Breach of Contract, Seller's Attempt to Cure, Expectation Damages

[PooYai]

What is the name of your state (only U.S. law)? CA

My question involves business law in the state of: California

Hope the is not too convoluted:

Custom chaise sofa (>$5000) was made for designer/buyer, but it didn't conform to specs. Furniture manufacturer/seller attempted to cure substantial defect by offering to fix at full retail price, but buyer did not accept because quoted price was too high (note: seller offered full retail to fix because seller didn't want to reveal buyer's markup in front of buyer's customer who was standing in the room.) Seller made no other offer to cure and buyer accepted delivery of sofa. Buyer then re-upholstered sofa for his customer and claims to have issued a refund to customer. Buyer now asking seller for half of alleged "refund" to his customer (costs plus profits) and threatens escalation if seller does not comply.

Legal Questions/Issues:

1) If seller's original quote to cure defect (retail price) was not the price the seller was actually going to charge the buyer (see note above), and this fact was communicated to the buyer, did the buyer accept the good "as is"?

2) If seller was not given an opportunity to amend her offer to cure, and buyer proceeded to re-upholster the piece without informing the seller, does this constitute an improper rejection of the good?

3) If seller is liable and dispute escalates, is buyer entitled to full amount of alleged refund plus "10 hours of [his] time to deal with the situation."

Thanks in advance.

 

[LdiJ]

What is the name of your state (only U.S. law)? CA

My question involves business law in the state of: California

Hope the is not too convoluted:

Custom chaise sofa (>$5000) was made for designer/buyer, but it didn't conform to specs. Furniture manufacturer/seller attempted to cure substantial defect by offering to fix at full retail price,

Can you clarify what you mean here?...because its unclear. If a custom piece of furniture didn't conform to specs, then the seller should have offered to repair it at no additional cost to the buyer or client, and/or offered a substantial discount for them to accept it "as is". That is just good business sense.

but buyer did not accept because quoted price was too high (note: seller offered full retail to fix because seller didn't want to reveal buyer's markup in front of buyer's customer who was standing in the room.) Seller made no other offer to cure and buyer accepted delivery of sofa. Buyer then re-upholstered sofa for his customer and claims to have issued a refund to customer. Buyer now asking seller for half of alleged "refund" to his customer (costs plus profits) and threatens escalation if seller does not comply.

Legal Questions/Issues:

1) If seller's original quote to cure defect (retail price) was not the price the seller was actually going to charge the buyer (see note above), and this fact was communicated to the buyer, did the buyer accept the good "as is"?

I still don't understand why there was any "quote" to cure the defect at all.

2) If seller was not given an opportunity to amend her offer to cure, and buyer proceeded to re-upholster the piece without informing the seller, does this constitute an improper rejection of the good?

Technically its possible that the buyer accepted the piece "as is" but we were not there to hear the conversation and we are not privy to the paperwork. If it was accepted "as is" then the seller is under no obligation to reimburse anything unless there are contractual requirements to do so. However...the seller may lose a customer and any goodwill that they might have had due to that customer.

3) If seller is liable and dispute escalates, is buyer entitled to full amount of alleged refund plus "10 hours of [his] time to deal with the situation."

Thanks in advance.

In the end, it really all depends on what the contract says.

 

[latigo]

What is the name of your state (only U.S. law)? CA

My question involves business law in the state of: California

Hope the is not too convoluted:

Custom chaise sofa (>$5000) was made for designer/buyer, but it didn't conform to specs. Furniture manufacturer/seller attempted to cure substantial defect by offering to fix at full retail price, but buyer did not accept because quoted price was too high (note: seller offered full retail to fix because seller didn't want to reveal buyer's markup in front of buyer's customer who was standing in the room.) Seller made no other offer to cure and buyer accepted delivery of sofa. Buyer then re-upholstered sofa for his customer and claims to have issued a refund to customer. Buyer now asking seller for half of alleged "refund" to his customer (costs plus profits) and threatens escalation if seller does not comply.

Legal Questions/Issues:

1) If seller's original quote to cure defect (retail price) was not the price the seller was actually going to charge the buyer (see note above), and this fact was communicated to the buyer, did the buyer accept the good "as is"?

2) If seller was not given an opportunity to amend her offer to cure, and buyer proceeded to re-upholster the piece without informing the seller, does this constitute an improper rejection of the good?

3) If seller is liable and dispute escalates, is buyer entitled to full amount of alleged refund plus "10 hours of [his] time to deal with the situation."

Thanks in advance.

The controlling issue here would be whether or not there was an unconditional acceptance of the goods by the retailer in the condition as delivered.

If so, what the retailer did with the goods after accepting delivery is of no consequence to the manufacturer.

The question is whether or not there was an unconditional acceptance. And that is not made clear, not to me at least

 

[irving12]

I recommend you read the history of the states of usa

 

[tranquility]

I'd say the item was accepted when it was reupholstered.

§ 2-606. What Constitutes Acceptance of Goods.

(1) Acceptance of goods occurs when the buyer

(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their non-conformity; or
(b) fails to make an effective rejection (subsection (1) of Section 2-602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
(c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.

(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.

That does not solve the problem(s) though.

§ 2-607. Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice of Claim or Litigation to Person Answerable Over.

(1) The buyer must pay at the contract rate for any goods accepted.

(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a non-conformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this Article for non-conformity.

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and
(b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

(4) The burden is on the buyer to establish any breach with respect to the goods accepted.

(5) Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over

(a) he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.
(b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.

(6) The provisions of subsections (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subsection (3) of Section 2-312).

Then,

§ 2-714. Buyer's Damages for Breach in Regard to Accepted Goods.

(1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.

(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

(3) In a proper case any incidental and consequential damages under the next section may also be recovered.

However,

§ 2-715. Buyer's Incidental and Consequential Damages.

(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.

(2) Consequential damages resulting from the seller's breach include

(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
(b) injury to person or property proximately resulting from any breach of warranty.

The bottom line is that I'd guess the non-conforming item was accepted and the seller notified seasonably. The buyer has a right to reasonable damages for the non-conformity and "cure" has nothing to do with it. (Although I suspect the issue of cure could be litigated, depending on the exact facts. Notification and attempts facts seem fuzzy.) There will be no expectation damages as a general principle and because the goods were accepted by doing acts against the seller's interest in the item. (Re-upholstery.) The buyer has a duty to pay the full amount and negotiate or sue for damages.

 

[justalayman]

buyer accepted delivery of sofa.

it all gets down to this. Depending on the terms of acceptance, the buyer may or may not have had a right to repair the defect and seek compensation from the manufacturer.

as to what the buyer would have been able to demand from the manufacturer would be based on what the defect was. If it did not require being completely reupholstered, then the damages are not going to be the cost to completely reupholster the item. Damages would be based on what it actually took to cure the actual defect. Damages would also be limited to actual cost to cure the defect regardless of what discount the buyer may have given the customer.

1) If seller's original quote to cure defect (retail price) was not the price the seller was actually going to charge the buyer (see note above), and this fact was communicated to the buyer, did the buyer accept the good "as is"?

it wasn't based on your argument here but depending on what did take place, it may have then become as is, or not.

2) If seller was not given an opportunity to amend her offer to cure, and buyer proceeded to re-upholster the piece without informing the seller, does this constitute an improper rejection of the good?

no

3) If seller is liable and dispute escalates, is buyer entitled to full amount of alleged refund plus "10 hours of [his] time to deal with the situation."

unless the 10 hours was time spent fixing the actual defect, no. It is not compensable time. I am under the impression the 10 hours is simply time spent "dealing" with the situation and not time spent repairing the defect.



the concern I have is due to this:

Custom chaise sofa (>$5000) was made for designer/buyer, but it didn't conform to specs. Furniture manufacturer/seller attempted to cure substantial defect by offering to fix at full retail price, but buyer did not accept because quoted price was too high (note: seller offered full retail to fix because seller didn't want to reveal buyer's markup in front of buyer's customer who was standing in the room.) Seller made no other offer to cure and buyer accepted delivery of sofa. Buyer then re-upholstered sofa for his customer and claims to have issued a refund to customer. Buyer now asking seller for half of alleged "refund" to his customer (costs plus profits) and threatens escalation if seller does not comply.

If the sofa was not as ordered, why would the manufacture even attempt to charge for the repair? Why would the buyer even entertain such a suggestion rather than flat out stating: it is not what was ordered. Take it back and make it right. You don't get to charge to make corrections to a product if it does not comply with the specs provided.

 

[tranquility]

it all gets down to this. Depending on the terms of acceptance, the buyer may or may not have had a right to repair the defect and seek compensation from the manufacturer.

How so? Where do you find the buyer has the right to repair the defect?

§ 2-602. Manner and Effect of Rightful Rejection.

(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

(2) Subject to the provisions of the two following sections on rejected goods (Sections 2-603 and 2-604),

(a) after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
(b) if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this Article (subsection (3) of Section 2-711), he is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them; but
(c) the buyer has no further obligations with regard to goods rightfully rejected.

(3) The seller's rights with respect to goods wrongfully rejected are governed by the provisions of this Article on seller's remedies in general (Section 2-703).

While I'm sure mitigation is on justalayman's mind, the couch is the property of the seller until the buyer accepts it. I will assume the OP is a merchant (which will give him more options) since he bought with resale in mind.

§ 2-603. Merchant Buyer's Duties as to Rightfully Rejected Goods.

(1) Subject to any security interest in the buyer (subsection (3) of Section 2-711), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller's account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

(2) When the buyer sells goods under subsection (1), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding ten per cent on the gross proceeds.

(3) In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.

 

[justalayman]

tranquility;3064442]How so? Where do you find the buyer has the right to repair the defect?

from your post:

§ 2-714. Buyer's Damages for Breach in Regard to Accepted Goods.

(1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.

 

[tranquility]

If he has accepted the item, it is the OP's to do with as he pleases with his stuff. The measure of damages will not fall on any purported repair and the quality of said repair.

 

[Mass_Shyster]

If he has accepted the item, it is the OP's to do with as he pleases with his stuff. The measure of damages will not fall on any purported repair and the quality of said repair.

I'll have to agree with the layman on this one.

The court below rejected this argument, and instead applied section 2-714(2) of the Illinois Uniform Commercial Code, ILL.REV.STAT., ch. 26, which provides that damages generally should represent the difference between the value of the goods at the time of acceptance and the value they would have had if they had been as warranted. The court stated that under this section the cost of repair is the proper standard. This was the correct approach under Illinois law, as well as under the general commercial law.Continental Sand Gravel Inc v. K & K Sand & Gravel Inc,755 F. 2d 87

 

[justalayman]

If he has accepted the item, it is the OP's to do with as he pleases with his stuff. The measure of damages will not fall on any purported repair and the quality of said repair.

that is why I specifically stated:

it all gets down to this. Depending on the terms of acceptance, the buyer may or may not have had a right to repair the defect and seek compensation from the manufacturer.

 

[tranquility]

What reasonable damages are depends on what is reasonable. The "cost" of repair? So, in this case the OP's only damages are the cost of the fabric and nails? But, that is not where the disagreement lie. You are not stating justalayman's position. No one has attempted to measure the damages yet. But, the measure will be at the time of the tender/rejection/acceptance of the item. We may be able to quantify it in certain situations through the cost of repair. But, that is AFTER the event's facts have already been set. CAN the cost of repair be the measure? Of course. But, it would depend on the facts about what is reasonable. The measure used in the case cited resulted in greater damages than the cost of the item on the basis of the benefit of the bargain. In our case, such a measure (repair) would result in lesser damages. The case also mentioned the profit issue to be included in the measure, but found them speculative.

it all gets down to this. Depending on the terms of acceptance, the buyer may or may not have had a right to repair the defect and seek compensation from the manufacturer.

Terms of acceptance? The item was accepted when it was upholstered. What "terms" do you mean? What do you mean by "may or may not" have the right? Either it is his to do with has he pleases or it is not. I say acceptance. Therefore, he has the ability. The terms have nothing to do with it.

The bottom line is that I'd guess the non-conforming item was accepted and the seller notified seasonably. The buyer has a right to reasonable damages for the non-conformity and "cure" has nothing to do with it. (Although I suspect the issue of cure could be litigated, depending on the exact facts. Notification and attempts facts seem fuzzy.) There will be no expectation damages as a general principle and because the goods were accepted by doing acts against the seller's interest in the item. (Re-upholstery.) The buyer has a duty to pay the full amount and negotiate or sue for damages.

 

[Mass_Shyster]

The "cost" of repair? So, in this case the OP's only damages are the cost of the fabric and nails?

On the other hand, "repair" may be the wrong remedy, since the goods were non-conforming, but not necessarily defective. The goods were not repaired, they were converted into conforming goods. That may have constituted economic waste. (Redding Pipe).

There better be a UCC remedies question on the Bar.

 

[tranquility]

Aren't you supposed to use the UCC AND common law on all contracts? Even if the UCC would not apply? That's what the crammers told me on the stone tablets they supplied.

 

[justalayman]

tranquility;3064489]What reasonable damages are depends on what is reasonable. The "cost" of repair? So, in this case the OP's only damages are the cost of the fabric and nails?

and labor but that in itself may not be correct either. We do not know what the actual defect was and what it would have taken to repair that defect. It may have not required a complete reupholstering. We have no way to determine what was needed, only what was done by the buyer. We don't even know why it was reupholstered or if that actually had anything to do with the defect.

But, that is not where the disagreement lie. You are not stating justalayman's position. No one has attempted to measure the damages yet.

that's because we do not even know what the defect was.


.

The measure used in the case cited resulted in greater damages than the cost of the item on the basis of the benefit of the bargain.

Huh? where do you get this? The only number mentioned is the >$5000. We have no idea of the amount sought by the buyer. That amount is actually irrelevant because that is not the amount of damages. The damages would be what it took to repair the defect. If the buyer discounted the sale, that is on them.

In our case, such a measure (repair) would result in lesser damages. The case also mentioned the profit issue to be included in the measure, but found them speculative.

what does that have to do with anything. The buyer can claim anything he wants. If it isn't supported by law, it is meaningless.

Terms of acceptance? The item was accepted when it was upholstered. What "terms" do you mean?

Oh bs. If the buyer accepted it with notice that there was a defect, buyer had a right to seek to recover the loss of value or cost of repair. If it was an outright "as is" acceptance, buyer is sol.

What do you mean by "may or may not" have the right? Either it is his to do with has he pleases or it is not. I say acceptance. Therefore, he has the ability. The terms have nothing to do with it.

yes, the terms of acceptance have something to do with this. In fact, they are the crux of the matter.