Printable Format84-2a-519. Lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods. (1) Except as otherwise provided with respect to damages liquidated in the lease agreement (K.S.A. 84-2a-504, and amendments thereto) or otherwise determined pursuant to agreement of the parties (K.S.A. 2024 Supp. 84-1-302 and K.S.A. 84-2a-504, and amendments thereto), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under K.S.A. 84-2a-518(2), and amendments thereto, or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.
(2) Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
(3) Except as otherwise agreed, if the lessee has accepted goods and given notification (K.S.A. 84-2a-516(3), and amendments thereto), the measure of damages for nonconforming tender or delivery or other default by a lessor is the loss resulting in the ordinary course of events from the lessor's default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.
(4) Except as otherwise agreed, the measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default or breach of warranty.
History: L. 1991, ch. 295, § 67; L. 2007, ch. 89, § 38; July 1, 2008.
KANSAS COMMENT, 1996
1. Subsection (1), which is a revised version of section 84-2-713(1), provides a lessee with an alternative to cover in determining the amount of damages for lessor's default. This subsection is available if the lessee does not attempt to cover or covers in a way that fails to satisfy section 84-2a-518(2). It is not available if the lessee properly covers under section 84-2a-518(2). See 1996 Kansas Comment 4 to 84-2a-518.
2. Under subsection (1), the measure of damages is the present value of the market rent at the date of default less the present value of the original rent, computed for the remaining lease term, plus incidental and consequential damages and less expenses saved as a result of the default. "Present value" is defined in 84-2a-103(1)(u), and is used because of the ongoing nature of the obligation to pay rent. Article 2A resolves the uncertainty present under Article 2 in determining market price in cases of anticipatory repudiation. See 1996 Kansas Comment 3 to 84-2-713. Under this subsection, market rent is determined as of the date of default, and in the case of an anticipatory repudiation default occurs when the lessor repudiates. See 84-2a-508(1). Official Comment 2 to this section highlights that the date of default is not necessarily the same as the date of an event of default, because consideration must be given to any relevant grace periods or notice requirements. Subsection (2) addresses the place for determining market rent, and is identical to the statutory analogue. See 84-2-713(2). Section 84-2a-507 sets out further rules for proving market rent.
3. Subsections (3) and (4) are derived from section 84-2-714, and deal with the remedies available to the lessee after it has accepted the goods and the time for revocation of acceptance has passed. Subsection (3) provides that if the lessee gives the notice required under section 84-2a-516(3), it may recover as damages for any nonconformity or other default the loss resulting in the ordinary course of events. Subsection (4) sets out the basic measure for breach of warranty unless special circumstances require otherwise. A lessee may recover the present value, at the time and place of acceptance, of the difference between the value of the use of the goods as accepted and the value of the use of the goods as warranted for the lease term. In essence, the measure of damages is the present value of the difference between the rental value of the goods as accepted and the rental value of the goods as warranted. William H. Lawrence & John H. Minan, The Law of Personal Property Leasing ¶ 15.02(9)(a) (1993). Although courts have frequently used the cost of repair as the measure of damages for breach of warranty under Article 2, see 1996 Kansas Comment 2 to 84-2-714, that measure would overcompensate a lessee: repairing the goods enhances the value of the lessor's residual interest as well as the lessee's leasehold interest. Under both subsections (3) and (4), the lessee also may recover incidental and consequential damages. See 84-2a-520.
4. Special circumstances may change the basic measure of damages for breach of warranty under subsection (4). Examples of special circumstances include actions for breach of warranty of title, cf. Ricklefs v. Clemens, 216 K. 128, 531 P.2d 94 (1975) (measuring damages at time buyer lost possession rather than time buyer accepted), and lease contracts in which the buyer has an option to purchase the goods.