UCC § 2-715

Definition

UCC § 2-715 outlines the consequential damages that a buyer can recover in a sales contract when there is a breach. This section of the Uniform Commercial Code (UCC) focuses on damages that arise from the buyer's specific needs or circumstances and are not directly tied to the product itself. Understanding this provision is essential for determining the extent of damages recoverable in case of non-performance by the seller, emphasizing the importance of clear communication of expectations in sales contracts.

5 Must Know Facts For Your Next Test

1. UCC § 2-715 allows buyers to claim damages if they can show that such damages were foreseeable at the time of contract formation.
2. Consequential damages may include lost profits, additional costs incurred due to delays, and other losses that were directly related to the breach.
3. The buyer must prove that they informed the seller about any special circumstances that would lead to these consequential damages when entering into the contract.
4. The provision is intended to encourage sellers to fulfill their contractual obligations by making them aware of potential liabilities.
5. Consequential damages can be limited or excluded in a sales contract, but such limitations must be clearly stated and agreed upon by both parties.

Review Questions

• How does UCC § 2-715 define consequential damages, and why is it important for buyers in sales contracts?
  • UCC § 2-715 defines consequential damages as losses that are not directly caused by a breach but arise from specific circumstances known to both parties at the time of contract formation. This definition is crucial for buyers because it allows them to recover additional losses that go beyond just the cost of goods. By understanding this provision, buyers can better protect themselves from unforeseen losses resulting from a seller's failure to meet contractual obligations.
• Discuss how UCC § 2-715 interacts with other sections of the UCC regarding damages and buyer rights.
  • UCC § 2-715 works in conjunction with UCC § 2-714, which deals with direct damages related to nonconforming goods. While § 2-714 allows buyers to recover for the difference in value between what was delivered and what should have been delivered, § 2-715 expands this by allowing recovery for indirect losses incurred due to specific circumstances. Together, these sections create a comprehensive framework that ensures buyers are compensated for both direct and consequential damages resulting from a breach.
• Evaluate the implications of UCC § 2-715 on drafting sales contracts and seller liability.
  • UCC § 2-715 has significant implications for how sales contracts are drafted, particularly regarding seller liability. Sellers need to be aware that if special circumstances are communicated by buyers, they may face claims for consequential damages in addition to direct losses. This understanding can influence negotiations and lead sellers to consider including clear limitations or exclusions for such damages in their contracts. Ultimately, effective communication and careful drafting are essential to minimize risks and ensure all parties understand their rights and responsibilities under the agreement.

Related terms

Consequential Damages: Damages that are not directly caused by a breach but arise from the particular circumstances of the injured party, often leading to lost profits or additional losses.

UCC § 2-714: This section addresses the buyer's right to recover damages for nonconformity of goods, focusing on the difference between the value of goods as accepted and as they should have been delivered.

Mitigation of Damages: The obligation of a party suffering loss to take reasonable steps to reduce or limit the damages they incur due to a breach of contract.