## Facts

- William G. Young supplied evergreen boughs and sold to Frank’s Nursery & Crafts, Inc. beginning in 1975; from 1976 through 1987 he sold exclusively to Frank’s.
- On January 27, 1987, the parties contracted for Young to deliver about 360 tons of boughs (including Douglas fir raw material and bundled boughs) in November 1987 for approximately $238,332.85.
- After receiving the order, Young obtained cutting rights from Michigan farmers, repaired equipment, and prepared additional hand tiers to meet the contracted quantity.
- On June 30, 1987, Frank’s issued a revised purchase order reducing the quantity to about 70 tons, removing the Douglas fir component, and cutting the contract price to under $60,000.
- Young asked Frank’s to reinstate the original order; Frank’s refused.
- Young attempted to locate substitute buyers through contacts with other buyers and brokers, but he could not secure other purchasers because fall orders had already been placed.
- Young cut and delivered only enough boughs to fill the reduced 70-ton order.

## Issues

1. When a buyer anticipatorily breaches and the seller seeks damages under UCC 2-704(2) and 2-708, which party bears the burden of proving that the seller’s decision to cease production was commercially unreasonable?
2. Is the seller’s commercial reasonableness in ceasing production an element of the seller’s damages claim, or part of the buyer’s mitigation defense?

## Decision

- The Ohio Supreme Court reversed the court of appeals.
- The court held that the buyer bears the burden of proving the seller acted in a commercially unreasonable manner in deciding to cease production after the buyer’s anticipatory breach.
- The court approved the trial court’s jury instruction placing that burden on Frank’s and rejected the appellate court’s contrary allocation.
- The court treated the buyer’s claim of commercial unreasonableness as an assertion of failure to mitigate, for which the breaching party carries the burden.
- The court’s holding left undisturbed the trial result awarding Young lost-profit damages based on the jury’s verdict.

## Legal Principles

- After a buyer’s anticipatory breach, UCC 2-704(2) permits the seller, in the exercise of reasonable commercial judgment, to complete or cease manufacture/production; the choice must be commercially reasonable.
- A seller seeking damages under UCC 2-708 may recover lost profits when the standard market/contract differential is inadequate.
- Allocation of the burden of proof on commercial reasonableness, when asserted to limit damages, follows mitigation doctrine: failure to mitigate is an affirmative defense.
- Therefore, when the seller elects to cease production after the buyer’s breach, the breaching buyer bears the burden to prove that the seller’s decision was commercially unreasonable.

## Conclusion

The Ohio Supreme Court held that, in an anticipatory-breach sales case where the seller proceeds under UCC 2-704(2) and 2-708 and stops production, the breaching buyer must prove the seller’s cessation decision was commercially unreasonable, because the contention functions as a mitigation defense rather than an element of the seller’s prima facie damages case.


Young v. Frank's Nursery & Crafts, Inc., 58 Ohio St. 3d 242, 569 N.E.2d 1034 (Ohio 1991)