Sales and Leases | 219
Example: A retailer ordered a shipment of widgets from a manufacturer. The contract price was $15,000, which the retailer was to pay upon accepting the goods. The manufacturer completed and properly tendered the widgets, and the widgets conformed to the contract. Even so, the retailer wrongfully rejected the widgets, thus breaching the contract. In good faith and in a commercially reasonable manner, the manufacturer resold the goods for $17,000, incurring $500 in resale expenses and saving nothing due to the breach. The manufacturer need not account to the retailer for the $1,500 profit on the resale versus the contract price. However, the manufacturer’s damages against the retailer for the breach will be $0, consisting of: $15,000 (contract price) - $15,000 (resale price, disregarding $1,500 profit over contract price) - $0 saved due to the breach. [ See 2 Hawkland UCC Series § 2-706:1, Westlaw (database updated June 2021).] 1) Rule if a Buyer or a Person in the Position of a Seller Profits on the Resale As discussed below, if a buyer rightfully rejects or revokes acceptance of goods, the buyer may acquire a security interest in the goods for any price paid and for specified expenses. Additionally, a person in the position of a seller (a technical term of art that does not mean the same thing as seller) may acquire a security interest in the goods. A buyer or a person in the position of a seller with a security interest in the goods may have a right to resell the goods. If so, and if the goods are in fact resold, then the buyer or person in the position of a seller is accountable to the original seller for any excess of the resale price over the security interest. [U.C.C. § 2-706(6) (1951); Person in the Position of a Seller, Buyer’s Remedies for Goods Not Accepted, Buyer's Damages for Breach Regarding Accepted Goods, infra ; compare Result if Seller Resells the Goods for More Than the Contract Price, supra .] Resale Damages and the Breaching Buyer’s Right to Restitution As discussed above, the breaching buyer may have a right of restitution under § 2-718, usually of any prepayment toward the purchase price minus either liquidated damages or, if none, a $500 statutory penalty (or, if less, a penalty of 20 percent of the value of the buyer’s performance, usually the contract price). Thus, the formula for the seller’s damages on resale must account for this right of restitution. Normally, the buyer receives credit toward its damages obligation in the amount of its statutory restitution. [ See 2 Hawkland UCC Series § 2-706:1, Westlaw (database updated June 2021); Breaching Buyer’s Restitution, supra .]
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