OTHER NOTES ON REMEDIES

Question 1

Liquidated damages provisions

Answer 1

A contractual provision that determines a preset amount for damages in case of breach.

1) These are unenforceable if the court finds that it constitutes a penalty
2) The basic purpose of these is to create greater incentive for performance—creates a guaranty
3) Where a clause is valid:
a) Did the parties intend for the clause to operate as a liquidated damages provision or as a penalty?
b) Was the clause reasonable at the time of contracting in relation to the anticipated harm?
c) Was the clause reasonable in relation to the harm and losses that actually occurred due to the breach?

Question 2

UCC §2-708

Answer 2

(UCC Monetary Damages)
Seller’s Remedies

Two sources of damages
(i) Difference between market price and contract price (ex ante)
OR
(ii) Lost profits (these are looked at ex post, after the damages occur)—lost volume sellers

b) Upon buyer’s breach, seller is free to cancel the contract and to withhold delivery of any un-delivered goods. Seller may also have a right to recover money damages for any goods already delivered and incidental damages

Question 3

UCC §2-709

Answer 3

(UCC Monetary Damages)
Seller’s Remedies

If some or all of the goods have been delivered and accepted, the seller is entitled to collect the contract price for those goods

Question 4

UCC §2-706

Answer 4

(UCC Monetary Damages)
Seller’s Remedies

(i) Seller resells to third party: §2-706—recover difference between contract price and resale price (good faith obligation). Not accountable to buyer for any additional profits

Question 5

UCC §2-708

Answer 5

(UCC Monetary Damages)
Seller’s Remedies

(ii) Seller doesn’t resell to third party: §2-708—difference between contract price and market price

Question 6

Lost Volume Seller

Answer 6

A seller who, had there been no breach by the buyer, could and would have had the benefit of both the original contract and the resale contract.

Rule: UCC §2-708(2)
lost volume seller is entitled to the profit of fuller performance by buyer

“A lost-volume seller may recover the amount it would have received from the breaching buyer, even if the seller has resold those same goods to another party.”–> See Krafsur v. UOP (In re El Paso Refinery, L.P.)

Question 7

Krafsur v. UOP (In re El Paso Refinery, L.P.)

Answer 7

refinery using UOP’s technology under license

UOP claims lost volume seller; court disagrees, as each license is unique to that refinery