Opportunistic Resales and the Uniform Commercial Code

36 Pages Posted: 18 May 2015 Last revised: 13 Oct 2017

Date Written: May 17, 2015

Abstract

This article takes up a split in the courts on a matter arising under the Uniform Commercial Code (the "Code") regarding advantageous resales of goods by sellers where the seller attempts to keep the resale profit under section 2-706 and collect a market-based remedy under section 2-708(1). While there was a split in the commentators some time ago, the cases had primarily prohibited this practice as a windfall to the seller. The recent case of Peace River Seed Coop, Ltd. v. Proseeds Mktg., Inc., though, permitted the seller to collect the windfall. The problem, of course, is that if a seller is permitted to engage in this behavior and collect a loss it did not suffer from the breaching buyer, then the seller can speculate at the expense of the buyer.

This article attempts to guide courts that seek to apply this section when the seller makes the favorable resale, but does not elect a resale remedy under section 2-706, perhaps due to failure to follow its strictures. Part I surveys the basic U.C.C. provisions involves, including the legislative history. Part II exams the accepted policy behind contractual damages under the Code and at common law. This Part highlights common misunderstandings regarding windfalls and contracting party behavior that can contribute to a faulty approach to damages. Part III examines Peace River and opposing cases, as well as providing an evaluation and critique of the commentators on this issue. Part IV that a seller who resells at a higher price should be limited to its actual loss. Any default rule on this point should take into account the policies underlying the Code, contracting behavior and consistency with other provisions of the Code.

Keywords: resales, Code, UCC, Uniform Commercial Code, Contract, sales, remedies, opportunistic, speculation, goods, transaction, Peace River, damages

JEL Classification: K01, K10, K12, K19, K20

Suggested Citation

Martin, Jennifer S., Opportunistic Resales and the Uniform Commercial Code (May 17, 2015). University of Illinois Law Review, Vol. 2016, No. 2, 2016, St. Thomas University School of Law (Florida) Research Paper No. 2016-03, Available at SSRN: https://ssrn.com/abstract=2607343

Jennifer S. Martin (Contact Author)

Albany Law School ( email )

80 New Scotland Avenue
Albany, NY 12208
United States

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