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84-2-708. Seller's damages for nonacceptance or repudiation. (1) Subject to subsection (2) and to the provisions of this article with respect to proof of market price (section 84-2-723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this article (section 84-2-710), but less expenses saved in consequence of the buyer's breach.

(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this article (section 84-2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

History: L. 1965, ch. 564, § 104; January 1, 1966.

KANSAS COMMENT, 1996

1. This section provides the seller with an alternative to resale in measuring the amount of damages for buyer's breach. Under subsection (1), the seller's damages equal the contract price less the market price at the time and place for tender. See Desbien v. Penokee Farmers Union Coop. Ass'n, 220 K. 358, 552 P.2d 917 (1976) (no damages when market rose above contract price). The operation of this subsection is illustrated by Wendling v. Puls, 227 K. 780, 610 P.2d 580 (1980); see also Sharp Elec. Corp. v. Lodgistix, Inc., 802 F. Supp. 370 (D. Kan. 1992) (determining date of tender in event of continuing negotiations). The court in Wendling v. Puls, supra, permitted the aggrieved seller to recover market damages under this subsection even though the seller had resold the goods and resale damages under 84-2-706 would have been less. See 1996 Kansas Comment 4 to 84-2-706. Market damages also are available if the seller does not resell the goods or resells them in a commercially unreasonable manner.

2. Subsection (2) provides an aggrieved seller with another measure of damages that can be used when resale under 84-2-706 and market damages under subsection (1) of this subsection are unavailable or inadequate. The classic application of this subsection is the lost volume seller—a seller that loses a sale as a result of the breach. Neither resale damages under section 84-2-706 nor market damages under subsection (1) of this section put a lost volume seller in as good a position as performance would have done. The Kansas Court of Appeals in Jetz Serv. Co. v. Salina Properties, 19 K.A.2d 144, 865 P.2d 1051 (1993), permitted a lost volume lessor of coin-operated laundry facilities to recover lost profits, reasoning by analogy to 84-2-708(2). The court identified the following evidence as sufficient to uphold the trial court's finding that the plaintiff was a lost volume lessor: it was "in the business of supplying coin-operated laundry equipment; . . .it continually look[ed] for new locations in which to install laundry equipment; it would have been able to fulfill [one] lease without using the machines from [the other] lease; and it is uncontroverted that[lessor] would have been able to enter into both transactions irrespective of the breach by [lessee]." Id. Other courts have added a requirement that the additional sales not only would have been possible, but that they would have been profitable. See R.E. Davis Chem. Corp. v. Diasonics, Inc., 826 F.2d 678 (7th Cir. 1987).

3. The measure of damages under subsection (2) is the seller's lost profits, including reasonable overhead. In the case of a lost volume seller, it makes no sense to give "due allowance for costs reasonably incurred and due credit for payments or proceeds of resale," and so that component of the damages formula should be ignored. See James J. White & Robert S. Summers, 1 Uniform Commercial Code § 7-13, at 399 (4th ed. Practitioner Treatise Series 1995). For proof of lost profits in cases involving new businesses, see Olathe Mfg., Inc. v. Browning Mfg., 259 K. 735, 915 P.2d 86 (1996); Kvassay v. Murray, 15 K.A.2d 426, 808 P.2d 896, rev. denied, 248 K. 996 (1991).

Law Review and Bar Journal References:

Seller's failure to establish a valid claim for the entire purchase price is not fatal to a general claim for damages, Keith Hey, 7 W.L.J. 35, 44, 45 (1967).

"Contract Law: A Clean Start for Lost Volume Lessees [Jetz Service Co. v. Salina Properties, 865 P.2d 1051 (Kan. Ct. App. 1993)]," Jonathan J. Lautt, 34 W.L.J. 136, 146 (1994).

CASE ANNOTATIONS

1. Measure of damages based on conversion in breach of contract action erroneous. Desbien v. Penokee Farmers Union Cooperative Association, 220 Kan. 358, 369, 552 P.2d 917.

2. Section cited in remanding case arising out of aborted sale of motor vehicle to trial court to determine damages. Stanturf v. Quality Dodge, Inc., 3 Kan. App. 2d 485, 488, 596 P.2d 1247.

3. Measure of damages to seller for nonacceptance or repudiation construed and applied. Wendling v. Puls, 227 Kan. 780, 783, 784, 785, 787, 610 P.2d 580.

4. Circumstances justifying recovery for lost profits in breach of contract suit for purchase and sale of consummable goods examined. Kvassay v. Murray, 15 Kan. App. 2d 426, 432, 808 P.2d 896 (1991).

5. Resale of goods is not per se bar to recovery of difference between tender market price and contract price. Sharp Electronics Corp. v. Lodgistix, 802 F. Supp. 370, 376, 377, 378, 379, 380, 381 (1992).

6. Whether the lost volume damage theory may be asserted by volume service providers examined. Jetz Serv. Co. v. Salina Properties, 19 Kan. App. 2d 144, 148, 865 P.2d 218 (1994).

7. Whether measure of damages where buyer failed to make payment is contract price less market value of goods examined. Smyers v. Quartz Works Corp., 880 F. Supp. 1425, 1434 (1995).


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