Sales and Leases | 28
4. Seller’s Lost Profits The seller can recover lost profits plus incidental damages if the general damages formula under § 2-708 is inadequate to put the seller in as good a position as the buyer’s performance would have. There must be due allowance for costs the seller reasonably incurs and, with exceptions, due credits for payments or resale proceeds to the seller. Situations in which sellers commonly recover lost profits include lost-volume sellers, middlemen or jobbers who resell the goods without ever possessing them ( e.g. , wholesalers), specially manufactured goods that the seller cannot easily resell, or a seller of components if the goods are unfinished when the breach occurs. a. Calculating Damages Based on Lost Profits Damages for lost profits equal (1) the contract price, minus (2) costs that the seller saved due to the breach, plus (3) incidental damages under § 2-710, plus (4) due allowance for costs reasonably incurred. Here, fixed or overhead costs (costs incurred regardless of output) are normally ignored. Variable costs are typically deducted from lost-profit damages.
b. The Lost-Volume Seller
A lost-volume seller may recover lost profits if:
the seller had the capacity to make a sale in addition to that represented in the breached contract ( i.e. , the seller had enough product on hand or had the capacity to produce it); both the sale to the breaching buyer and the other sale would have been profitable; and but for the buyer’s breach, the seller likely would have made an additional sale. Due Allowance for Resale Proceeds and the Lost-Volume Seller Ordinarily, resale proceeds are not deducted from a lost-volume seller’s lost-profits damages, unless (1) the goods are unfinished when the breach occurs and (2) the seller commercially reasonably elects not to finish them and, instead, sells them for scrap. 5. Seller’s Action for the Price The seller may recover the price if the buyer has failed to pay at least part of the purchase price when due, and: the buyer has accepted the goods and not justifiably revoked acceptance; conforming goods are lost or damaged within a commercially reasonable time after the risk of loss has passed to the buyer; or
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