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Sellers are entitled to incidental, but not consequential damages, under the Uniform Commercial Code. Michigan defines a seller's incidental damages to include any commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care, and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach. Mich. Comp. Laws § 440.2710 (1994).
This dispute arose from a contract between Firwood Manufacturing Company, Inc. (Firwood) and General Tire, Inc. (General Tire) in which General Tire allegedly agreed to purchase fifty-five model 1225 post-cure inflators (PCIs), thirty-thousand dollar machines used by General Tire in its manufacturing process. Firwood offered in writing to sell to General Tire a quantity of custom built goods at a fixed price. General Tire orally accepted the offer, and subsequently confirmed the quantity in a written letter of intent. General Tire appealed the district court's denial of its motions for judgment as a matter of law, a new trial, and remittitur following a jury verdict in this diversity action awarding Firwood $187,513 in resale damages and $100,476 in interest in this breach of contract dispute. General Tire argued that it was entitled to judgment as a matter of law because Firwood did not prove its damages under Mich. Comp. Laws Ann. § 440.2706 (West 1994); that the District Court should have granted a new trial because the jury was given an erroneous and prejudicial instruction regarding contract formation; and that it was entitled to remittitur of the interest portion of damages because sellers are entitled to receive incidental, but not consequential, damages and interest is a consequential damage.
Could Firwood recover interest as a consequential damage?
In affirming the judgment as to liability, the court held that the trial court's instruction regarding formation of a contract was not error. The court noted that General Tire’s written letter of intent did not necessarily vary the terms of its admitted oral acceptance, and was therefore competent to prove the quantity. The court also held that Firwood proved its damages under Mich. Comp. Laws § 440.2706 (1994). The court held that the evidence was sufficient to establish that certain substituted materials were truly fungible, and that sales of the goods three years after the breach were not commercially unreasonable. The court vacated the judgment, however, to the extent it awarded Firwood interest as damages. The court held that interest was a consequential damage, and that under Mich. Comp. Laws § 440.2710 (1994) sellers could recover incidental, but not consequential damages. But Firwood was entitled to interest pursuant to Mich. Comp. Laws § 600.6013.