Sales and Leases | 31
1. General Measure of Direct Damages Generally, direct damages equal the difference between the value of the performance that the seller promised and the value of the performance the seller actually delivered. Courts often use the cost to repair defective goods to measure direct damages. In breach-of-warranty cases, direct damages normally include the difference between the value, at the time and place of acceptance, of the goods as accepted (of which resale price is strong evidence) and their value had they been as warranted (of which the contract price is strong evidence). Buyer’s Incidental Damages Generally speaking, the buyer’s incidental damages embrace normal, commercially reasonable expenses in dealing with the goods after the breach or in mitigating the breach, including: expenses reasonably incurred in handling nonconforming goods, such as costs to inspect, receive, care for, transport, and maintain custody of the goods; expenses of implementing cover, that is, locating and obtaining substitute goods; and other expenses incident to the breach. Buyer’s Consequential Damages Only the buyer may recover consequential damages. Consequential damages include loss arising from the buyer’s needs or requirements, be they general or particular, of which the seller had reason to know at the time of contracting. Examples include lost business and lost profits. But consequential damages are not recoverable insofar as the buyer could, with reasonable effort, have prevented them by cover or some other means. That is, the buyer must make reasonable, good-faith efforts to mitigate her damages within a reasonable time after learning of the breach. If she does, she can recover consequential damages even if those efforts fail. If she does not, then loss that could reasonably have been saved will be subtracted from consequential damages. Additionally, consequential damages include personal injury or property damages proximately caused by the seller’s breach of warranty. In any case, the buyer must prove consequential damages with reasonable certainty. Limitation or Modification of Remedies in the Agreement As a general rule, and subject to the rules on liquidating and limiting damages, an agreement may (1) set forth remedies instead of or in addition to those articulated in Article 2 or (2) limit or alter the measure of damages that a party could otherwise recover under Article 2. A common example here arises in the case of an agreement excluding incidental or consequential damages and confining the buyer’s remedies to repair or replacement of defective goods and a refund of the purchase price. Typically, if the agreement contemplates a limited, modified, or alternative
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