Neri v. Retail Marine Corp.

New York Court of Appeals · 1972 · Contracts

Contractsdamageslost volume sellerUCClost profitsUCC 2-708(2)UCC 2-718UCC 2-710

Facts

Plaintiffs contracted to buy a new boat from defendant retail dealer for $12,587.40 and paid a $4,250 deposit after asking for immediate delivery on a firm-sale basis. Six days later, plaintiffs' lawyer sent a letter rescinding because plaintiff Neri was about to undergo hospitalization and surgery and allegedly could not make payments. The boat had already been ordered and delivered to defendant, and defendant later resold it four months later to another buyer for the same price. Defendant proved without contradiction that its profit on plaintiffs' sale would have been $2,579 and that it incurred $674 in storage, upkeep, finance charges, and insurance while the boat remained unsold.

Issue

When a retail dealer buyer repudiates, and the dealer later resells the same goods for the same price, may the dealer recover lost profits and incidental damages under UCC 2-708(2) as an offset against the buyer's restitution claim under UCC 2-718? Also, are attorney's fees in this action recoverable as incidental damages?

Rule

A seller may offset a breaching buyer's restitution claim under UCC 2-718(3)(a) by damages recoverable under other Article 2 provisions. If UCC 2-708(1)'s market-price measure is inadequate to put the seller in as good a position as performance would have done, UCC 2-708(2) allows recovery of the profit, including reasonable overhead, that the seller would have made from full performance, together with incidental damages under UCC 2-710; for a retail seller of standard-priced goods, resale to another buyer at the same price does not bar lost-profit recovery. Attorney's fees incurred in the action are not incidental damages under these provisions.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakefront Audio, a retail dealer in Cleveland, contracts to sell a standard-model home theater system to Omar Reed for $8,000. Omar pays a $2,000 deposit, then repudiates before delivery; the dealer later sells the same unit to another customer for the same $8,000 and proves it would have earned a $1,600 profit on Omar's sale.

If Omar sues for return of his deposit, what is the dealer's strongest argument for retaining part of it?

Explanation. The majority held that where a retail dealer sells standard-priced goods, a same-price resale does not necessarily make the seller whole. If the seller would have made two sales absent the breach, the market-price formula in UCC 2-708(1) is inadequate, and UCC 2-708(2) permits recovery of the profit the seller would have made from full performance. That recoverable damage may be used as an offset against the buyer's restitution claim under UCC 2-718(3)(a).