SECTIONS 2701-2725 - California Statutes

COMMERCIAL CODE

SECTION 2701-2725

2701. Remedies for breach of any obligation or promise collateral
or ancillary to a contract for sale are not impaired by the
provisions of this division.

2702. (1) Where the seller discovers the buyer to be insolvent he
may refuse delivery except for cash including payment for all goods
theretofore delivered under the contract, and stop delivery under
this division (Section 2705).
(2) Where the seller discovers that the buyer has received goods
on credit while insolvent he may reclaim the goods upon demand made
within 10 days after the receipt, but if misrepresentation of
solvency has been made to the particular seller in writing within
three months before delivery the 10-day limitation does not apply.
Except as provided in this subdivision the seller may not base a
right to reclaim goods on the buyer's fraudulent or innocent
misrepresentation of solvency or of intent to pay.
(3) The seller's right to reclaim under subdivision (2) is subject
to the rights of a buyer in ordinary course or other good faith
purchaser under this division (Section 2403). Successful reclamation
of goods excludes all other remedies with respect to them.

2703. Where the buyer wrongfully rejects or revokes acceptance of
goods or fails to make a payment due on or before delivery or
repudiates with respect to a part or the whole, then with respect to
any goods directly affected and, if the breach is of the whole
contract (Section 2612), then also with respect to the whole
undelivered balance, the aggrieved seller may
(a) Withhold delivery of such goods;
(b) Stop delivery by any bailee as hereafter provided (Section
2705);
(c) Proceed under the next section respecting goods still
unidentified to the contract;
(d) Resell and recover damages as hereafter provided (Section
2706);
(e) Recover damages for nonacceptance (Section 2708) or in a
proper case the price (Section 2709);
(f) Cancel.

2704. (1) An aggrieved seller under the preceding section may
(a) Identify to the contract conforming goods not already
identified if at the time he learned of the breach they are in his
possession or control;
(b) Treat as the subject of resale goods which have demonstrably
been intended for the particular contract even though those goods are
unfinished.
(2) Where the goods are unfinished an aggrieved seller may in the
exercise of reasonable commercial judgment for the purposes of
avoiding loss and of effective realization either complete the
manufacture and wholly identify the goods to the contract or cease
manufacture and resell for scrap or salvage value or proceed in any
other reasonable manner.

2705. (1) The seller may stop delivery of goods in the possession
of a carrier or other bailee when he discovers the buyer to be
insolvent (Section 2702) and may stop delivery of carload, truckload,
planeload or larger shipments of express or freight when the buyer
repudiates or fails to make a payment due before delivery or if for
any other reason the seller has a right to withhold or reclaim the
goods.
(2) As against such buyer the seller may stop delivery until
(a) Receipt of the goods by the buyer; or
(b) Acknowledgment to the buyer by any bailee of the goods except
a carrier that the bailee holds the goods for the buyer; or
(c) Such acknowledgment to the buyer by a carrier by reshipment or
as a warehouse; or
(d) Negotiation to the buyer of any negotiable document of title
covering the goods.
(3) (a) To stop delivery the seller must so notify as to enable
the bailee by reasonable diligence to prevent delivery of the goods.
(b) After such notification the bailee must hold and deliver the
goods according to the directions of the seller but the seller is
liable to the bailee for any ensuing charges or damages.
(c) If a negotiable document of title has been issued for goods
the bailee is not obliged to obey a notification to stop until
surrender of possession or control of the document.
(d) A carrier who has issued a nonnegotiable bill of lading is not
obliged to obey a notification to stop received from a person other
than the consignor.

2706. (1) Under the conditions stated in Section 2703 on seller's
remedies, the seller may resell the goods concerned or the
undelivered balance thereof. Where the resale is made in good faith
and in a commercially reasonable manner the seller may recover the
difference between the resale price and the contract price together
with any incidental damages allowed under the provisions of this
division (Section 2710), but less expenses saved in consequence of
the buyer's breach.
(2) Except as otherwise provided in subdivision (3) or unless
otherwise agreed resale may be at public or private sale including
sale by way of one or more contracts to sell or of identification to
an existing contract of the seller. Sale may be as a unit or in
parcels and at any time and place and on any terms but every aspect
of the sale including the method, manner, time, place and terms must
be commercially reasonable. The resale must be reasonably identified
as referring to the broken contract, but it is not necessary that the
goods be in existence or that any or all of them have been
identified to the contract before the breach.
(3) Where the resale is at private sale the seller must give the
buyer reasonable notification of his intention to resell.
(4) Where the resale is at public sale
(a) Only identified goods can be sold except where there is a
recognized market for a public sale of futures in goods of the kind;
and
(b) It must be made at a usual place or market for public sale if
one is reasonably available and except in the case of goods which are
perishable or threaten to decline in value speedily the seller must
give the buyer reasonable notice of the time and place of the resale;
and
(c) If the goods are not to be within the view of those attending
the sale the notification of sale must state the place where the
goods are located and provide for their reasonable inspection by
prospective bidders; and
(d) The seller may buy.
(5) A purchaser who buys in good faith at a resale takes the goods
free of any rights of the original buyer even though the seller
fails to comply with one or more of the requirements of this section.
(6) The seller is not accountable to the buyer for any profit made
on any resale. A person in the position of a seller (Section 2707)
or a buyer who has rightfully rejected or justifiably revoked
acceptance must account for any excess over the amount of his
security interest, as hereinafter defined (subdivision (3) of Section
2711).

2707. (1) A "person in the position of a seller" includes as
against a principal an agent who has paid or become responsible for
the price of goods on behalf of his principal or anyone who otherwise
holds a security interest or other right in goods similar to that of
a seller.
(2) A person in the position of a seller may as provided in this
division withhold or stop delivery (Section 2705) and resell (Section
2706) and recover incidental damages (Section 2710).

2708. (1) Subject to subdivision (2) and to the provisions of this
division with respect to proof of market price (Section 2723), the
measure of damages for nonacceptance or repudiation by the buyer is
the difference between the market price at the time and place for
tender and the unpaid contract price together with any incidental
damages provided in this division (Section 2710), but less expenses
saved in consequence of the buyer's breach.
(2) If the measure of damages provided in subdivision (1) is
inadequate to put the seller in as good a position as performance
would have done then the measure of damages is the profit (including
reasonable overhead) which the seller would have made from full
performance by the buyer, together with any incidental damages
provided in this division (Section 2710), due allowance for costs
reasonably incurred and due credit for payments or proceeds of
resale.

2709. (1) When the buyer fails to pay the price as it becomes due
the seller may recover, together with any incidental damages under
the next section, the price
(a) Of goods accepted or of conforming goods lost or damaged
within a commercially reasonable time after risk of their loss has
passed to the buyer; and
(b) Of goods identified to the contract if the seller is unable
after reasonable effort to resell them at a reasonable price or the
circumstances reasonably indicate that such effort will be
unavailing.
(2) Where the seller sues for the price he must hold for the buyer
any goods which have been identified to the contract and are still
in his control except that if resale becomes possible he may resell
them at any time prior to the collection of the judgment. The net
proceeds of any such resale must be credited to the buyer and payment
of the judgment entitles him to any goods not resold.
(3) After the buyer has wrongfully rejected or revoked acceptance
of the goods or has failed to make a payment due or has repudiated
(Section 2610), a seller who is held not entitled to the price under
this section shall nevertheless be awarded damages for nonacceptance
under the preceding section.

2710. Incidental damages to an aggrieved seller include any
commercially reasonable charges, expenses or commissions incurred in
stopping delivery, in the transportation, care and custody of goods
after the buyers' breach, in connection with return or resale of the
goods or otherwise resulting from the breach.

2711. (1) Where the seller fails to make delivery or repudiates or
the buyer rightfully rejects or justifiably revokes acceptance then
with respect to any goods involved, and with respect to the whole if
the breach goes to the whole contract (Section 2612), the buyer may
cancel and whether or not he has done so may in addition to
recovering so much of the price as has been paid
(a) "Cover" and have damages under the next section as to all the
goods affected whether or not they have been identified to the
contract; or
(b) Recover damages for nondelivery as provided in this division
(Section 2713).
(2) Where the seller fails to deliver or repudiates the buyer may
also
(a) If the goods have been identified recover them as provided in
the division (Section 2502); or
(b) In a proper case obtain specific performance or replevy the
goods as provided in this division (Section 2716).
(3) On rightful rejection or justifiable revocation of acceptance
a buyer has a security interest in goods in his possession or control
for any payments made on their price and any expenses reasonably
incurred in their inspection, receipt, transportation, care and
custody and may hold such goods and resell them in like manner as an
aggrieved seller (Section 2706).

2712. (1) After a breach within the preceding section the buyer may
"cover" by making in good faith and without unreasonable delay any
reasonable purchase of or contract to purchase goods in substitution
for those due from the seller.
(2) The buyer may recover from the seller as damages the
difference between the cost of cover and the contract price together
with any incidental or consequential damages as hereinafter defined
(Section 2715), but less expenses saved in consequence of the seller'
s breach.
(3) Failure of the buyer to effect cover within this section does
not bar him from any other remedy.

2713. (1) Subject to the provisions of this division with respect
to proof of market price (Section 2723), the measure of damages for
nondelivery or repudiation by the seller is the difference between
the market price at the time when the buyer learned of the breach and
the contract price together with any incidental and consequential
damages provided in this division (Section 2715), but less expenses
saved in consequence of the seller's breach.
(2) Market price is to be determined as of the place for tender
or, in cases of rejection after arrival or revocation of acceptance,
as of the place of arrival.

2714. (1) Where the buyer has accepted goods and given notification
(subdivision (3) of Section 2607) he or she may recover, as damages
for any nonconformity of tender, the loss resulting in the ordinary
course of events from the seller's breach as determined in any manner
that 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 Section 2715 also may be recovered.

2715. (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.

2716. (1) Specific performance may be decreed where the goods are
unique or in other proper circumstances.
(2) The decree for specific performance may include such terms and
conditions as to payment of the price, damages, or other relief as
the court may deem just.
(3) The buyer has a right of replevin for goods identified to the
contract if after reasonable effort he or she is unable to effect
cover for such goods or the circumstances reasonably indicate that
such effort will be unavailing or if the goods have been shipped
under reservation and satisfaction of the security interest in them
has been made or tendered. In the case of goods bought for personal,
family, or household purposes, the buyer's right of replevin vests
upon acquisition of a special property, even if the seller had not
then repudiated or failed to deliver.

2717. The buyer on notifying the seller of his intention to do so
may deduct all or any part of the damages resulting from any breach
of the contract from any part of the price still due under the same
contract.

2718. (1) Damages for breach by either party may be liquidated in
the agreement subject to and in compliance with Section 1671 of the
Civil Code. If the agreement provides for liquidation of damages, and
such provision does not comply with Section 1671 of the Civil Code,
remedy may be had as provided in this division.
(2) Where the seller justifiably withholds delivery of goods
because of the buyer's breach, the buyer is entitled to restitution
of any amount by which the sum of his or her payments exceeds:
(a) The amount to which the seller is entitled by virtue of terms
liquidating the seller's damages in accordance with subdivision (1),
or
(b) In the absence of such terms, 20 percent of the value of the
total performance for which the buyer is obligated under the contract
or five hundred dollars ($500), whichever is smaller.
(3) The buyer's right to restitution under subdivision (2) is
subject to offset to the extent that the seller establishes:
(a) A right to recover damages under the provisions of this
chapter other than subdivision (1), and
(b) The amount or value of any benefits received by the buyer
directly or indirectly by reason of the contract.
(4) Where a seller has received payment in goods their reasonable
value or the proceeds of their resale shall be treated as payments
for the purposes of subdivision (2); but if the seller has notice of
the buyer's breach before reselling goods received in part
performance, his or her resale is subject to the conditions laid down
in this division on resale by an aggrieved seller (Section 2706).

2719. (1) Subject to the provisions of subdivisions (2) and (3) of
this section and of the preceding section on liquidation and
limitation of damages,
(a) The agreement may provide for remedies in addition to or in
substitution for those provided in this division and may limit or
alter the measure of damages recoverable under this division, as by
limiting the buyer's remedies to return of the goods and repayment of
the price or to repair and replacement of nonconforming goods or
parts; and
(b) Resort to a remedy as provided is optional unless the remedy
is expressly agreed to be exclusive, in which case it is the sole
remedy.
(2) Where circumstances cause an exclusive or limited remedy to
fail of its essential purpose, remedy may be had as provided in this
code.
(3) Consequential damages may be limited or excluded unless the
limitation or exclusion is unconscionable. Limitation of
consequential damages for injury to the person in the case of
consumer goods is invalid unless it is proved that the limitation is
not unconscionable. Limitation of consequential damages where the
loss is commercial is valid unless it is proved that the limitation
is unconscionable.

2720. Unless the contrary intention clearly appears, expressions of
"cancellation" or "rescission" of the contract or the like shall not
be construed as a renunciation or discharge of any claim in damages
for an antecedent breach.

2721. Remedies for material misrepresentation or fraud include all
remedies available under this division for nonfraudulent breach.
Neither rescission or a claim for rescission of the contract for sale
nor rejection or return of the goods shall bar or be deemed
inconsistent with a claim for damages or other remedy.

2722. Where a third party so deals with goods which have been
identified to a contract for sale as to cause actionable injury to a
party to that contract
(a) A right of action against the third party is in either party
to the contract for sale who has title to or a security interest or a
special property or an insurable interest in the goods; and if the
goods have been destroyed or converted a right of action is also in
the party who either bore the risk of loss under the contract for
sale or has since the injury assumed that risk as against the o ther;
(b) If at the time of the injury the party plaintiff did not bear
the risk of loss as against the other party to the contract for sale
and there is no arrangement between them for disposition of the
recovery, his suit or settlement is, subject to his own interest, as
a fiduciary for the other party to the contract;
(c) Either party may with the consent of the other sue for the
benefit of whom it may concern.

2723. (1) If an action based on anticipatory repudiation comes to
trial before the time for performance with respect to some or all of
the goods, any damages based on market price (Section 2708 or Section
2713) shall be determined according to the price of such goods
prevailing at the time when the aggrieved party learned of the
repudiation.
(2) If evidence of a price prevailing at the times or places
described in this division is not readily available the price
prevailing within any reasonable time before or after the time
described or at any other place which in commercial judgment or under
usage of trade would serve as a reasonable substitute for the one
described may be used, making any proper allowance for the cost of
transporting the goods to or from such other place.
(3) Evidence of a relevant price prevailing at a time or place
other than the one described in this division offered by one party is
not admissible unless and until he has given the other party such
notice as the court finds sufficient to prevent unfair surprise.

2724. Whenever the prevailing price or value of any goods regularly
bought and sold in any established commodity market is in issue,
reports in official publications or trade journals or in newspapers
or periodicals of general circulation published as the reports of
such market shall be admissible in evidence. The circumstances of the
preparation of such a report may be shown to affect its weight but
not its admissibility.

2725. (1) An action for breach of any contract for sale must be
commenced within four years after the cause of action has accrued. By
the original agreement the parties may reduce the period of
limitation to not less than one year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless
of the aggrieved party's lack of knowledge of the breach. A breach of
warranty occurs when tender of delivery is made, except that where a
warranty explicitly extends to future performance of the goods and
discovery of the breach must await the time of such performance the
cause of action accrues when the breach is or should have been
discovered.
(3) Where an action commenced within the time limited by
subdivision (1) is so terminated as to leave available a remedy by
another action for the same breach such other action may be commenced
after the expiration of the time limited and within six months after
the termination of the first action unless the termination resulted
from voluntary discontinuance or from dismissal for failure or
neglect to prosecute.
(4) This section does not alter the law on tolling of the statute
of limitations nor does it apply to causes of action which have
accrued before this code becomes effective.