Facts
- A buyer contracted to purchase a new boat from a retail dealer for $12,587.40.
- The buyer initially paid a $40 deposit and later increased the down payment to $4,250 to obtain “immediate delivery” after the seller agreed to order from the manufacturer on the basis of “a firm sale.”
- About six days after contracting, the buyer’s attorney sent a letter purporting to rescind because the buyer faced hospitalization and surgery and allegedly could not make payments.
- By the time the seller received the letter, the boat had already been ordered and delivered to the seller.
- The seller refused to refund the $4,250 down payment.
- The seller kept the boat for several months and resold it about four months later for the same price as in the buyer’s contract.
- The seller proved, without contradiction, that it expected a $2,579 profit on the buyer’s contract and incurred $674 in expenses (storage, upkeep, finance charges, insurance) while holding the boat.
- A key dispute was whether resale at the same price eliminated the seller’s loss, or whether the seller lost the profit from one sale because it could have made both the original sale and the later sale.
Issues
- Whether a retail seller may recover lost profits under UCC § 2-708(2) when the buyer repudiates and the seller later resells the same goods at the same price.
- Whether the seller may also recover incidental damages under UCC § 2-710 for expenses incurred after the buyer’s breach.
- Whether UCC § 2-718(2)(b)’s $500 default limit on deposit retention bars a seller from offsetting the buyer’s restitution claim with greater proven damages.
Decision
- The court held the seller was entitled to lost profits under UCC § 2-708(2) and incidental damages under UCC § 2-710.
- The court ruled the buyer was entitled to restitution of the $4,250 deposit, but subject to an offset for the seller’s proven damages.
- The court allowed an offset of $2,579 (lost profit) plus $674 (incidental damages), totaling $3,253.
- The court modified the judgment to award the buyer 4,250 minus $3,253) and affirmed as modified.
- The court rejected limiting the seller to $500 based on UCC § 2-718(2)(b) where the seller proved higher damages.
Legal Principles
- When the contract-market differential under UCC § 2-708(1) is inadequate to place the seller in as good a position as performance would have done, UCC § 2-708(2) permits recovery of the seller’s profit (including reasonable overhead), plus incidental damages, with credit for resale proceeds and payments.
- A resale at the same price does not necessarily eliminate damages; if the seller would likely have made both sales absent the breach, the seller may recover the lost profit on the breached sale (lost-volume reasoning).
- Incidental damages under UCC § 2-710 include commercially reasonable expenses incurred as a result of the buyer’s breach, such as storage, upkeep, financing, and insurance while awaiting resale.
- UCC § 2-718 addresses the buyer’s restitution interest in a deposit; the statutory $500 figure operates as a default amount the seller may retain absent proof of greater damages, not a cap on proven damages.
- A buyer’s restitution recovery is reduced by the seller’s proven damages; the seller may offset lost profits and incidental damages against the deposit.
Conclusion
The court held that a retail seller who proves it lost a sale despite resale at the same price may recover lost profits and incidental damages under the UCC, and those damages may be applied as an offset against the buyer’s claim to restitution of a down payment beyond the UCC’s $500 default retention amount.