A1 Business & Technical College Business Law Chapter 24 Discussion

Review U.S.A. Coil & Air, Inc. v. Hodess Building Co.,on pages 73-74 of your text.

Discuss the following questions that are posed in the Critical Thinking section following the case:

Hodess appears to have had an advantage in the case because it had better evidence.  How so?  How could U.S.A. have increased its chances of winning?

Also discuss whatever damages Hodess may have incurred due to U.S.A.’s failure to provide a properly working product?

2/9/2018
Chapter 24
Remedies for Breach of Sales and
Lease Contracts
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Overview
• LO24-1: What constitutes a breach of a
sales contract?
• LO24-2: What is resale?
• LO24-3: What money damages are
available for breach?
• LO24-4: What are liquidated damages?
• LO24-5: What is cover?
• LO24-6: When is specific performance of
the contract a remedy?
24-2
The Goal of Contract Remedies
• Primary goal of contract remedies: To fulfill
expectations and intentions of parties to
agreement; give them “benefit of the bargain”
negotiated
24-3
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Breach, Resale, and Cover
• Breach: Failure to honor the contract
• Money damages usually recovery of purchase price or lease
payments due; sometimes lost profit as well
• Resale: Sellers/lessors allowed to sell the goods to another
buyer or dispose of the goods when buyer is in breach and
goods not delivered
• Seller/lessor holds buyer/lessee liable for any loss
• Preferred remedy for nonbreaching sellers
• Cover: Substitute goods
• Must demonstrate good faith, pay a reasonable sum for the
substitute, act without delay, and purchase reasonable
substitutes
24-4
Remedies Available to Sellers and
Lessors Under UCC
• When buyer/lessee is in breach, seller/lessor
can:
•
•
•
•
Cancel contract
Withhold delivery
Sell or otherwise dispose of goods
Sue to recover purchase price, lease payments
due, or some other measure of damages that give
seller/lessor benefit of bargain
24-5
Liquidated Damages
• Definition: Damages specified in contract before
breach occurs
• General rule: Parties free to negotiate, as part of
contract, a liquidated damages clause
• Courts will enforce liquidated damages clause,
provided it is reasonable and not punitive
• UCC Section 2-718: Allows nonbreaching seller
to claim against breaching buyer twenty percent
of purchase price or $500, whichever is less, as
liquidated damages
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Remedies Available to Buyers and
Lessees Under UCC
• When seller/lessor is in breach, buyer/lessee can:
•
•
•
•
•
•
•
•
Cancel contract
Obtain cover (substitute goods)
Sue to recover damages
Recover goods
Obtain specific performance
Reject nonconforming goods
Revoke acceptance of nonconforming goods
Accept nonconforming goods and seek damages
24-7
Elements Necessary to
Obtain Legal Cover
• Buyer must:
• Demonstrate good faith in obtaining
substitute goods
• Pay reasonable amount for substitute
goods
• Act without unreasonable delay in
purchasing substitute goods
• Purchase goods that are reasonable
substitutes
24-8
Modification/Limitations to
Remedies Provided by UCC
• Parties to sales and lease contracts are
allowed to modify/limit remedies
• Courts uphold modifications/limitations to
remedies unless remedies fail in their
essential purpose
24-9
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