Quick Summary
Anthony Neri (plaintiff) entered into a contract with Retail Marine Corporation (defendant) to purchase a boat but attempted to rescind it due to medical issues. The dispute involved whether the seller could recover lost profits after buyers’ breach under UCC guidelines.
The Court concluded that under UCC § 2-708 (2), the defendant is entitled to lost profit and incidental damages since these would place them in as favorable a position as if performance had occurred.
Facts of the Case
Anthony Neri and his co (plaintiffs) entered into a contract with Retail Marine Corporation (defendant), doing business as Emmette Marine Corporation, to purchase a new boat for $12,587.40. They made an initial deposit of $40 and subsequently increased it to $4,250 after the defendant agreed to expedite delivery upon confirming it as a “firm sale.”
Shortly after that, due to unforeseen medical circumstances requiring Mr. Neri’s hospitalization and surgery, the plaintiffs attempted to rescind the contract, claiming inability to make further payments. Despite this, the boat had already been ordered and delivered to Retail Marine Corporation at or around the time of the attempted rescission.
Procedural Posture and History
- Plaintiffs sought a refund of their deposit, initiating legal action against the defendant.
- Defendant countered by alleging breach of contract and claimed damages equivalent to the deposit amount.
- The Court granted summary judgment on liability in favor of the defendant but required an assessment of damages.
- The trial court found in favor of the defendant for damages but limited it to $500 under UCC § 2-718 (2)(b), allowing plaintiffs partial restitution.
- The Appellate Division affirmed without opinion.
- Retail Marine Corporation appealed to the Court of Appeals of New York.
I.R.A.C. Format
Issue
Whether the Uniform Commercial Code permits a seller to claim loss of profits and related costs when a purchase contract is repudiated by the buyer.
Rule of Law
The Uniform Commercial Code § 2-708 (2) governs loss of profit recovery for sellers in retail transactions where standard-priced goods are involved.
Reasoning and Analysis
The Court’s reasoning hinged on the understanding that under UCC § 2-708 (2), a seller is entitled to recover lost profits and incidental damages when a buyer breaches a contract, provided that such damages would place the seller in as good a position as if the buyer had fully performed under the contract.
The Court concluded that if Retail Marine Corporation could have sold two boats (the one ordered by Mr. Neri and another one) instead of one had there been no breach, they were entitled to lost profit on one sale.
Additionally, the Court found that incidental expenses incurred from holding onto the boat until it was eventually resold were recoverable despite the trial court’s contrary finding.
Conclusion
The Court modified and affirmed the order of the Appellate Division, recognizing that Retail Marine Corporation was entitled to recover both lost profits and incidental damages from Mr. Neri.
Key Takeaways
- Sellers can recover lost profits on standard-priced goods when a buyer breaches a sales contract.
- Incidental damages are also recoverable under UCC § 2-710.
- The recovery of attorney’s fees is not included as incidental damages.
Relevant FAQs of this case
How does the UCC impact lost profit recovery for sellers in retail transactions?
The UCC, specifically § 2-708 (2), allows sellers to recover lost profits in retail transactions involving standard-priced goods, ensuring sellers are positioned as if the buyer fulfilled the contract.
- For example: If a bookstore sells a standard-priced textbook, and the buyer breaches the contract, the UCC enables the bookstore to claim lost profits.
Can sellers recover lost profits for non-standard-priced goods under UCC?
UCC primarily supports lost profit recovery for standard-priced goods. Recovering lost profits for non-standard-priced goods depends on jurisdiction and case specifics.
- For example: An artisan selling unique, non-standard-priced jewelry might need help recovering lost profits compared to a seller dealing in standardized goods.
How does the Court assess recoverable incidental expenses in a contract breach?
The Court evaluates recoverable incidental expenses based on whether they would place the seller in a favorable position if the buyer fulfilled the contract, adhering to UCC principles.
- For example: If a seller incurs storage costs post-breach, those expenses could be considered recoverable incidental damages under UCC.
References
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