In the circumstances of a case in which the seller knew that the buyer had a resale contract, the buyer has not been able to show that it will be liable in damages to the buyer on its forward contract, and there has been no finding of bad faith on the part of the seller, the policy of Cal. Com. Code § 1106(1), that the aggrieved party be put in as good a position as if the other party had performed, requires that the award of damages to the buyer be limited to its actual loss, the amount it expected to make on the transaction.
The plaintiff entered into two contracts with the defendant for the sale of raisins. The plaintiff would then sell the raisins to other businesses. Due to heavy rains, the defendant was unable to fulfill the agreement. The lower court calculated expectancy damages based on fact that the plaintiff was a broker and not a simple buyer. The plaintiff appealed the judgment, claiming that he was a buyer and only had a mere “forward contract” for the goods.
Did the lower court incorrectly categorize the plaintiff as a broker, instead of a buyer?
Yes, however this determination did not change the amount of damages awarded to the plaintiff.
The court held that the buyer was incorrectly categorized as broker, but initial damage award was proper. It held that it is common for buyers, or exporters, to have back-to-back contracts and not be categorized as a broker. The seller knew that the plaintiff was planning on reselling the goods, and the plaintiff was unable to prove that he would be liable to the future buyer. This, combined with the fact that there was no bad faith on the part of the seller, means that the aggrieved party be put in as good a position as if the other party had performed. In other words, the damages should be limited to the actual loos and the amount the plaintiff expected to make in the transaction. The amount the lower court ordered was sufficient.