What Are the Rights of an Unpaid Seller in a Contract for the Sale of Goods?


The Uniform Commercial Code (UCC) is a model code that many major U.S. territories, the District of Columbia and each of the 50 states has enacted into its own code of laws. UCC Article 2 governs contracts for the sale of goods in every jurisdiction except for Louisiana and sets forth remedies for buyers and unpaid sellers alike in Part 7, entitled "Remedies."

Breach and Seller's Remedies in General

UCC 2-703(1) defines breach of a sales contract as "the buyer's wrongful rejection or wrongful attempt to revoke acceptance of goods, wrongful failure to perform a contractual obligation, failure to make a payment when due, and repudiation." UCC 2-703(2) sets forth a list of 12 remedies available to the seller and provides cross-references for the specific UCC provisions dealing with each such remedy. UCC 2-703(3) contains a list of remedies available to a seller when a buyer becomes insolvent, including withholding delivery of goods, stopping delivery or reclaiming the goods.

Resale of Goods

A seller may attempt to mitigate his damages by selling the goods from the broken contract. UCC 2-706 states that under the conditions set forth in UCC 2-703, a seller can sell the goods at a public or private sale. Provided that he holds the sale in good faith and sells the goods for a commercially reasonable price, he can sue the breaching buyer in the broken contract for the difference between the contract price and what he actually sold the goods for after the buyer's breach and also any "incidental" damages as set forth in UCC 2-710.

Action for the Price

UCC 2-709, "Action For The Price," states that if a buyer doesn't pay for the goods when payment becomes due, the seller can maintain an action for the price of goods accepted or conforming goods lost after the buyer assumed the risk of their loss and also of goods identified to the contract -- goods meant to be delivered in fulfillment of the contract -- that the seller is unable to re-sell after using his best efforts. Where the seller sues for the price of goods identified to the contract that remain under his control, he has to keep them for the buyer unless he can re-sell them, in which case the buyer is entitled to a credit for the sale price.

Incidental Damages

UCC 2-710 covers a seller's incidental damages, or damages incurred in addition to the contract sales price of the goods, in the case of a buyer's breach of the sales contract. Pursuant to UCC 2-710(1), incidental damages include all costs incurred by the seller in stopping delivery of the goods, transporting or storing the goods after the buyer's breach, re-selling the goods or taking them back. UCC 2-710(2) makes a buyer liable for the seller's consequential damages resulting from the breach when the buyer knew or had reason to know of the seller's special circumstances that would cause such damages. UCC 2-710(3) absolves buyers in consumer sales transactions from liability under 2-710(2).

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