The Uniform Commercial Code (UCC) Article 2 provides a framework for remedies available to sellers when a buyer breaches a contract for the sale of goods, such as by refusing delivery, wrongfully rejecting goods, or failing to pay. These remedies aim to make the seller whole without allowing overcompensation. A key principle is that sellers can combine monetary remedies (e.g., damages based on market price) with non-monetary ones (e.g., canceling the contract), but they cannot combine multiple monetary remedies. Additionally, if the buyer has accepted the goods, the seller’s options are limited to recovering the purchase price or, in specific cases, reclaiming the goods. This article explains these rules with practical examples to illustrate their application.
Combining Monetary and Non-Monetary Remedies
Under UCC § 2-703, sellers have flexibility in choosing remedies when a buyer breaches before accepting the goods. Monetary remedies provide financial compensation, such as damages for lost profits or price differences, while non-monetary remedies include actions like canceling the contract or withholding delivery. The UCC allows combining one monetary remedy with non-monetary ones to address the breach holistically, but prohibits stacking multiple monetary remedies to prevent double recovery. This ensures the seller is restored to the position they would have been in had the contract been performed, without windfalls.
Example: Combining Market Price Damages and Contract Cancellation
Suppose a seller agrees to sell 100 industrial pumps to a buyer for $20,000 (contract price). Before delivery, the buyer cancels the order, breaching the contract. At the time of the breach, the market price for the pumps has fallen to $15,000 due to a market slump. The seller can:
- Cancel the contract (non-monetary remedy under UCC § 2-703), relieving both parties of further obligations.
- And sue for market price damages (monetary remedy under UCC § 2-708), calculated as the difference between the contract price ($20,000) and the market price ($15,000), resulting in $5,000 in damages, plus any incidental costs like storage.
This combination is permissible because cancellation halts the deal, while the damages compensate for the financial loss from the market drop. Alternatively, the seller could withhold delivery (another non-monetary remedy) alongside seeking these damages.
However, the seller cannot pursue multiple monetary remedies for the same breach. For instance, if the seller resells the pumps to another buyer for $14,000, they could claim resale damages (UCC § 2-706: $20,000 contract price minus $14,000 resale price = $6,000, plus incidental costs). But they cannot also seek market price damages ($5,000) or the full contract price ($20,000 under UCC § 2-709), as these are all monetary remedies addressing the same loss. The seller must choose one monetary remedy to avoid overcompensation.
Limited Remedies After Buyer Acceptance
Once the buyer accepts the goods (per UCC § 2-606, e.g., by taking possession and not rejecting them within a reasonable time), the seller’s remedies are significantly restricted. The UCC prioritizes finality in such transactions, so remedies like resale or market price damages, which assume non-acceptance, are unavailable. Instead, the seller’s options are limited to:
- Recovering the purchase price (UCC § 2-709), plus incidental damages.
- Reclaiming the goods (UCC § 2-702), but only in rare cases, such as buyer insolvency within 10 days of receipt on credit terms.
These limitations prevent disruption to the buyer’s use of accepted goods while ensuring the seller can recover payment or, in extreme cases, repossess goods.
Example: Action for the Price After Acceptance
Consider a seller who delivers 50 custom-built machines to a buyer for $50,000. The buyer inspects and accepts the machines but later refuses to pay, breaching the contract. The seller’s primary remedy is an action for the price (UCC § 2-709), suing to recover the full $50,000, plus any incidental costs (e.g., shipping fees incurred). Since the buyer has accepted the goods, the seller cannot resell them or claim market price damages, as the goods are now the buyer’s property.
Example: Reclaiming Goods on Buyer Insolvency
In a similar scenario, the seller delivers the 50 machines on credit, and the buyer accepts them. Within 10 days, the buyer becomes insolvent and cannot pay. Under UCC § 2-702, the seller can reclaim the goods by demanding their return, provided the demand is made promptly and the goods are identifiable. If successful, the seller could then resell the machines to another party. However, the seller cannot reclaim the goods and sue for the $50,000 price, as these remedies are mutually exclusive—reclamation assumes the seller takes the goods back, negating the basis for demanding the price. If the seller misses the 10-day window or the buyer is not insolvent, the seller’s only option is to sue for the price.
In Sum
UCC Article 2 provides sellers with a balanced set of remedies to address buyer breaches, tailored to whether the goods have been accepted. Before acceptance, sellers can mix one monetary remedy (like market price or resale damages) with non-monetary ones (like cancellation), but cannot stack monetary remedies to avoid overcompensation. After acceptance, remedies are limited to recovering the price or, in narrow cases like insolvency, reclaiming the goods. These rules ensure fairness while protecting the seller’s economic interests. Understanding these options, as illustrated by the examples above, helps sellers navigate breaches effectively while complying with UCC principles.
Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. The information presented is based on general principles of the Uniform Commercial Code (UCC) Article 2 as understood at the time of writing. Laws and their interpretations may vary by jurisdiction and can change over time. Readers should consult with a qualified legal professional for advice specific to their situation before taking any action based on this content. The author and publisher are not responsible for any errors, omissions, or outcomes resulting from the use of this information.
