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84-2-704. Seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods. (1) An aggrieved seller under the preceding section may

(a) identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control;

(b) treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.

(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.

History: L. 1965, ch. 564, ยง 100; January 1, 1966.

KANSAS COMMENT, 1996

1. This section defines the seller's rights with respect to goods not yet identified to the contract or goods unfinished at the time of buyer's breach. It is most likely to come into play when the buyer repudiates the contract. Under this section, the seller may proceed to identify conforming goods to the contract, or, in the case of unfinished goods, either complete them or cease manufacture and resell the goods for salvage. The goods then may be resold under 84-2-706. In either case, the seller is protected so long as it acts in a commercially reasonable manner. A primary factor in evaluating whether the seller acted reasonably is whether the action results in a material increase in the buyer's damages. See Official Comment 2 to this section. The action is to be judged on the facts as they appeared at the time, and the seller is not to be penalized by the use of hindsight.

2. Although the text and Official Comments are unclear, this section also seems to impose a duty on the seller to exercise reasonable commercial judgment when it decides not to complete manufacture of the goods. In other words, if it is commercially reasonable to complete the manufacture of the goods, the seller must do so or be precluded from recovering any additional damages under general principles of mitigation of damages.

Law Review and Bar Journal References:

"Remedies for Breach of Sales Contract Under the Code," Keith Hey, 7 W.L.J. 35, 44 (1967).


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