Sales Law

A buyer's basic obligations are to accept the goods and pay the sale price. If the goods are nonconforming, the buyer may reject the goods. If the goods conform to the specifications of the sales contract and the buyer wrongfully rejects them, the seller may choose one of four options, or a blend of two or more options.

First, the seller may sue for damages. The amount of damages for a wrongful rejection would be the sale price minus the market price of the goods, measured at the time and place of the tender. Second, the seller may sue for the price of the goods, but only if the goods cannot be resold in the seller's ordinary course of business or if circumstances indicate that resale efforts will be fruitless. Third, the seller could cancel the contract, putting an end to shipments and reserving the right to sue for damages or collect unpaid balances. Fourth, the seller could resell the goods to a third party and recover the difference between the sale price and the resale price plus any incidental damages.

The resale of wrongfully rejected goods presents a few special problems. Under section 2–706 of the UCC, the sale may be either public or private. A private sale is made personally by the seller, whereas a public sale is made with public notice and carried out by a sheriff or at a publicly held auction. In either case the sale must be commercially reasonable in method, manner, time, place, and terms. Furthermore, the seller must notify new buyers that the goods are being resold under a breached contract to disclose the potential for legal conflict.

A seller who resells wrongfully rejected goods must inform the original buyer of the resale. If wrongfully rejected goods are perishable, the seller need not give notice to the buyer of the time and place of the resale. If the resale of wrongfully rejected goods is at a public sale, only goods identified in the contract may be sold, and the sale must be made at a usual place for public sale, provided that such a site is reasonably available. If the goods are not in view of bidders at a public sale, the public notice of the sale must state the place where the goods are located, and the seller must give bidders an opportunity to inspect the goods. If the seller resells the goods for a price higher than the price in the original sales contract and the extra profit covers costs incident to the resale, the seller has no damages, and the original buyer is not liable to the seller for the wrongful rejection.

In sales where the buyer pays a deposit and then wrongfully rejects the goods, the seller may keep the goods and the deposit. However, a seller is not entitled to a deposit that far exceeds his or her actual or expected damages. Under section 2–718 of the UCC, a buyer is entitled to restitution of any amount by which the sum of the payments already made exceeds either (1) the amount of any reasonable liquidated damages clause, or (2) 20 percent of the value of the total performance for which the buyer is obligated under the contract, or $500, whichever amount is smaller.

When a buyer accepts a seller's tender of conforming goods, the buyer is obligated to pay the sale price contained in the contract for sale. In some cases the parties may fail to agree to a price or choose to leave the price terms open. Under section 2–305 of the UCC, if a price term is left open, the price should be set in good faith at a reasonable market price at the time of delivery. If the parties intend that there is to be no contract unless a price is agreed to or fixed by a particular market indicator and the parties ultimately are unable to agree to a price term, there is no contract. In such a case the buyer must return any goods received, and the seller must return any money paid by the buyer.

Generally, a buyer has the right to pay in any manner observed in the business unless the seller demands a particular form of payment. Unless the parties agree otherwise, payment should be made when the goods are delivered to the buyer. A buyer does not have the right to inspect the goods if they are delivered cash on delivery or on similar terms, or if the contract provides for payment before inspection.