## Facts

- Kenco Homes, Inc. sold mobile homes and sometimes contracted for homes not yet ordered from the factory; the trial court found Kenco had a virtually unlimited supply of product.
- On September 27, 1994, Kenco and Dale and Debi Williams signed a contract for a mobile home priced at $39,400 with a $500 down payment; the home had not yet been ordered.
- The contract was conditional on (1) Williams obtaining financing and (2) Williams later approving a bid for site improvements; financing was to cover both the home and the land.
- The contract provided Kenco would have UCC seller’s remedies upon breach, except liquidated damages under UCC § 2-718, and included an attorney-fee clause for the prevailing party.
- In early October 1994, Williams approved the site-improvement bid and obtained preliminary financing approval.
- Around October 12, 1994, Williams tendered a $600 check for a land appraisal, then stopped payment and repudiated the transaction because he found a better deal elsewhere.
- Kenco had not ordered the home; after repudiation it did not place the order, incurring only minor office overhead.
- Kenco sued for lost profits; after a bench trial, the court found breach and found lost profits of $11,133 but awarded only the $500 down payment as adequate compensation.

## Issues

1. Whether a seller with a virtually unlimited supply is entitled under UCC Article 2 to recover lost profits for a buyer’s repudiation, rather than being limited to retaining the down payment.
2. Whether Kenco qualified as a lost-volume seller entitled to expectation damages measured by lost profits even though the home was never ordered.

## Decision

- The Court of Appeals reversed the damages award and remanded.
- It held the trial court applied an incorrect measure of damages by limiting recovery to the $500 down payment.
- Based on the finding of a virtually unlimited supply and the trial court’s lost-profit finding, Kenco was a lost-volume seller entitled to recover lost profits under UCC seller’s remedies.
- The down payment could be credited against damages but could not cap recovery.
- On remand, the trial court was directed to enter judgment consistent with UCC lost-profit damages, with appropriate credits and any contract-authorized attorney’s fees and allowable incidental damages.

## Legal Principles

- A lost-volume seller—one with the capacity and supply to make the breached sale in addition to other sales—may recover lost profits under UCC Article 2 when a buyer repudiates.
- For a lost-volume seller, avoidance of procurement or manufacturing costs after repudiation does not eliminate the lost profit from the foregone sale.
- Contract terms incorporating UCC seller’s remedies require use of UCC damages measures, absent an enforceable liquidated-damages provision.
- A buyer’s deposit is applied as a credit toward total damages and is not, by itself, the exclusive remedy when lost profits are proven.

## Conclusion

The appellate court held that a high-capacity mobile-home retailer was a lost-volume seller and therefore entitled to UCC lost-profit damages for the buyer’s repudiation; limiting recovery to the down payment conflicted with the UCC and the trial court’s own finding of $11,133 in lost profits.


Kenco Homes, Inc. v. Williams, 94 Wash. App. 219, 972 P.2d 125 (Wash. Ct. App. 1999)