 1; Apr. 9, 1997, D.C. Law 11-255, § 27(oo), 44 DCR 1271.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
To make market quotations admissible in evidence while providing for a challenge of the material by showing the circumstances of its preparation.
No explicit provision as to the weight to be given to market quotations is contained in this section, but such quotations, in the absence of compelling challenge, offer an adequate basis for a verdict.
Market quotations are made admissible when the price or value of goods traded "in any established market" is in issue. The reason of the section does not require that the market be closely organized in the manner of a produce exchange. It is sufficient if transactions in the commodity are frequent and open enough to make a market established by usage in which one price can be expected to affect another and in which an informed report of the range and trend of prices can be assumed to be reasonably accurate.
This section does not in any way intend to limit or negate the application of similar rules of admissibility to other material, whether by action of the courts or by statute. The purpose of the present section is to assure a minimum of mercantile administration in this important situation and not to limit any liberalizing trend in modern law.
Definitional Cross Reference
"Goods". Section 2-105.
Prior Codifications
1981 Ed., § 28:2-724.
1973 Ed., § 28:2-724.
Legislative History of Laws
Law 11-255, the "Second Technical Amendments Act of 1996," was introduced in Council and assigned Bill No. 11-905, which was referred to the Committee of the Whole. The Bill was adopted on first and second readings on November 7, 1996, and December 3, 1996, respectively. Signed by the Mayor on December 24, 1996, it was assigned Act No. 11-519 and transmitted to both Houses of Congress for its review. D.C. Law 11-255 became effective on April 9, 1997.
(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
(3) Where an action commenced within the time limited by subsection (1) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.
(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this subtitle becomes effective.
(Dec. 30, 1963, 77 Stat. 670, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
To introduce a uniform statute of limitations for sales contracts, thus eliminating the jurisdictional variations and providing needed relief for concerns doing business on a nationwide scale whose contracts have heretofore been governed by several different periods of limitation depending upon the state in which the transaction occurred. This Article takes sales contracts out of the general laws limiting the time for commencing contractual actions and selects a four year period as the most appropriate to modern business practice. This is within the normal commercial record keeping period.
Subsection (1) permits the parties to reduce the period of limitation. The minimum period is set at one year. The parties may not, however, extend the statutory period.
Subsection (2), providing that the cause of action accrues when the breach occurs, states an exception where the warranty extends to future performance.
Subsection (3) states the saving provision included in many state statutes and permits an additional short period for bringing new actions, where suits begun within the four year period have been terminated so as to leave a remedy still available for the same breach.
Subsection (4) makes it clear that this Article does not purport to alter or modify in any respect the law on tolling of the Statute of Limitations as it now prevails in the various jurisdictions.
Definitional Cross References
"Action". Section 1-201.
"Aggrieved party". Section 1-201.
"Agreement". Section 1-201.
"Contract for sale". Section 2-106.
"Goods". Section 2-105.
"Party". Section 1-201.
"Remedy". Section 1-201.
"Term". Section 1-201.
"Termination". Section 2-106.
Prior Codifications
1981 Ed., § 28:2-725.
1973 Ed., § 28:2-725.
