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Damages Under the Uniform Commercial Code

Database updated September 2009
Roy Ryden Anderson
Chapter
7. Overview of Buyers' Damage Remedies
I. Introduction
Correlation Table References
7:2. Choosing from catalog of buyers' remedies
West's Key Number Digest
West's Key Number Digest, Sales

390 to 448

The Code provides three damage remedies for buyers: (1) the cover remedy (Section 2-712); (2) the
market formula (Section 2-713); and (3) damages for accepted goods (Section 2-714). As for sellers, the
availability of a particular damage remedy for buyers depends upon whether the buyer has accepted the
goods[1] without having revoked the acceptance.[2] The Code rules pertaining to acceptance and revocation
are discussed elsewhere.[3]
If the buyer has accepted the goods and has not revoked the acceptance, her damage remedy is governed
by Section 2-714. A breach by the seller with respect to accepted goods will usually be in the nature of a
breach of warranty, and damages to the buyer will usually be measured by "the difference at the time and
place of acceptance between the value of the goods accepted and the value they would have had if they had
been as warranted."[4] If this value differential measurement will not compensate the buyer, Section 2-714
allows him to show "special circumstances" causing damages of a different amount.[5] The courts have liberally accepted evidence of such special circumstances and have artfully tailored the damage award to the
circumstances so that the buyer is fully compensated for his injury.[6] The Code permits, even requires, that
the courts proceed in this matter. Section 2-714 states that damages for accepted goods may be "determined
in any manner which is reasonable,"[7] and Section 1-106[7.50] mandates that remedies "be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed."[8]
A common damage measurement for accepted goods under Section 2-714 is the cost to repair defects.
Three theories have been used. Some courts have reasoned that repair costs are simply acceptable evidence
of the difference in the value of the goods as accepted and as warranted under Section 2-714(2). Other courts
have concluded that repair costs fall under the "special circumstances" exception of subsection (2). Still others find justification from the language in subsection (1) that damages for accepted goods may be "determined in any manner which is reasonable."[9]
Damages for accepted goods need not involve a breach of warranty as to quality. For example, the buyer
might choose to accept conforming goods even though their tender is late. Damages then will be measured
under Section 2-714(1) for a "noncomformity of tender in any manner which is reasonable."[10]

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It is critical to a claim for damages under Section 2-714 that the buyer have given timely notice of
breach,[11] because a failure to give seasonable notice as to accepted goods will bar the buyer from any
remedy.[12]
If the buyer has not accepted the goods or revokes acceptance of them, her remedies are governed by
Section 2-711.[13] The provision requires one of four events to have occurred: (1) a wrongful failure of the
seller to deliver the goods; (2) a repudiation of the contract by the seller;[14] (3) a rightful rejection of the
goods; or (4) a justifiable revocation of acceptance.[15] These events are indirect indicators that the buyer
has not irrevocably accepted the goods. Comment 1 to Section 2-711 states:
The remedies listed here are those available to a buyer who has not accepted the goods or who has justifiably revoked his acceptance. The remedies available to a buyer with regard to goods finally accepted
appear in the section dealing with breach in regard to accepted goods.[16]
The initial remedial rights given the aggrieved buyer by Section 2-711 are to "cancel"[17] the contract
and to recover "so much of the price as has been paid."[18]
The buyer is presumably entitled to a refund of payments made on the contract price regardless of
whether he can prove any other damages and regardless of whether the seller can prove that the buyer would
have lost money on the contract.[19] This was the result at common law except that the buyer's recovery was
in restitution for quantum meruit rather than for breach of contract.
For example, in the well known case of Bush v. Canfield,[20] the seller breached a contract to deliver
flour. The contract price was $14,000, of which the buyers had prepaid $5,000. Upon suit by the buyers, the
seller proved that the market value of the flour at the time and place for performance was only $11,000. The
seller thus argued that the buyers' damages were only $3,000. Although the $3,000 amount was the proper
measure of damages for a suit for breach of contract, the buyer was allowed recovery in quantum meruit for
the $5,000 prepayment on the theory that a seller in breach should not be allowed to retain the benefit of an
innocent party's partial performance.
In addition to a return of any payments made on the purchase price, Section 2-711 allows the buyer to
choose between two damage remedies. The buyer may either cover as provided in Section 2-712 by purchasing goods in substitution for those promised and recover the difference between the cover price and the price
of the breached contract, or the buyer may recover under Section 2-713 the market/contract differential for
the goods at the time when the buyer learned of the breach.
The choice between these two damage remedies depends entirely upon whether the buyer has covered.
There is no obligation for the buyer to cover. Section 2-712(3) states: "Failure of the buyer to effect cover
within this section does not bar him from any other remedy."[21] A buyer's failure to cover, however, may
represent a failure to mitigate damages and prevent the buyer from recovering for any consequential loss that
could have been thereby avoided. Section 2-715 defines consequential damages in part as those "which
could not reasonably be prevented by cover or otherwise."[22]
As a practical matter, most buyers, particularly commercial ones, will still want the goods that were to
be provided by the breached contract and will cover for them. If the buyer does properly cover, her remedy
is restricted to damages as measured under Section 2-712, and she waives her right to recover under the market formula of Comment 5 to Section 2-713. Section 2-713 provides: "The present section provides a remedy
which is completely alternative to cover under the preceding section and applies only when and to the extent
that the buyer has not covered."[23] The courts have uniformly enforced this provision.[24]

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In sum, determining the applicable damage formula for buyers is quite simple. All depends upon the two
factors of whether the goods have been finally accepted and, if not, whether the buyer has covered. If the
goods have been irrevocably accepted, damages are to be determined under Section 2-714. If they have not
and the buyer has covered, damages must be based on the cover remedy in Section 2-712. If the buyer has
not covered, nor irrevocably accepted the goods, he may recover damages based on the market formula in
Section 2-713. In either case, the buyer may recover back any payments on the purchase price.
Regardless of which of these three damage remedies is pursued, the buyer is entitled to recover for any
provable incidental and consequential damages as provided in Section 2-715.[25]

[FN1] Acceptance is governed by UCC 2-606.

[FN2] Revocation of acceptance is governed by UCC 2-608.
[FN3] See the discussion in 3:5 et seq.
[FN4] UCC 2-714(2).
US- Ameristar Jet Charter, Inc. v. Signal Composites, Inc., 271 F.3d 624, 46 U.C.C. Rep. Serv. 2d
425 (5th Cir. 2001) (under the UCC 2-714(2), a buyer's measure of damages for breach of warranty is the difference between the value of the goods as accepted and the value of the goods as
warranted; district court erred in setting market value of accepted commercial liners at a higher
price than buyer was actually selling them for to third parties).
AR- H.A.S. of Fort Smith, LLC v. J.V. Mfg., Inc., 54 U.C.C. Rep. Serv. 2d 1007 (Ark. Ct. App.
2004) (where evidence showed that accepted goods had no value, recovery of purchase price by
buyer was appropriate under U.C.C. 2-714 as the difference between the value of the goods as
warranted and as received).
CN- Dunleavey v. Paris Ceramics USA, Inc., 47 Conn. Supp. 565, 819 A.2d 945, 49 U.C.C. Rep.
Serv. 2d 515 (Super. Ct. 2002) (buyer awarded damages measured by the contract price less salvage
value of otherwise worthless goods).
GA- Hill v. Mercedes Benz USA, L.L.C., 274 Ga. App. 826, 619 S.E.2d 353, 58 U.C.C. Rep. Serv.
2d 173 (2005) (summary judgment for seller upheld on buyer's warranty claim because buyer failed
to provide evidence of diminution in value).
IN- Iron Dynamics v. Alstom Power, Inc., 66 U.C.C. Rep. Serv. 2d 694 (N.D. Ind. 2008) (although
contract excluded seller's liability for incidental and consequential damages, buyer could recover
cost of repair of two hot gas recuperators as general damages under U.C.C. 2-714(2); damage
measurement in that provision is not exclusive and alternative measures may include cost to repair
or fair market value of goods as warranted less either their salvage value or their fair market value
when received).
MD- Hardy v. Winnebago Industries, Inc., 120 Md. App. 261, 706 A.2d 1086, 34 U.C.C. Rep. Serv.
2d 1007 (1998) (breach of warranty claim dismissed for failure to provide evidence of difference in
value of motor home as accepted and value as warranted).
MN- US Salt, Inc. v. Broken Arrow, Inc., 65 U.C.C. Rep. Serv. 2d 127 (D. Minn. 2008), appeal dismissed as moot, 563 F.3d 687 (8th Cir. 2009) (where it immediately notified seller goods were non-

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conforming, buyer retained its right to remedy for breach of warranty even though buyer accepted
and resold goods).
NY- Villette v. Sheldorado Aluminum Products, Inc., 45 U.C.C. Rep. Serv. 2d 470 (N.Y. Sup 2001)
(where buyer of a defective awning accepted the goods, even absent an effective revocation of acceptance buyer would be entitled to damages for breach of warranty under 2-714(2) measured by
the difference between the value of the goods as warranted and their value with the defect).
OK- Goodwin v. Durant Bank & Trust Co., 1998 OK 3, 952 P.2d 41, 34 U.C.C. Rep. Serv. 2d 682
(Okla. 1998) (where seller misrepresented year of equipment sold, correct measure of damages for
breach of express warranty was difference in value between goods of model year accepted and
goods of model year represented).
TX- JHC Ventures, L.P. v. Fast Trucking, Inc., 94 S.W.3d 762, 49 U.C.C. Rep. Serv. 2d 167 (Tex.
App. San Antonio 2002) (contract price represented value of the goods as warranted; resale value
represented value of goods delivered).
[FN5] UCC 2-714(2).
NY- Malul v. Capital Cabinets, Inc., 47 UCC Rep Serv2d (NY Civ Ct 2002) (where there was no
evidence to suggest that there was a market for the accepted melted cabinet doors nor any evidence that they could be repaired, unsightly condition of the doors rendered them effectively worthless to the buyer, thereby creating a special circumstance so that the purchase price of the doors
was an appropriate measure of damages).
[FN6] See the discussion in 10:4.
[FN7] UCC 2-714(1).
[FN7.50] Revised Article 1 has been adopted in over half the states. Section 1-106 has been renumbered and can now be found at 1-305 [Rev].
[FN8] UCC 1-106(1).
[FN9] Damages for breach of warranty based on cost of repairs are discussed in 10:6.
[FN10] UCC 2-714(1).
[FN11] UCC 2-714(1) is prefaced with the following language: "Where the buyer has accepted
goods and given notification (subsection (3) of Section 2-607) ."
AR- Industrial Electronic Supply, Inc. v. Lytle Mfg., L.L.C., 94 Ark. App. 81, 58 U.C.C. Rep. Serv.
2d 719 (2006) (notice of breach is a condition precedent to recovery under 2-714; telephone call
may be sufficient notice, but mere failure to pay for goods is not proper notice).
[FN12] UCC 2-607(3)(a).
AR- Adams v. Wacaster Oil Co., Inc., 81 Ark. App. 150, 98 S.W.3d 832, 50 U.C.C. Rep. Serv. 2d
774 (2003) (where buyers failed to allege in their complaint the giving of notice of breach, summary judgment against them was proper).
CT- See, e.g., Sylvan R. Shemitz Designs, Inc. v. Newark Corp., 41 Conn. L. Rptr. 440, 60 U.C.C.
Rep. Serv. 2d 117 (Conn. Super. Ct. 2006) (additional ground for dismissal of claim for breach of

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warranty was that buyer's pleadings did not allege notice of breach had been given to seller).
[FN13] UCC 2-711.
FL- Apex Mach. Co. v. Ritter GmbH, 62 U.C.C. Rep. Serv. 2d 66 (S.D. Fla. 2007) (buyer could not
bring claim for breach of warranty where buyer had rejected goods, nor for damages based on
2-714, which pertains to accepted goods; buyer's proper remedy was for breach of contract, and its
damage remedies were governed by 2-711, 2-712, 2-713).
NY- Allied Semi-Conductors Intern., Ltd. v. Pulsar Components Intern., Inc., 907 F. Supp. 618, 34
Fed. R. Serv. 3d 128, 28 U.C.C. Rep. Serv. 2d 543 (E.D. N.Y. 1995) (UCC 2-711 provides aggrieved buyer with right to return of purchase price paid as well as other remedies such as cover).
OH- Furlong v. Alpha Chi Omega Sorority, 73 Ohio Misc. 2d 26, 657 N.E.2d 866, 104 Ed. Law
Rep. 1322, 28 U.C.C. Rep. Serv. 2d 1194 (Mun. Ct. 1993).
TX- Selectouch Corp. v. Perfect Starch, Inc., 111 S.W.3d 830, 51 U.C.C. Rep. Serv. 2d 1070 (Tex.
App. Dallas 2003) (buyer who rightfully rejects or justifiably revokes acceptance may recover damages as provided in 2-711, including so much of the price as has been paid; alternatively, buyer
may accept nonconforming goods and recover damages as provided in 2-714, including incidental
and consequential damages).
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (Tex. App. Fort Worth
2005), review granted, cause remanded, (Mar. 31, 2006) (remedies available to buyer under UCC
depend on whether buyer has accepted goods without revoking acceptance; if buyer accepts and
does not revoke, buyer's damage remedy is governed by U.C.C. 2-714; otherwise buyer's remedies
are governed by U.C.C. 2-711).
[FN14] The Code does not define repudiation. It is probable that the basic common law contract
rules will apply and, in particular, that an anticipatory repudiation by word or act must demonstrate
a definite, unequivocal and wrongful renunciation of contract obligations. UCC 2-610, Comment
1, states that "anticipatory repudiation centers upon an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue
with performance."
UCC 2-610, Comment 2, states:
It is not necessary for repudiation that performance be made literally and utterly impossible. Repudiation can result from action which reasonably indicates a rejection of the continuing obligation. And, a
repudiation automatically results under the preceding section on insecurity when a party fails to provide
adequate assurance of due future performance within thirty days after a justifiable demand therefore has
been made. Under the language of this section, a demand by one or both parties for more than the contract calls for in the way of counter-performance is not in itself a repudiation nor does it invalidate a
plain expression of desire for future performance. However, when under a fair reading it amounts to a
statement of intention not to perform except on conditions which go beyond the contract, it becomes a
repudiation.
See also, UCC 1-103 and Restatement (Second) Contracts 250 (1980).
[FN15] See UCC 2-711(1).
TX- Ellis v. Precision Engine Rebuilders, Inc., 68 S.W.3d 894, 47 U.C.C. Rep. Serv. 2d 992 (Tex.

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App. Houston 1st Dist. 2002) (under UCC, buyer may seek breach of contract remedies after delivery of goods if he: (a) timely rejects the goods; (b) timely revokes acceptance of the goods; or (c)
keeps the goods, notifies the buyer of the problem, and sues for damages).
[FN16] UCC 2-711, Comment 1.
[FN17] UCC 2-106(4) defines "cancellation" as follows: "'Cancellation' occurs when either party
puts an end to the contract for breach by the other and its effect is the same as that of 'termination'
except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance."
"Termination" is defined in UCC 2-106(3).
NY- Conductores Monterrey, S.A. de C.V. v. Remee Products Corp., 45 U.C.C. Rep. Serv. 2d 111
(S.D. N.Y. 2000) (buyer who rightfully rejects or justifiably revokes acceptance may cancel the
contract and recover the price that has been paid).
[FN18] UCC 2-711(1).
US- Phoenix Color Corp. v. Krause America, Inc., 25 Fed. Appx. 133, 46 U.C.C. Rep. Serv. 2d 442
(4th Cir. 2001) (buyer made a justifiable revocation of acceptance of plate-making machine and was
entitled by 2-711 to a return of the purchase price paid for the machine).
MI- Head v. Phillips Camper Sales & Rental, Inc., 234 Mich. App. 94, 593 N.W.2d 595, 37 U.C.C.
Rep. Serv. 2d 1033 (1999) ( 2-711 allows buyer to recover purchase payments as damages, but entails no affirmative obligation for seller to return money, and thus the section would not support action for conversion of money); Midwest Mobile Diagnostic Imaging, L.L.C. v. Dynamics Corp. of
America, 965 F. Supp. 1003, 33 U.C.C. Rep. Serv. 2d 453 (W.D. Mich. 1997), judgment aff'd, 165
F.3d 27 (6th Cir. 1998).
MO- Bowen v. Foust, 925 S.W.2d 211, 29 U.C.C. Rep. Serv. 2d 825 (Mo. Ct. App. S.D. 1996) (
UCC 2-711 authorizes buyers to recover purchase price paid without proving any additional damages).
NJ- Cuesta v. Classic Wheels, Inc., 358 N.J. Super. 512, 818 A.2d 448, 50 U.C.C. Rep. Serv. 2d
791 (App. Div. 2003) (where revocation is justifiable, buyer may recover as much of the purchase
price as has been paid).
NY- Allied Semi-Conductors Intern., Ltd. v. Pulsar Components Intern., Inc., 907 F. Supp. 618, 34
Fed. R. Serv. 3d 128, 28 U.C.C. Rep. Serv. 2d 543 (E.D. N.Y. 1995); Villette v. Sheldorado Aluminum Products, Inc., 45 U.C.C. Rep. Serv. 2d 470 (N.Y. Sup 2001) (buyer who has effectively revoked her acceptance is entitled to return of the purchase price pursuant to 2-711(1)); Williams v.
Planet Motor Car, Inc., 190 Misc. 2d 22, 738 N.Y.S.2d 170, 47 U.C.C. Rep. Serv. 2d 1000 (City
Civ. Ct. 2001) (car buyer could maintain an action for damages notwithstanding an arbitration
award of a refund of the purchase price under New York's Used Car Lemon Law).
OH- Furlong v. Alpha Chi Omega Sorority, 73 Ohio Misc. 2d 26, 657 N.E.2d 866, 104 Ed. Law
Rep. 1322, 28 U.C.C. Rep. Serv. 2d 1194 (Mun. Ct. 1993).
TN- Wings Mfg. Corp. v. Lawson, 58 U.C.C. Rep. Serv. 2d 836 (Tenn. Ct. App. 2005) (where buyer properly rejected defective goods, buyer entitled to reimbursement of $50,000 seller wrongfully
withdrew from buyer's letter of credit as payment of purchase price).

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VA- Micro Products, Inc. v. Sylvan Learning Systems, Inc., Caliber Learning Network, Inc., 47 Va.
Cir. 24, 39 U.C.C. Rep. Serv. 2d 428 (1999) ( 2-711 allows buyer who has properly revoked acceptance to recover refund of purchase price paid even though buyer failed to prove any other damages).
VA- Love v. Kenneth Hammersley Motors Inc., 263 Va. 45, 556 S.E.2d 764, 46 U.C.C. Rep. Serv.
2d 1031 (2002) (where buyer properly revoked her acceptance, she could recover monetary damages, including the purchase price pursuant to 2-711).
WY- Kirby v. NMC/Continue Care, 993 P.2d 951, 40 U.C.C. Rep. Serv. 2d 368 (Wyo. 1999)
(buyer entitled to recover under UCC 2-711 Medicaid payments made to seller for nonconforming
wheelchair even though payments were not made directly by buyer).
[FN19] MO- Bowen v. Foust, 925 S.W.2d 211, 29 U.C.C. Rep. Serv. 2d 825 (Mo. Ct. App. S.D.
1996) (UCC 2-711 authorizes buyers to refund of purchase price paid without proving any additional damages).
NY- Murphy v. Mallard Coach Co., 179 A.D.2d 187, 582 N.Y.S.2d 528, 19 U.C.C. Rep. Serv. 2d
395 (3d Dep't 1992) (upon proper revocation of acceptance, court properly allowed buyer full refund of purchase price; buyer proved no other damages).
FL- Fryatt v. Lantana One, Ltd., 866 So. 2d 158, 53 U.C.C. Rep. Serv. 2d 543 (Fla. Dist. Ct. App.
1st Dist. 2004) (the buyers entitled to recover a refund of purchase price of rejected goods although
they failed to prove other damages).
[FN20] CT- Bush v. Canfield, 2 Conn. 485, 1818 WL 21 (1818).
[FN21] UCC 2-712(3). UCC 2-712, Comment 3, states:
Subsection (3) expresses the policy that cover is not a mandatory remedy for the buyer. The buyer is always free to choose between cover and damages for non-delivery under the next section.
[FN22] UCC 2-715(2)(a). UCC 2-712, Official Comment, states in reference to subsection (3):
"[T]his subsection must be read in conjunction with the section which limits the recovery of consequential damages to such as could not have been obviated by cover."
US- Melford Olsen Honey, Inc. v. Adee, 452 F.3d 956, 60 U.C.C. Rep. Serv. 2d 331 (8th Cir. 2006)
(definitions of incidental and consequential damages in 2-715 require buyer to make reasonable
attempt to cover to be eligible for those damages; award of incidental and consequential damages
upheld based on jury's findings that cover was not reasonably available to buyer).
MI- Midwest Mobile Diagnostic Imaging, L.L.C. v. Dynamics Corp. of America, 965 F. Supp.
1003, 33 U.C.C. Rep. Serv. 2d 453 (W.D. Mich. 1997), judgment aff'd, 165 F.3d 27 (6th Cir. 1998)
(rental costs of substitute goods, while not constituting cover, were recoverable as incidental damages caused by seller's delay in tender).
[FN23] UCC 2-713, Comment 5.
[FN24] See the discussion in 8:6 and 9:6.
[FN25] See UCC 2-712(2), 2-713(1) and 2-714(3).

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