Tesoro Petroleum Corp. v. Holborn Oil Co.

145 Misc. 2d 715, 547 N.Y.S.2d 1012 (Sup. Ct. 1989)

 

RULE:

A seller who resells goods reasonably identified to the broken contract for a price above the N.Y. U.C.C. Law § 2-708(1), the market price should be limited to the difference between the contract price and his actual resale price.

FACTS:

Plaintiff, a petroleum company, contracted to sell million of gallons of gasoline to defendant prospective buyer, another oil company, at a set price per gallon after having bought it at a slightly lower price. Defendant informed plaintiff that it would not accept the product and that there was no binding agreement. Plaintiff then negotiated the sale of the gasoline to a third party at a loss. Plaintiff filed an action to establish a contract and its subsequent breach by defendant. Both parties filed a motion for summary judgment to determine damages. In its motion, the plaintiff claimed that because of a sudden sharp drop in price, its recovery should not be limited to its actual loss resulting from the breach, as it was entitled to recover the difference between market price and contract price, resulting in a gain of millions of dollars. The court found for plaintiff and held that if it prevailed and established a breach of contract at trial, damages for the breach would be measured as a difference between the contract price and the resale price pursuant to N.Y. U.C.C. Law § 2-706.

ISSUE:

If plaintiff prevailed and established a breach of contract at trial, should the damages for the breach be measured as a difference between the contract price and the resale price pursuant to N.Y. U.C.C. Law § 2-706?

ANSWER:

Yes.

CONCLUSION:

In the case of White and Summers, Uniform Commercial Code (at 354 [Practitioner's 3d ed 1988]), it was concluded that: "a seller who resells goods reasonably identified to the broken contract for a price above the 2-708(1) market price should be limited to the difference between the contract price and his actual resale price. The court believed that that was an exact measure of his expectation and that he should not recover more than that. Accordingly, the court concluded that the proper interrelationship of sections 2-706 and 2-708 was that summarized by White and Summers. Thus, in the event plaintiff prevailed and established a breach of contract at trial, its damages would be measured in accordance with section 2-706.

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