Risk of Loss
Seller's Remedies for Buyer's Breach
The focus of class on April 2 was the variety of remedies available to the seller when the buyer has breached the contract. In studying this issue, I think it important for our purposes to keep the hierarchy of remedies in mind. Though 2-701 through 2-710 covers buyer's remedies, the most important remedies are discussed in 2-706 (when seller has covered), 2-708 (damages for non-acceptance or repudiation) and 2-709 (action for the price). In addition, you should know the index section, 2-703, which functions for the seller much like 2-711 functions for the buyer, and you should also know 2-704 (the right to identify goods and continue production in certain circumstances) and 2-710 (the availability of incidental damages). I didn't assign the last three, but I mentioned them in class and so, to the extent I mention them, you will be responsible for them. You are also responsible for the following Comments to various Code sections. To 2-706, Comments 2,4,5,8,9; To 2-708, Comments 1,2; To 2-709, Comments 2,3,6,7.
Action for the Price. 2-709 presents the three scenarios when action for the price is available to the seller. Before understanding action for the price, however, one must recall that upon acceptance the "buyer must pay at the contract rate for any goods accepted (2-607(1))." If the buyer does not within a reasonable time after discovery of breach notify the seller, the buyer is "barred from any remedy (2-607(3)(a))." Thus, when the buyer fails to pay the price as it becomes due, it is liable to seller's action for the price for "goods accepted (2-709(1)(a))." This is the first scenario: a seller's action for the price is available when the goods have been accepted. The second is when conforming goods have been lost or damaged but risk of loss has passed to the buyer. Though we didn't cover risk of loss earlier in the class, I will devote part of our last session to it (2-509, 2-510). The third scenario is when goods have been identified to the contract and the seller is either unable to sell them after reasonable effort or can show by the circumstances that such effort to sell them will be unavailing (2-709(1)(b)). I also read through sections (2) and (3), which obligate the seller to hold the goods when an action for the price is pursued or, if resale is avaialble, to offset the price of resale from the amount owed by the buyer.
An example of the last, which also incorporates a brief analysis of 2-704, is if a person were to order a special garment (dress/suit) that is only appropriate to the person and to a special occasion and, when the tailor is in the process of making the garment, the person repudiates. The seller may, using the remedies in 2-704, if it is "in the exercise of reasonable commerical judgment" complete the manufacture of the garment or resell for "scrap or salvage value." If the tailor decides to complete the garment and can show it is reasonable to do so, the tailor will have an action for the price if he can show that it is highly unlikely that anyone else would buy such a good.
Note the Comments cited above. Comment 2 restates the law succinctly, while Comment 3 emphasizes that an objective test on resale has replaced a former "not readily resalable" test. Comment 6 stresses, unlike most of the other Code sections dealing with remedies, that the listing of these three situations in 2-709 for action for the price is an exhaustive list. Finally, Comment 7 emphasizes that if this remedy fails, one can get damages under 2-708. Thus, in pleading, it is important to bring two counts at least when the buyer has repudiated.
Two cases considered the action for the price: Industrial (p. 503) and Bloom (p. 506). At issue in the former is whether an action for the price was available after the son of defendant's president ordered 5,000,000 plastic clothing clips for their retail clothing concern. Even though delivery was never made to defendant's plant, the court concluded that an acceptance had taken place (why did the court so hold?) and this acceptance triggered the duty to pay. When full payment was not forthcoming, plaintiff could successfully pursue an action for the price. The latter case had to do with whether an action for the price was available when a purchaser of candelabras was not at home for the period of a month to receive delivery of the goods, and when the seller had repeatedly tried to deliver the goods and left notes indicating his interest in delivery of the goods. The court concluded also that an acceptance had taken place and therefore an action for the price was appropriate. Note that the court argued from 2-503 and 2-507 (assigned for class) to maintain that a tender had been made, and that once a tender was made the duty on the buyer was to accept or to make an effective rejection. The court concluded that an effective rejection was not made. Though some might debate the correctness of the court's conclusion (historical note: Judge Cedarbaum in this case was the judge in the recently concluded trial of Martha Stewart), I think it comports with the point I made earlier in class that the Code's position is that once a contract is made, silence on the part of the purchaser indicates acceptance. So it was the case here.
Though we begin with action for the price, it is not as frequently granted as the action for damages upon non-acceptance (2-708) or resale (2-706). I turn to those on the next page.