Remedies Available To Sellers And Lessors Under The UCC ✓ Solved

Remedies Available To Sellers And Lessors Under The UCC

UCC Sections 2-703(f) and 2A-523(1)(a) allow a seller or lessor to cancel the contract if the buyer or lessee is in breach. The UCC requires sellers/lessors to notify buyers/lessees of the cancellation. Then the seller or lessor pursues remedies available under the UCC. These remedies give the seller/lessor the benefit of the bargain and no more.

Sometimes a buyer breaches the contract or lease before the seller has delivered the goods. For instance, the buyer or lessee might fail to pay according to the terms of the agreement. UCC Sections 2-703(a) and 2A-523(1)(c) allow sellers or lessors to withhold delivery of goods when the buyer or lessee is in breach.

Sellers or lessors are also allowed to resell or dispose of the goods when the buyer is in breach and the goods have not yet been delivered. The seller or lessor then holds the buyer or lessee liable for any loss. UCC Section 2-706 allows the seller to recover the difference between the resale price and the contract price, plus incidental damages and minus expenses saved. Although buyers are liable for these damages, the seller gets to keep any profits it makes on the resale. UCC 2A-527(2) outlines a similar rule for lease agreements.

The lessor is allowed to lease the goods to another party and recover unpaid lease payments, plus any deficiency between the lease payments due under the original lease contract and those due under the new contract. The lessor can also seek incidental damages.

UCC Sections allow a seller or lessor to stop delivery of goods that are in transit. In transit means that the seller or lessor has delivered the goods to a carrier or bailee but the carrier or bailee has not yet turned them over to the buyer. The seller/lessor must give timely notice to the carrier/bailee so that the carrier/bailee is able to stop delivery.

If the buyer or lessee is insolvent, the carrier/bailee can stop delivery regardless of the quantity shipped. If the buyer/lessee is solvent, however, the carrier/bailee can stop delivery only if the quantity shipped is a large shipment, such as a carload or truckload.

Under UCC Sections 2-502 and 2A-522, if the buyer or lessee has possession of the goods and is in breach, the seller or lessor can sue for the purchase price of the goods or for the lease payments due, plus incidental damages.

Remedies Available to Buyers and Lessees under the UCC

UCC Sections allow buyers and lessees to cancel the contract when sellers or lessors fail to deliver the goods or to deliver conforming goods. Buyers and lessees can then seek remedies that give them the benefit of the bargain.

Under UCC Sections 2-712 and 2A-518, buyers and lessees are allowed to cover, or substitute, goods for those due under the sales or lease agreement. The buyer must demonstrate good faith in obtaining the substitute goods, pay a reasonable amount for the substitute goods, act without unreasonable delay in purchasing the substitute goods, and purchase goods that are reasonable substitutes.

Moreover, buyers and lessees are entitled to incidental and consequential damages. Consequential damages include damages for lost profits, as long as these damages are not too speculative. The UCC allows for liquidated damages and, under certain situations, punitive damages. Liquidated damages are damages specified as a term of the contract, before a breach of contract occurs.

UCC Section 2-718 allows the nonbreaching seller to claim against a breaching buyer 20 percent of the purchase price or $500, whichever is less, as liquidated damages. Although the UCC does not mention punitive damages, there remains discussion around their application in contract law, especially for intentional breaches.

Conclusion

The UCC provides a comprehensive framework of remedies for sellers, lessors, buyers, and lessees in the event of breaches in sales and lease contracts. Understanding these remedies is essential for parties involved in such agreements to ensure their rights and obligations are upheld. The code emphasizes the protection of parties' interests while maintaining fairness and consistency in commercial transactions.

References

• Kubasek, N., Browne, M. N., Herron, D. J., Dhooge, L. J., & Barkacs, L. (2016). Dynamic business law: The essentials (4th ed.). New York, NY: McGraw-Hill Education.
• U.C.C. § 2 (amended 2002).
• U.C.C. § 2-703(f) - Seller's remedies for breach by the buyer.
• U.C.C. § 2A-523(1)(a) - Lessor's remedies for breach by the lessee.
• U.C.C. § 2-706 - Resale of goods by the seller.
• U.C.C. § 2A-527(2) - Lessor's right to recover unpaid lease payments.
• U.C.C. § 2-712 - Buyer's right to cover.
• U.C.C. § 2-718 - Liquidated damages.
• U.C.C. § 2-502 - Buyer's right to recover goods.
• U.C.C. § 2A-521(1) - Specific performance remedies.