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Each year, a number of questions on the MBE portion of the Bar Exam will ask you to determine the correct amount of damages a party is entitled to in a contract action.  One scenario frequently questioned involves the damages a volume seller is entitled to as a result of a lost sale.  A recent Bar Exam posed the following question:

A computer vendor entered into a written contract with a consumer to sell a specific model of personal computer.  The contract provided that the consumer would pick up the computer and pay $3,000 for it on February 1.   The consumer unjustifiably repudiates on February 1.  The vendor then sells the specific computer to another customer for $3,000.  The vendor can buy an unlimited number of the same model computer from the manufacturer.  In a contract suit against the consumer, what damages is the vendor entitled to?

(1)  Nothing, because the vendor resold the computer for a price equal to the contract price

(2)  Nothing, because the vendor failed to provide the consumer with notice of the intent to resell

(3)  The vendor’s anticipated profit plus any incidental damages

(4)  The full contract price of $3,000

The correct answer is (3).  Where a seller of goods can obtain a greater quantity of a particular good they could sell at retail, the measure of damages for a lost sale is the anticipated profit on that sale.  The volume seller is an exception to the general U.C.C. rule that a seller’s damages are the difference between the contract price and either the actual sale price the seller receives from a different buyer or the market price.

This question is also a good example of when you can rule out answers just by using common sense.  For instance, answer (4) cannot be the right answer, because it would put the vendor in a better position than it would have been in had the consumer performed.  Answer (4) would result in vendor having $3,000 cash, without having had to deliver a computer to the consumer.

Dominate The Bar Flash Cards cover this material by asking the following questions:

Q:  Under the U.C.C., what are the seller’s damages if the buyer breaches?

A:  Seller’s Damages: Depends on whether the seller resells the goods:

    1. Resell: Resale Price less Contract Price.
    2. Don’t Resell: Contract Price less Market Price.

NOTE: As with the buyer, the seller might have no damages.  This will be the case if the market price or resale price is higher than the contract price.

Q:  Johnny is a car dealer, and makes a profit of $1k on each car he sells.  He can get as many cars as he wants from the manufacturer.  Johnny contracts to sell a car to Jimmy for $25,000. Jimmy however, refuses to buy the car, and Johnny ends up selling the car to Jerry for $25,000.  What are Johnny’s damages?

A:  Lost Volume Sellers are an exception to the general rule of damages and receive lost profit.   Therefore Johnny is entitled to damages in the amount of $1k.  The rationale is that as a volume seller, absent the breach, Johnny would have sold two cars, whereas now he only sold one.   To be a volume seller, a party must have an inventory that it can restock at will.

 

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