When a party refuses to perform its contract to purchase goods, the Uniform Commercial Code entitles the aggrieved seller to sell the goods to another buyer and recover damages from the defaulting party. Often the seller must sell at less than the contract price and then recover as damages the different between the unpaid contract price and the resale price. The UCC offers as an alternative measure of damages the difference between the contract price and the market price for the goods.
What the UCC does not make clear is whether the seller may recover the difference between the unpaid contract price and the market price in circumstances where the market price damages would exceed resale price damages. Last week the Oregon Supreme Court held that the jilted seller may in fact recover market price damages, even if those damages would cause the seller to recover more than the actual loss suffered.
In Peace River Seed Co-operative, Ltd. v. Proseeds Marketing, Inc., the court considered the relevant text, context and legislative history to conclude that "an aggrieved seller can seek [market price] damages even if the seller has resold the goods and market price damages exceed resale price damages." The court noted that a fixed price contract always requires the parties to bear the risk of market price fluctuations. Subjecting the buyer to damages based on market price is consistent with that risk.
In a sale of goods under the Uniform Commercial Code, the statements of an unidentified employee aren't sufficient to prove an express warranty, according to a case decided yesterday by the Oregon Court of Appeals. In East County Recycling, Inc. v. Pneumatic Construction, Inc., the court addressed an alleged representation about a baling machine's ability to operate in Oregon's wet weather. The buyer of the machine sued the seller when the baler didn't hold up to the elements. The buyer claimed that, before it made the purchase, an unidentified employee of the seller promised over the phone that the baler would work outdoors, thereby creating an express warranty as to the machine's characteristics under the UCC.
Because the identity of that employee was unknown, the buyer could not show that the employee had authority to make representations about the machine on behalf of the seller. Lacking that evidence, the buyer was unable to prove the existence of an express warranty, and the Court of Appeals affirmed summary judgment for the seller.
This case shows that, when making a big-ticket purchase, it's critical to get in writing any representations about the product's features and characteristics. Testimony about an oral representation by the other side may not stand up in court.
Consider these facts: A seller of manufactured homes delivers a home to the buyer's lot, but a month later, before the seller completes the finishing work inside the home and before it's ready for occupancy, a storm causes extensive damage. Who is responsible to pay for repairs - the seller or the buyer?
In Lucas v. Berry, the Oregon Court of Appeals decided last week that the seller had to pay to repair the manufactured home because the risk of loss had not yet passed to the buyer at the time of the storm. The parties' contract required the seller to deliver and set up the home, but didn't address when the buyer would become responsible for damage to it. The court turned to Article 2 of the Uniform Commercial Code, governing sale of goods, for the answer. ORS 72.5090(1)(b) states that the risk of loss passes to the buyer when the goods are duly tendered so as to enable the buyer to take delivery. Even though the home had been delivered to the buyer's lot, it had not yet been "delivered" as that term is used in the UCC. The seller had contracted to provide a home fully ready for occupancy, and until that happened there was no delivery to the buyer and the risk of loss remained with the seller.