Quiz 27: Remedies for Breach of Sales Contracts


a) True. Since, buyer is insolvent seller can remedy by reclaiming the goods. b ) False. A third party purchaser of the goods has rightful title of it. However, seller may still be able to reclaim damage for the sold good. c) False. Typically the 10 days limitation holds, but since, buyer misrepresented their financial situation seller have right even after the limitation period. d ) False. There are many course of action that seller may choose to recover for damages, they are not limited to one.

Refer to the case Firwood Manufacturing v General Tire (96 F3d 163). Case Issue The issue is whether seller can recover for the difference in contract price and selling price to other buyers after the original buyer breach the contract, even though it took the seller three years to make resale. Trial court granted the difference amount to seller. Buyer appealed the decision. Relevant Terms, Laws, and Cases UCC 2-706 - allows the seller to sell goods to other buyers when the original buyer breach contract. It requires that seller make sale in a commercially reasonable manner and inform buyer its intention to resale. Opinion Higher court affirmed the decision. The court looked at whether the seller made their resale in a commercially reasonable manner as required by UCC 2-706. The court conceded three years is a long time, but the reasonable time is not determined by time itself but rather by the goods itself. The court found that these goods were intended for a specific usage, and there were no market for the seller's good at during the three years; hence, they determined seller made a good faith effort to cover losses.

a) True. The buyer breached the contract by informing seller they didn't intend to buy or pay. Even though the seller had sold the goods they are still entitled to the amount they would have received, difference between contract price and sold price, had buyer not breached. b) False. The buyer had already informed seller they didn't intend to buy, an anticipatory breach. Once the contract is breach by buyer, the seller doesn't have to wait for contract expiration date to cover their losses. c) False. It is too late as seller had already covered their losses by finding another buyer. d) False. The buyer breached the contract; hence, they don't have cause for recovery.

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