Hessler v. Crystal Lake Chrysler-Plymouth, Inc.
273 Ill. Dec. 96, 788 N.E.2d 405, 338 Ill.App.3d 1010 (2003)
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Rule of Law:
Under the Uniform Commercial Code (UCC), when a seller repudiates a contract for the sale of goods, the buyer may "cover" by making a reasonable substitute purchase, and the proper measure of damages is the difference between the cost of cover and the contract price.
Facts:
- On February 5, 1997, Donald R. Hessler signed a 'Retail Order for a Motor Vehicle' with Crystal Lake Chrysler-Plymouth, Inc. to purchase a new 1997 Plymouth Prowler, a promotional vehicle of uncertain production.
- The agreement specified a price of $5,000 over the manufacturer's list price and included a $5,000 deposit from Hessler. A salesperson for the dealership wrote 'ASAP' in the delivery date box.
- Hessler was the first person to place an order and provide a deposit for a Prowler at the dealership.
- On May 23, 1997, the dealership entered into a second contract with another customer, Salvatore Palandri, promising to sell him the 'first one delivered to [the] dealership' for a higher price.
- On September 22, 1997, after Hessler informed the dealership's co-owner, Gary Rosenberg, that the dealership was on a list to receive a Prowler, Rosenberg stated he would not sell Hessler the car because it was already 'committed' to someone else.
- On October 25, 1997, after seeing a Prowler at the dealership and being told again by Rosenberg that he would not sell him the car, Hessler purchased a Prowler from another dealer for $77,706.
- On October 27, 1997, Crystal Lake Chrysler-Plymouth sold the only Prowler it received that year to Palandri.
Procedural Posture:
- Plaintiff Donald R. Hessler sued Defendant Crystal Lake Chrysler-Plymouth, Inc. for breach of contract in the Illinois circuit court (trial court).
- The trial court initially granted the defendant's motion to dismiss.
- Hessler, as appellant, appealed to the Illinois Appellate Court (intermediate appellate court).
- The appellate court reversed the dismissal and remanded the case to the trial court for an evidentiary hearing, finding the contract was ambiguous.
- Following a bench trial on remand, the trial court entered judgment for Hessler and awarded him $29,853 in damages.
- Crystal Lake Chrysler-Plymouth, Inc., as appellant, then appealed the trial court's judgment to the Illinois Appellate Court.
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Issue:
Under the Uniform Commercial Code (UCC), when a seller repudiates a contract for the sale of goods and the buyer makes a substitute purchase ('cover'), are the buyer's damages calculated as the difference between the cost of cover and the contract price, or the difference between the market price and the contract price?
Opinions:
Majority - Justice Callum
Yes, under the UCC, when a seller repudiates a contract and the buyer covers, the correct measure of damages is the difference between the reasonable cost of cover and the original contract price. The court found that the term 'ASAP' was a valid part of the contract, meaning Hessler was entitled to the first Prowler received by the dealership. The dealership's repeated statements that it would not sell the car to Hessler and its sale of the car to another customer constituted an anticipatory repudiation of the contract. Upon repudiation, the UCC § 2-711 allows a buyer to either 'cover' under § 2-712 or seek damages for non-delivery under § 2-713. Because Hessler chose to cover by purchasing a substitute vehicle, the proper measure of damages is dictated by § 2-712, which is the difference between the cost of cover and the contract price. The court rejected the defendant's argument that damages should be based on the market price (§ 2-713), as that section expressly applies only when the buyer has not covered. The court concluded that Hessler's purchase of the substitute Prowler was a reasonable cover made in good faith, given the vehicle's limited availability and his prior efforts to find one.
Analysis:
This case serves as a clear illustration of the buyer's remedies under Article 2 of the UCC, particularly the hierarchy between 'cover' and market-based damages. It reinforces that cover, under § 2-712, is the preferred remedy for buyers, as it reflects the actual cost of mitigation and aims to place the aggrieved party in the position they would have been in had the contract been performed. The decision clarifies that once a buyer properly covers, the damage formula of § 2-712 is mandatory and displaces the more abstract market price formula of § 2-713. This precedent provides certainty for commercial actors by confirming that a buyer's reasonable, real-world replacement costs will be the standard for damages against a breaching seller.
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