N.Y. U.C.C. Law § 2-718(2)(a)-(b) provides, among other things, that the buyer, despite his breach, may have restitution of the amount by which his payment exceeds: (a) reasonable liquidated damages stipulated by the contract or (b) absent such stipulation, 20 percent of the value of the buyer's total performance or $ 500, whichever is smaller.
A buyer contracted to purchase a boat, for which he made a deposit of $ 4,250. However, he rescinded the contract after the boat had already been ordered from the manufacturer and was delivered to the retail dealer. As a result, the retail dealer declined to refund the buyer's deposit on the ground that his profit from the sale would have been $ 2,579 and he incurred $ 674 of incidental expenses during the period the boat remained unsold. An action to recover their deposit was commenced with the buyer in the trial court. The retail dealer counterclaimed, alleging breach of the contract and damages. The trial court held that the retail dealer was entitled to damages, but these damages had not been properly determined. Under § 2-708, the correct measure of damages was the loss of profits and incidental damages. On appeal, the trial court's decision was affirmed. The case was appealed to the Court of Appeals of New York.
Was the trial court's determination of damages proper?
The Court held that under the Uniform Commercial Code, the correct measure of damages was the loss of profits and incidental damages. Prior law had limited damages to the difference between the contract price and the market price. Under new provisions of the law, if the measure of damages under the difference in price was inadequate to put the seller in as good a position as performance would have done, then the seller was entitled to its profit together with any incidental damages.