Neri v. Retail Marine Corp., 30 N.Y.2d 393 (1972)
Under UCC 2-708(2), a seller of standard-priced goods can recover lost profits and incidental damages when a buyer breaches a sales contract, even if the seller resells the goods at the same price, because the resale does not compensate for the lost sale.
Summary
Retail Marine Corp. (defendant) contracted to sell a boat to the Neris (plaintiffs). The Neris rescinded the contract, and Retail Marine resold the boat for the same price. Retail Marine refused to return the Neris’ deposit. The New York Court of Appeals held that Retail Marine was entitled to recover lost profits and incidental damages under UCC 2-708(2), despite reselling the boat at the original contract price, because as a dealer with an unlimited supply of standard-priced goods, the resale did not make them whole for the lost sale.
Facts
The Neris contracted to purchase a boat from Retail Marine for $12,587.40, making a $40 deposit, later increased to $4,250. Retail Marine agreed to arrange for immediate delivery. Six days later, the Neris’ lawyer sent a letter rescinding the contract due to Mr. Neri’s upcoming surgery, which would make payments impossible. Retail Marine had already ordered the boat, which was delivered to them. Retail Marine refused to refund the deposit.
Procedural History
The Neris sued Retail Marine to recover their deposit. Retail Marine counterclaimed for breach of contract, seeking $4,250 in damages. The court granted Retail Marine summary judgment on liability and ordered an assessment of damages. At trial, it was shown the boat was resold four months later for the same price. The trial court rejected Retail Marine’s claim for lost profits and limited damages to $500 under UCC 2-718(2)(b), ordering the balance of the deposit returned to the Neris. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.
Issue(s)
Whether, under UCC 2-708(2), a seller can recover lost profits and incidental damages from a breaching buyer when the seller resells the goods at the original contract price?
Holding
Yes, because UCC 2-708(2) allows a seller to recover lost profits when the standard measure of damages (market price minus contract price) is inadequate to put the seller in as good a position as performance would have done; the resale of standard-priced goods does not compensate the seller for the lost volume.
Court’s Reasoning
The court found that UCC 2-718, which addresses the buyer’s right to restitution after breach, is subject to the seller’s right to recover damages under other provisions of the UCC, specifically UCC 2-708. UCC 2-708(1) provides a standard measure of damages, but UCC 2-708(2) allows for lost profits if the standard measure is inadequate. The court emphasized that UCC 2-708(2) was intended to change prior law, which often limited damages to the difference between contract price and market price. The court quoted the Official Comment to UCC 2-708, stating that the section “permits the recovery of lost profits in all appropriate cases, which would include all standard priced goods.”
The court reasoned that Retail Marine, as a retail seller with an unlimited supply of standard-priced goods, was entitled to lost profits because the resale of the boat did not make them whole. The court cited Dean Hawkland’s example: “Thus, if an automobile dealer agrees to sell a car to a buyer at the standard price of $2000, a breach by the buyer injures the dealer, even though he is able to sell the automobile to another for $2000. If the dealer has an inexhaustible supply of cars, the resale to replace the breaching buyer costs the dealer a sale, because, had the breaching buyer performed, the dealer would have made two sales instead of one.”
The court also held that Retail Marine was entitled to incidental damages (storage, upkeep, finance charges, and insurance) under UCC 2-710, but not attorney’s fees. The court stated, “From the language employed it is too clear to require discussion that the seller’s right to recover loss of profits is not exclusive and that he may recoup his ‘incidental’ expenses as well.”
Therefore, the court modified the Appellate Division’s order, directing that the Neris were entitled to restitution of their deposit, less Retail Marine’s lost profit and incidental damages.