Buyer's Remedies Flashcards
2-711 (Catalogue the Buyer’s Remedies)
If seller failsnto make delivery o repudiates or the buyer rightfully rejects or revokes acceptance of goods, buy may cancel and:
➤ “Cover” (buy substitute goods) & recover damages
If the seller fails to deliver or repudiates, the buyer may also:
➤ if goods have been identified, recover the goods as provided in 2-502
➤ demand specific peformance or replevin (repossess by judicial action)
Buyer can also get incidental and consequential damages.
2-712
Summary:
This section allows a buyer, after a seller breaches a contract (e.g., by failing to deliver goods), to go out and buy replacement goods (“cover”) and then recover the difference in cost from the seller.
Key Points:
Buyer can make a good faith and reasonable purchase of substitute goods.
Buyer can recover:
Cover Damages = Cost of Cover – Contract Price + Incidental/Consequential Damages – Expenses Saved
Purpose: Encourages buyers to mitigate their losses quickly by obtaining replacement goods and provides a fair measure of damages.
2-713
UCC § 2-713 – Buyer’s Damages for Non-Delivery or Repudiation
Summary:
If the buyer does not “cover”, this section gives a way to calculate damages based on the market price at the time the seller should have delivered the goods.
Key Points:
Damages are based on:
Market Damages = Market Price at Time of Breach – Contract Price + Incidental/Consequential Damages – Expenses Saved
Market price is typically based on place of delivery.
Purpose: Gives a fallback method for buyers who didn’t or couldn’t cover, letting them still recover damages based on market value
2-714: Buyer’s damages for breach in regards to accepted goods
If the buyer accepted the goods and given notification, he can recover damages for non-conformity of tender. Measure of damages for the breach is the sifference at the time and place of acceptance between the value of the goods accepted and the value of the goods had they been as warranted.
2. This provision is primarily for breach of warranty actions.
3. Comment 2. Non-conformity can mean both breach in
good (e.g. fail in any respect) or a breach in performance.
4. Comment 3. It measures value at place of tender, to
benefit buyer of the good.
2-715: Buyer’s Incidental and Consequential Damages
🔹 Incidental Damages (Subsection 1):
Costs directly related to the breach, like:
1. Inspecting, receiving, transporting, or caring for rejected goods
2. Cover-related costs (e.g., finding substitute goods).
3. Any other reasonable expenses due to the breach
🔹 Consequential Damages (Subsection 2):
(a) Losses from needs the seller knew about at the time of contract, if they couldn’t be avoided
(b) Injury to person or property caused by breach of warranty
- Comment 2. Adopts Hadley v. Baxendale ”reason to know”
requirement for consequential damages is abandoned - Comment 2. There is an affirmative duty on the buyer to mitigate
damages that it could have reasonably prevented (failure to do so
may relieve seller of remedy obligations). - Comment 3. ”seller is liable for consequential damages in all cases
where he have reason to know of the buyer’s general or particular
requirements at the time of contracting.” - Comment 4. Burden of proof is on the buyer.
Problem 88
a. Likely Breached Warranty:
➡️ Implied Warranty of Merchantability (§2-314)
The piano must be fit for ordinary use, i.e., safe to play.
A hidden defect that causes harm when used normally (even if rare) breaches this warranty.
Express Warranty?
No written or stated promise is mentioned, so probably no express warranty (§2-313), unless promises were made orally.
Does Care or Freak Injury Matter?
No. Warranties are strict liability—breach doesn’t require fault or negligence.
The fact that Cristofori’s reaction was unusual doesn’t excuse the breach if the product was unfit for ordinary use for this buyer and the seller didn’t disclaim.
(b) Under 2-714(2):
- $3,000 – cost of the piano (if value as warranted is full price and accepted value is zero due to defect)
- $2,000 – doctor’s fees (possibly part of consequential damages)
- Lost income ($750,000)
- Lost hearing ($1m)
❌ $5 for the axe – not reasonably connected to the breach. This is not foreseeable. He has a duty to leave the axe alone.
❓ $500 for expert exam – may be incidental or consequential,
(c) Under 2-715(1)
Incidental = reasonable expenses directly tied to the breach, like inspection, care, etc.
✅ $500 – paid to experts to inspect and analyze piano defect (fits §2-715(1))
❌ Doctor’s fees – more aligned with consequential damages
❌ Lost income, hearing value, axe – not incidental.
(d)
✅ Yes, it’s relevant.
Under §2-715(2)(a) (consequential damages), the seller is only liable for losses that:
Result from known or foreseeable special needs at the time of contract
Couldn’t be prevented by cover or otherwise
👉 Issue: Did Silbermann know or have reason to know of Cristofori’s medical history or vulnerability?
➡️ Unlikely. The hearing loss was due to a unique, unforeseeable condition (metal plate, skull structure), which Silbermann could not have reasonably anticipated.
🟰 So under Hadley, the lost income ($750,000) and hearing loss ($1,000,000) would not be recoverable.
(e) $5,500 for the value of the defective piano, expert inspection and doctor’s fees.
Problem 89
Great, let’s walk through Problem 89 systematically, using the UCC provisions and relevant case law to answer each part thoroughly:
(a) Can Sheila refuse to pay the bill under UCC §2-717? What if she only wants to pay part? (§3-311)
✅ UCC §2-717 – Deduction of Damages from the Price
- A buyer may withhold payment of all or part of the purchase price if there is a breach of contract, including a breach of warranty.
- Sheila alleges a breach of warranty (the yo-yo cord was defective).
- So yes, she can refuse to pay the $1.50 if the product was defective and caused damages.
💡 If she believed she owed only part, UCC says:
- She must notify the seller of her intention to deduct damages from the price.
✅ UCC §3-311 – Payment-in-Full Checks
- If Sheila decided to pay part of the bill as full settlement (e.g., $0.50 with a “payment in full” note), that could potentially discharge the entire claim if accepted by the seller.
- But this applies more to check payments with clear disputed claim—not directly relevant unless she’s tendering a lesser payment as full satisfaction.
(b) Are Sheila’s consequential damages too speculative?
🔍 Official Comment 4 to §2-715 + Wachtel v. National Alfalfa Journal:
- Damages must be shown with reasonable certainty, but exact precision isn’t required.
- Wachtel supports recovery of damages for the value of the chance of winning a contest.
🟰 So, while the full $50,000 may be a stretch, the fact that Sheila was favored to win and experts confirm she was the best supports a claim for damages, at least for the value of her lost opportunity.
✅ Not too speculative—a jury or court could reasonably estimate what her loss of chance was worth.
(c) Is Mort right that he must have agreed to the risk of consequential damages to be liable?
🔍 UCC §2-715(2)(a) + Official Comment 2:
- Seller is liable for consequential damages if they had reason to know of:
- The buyer’s particular needs, and
- That damages couldn’t be prevented by cover or otherwise
🚫 There is no requirement that the seller must expressly agree to accept the risk.
🔹 Knowledge alone is enough, per Official Comment 2:
> “The seller is liable for damages resulting from requirements which he had reason to know.”
➡️ Mort is wrong: Liability does not require an express or implied agreement to assume the risk—just knowledge.
(d) Can Sheila recover attorney’s fees as consequential damages?
🚫 Generally, no—under the American Rule, attorney’s fees are not recoverable unless:
- There’s a statute or
- A contract provision allowing them
📚 Cases say:
- Equitable Lumber: fees recoverable if contract allows
- Too Marker Products: no statutory or contractual basis = no fees
- Modine: Code doesn’t authorize punitive damages (which includes penalty-like fees)
🟰 Since there’s no contract provision or statute mentioned, Sheila cannot recover attorney’s fees as consequential damages.
✅ Summary of Answers:
(a) Yes, Sheila can refuse to pay under §2-717. If she only wants to pay part, she must notify Mort and could try a “payment in full” check under §3-311.
(b) Her damages are not too speculative—she can recover for the value of the lost opportunity.
(c) Mort is wrong—the seller’s knowledge alone of possible loss is enough to impose consequential liability.
(d) No attorney’s fees unless allowed by contract or statute (which they aren’t here).
Let me know if you’d like this turned into a one-page study outline or flashcards!
Problem 90
- Storage Charges: Rambo Trucks is likely responsible for the storage fees. While the contract disclaims consequential damages, storage charges are considered incidental damages (not consequential), and the UCC allows recovery of incidental damages even if consequential damages are excluded.
- Breach of Warranty of Title: If Rambo Trucks delivered the van without a proper title, it would breach the warranty of title. Damages would include financial losses Hercules suffered due to the delay in receiving the title, such as operational disruptions or legal issues related to the truck’s ownership.
Problem 91
In this case, Vegan Vehicles seeks specific performance of the contract after Inter Supplies breached the agreement to deliver actuators, which were uniquely designed for Vegan’s products and required strict engineering specifications.
Should the court order specific performance?
Under UCC §2-716, specific performance can be ordered when the goods are unique or when there are other proper circumstances. The actuators in question are uniquely designed for Vegan Vehicles, and no other supplier can meet the exact specifications. This situation falls under the unique goods exception, making it a valid case for specific performance.
Inter Supplies argues that only monetary damages should be available, but because the goods are unique and there is no alternative supplier, specific performance is appropriate in this case. The court could order Inter Supplies to deliver the actuators as agreed in the contract.
What are “proper circumstances” for specific performance?
“Proper circumstances” refer to situations where monetary damages would not be an adequate remedy, often when the goods are rare, unique, or when it is difficult to substitute the goods in question. In cases like:
- Laclede Gas Co. v. Amoco Oil Co. (long-term supply of propane gas),
- Eastern Airlines v. Gulf Oil Corp. (exclusive jet fuel supply),
- Sedmak v. Charlie’s Chevrolet, Inc. (limited edition cars),
- Almetals, Inc. v. Wickeder Westfalenstahl (unique metal supply),
specific performance was granted because the goods involved were unique or critical to the buyer’s needs. These cases illustrate that unique or irreplaceable goods are the type of “proper circumstances” where a court would consider ordering specific performance.
Conclusion:
Given the unique nature of the actuators and the lack of alternative suppliers, the court should order specific performance and require Inter Supplies to deliver the actuators as promised.
Contract: If montary damages are not sufficient, the buyer is entitled to SP. This is a liquidated damages clause as it states in the contract what kind of remedy is available.
The inability to cover the goods supports SP. It is a little less strict that the common law in relation to, even if it is available elsewhere, if you cannot get the good elsewhere, SP remains available.
Problem 92
Cover Price- Contract Price + incidental + consequential - expenses saved.
Transients would argue that it is a reasonably similar alternative.
To compute the damages for the Transients under §2-712, let’s analyze this step by step:
Framework under §2-712:
Section 2-712 of the UCC allows a buyer to recover damages for “cover” after a seller’s breach of contract. If the buyer, in good faith and without unreasonable delay, purchases substitute goods, they can recover the difference between the cost of cover and the original contract price, as well as any incidental or consequential damages, minus expenses saved.
Applying §2-712 to the Facts:
1. Cover price: The Transients bought the 2025 Behemoth mobile home for $15,000 on September 25.
2. Original contract price: The price for the Blocklong model mobile home was $8,000.
3. Difference between cover price and original price: $15,000 - $8,000 = $7,000.
- This is the baseline for potential damages.
4. Foundation savings: The Behemoth did not require a foundation, meaning the Transients saved $500 they otherwise would have spent on the Blocklong model.
- This savings must be deducted, reducing the damages to $7,000 - $500 = $6,500.
Defense arguments from Home on Wheels:
1. Price of the Behemoth before September 5: Home on Wheels argues that the Behemoth was selling for $10,000 before the price increase on September 5. However, this is irrelevant to §2-712 damages, which are based on the actual cost of cover incurred by the buyer after the breach. Since the Transients paid $15,000 on September 25, that is the relevant cover price.
2. Difference in model features: Home on Wheels claims the Behemoth is “snazzier” and always sells for $2,000 more than the Blocklong. While this may indicate the Behemoth is not an identical substitute, §2-712 does not require identical goods—only reasonable cover in good faith. The court is likely to find that the Transients acted reasonably in purchasing the Behemoth, given the unavailability of the Blocklong and the dramatic rise in trailer prices.
Conclusion:
Under §2-712, the Transients are entitled to $6,500 in damages:
- $7,000 (difference between cover price and contract price),
- minus $500 (foundation costs saved).
Let me know if you’d like further clarification!
Problem 93
Under §2-712 of the Uniform Commercial Code (UCC), a buyer is entitled to “cover” by procuring substitute goods in good faith and without unreasonable delay after a seller’s breach. The buyer can recover damages for the difference between the cost of cover and the original contract price, along with incidental or consequential damages, minus any expenses saved due to the breach.
In BRC Rubber & Plastics, Inc. v. Continental Carbon Co., the court upheld the buyer’s right to cover, finding that the buyer acted reasonably in securing substitute goods after the seller’s breach. The court emphasized that the seller’s failure to provide adequate assurance of performance justified the buyer’s decision to terminate the contract and seek alternatives.
Applying these principles to the case of Material Differences, LLC:
- Elemental Quarry’s repeated failures to deliver on time, overcharging, and eventual termination of the contract constitute a breach.
- Material Differences acted reasonably by entering into a replacement contract at the market price.
- Elemental Quarry’s subsequent offer to perform at the original contract price does not negate the buyer’s right to recover damages for the breach, as the buyer had already mitigated its losses by covering.
Thus, Material Differences is likely entitled to recover the difference between the replacement contract price and the original contract price as damages. The reasoning aligns with both §2-712 and the precedent set in BRC Rubber & Plastics, Inc. v. Continental Carbon Co..
Problem 94
Let’s break this down step by step, starting with the relevant provisions of the Uniform Commercial Code (UCC).
(a) Computation of damages:
1. Damages under §2-712 (“Cover”):
Section 2-712 allows the buyer (Classy Caterers) to recover the cost of covering (obtaining substitute goods) when a seller breaches. Classy Caterers bought identical wine locally for $750—the same price it had originally agreed to pay Grapes Vineyards. Therefore, under §2-712, the damages due Classy Caterers for “cover” would be $0, since the cost of substitution was equal to the original contract price. There’s no additional out-of-pocket expense incurred for covering.
-
Damages under §2-713 (“Market Price Damages”):
Section 2-713 calculates damages as the difference between the market price at the time of breach and the contract price. Here, the market price in San Francisco (the location specified in the F.O.B. term) was $900. Transportation costs from San Francisco to the party site would have been $100, making the total delivered market price $1,000. The original contract price was $750. Under §2-713, the damages due Classy Caterers would be $250 ($1,000 market price - $750 contract price).
(b) Role of the $100 transportation cost:
The transportation cost is critical under §2-713 for determining the “market price” at the delivery location. Section 2-723 defines “market price” based on the place of tender or the place where the goods would have been delivered. Since the goods were ordered F.O.B. San Francisco, the market price includes transportation costs to the site of delivery. In this case, the transportation cost ($100) is added to the San Francisco market price ($900) to determine the total market price at the party site.
To summarize:
- Damages under §2-712: $0 (no additional cost for covering).
- Damages under §2-713: $250 (market price difference, including transportation).
The $100 transportation cost plays a role in calculating damages under §2-713 but is irrelevant under §2-712. Let me know if you’d like me to clarify further!
Problem 95
Let’s tackle this systematically based on the CISG (United Nations Convention on Contracts for the International Sale of Goods):
-
Article 47 - Nachfrist
If Dingo Ranch sent a letter proposing an extension of the delivery deadline to February 1, this constitutes granting a “Nachfrist” (additional time for performance) under Article 47. However, Dingo Ranch is not bound to wait until February 1 before suing if:
- Experimental Transportation fails to deliver within the extended deadline.
- Experimental Transportation’s reply is hostile, such as “Go to hell!”, indicating an unwillingness to comply. In this case, Dingo Ranch could treat the reply as repudiation and pursue remedies immediately. -
Articles 48 and 63 - Grace Period
If instead of Dingo Ranch (the buyer) proposing the Nachfrist, Experimental Transportation (the seller) suggests a grace period for delivery, Article 48 allows the seller to do so if it does not cause unreasonable inconvenience or uncertainty to the buyer. Article 63 similarly allows the buyer to set an additional deadline for performance. Thus, either party can propose an extension, but it must be done in good faith and not result in undue harm to the other party. -
Article 46(3) - Right to Repair
Under Article 46(3), if the Clod Jumper is delivered but fails to function as promised, Dingo Ranch has the right to demand Experimental Transportation to fix it, provided that repair is reasonable under the circumstances. This remedy aligns with the CISG’s strong presumption in favor of specific performance.
- In American law (UCC §2-716): Specific performance is more restricted. Courts require that there be no adequate remedy at law (e.g., damages) and generally avoid granting specific performance if it requires ongoing supervision of the seller’s performance. Consequently, Dingo Ranch’s ability to compel Experimental Transportation to repair the vehicle in the U.S. would depend on meeting these equitable criteria.
-
Article 28 - Limits to Specific Performance
While Articles 46 and 62 favor specific performance, Article 28 provides that courts are not required to order specific performance if doing so would conflict with the rules of their domestic law. In the U.S., courts often prefer monetary damages over specific performance due to the limits on equitable remedies, such as the need for clear enforceability without excessive oversight.
Conclusion:
- Dingo Ranch is not obligated to wait until February 1 if Experimental Transportation refuses to comply with the Nachfrist.
- Either party can propose a grace period, but it must be reasonable.
- If the Clod Jumper is delivered but defective, Dingo Ranch can demand repair under the CISG, though specific performance might be unavailable in U.S. courts.
- Article 28 offers flexibility, allowing U.S. courts to avoid specific performance when consistent with their domestic rules.
The CISG and UCC offer fascinating contrasts when it comes to remedies! If you’d like, I can explore specific performance scenarios further.
Far E. Aluminum Works Co. v. Viracon, Inc.
Here’s a FIRAC case brief for Far East Aluminum Works Co. v. Viracon, Inc., 27 F.4th 1361 (8th Cir. 2021):
FIRAC Case Brief
Case Name: Far East Aluminum Works Co. v. Viracon, Inc.
Court: United States Court of Appeals for the Eighth Circuit
Citation: 27 F.4th 1361 (8th Cir. 2021)
Judge: Stras, Circuit Judge
Date: 2021
Facts:
Far East Aluminum Works Co. (Far East), a commercial construction supplier, purchased specially coated, color-shifting glass lites from Viracon, Inc. for installation in the Wynn Palace resort in Macau. The contract included clauses that (1) limited remedies to replacement or refund of the purchase price, (2) disclaimed implied warranties, and (3) excluded consequential damages in all circumstances.
When the lites began to fail over time, Far East incurred over $8 million in removal and replacement costs, including payments demanded by the project’s general contractor. Far East sued Viracon to recover those costs. The district court dismissed the complaint under Fed. R. Civ. P. 12(b)(6), holding that the contract barred consequential damages.
Issue(s):
1. Are the damages Far East seeks classified as consequential damages under Minnesota law and thus barred by the contract?
2. Is the consequential-damages exclusion unconscionable and therefore unenforceable?
3. Does the consequential-damages exclusion remain enforceable even if the contract’s limited remedy “fails of its essential purpose”?
4. Is Far East entitled to indemnification under the contract?
Rule(s):
- Minn. Stat. § 336.2-715(2): Consequential damages include losses from specific needs known at contract formation and damages to property or persons caused by breach of warranty.
- Minn. Stat. § 336.2-719: Consequential-damages exclusions are valid unless unconscionable. Even if a remedy fails of its essential purpose, the consequential-damages exclusion may still be valid in commercial contracts involving sophisticated parties.
- Unconscionability (Osgood v. Medical, Inc.): Requires showing of extreme one-sidedness or lack of meaningful choice.
- Indemnity (Hendrickson v. Minn. Power & Light Co.): Requires express language in the contract to support indemnity.
Application:
- The court found that Far East’s claimed damages (removal and reinstallation costs, payments to the general contractor) were consequential because they stemmed from the failure to meet specific project needs known to the parties.
- The consequential-damages exclusion was not unconscionable since both parties were sophisticated commercial entities and the contract was negotiated at arm’s length.
- The court held that the failure of the exclusive remedy (refund or replacement) to fully compensate Far East does not invalidate the consequential-damages exclusion in a commercial setting. This rule follows Minnesota Supreme Court precedent in Franz.
- Far East’s indemnity claim failed because the contract lacked any express provision obligating Viracon to reimburse Far East for third-party liabilities or costs beyond replacement or refund.
Conclusion:
The Eighth Circuit affirmed the district court’s dismissal. The consequential-damages exclusion in the parties’ contract is enforceable, not unconscionable, and remains valid even if the limited remedy failed of its essential purpose. Far East’s indemnity claim also fails due to lack of contractual support.
Unaccpeted Goods
Where the seller never delivers the goods or where the buyer rejects or revokes acceptance, §2-711 states that the buyer may recover the price and other damages. (Usually includes incidental and consequential damages).
Mirion Technologies (Canberra), Inc. v. Sunpower, Inc.
Court: United States District Court, Southern District of Ohio, 2017
Citation: 2017 WL 5090436
Judge: James L. Graham
I. Issue
The issue in this case is whether Mirion Technologies (Canberra), Inc. is entitled to a preliminary injunction requiring Sunpower, Inc. to specifically perform the terms of a supply agreement by manufacturing and supplying 250 cryocoolers to Mirion.
II. Facts
Parties: Mirion Technologies (Canberra), Inc. (“Mirion”) is a Delaware corporation that manufactures radiation detection instruments. Sunpower, Inc. is an Ohio corporation that manufactures CryoTel GT cryocoolers.
The Supply Agreement: On June 16, 2017, Mirion and Sunpower entered into a Supply Agreement where Sunpower agreed to supply cryocoolers to Mirion for a three-year period. Mirion placed an order for 250 cryocoolers on June 29, 2017, valued at $2.65 million.
Dispute: Sunpower refused to fulfill the purchase order, leading to litigation. Mirion sought a preliminary injunction for specific performance, arguing that Sunpower was contractually obligated to supply the cryocoolers.
III. Rule of Law
Specific Performance: A remedy that may be granted when there is no adequate remedy at law (i.e., damages) and when the goods are unique or in other proper circumstances (O.R.C. §1302.90).
Commercial Feasibility of Replacement: A buyer may seek specific performance if they cannot commercially cover or replace the goods contracted for (U.C.C. §2-716, Off. Cmt. 2).
IV. Analysis
Uniqueness of the Cryocoolers: The court found that Sunpower’s CryoTel GT cryocoolers were not unique. While they are important in the nuclear industry, they are not rare or impossible to replace. Mirion had previously identified multiple potential suppliers for cryocoolers.
Ability to Obtain Cover: The court emphasized that Mirion had other commercial options. They had been able to obtain cryocoolers from Lihan, and discussions with other suppliers like Thales were ongoing. The court concluded that Mirion could replace the cryocoolers through commercial means, such as working with Lihan or another supplier, thus making specific performance unnecessary.
Adequacy of Damages: Since Mirion could obtain an alternative supply of cryocoolers and the cost differences with alternative suppliers could be compensated by monetary damages, the court found that damages would be an adequate remedy.
Preliminary Injunction: The court denied the motion for a preliminary injunction, reasoning that Mirion had not shown a strong likelihood of success in its claim for specific performance, as they had access to alternative sources for cryocoolers.
V. Conclusion
The motion for a preliminary injunction is denied. Mirion Technologies (Canberra), Inc. is not entitled to specific performance of the supply agreement with Sunpower, Inc. because the cryocoolers are not unique, and Mirion can cover its needs by obtaining cryocoolers from other suppliers
Hughes Communications Galaxy, Inc. v. United States
United States Court of Appeals, Federal Circuit, 2001
271 F.3d 1060
Rader, Circuit Judge.
This case revolves around a breach of contract claim by Hughes Communications Galaxy, Inc. against the United States, arising from NASA’s failure to launch Hughes’ satellites under a Launch Services Agreement (LSA) that was initially signed in 1985. The contract required NASA to use its “best efforts” to launch ten HS-393 satellites on space shuttles. However, after the Challenger disaster in 1986, NASA suspended shuttle operations and later, the U.S. government announced it would no longer launch commercial satellites on shuttles.
Hughes was forced to launch its satellites using expendable launch vehicles (ELVs), which incurred higher costs than using shuttles. The Court of Federal Claims awarded Hughes $102,680,625 in damages for the increased costs it incurred from having to use ELVs instead of shuttles. The Government appealed the decision, but the Court of Appeals affirmed the lower court’s ruling. Here are the key points from the case:
Key Facts:
- The LSA signed in 1985 required NASA to launch Hughes’ satellites using its “best efforts.”
- After the Challenger disaster, NASA suspended shuttle launches, and later President Reagan announced that NASA would no longer launch commercial satellites on shuttles.
- Hughes launched some of its satellites on expendable launch vehicles (ELVs) at a higher cost than using shuttles.
- Hughes sued the U.S. government for breach of contract and sought damages for the increased costs it incurred by using ELVs.
Legal Issues:
- The issue was whether Hughes should be awarded damages for the increased costs of launching its satellites on ELVs.
- The Court of Federal Claims ruled that Hughes could recover the increased costs it incurred from using ELVs as a result of the breach, which it referred to as a “cover” remedy (a common law remedy for breach of contract).
- The Court of Appeals agreed with the Court of Federal Claims’ use of a “cover” remedy to calculate damages.
- Hughes used two methods to calculate its increased costs: the “Ten HS-393 Satellites Method” and the “Primary Method.”
- The Court of Federal Claims decided to use the Ten HS-393 Satellites Method, but modified it, awarding damages for only five satellites (based on NASA’s best efforts).
- The court found that the use of the HS-601 satellites as substitutes for the HS-393 satellites was reasonable because they were more suited for ELV launches.
- The Court of Appeals found that the lower court did not abuse its discretion in awarding damages and that the damages calculation was reasonable.
Damages and the “Cover” Remedy:
- The Court of Federal Claims’ calculation of damages for Hughes’ increased costs was a reasonable approximation based on the costs of launching satellites on shuttles versus ELVs.
- The damages awarded were considered “direct damages,” as they were related to the increased costs of substitute launch services.
- The court rejected the Government’s attempt to reduce damages based on the prices Hughes passed on to its customers. The court found that such a reduction would be too remote and difficult to prove.
Conclusion:
The Court of Appeals affirmed the lower court’s decision, ruling that Hughes was entitled to recover the increased costs incurred from launching satellites on ELVs instead of shuttles. The Court held that the damages were reasonable and were appropriately calculated by the Court of Federal Claims. The appeal was rejected, and the damages award stood.
Final Ruling: The judgment of the Court of Federal Claims was affirmed.
What is the legal effect of a buyer’s decision to cover?
The legal effect is measured against a standard of reasonableness in the given factual situation.
This includes considerations of whether the buyer would have made the same arrangements without the prospect of a successful suit.
What are the two types of damages a buyer may choose between under §2?
- Cover damages under §2-712
- Market differential damages under §2-713
Refer to Turner v. NJN Cotton Company, 485 S.W.3d 513 (Tex. App. 2015).
What happens if a buyer fails to cover in an appropriate situation?
Consequential damages that could have been avoided are denied.
See §2-715(2)(a).
What is an excuse for non-cover?
Financial inability.
Refer to REB, Inc. v. Ralston Purina Co., 525 F.2d 749, (10th Cir. 1975).
What provision is often criticized for measuring damages when a buyer does not cover?
§2-713.
Refer to Childres, Buyer’s Remedies: The Danger of Section 2-713, 72 Nw. U. L. Rev. 837 (1978).
Fill in the blank: If a buyer does not cover, damages may be measured under _______.
§2-713.
True or False: A buyer must always cover after a breach.
False.
What is a practical test to gauge the reasonableness of a buyer’s covering actions?
Whether the buyer would have made the same arrangements if there was no prospect of a successful suit against the breaching seller.
This test helps assess the buyer’s intentions and actions in the covering process.
Tonigsh v Thomas
Tongish v. Thomas, 251 Kan. 728 (1992), 840 P.2d 471
Court: Supreme Court of Kansas
Date: 1992
Issue: Whether damages for the nondelivery of contracted sunflower seeds should be based on K.S.A. 84-1-106 (actual loss of profits) or K.S.A. 84-2-713 (difference between market price and contract price).
Facts:
- Denis Tongish and the Decatur Coop Association (Coop) entered a contract for Tongish to grow sunflower seeds, which Coop agreed to buy at specific prices per hundredweight.
- Due to market fluctuations, the price of sunflower seeds doubled after the contract was signed. In May 1989, Tongish breached the contract by refusing to deliver more sunflower seeds after already delivering a portion.
- Tongish later sold the seeds at a higher price to another buyer, Danny Thomas, and sought damages for the unpaid balance of the sale.
- Coop intervened, seeking damages for Tongish’s breach.
Court’s Analysis:
- K.S.A. 84-1-106 is a general provision governing remedies under the Uniform Commercial Code (UCC) and allows the aggrieved party to be placed in as good a position as if the contract had been performed.
- K.S.A. 84-2-713 specifically addresses the measure of damages for nondelivery by the seller and provides that the buyer can recover the difference between the market price at the time the buyer learns of the breach and the contract price.
The trial court had originally awarded damages based on actual loss of profits under K.S.A. 84-1-106, but the Court of Appeals reversed, ruling that K.S.A. 84-2-713, which allows for market price damages, should apply in this case. The Supreme Court affirmed the Court of Appeals’ ruling.
Reasoning:
- The court noted a conflict between the two statutes: K.S.A. 84-1-106 is a general remedy for damages, while K.S.A. 84-2-713 is specific to sales contracts for goods.
- The court applied the rule of statutory construction, stating that the more specific statute (K.S.A. 84-2-713) prevails over the general rule (K.S.A. 84-1-106), as it directly governs the breach of contract in the sale of goods.
- The market price measure, provided in K.S.A. 84-2-713, encourages the honoring of contracts by discouraging breaches when market conditions change in favor of the breaching party, thus promoting market stability.
Conclusion:
- K.S.A. 84-2-713 applies, and Coop is entitled to the difference between the market price of sunflower seeds at the time of breach and the contract price, rather than the actual loss of profits under K.S.A. 84-1-106.
- The Court affirmed the Court of Appeals’ decision, reversing the district court’s ruling and remanding the case for further determination of damages based on the market price difference.
This decision emphasizes the application of specific UCC provisions to resolve disputes in commercial contracts and promotes efficient contract enforcement.
What is the primary purpose of the CISG Treaty?
To provide a uniform framework for international sales of goods
The CISG (Convention on Contracts for the International Sale of Goods) aims to harmonize international trade law.
Which articles of the CISG deal with damages provisions?
Articles 74 to 78
These articles outline how damages are to be calculated and awarded in cases of breach.
What concept does the term ‘fundamental breach’ refer to in the context of the CISG?
A serious violation of the contract that allows the other party to terminate the contract
This concept is similar to ‘material breach’ in American contract law.
What is the equivalent term for ‘fundamental breach’ in American law?
‘Material breach’
Material breach is the opposite of ‘substantial performance.’
According to the Restatement (Second) of Contracts §241, what is one circumstance significant in determining whether a failure is material?
The extent to which the injured party will be deprived of the benefit which he reasonably expected
This is the first of several factors considered in determining materiality.
Fill in the blank: The likelihood that the party failing to perform will cure his failure is considered in determining whether a failure is _______.
material
What does the second circumstance in §241 involve?
The extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived
This assesses the adequacy of damages available to the injured party.
True or False: The behavior of the party failing to perform should comply with standards of good faith and fair dealing.
True
This is one of the significant circumstances in determining if a failure is material.
What is the fourth factor considered in determining material failure according to the Restatement?
The likelihood that the party failing to perform will cure his failure
This factor emphasizes the potential for remedying the breach.
List all five circumstances significant in determining whether a failure is material according to the Restatement (Second) of Contracts §241.
- The extent to which the injured party will be deprived of the benefit which he reasonably expected
- The extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived
- The extent to which the party failing to perform will suffer forfeiture
- The likelihood that the party failing to perform will cure his failure
- The extent to which the behavior of the party failing to perform comports with standards of good faith and fair dealing.
What is the significance of Articles 46(2) and 25 in the context of the CISG?
They relate to the definition and implications of fundamental breach
Article 25 defines fundamental breach while Article 46(2) discusses the rights of the buyer in case of such a breach.
Buyer’s Right to SP
Unique goods that the buyer cannot cover. There is a more liberal attitude than common law. You must consider that 90% of the time, the seller is meant to sell something and they make a contract price to sell something for a low price, the seller then wants to sell it for a higher price and they try to get out of the contract. 2-713 and 2-712= to discourage the seller from doing this.
