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Buyer's Remedies Under the Uniform Commercial Code

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  • 0:02 Contracts for the Sale…
  • 2:25 Buyer's Remedies
  • 4:06 Buyer Cancels and Covers
  • 6:26 Buyer Does Not Cover
  • 8:12 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

When a seller breaches a sales contract, the buyer will be entitled to certain remedies as outlined in the Uniform Commercial Code. This lesson explains a buyer's remedies under the UCC, including specific performance.

Contracts for the Sale of Goods

Many businesses sell goods. Goods are movable property, like food, furniture or clothing. For businesses that sell goods, it's helpful to be familiar with the Uniform Commercial Code, or UCC. The UCC is a uniform act that covers sales and other commercial transactions.

Note that the UCC isn't law. Instead, it's a guide meant to encourage uniformity in state laws. Different portions of the UCC have been enacted as law in different states. Therefore, laws regarding sales differ slightly from state to state. However, the UCC is a good representation of the law in most states.

The UCC's Article 2 specifically addresses contracts for the sale of goods. Keep in mind that a sales contract is created every time goods are bought and sold. The buyer offers to pay for the goods, and the seller agrees to sell the goods for that price. Most of these agreements are considered to be sales contracts under the UCC, even when they are unwritten and unsigned.

Let's take a look at what happens when, after an agreement is made, one of the parties fails to perform his or her obligations under the contract. This is known as a breach of the sales contract.

Either the buyer or the seller can breach the sales contract. A seller breaches a sales contract when the seller:

  • Fails to deliver the goods according to the contract
  • Delivers goods that don't conform to the contract
  • Expresses that he or she can't or won't fulfill the contract

When a seller breaches a sales contract, the UCC allows the buyer several different remedies. A remedy is a legal relief meant to compensate a party for any harm caused. Each UCC remedy is a different attempt to make the buyer whole. This simply means that the remedies are meant to put the buyer back into the position he or she would've been in had the seller fulfilled the contract.

Buyer's Remedies

The Uniform Commercial Code outlines a buyer's remedies in several different sections of Article 2. There are numerous remedies that can apply when a seller breaches a sales contract. We'll discuss some of the most common. Depending on the circumstances, the buyer may:

  • Cancel the contract
  • Recover the price paid for undelivered goods
  • Cover, or buy replacement goods
  • Recover damages for the difference in price
  • Recover damages based on current market price
  • Obtain specific performance for unique goods

For example, let's say that Bonnie, the buyer, owns a bicycle repair shop. Bonnie orders 50 bicycle chains from Saul, the seller. Saul owns and runs a bicycle supply store. Bonnie specifically orders chains that will fit youth-sized mountain bikes. In her order, she states that she must have the chains by September 1. Bonnie pays the full contract price of $500, or $10 per chain, to Saul.

However, on September 1 Saul delivers 50 chains that will only fit adult-sized bikes. The goods are nonconforming because the chains aren't what Bonnie ordered. Since she needs the chains that same day, there's no time to fix the order. Saul breached the sales contract.

Buyer Cancels and Covers

Bonnie's first option is to simply cancel the contract. Once she informs Saul that she's canceling the contract, she's entitled to recover the $500 she paid for the youth-sized chains that weren't delivered. She's also obligated to return the adult-sized chains she didn't order. Both parties are returned to the positions they were in prior to the contract. Bonnie has her $500 and Saul has his chains.

Bonnie's next option is to cover, or purchase reasonable replacement goods. If Bonnie is able to, she can contact another supplier and order the chains to be delivered that same day. Just remember that the new deal must be somewhat comparable and reasonable in comparison to the breached contract. In other words, Bonnie can't use this opportunity to purchase much more expensive chains. Let's say Bonnie finds the same chains she needs from Sally, another bicycle parts supplier. However, Sally charges $12 per chain, or $600 for the order. Additionally, Sally charges $50 for same-day delivery.

Bonnie can cover with Sally's chains and recover money damages from Saul. Bonnie's damages will be calculated using the cost to cover, plus any incidental or consequential damages she reasonably incurred. Incidental damages include expenses due to the inspection, receipt, delivery or storage of the goods. Sally's $50 rush charge is an incidental expense. Consequential damages, on the other hand, are other expenses caused by the breach, such as loss of profits or loss of goodwill.

In our scenario, Saul owes Bonnie:

  • $500 in damages for the goods she paid for but didn't receive
  • $100 for the additional cost of replacing those goods
  • $50 in incidental damages

Bonnie's total damages are $650.

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