In Support of Consequential Damages for Sellers
36 Pages Posted: 28 Jan 2016 Last revised: 9 Feb 2016
Date Written: 1992
In March 1988 the American Law Institute and the Permanent Editorial Board for the Uniform Commercial Code appointed a study group to consider an extensive revision of Article 2. One of the Study Group's important recommendations in its 1990 Preliminary Report is that Section 2-710 be revised to grant a seller the explicit right to recover consequential damages. Although all of the seller damage remedy provisions in Article 2 expressly allow for incidental damages, they are uniformly silent on the matter of consequential damages. As the above scenario demonstrates, sellers do, at least on occasion, suffer consequential loss and that loss may represent the major portion of their damages. Nevertheless, the courts to date have consistently construed Section 1-106 to bar a. seller's recovery of consequential damages. Sellers do, at least on occasion, suffer consequential loss and that loss may represent the major portion of their damages. Nevertheless, the courts to date have consistently construed Section 1-106 to bar a. seller's recovery of consequential damages. This result has obtained despite the very strong, overarching mandate in Section 1-106 that the courts liberally administer remedies so that the aggrieved party is compensated by being placed in as good a position as he would have occupied had the breaching party fully performed. Section 1-106 thus reflects an inconsistent, schizophrenic aura by first stating as a fundamental remedial precept that an aggrieved party be fully compensated and then substantially recanting from it, at least for sellers, by denying recovery for what may be the primary loss caused by the breach.
There is no reason in logic or fairness for treating the consequential loss of one party, the seller, as penal damages while simultaneously treating such a Joss by the buyer as compensatory. Thus, this article supports the Study Group recommendation regarding consequential damages for sellers. It will explore how the rule denying recovery came to pass, will question the wisdom and correctness of judicial decisions to date which have interpreted the Code to bar a seller's recovery for consequential damages, and will suggest that any upcoming revision of Article 2 of the Code must include a specific provision placing sellers on equal footing with buyers with respect to consequential damages.
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