KANSAS COMMENT, 1996

1. Subsection (1) defines the phrase "incidental damages" as expenses a buyer reasonably incurs in rejecting, revoking acceptance, or effecting cover. The provision is illustrated by La Villa Fair v. Lewis Carpet Mills, Inc., 219 K. 395, 548 P.2d 825 (1976). The list of items in subsection (1) is not exclusive; the buyer can recover the items listed and "any other reasonable expense incident to the delay or other breach." Incidental damages are expenses incurred after the breach to mitigate the resulting losses. They should be distinguished from consequential damages, which result from investments made before breach to enable the buyer to use the seller's performance.

2. Subsection (2) defines the phrase "consequential damages." Paragraph (2)(a) includes as consequential damages economic losses such as lost profits. See La Villa Fair v. Lewis Carpet Mills, Inc., supra; Dold v. Sherow, 220 K. 350, 552 P.2d 945 (1976). To recover lost profits under this section, a buyer bears the burden of proving the loss with reasonable certainty; mere speculation is not enough. See Olathe Mfg., Inc. v. Browning Mfg., 259 K.735, 915 P.2d 86 (1996). Other forms of consequential loss have been allowed under paragraph (2)(a) as well. See Cricket Alley Corp. v. Data Terminal Sys., Inc., 240 K. 661, 732 P.2d 719 (1987) (increased labor costs due to malfunctioning computerized cash registers); Service Iron Foundry, Inc. v. M.A. Bell Co., 2 K.A.2d 662, 588 P.2d 463 (1978) (attorney's fees in connection with an administrative hearing; consulting fees); Schatz Distrib. Co. v. Olivetti Corp., 7 K.A.2d 676, 647 P.2d 820 (1982) (interest); Halstead Hosp., Inc. v. Northern Bank Note Co., 680 F.2d 1307 (10 th Cir. 1982) (applying Kansas law) (travel expenses and loss of net investment earnings).

3. Built into paragraph (2)(a) are the familiar contract damage limitations of foreseeability ("loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know") and mitigation ("could not reasonably be prevented by cover or otherwise"). The foreseeability requirement is a codification of the rule of Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854). See Cricket Alley Corp. v. Data Terminal Sys., Inc., supra. Failure to attempt cover, when cover reasonably could have prevented the loss, precludes recovery of consequential damages. See Panhandle Agri-Service, Inc. v. Becker, 231 K. 291, 644 P.2d 413 (1982); International Petroleum Serv., Inc. v. S&N Well Serv., 230 K. 452, 639 P.2d 29 (1982).

4. Paragraph (2)(b) allows recovery as consequential damages for any injury to person or property. Many cases involving these sorts of damages will be litigated as product liability cases under the doctrine of strict tort liability, with breach of warranty claims raised as alternative theories of recovery. The Kansas Product Liability Act, K.S.A. 60-3301 et seq., also expressly encompasses actions seeking to recover these types of damages. K.S.A. 60-3302(d); see also 1996 Kansas Comment 5 to 84-2-314.

Law Review and Bar Journal References:

"Remedies for Breach of Sales Contract Under the Code," Keith Hey, 7 W.L.J. 35, 42, 43 (1967).

Landlord-tenant implied warranty of habitability, 22 K.L.R. 666, 675 (1974).

"Beefing Up Product Warranties: A New Dimension In Consumer Protection," Barkley Clark, Michael J. Davis, 23 K.L.R. 567, 575, 591, 600, 601 (1975).

The uniform commercial code, the statute of frauds, and the farmer, 25 K.L.R. 318, 319 (1977).

Strict liability in tort as adopted in Kansas, 25 K.L.R. 462, 467, 468, 470, 473 (1977).

"Comparative Fault and Strict Products Liability in Kansas: Reflections on the Distinction Between Initial Liability and Ultimate Loss Allocation," William Edward Westerbeke and Hal D. Meltzer, 28 K.L.R. 25, 96, 97, 98 (1979).

"Lost Profits and Hadley v. Baxendale," Wyatt McDowell Wright, 19 W.L.J. 488 (1980).

"Some Observations on the Kansas Product Liability Act (Part I)," William Edward Westerbeke, 53 J.K.B.A. 296 (1984).

"Liquidated Damages - When is the Claimant Entitled to Prejudgment Interest?" Mary E. Christopher and Michelle M. Watson, 74 J.K.B.A. No. 5, 14 (2004).

CASE ANNOTATIONS

1. Applied with K.S.A. 84-2-714, 84-2-302; measure of damages for breach of warranty of automobile title determined. Ricklefs v. Clemens, 216 Kan. 128, 131, 132, 134, 135, 531 P.2d 94.

2. Applied; incidental and consequential damages allowed in action for recision of portion of contract upheld. La Villa Fair v. Lewis Carpet Mills, Inc., 219 Kan. 395, 404, 405, 548 P.2d 825.

3. Failure to include instruction on incidental damage not prejudicial to defendant; damage action for breach of warranties. Dold v. Sherow, 220 Kan. 350, 354, 552 P.2d 945.

4. Trial court correctly instructed jury concerning damages allowable under this section and K.S.A. 84-2-714. Service Iron Foundry, Inc. v. M. A. Bell Co., 2 Kan. App. 2d 662, 678, 679, 588 P.2d 463.

5. Party claiming incidental and consequential damages must present evidence of such damages and must comply with the statutory requirements under the UCC. International Petroleum Services, Inc. v. S & N Well Service, Inc., 230 Kan. 452, 460, 462, 463, 464, 639 P.2d 29 (1982).

6. Upon subcontractor's breach, contractor was entitled to recover costs to reschedule laborers. In Re John Gruss Co., Inc., 22 B.R. 236, 237, 242 (1982).

7. Damages may include interest on moneys paid under contract; prejudgment interest on unliquidated damages not allowed. Schatz Distributing Co. v. Olivetti Corp. of America, 7 Kan. App. 2d 676, 681, 683, 647 P.2d 820 (1982).

8. Directed verdict for defendants erroneous; disputed material facts on issue of buyer's entitlement to remedies provided hereby unresolved. Stair v. Gaylord, 232 Kan. 765, 772, 774, 659 P.2d 178 (1983).

9. Cited; insured entitled to interest paid as consequential damages where insurer breached contract and failed to timely pay claim. Hochman v. American Family Ins. Co., 9 Kan. App. 2d 151, 153, 673 P.2d 1200 (1984).

10. Loss may be determined in manner reasonable under circumstances; no abuse in allowing jury to consider consequential damages question. State Office Systems v. Olivetti Corp. of America, 762 F.2d 843, 846 (1985).

11. Consequential damages to plaintiff were properly submitted to jury under facts in this case. Cricket Alley Corp. v. Data Terminal Systems, Inc., 240 Kan. 661, 667, 668, 669, 732 P.2d 719 (1987).

12. Limitations of implied warranties examined where Kansas consumer protection act (K.S.A. 50-623 et seq.) comes into play. Farrell v. General Motors Corp., 249 Kan. 231, 239, 815 P.2d 538 (1991).

13. Cited in holding specific provisions of K.S.A. 84-2-713 prevail over general provisions in K.S.A. 84-1-106 when seller breaches contract for sale of goods. Tongish v. Thomas, 251 Kan. 728, 731, 840 P.2d 471 (1992).

14. Whether buyer failed to cover when cover was reasonably available precluding recovery of lost profits examined. Kelley Metal Trading Co. v. Al-Jon/United, Inc., 877 F. Supp. 1478, 1484 (1995).

15. Export testimony regarding lost profits excluded as unreliable, untimely hearsay. Olathe Mfg., Inc. v. Browning Mfg., 259 Kan. 735, 766, 915 P.2d 86 (1996).

16. Failure to use remedy of cover, when reasonably available precludes recovery of consequential damages. Lohmann & Rauscher, Inc. v. YKK (U.S.A.) Inc., 477 F. Supp. 2d 1147, 1156 (2007).

17. Incidental damages from breach of sales contract must be reasonably-contemplated probable result of breach. GFSI, Inc. v. J-Loong Trading, Ltd., 505 F. Supp. 2d 935, 939, 941, 942, 947 (2007).