Serna, Inc., Cross-Appellant v. Paul C. Harman, Cross-Appellee
39 U.C.C. Rep. Serv. (West) 481, 742 F.2d 186, 1984 U.S. App. LEXIS 18402 (1984)
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Rule of Law:
Under the Uniform Commercial Code, a seller's incidental damages are limited to commercially reasonable expenses incurred after the buyer's breach. Damages for non-acceptance are calculated based on the market price at the time and place for tender, which must be determined by the court as a finding of fact.
Facts:
- On March 18, 1977, Harman orally agreed to purchase ten Charoláis cows and their offspring from Serna for $125,000, with delivery and full payment due by June 1977.
- On the day of the agreement, Serna delivered four cows and one calf to Harman.
- In May and June 1977, Harman informed Serna he could not accept the remaining cows at that time but would reschedule delivery, and he did not pay the remaining balance as agreed.
- In late June 1977, Serna sent Harman a written invoice confirming the March 18 oral agreement.
- Between September 1977 and August 1978, Harman accepted two more cows and made partial payments, repeatedly assuring Serna that he still intended to purchase the remaining four cows.
- In October 1978, the market price for full French Charoláis cattle dropped significantly.
- On January 24, 1979, Harman told Serna for the first time that he was not sure he would be able to take delivery of the remaining cattle.
- Following this conversation, Serna resold some of the remaining cattle and retained the others.
Procedural Posture:
- Serna sued Harman in U.S. District Court for breach of an oral agreement, based on diversity jurisdiction.
- Following a nonjury trial, the district court entered a judgment in favor of Serna, awarding damages of $43,825.08, plus attorney's fees and interest.
- Harman, the defendant, appealed the judgment to the United States Court of Appeals for the Fifth Circuit.
- Serna, the plaintiff, filed a cross-appeal challenging the district court's failure to award certain damages.
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Issue:
Under the Uniform Commercial Code, must a seller's damages for non-acceptance be calculated based on the market price at the time and place for tender, and are incidental damages limited to expenses incurred only after the buyer's breach has occurred?
Opinions:
Majority - Johnson, Circuit Judge
Yes. Under the Uniform Commercial Code, damages for non-acceptance must be calculated based on the market price at the 'time and place for tender,' and incidental damages are recoverable only for expenses incurred after the buyer's breach. The court affirmed the finding that the breach occurred in January 1979, not June 1977, because Harman had repeatedly given assurances that he would perform the contract. However, the court found the district court erred in its damage calculations. For the two cows Serna retained, the district court failed to determine the 'time and place for tender' as required by UCC § 2.708, instead using an incorrect standard. For incidental damages, the court held that UCC § 2.710 plainly limits recovery to expenses incurred 'after the buyer's breach,' and therefore the award for costs prior to January 1979 was improper. The court also held that a seller's commercially unreasonable resale under § 2.706 does not automatically preclude recovery of market damages under § 2.708, as UCC remedies are cumulative, and remanded this issue for the district court to consider.
Analysis:
This decision clarifies several key damage provisions under the UCC for sellers dealing with a breaching buyer. It emphasizes that the date of breach is a crucial factual determination that hinges on the parties' communications and conduct, not necessarily the original contract date. The case reinforces the strict statutory requirements for calculating damages, drawing a sharp distinction between the 'time of breach' for incidental damages and the 'time of tender' for market damages. Furthermore, it affirms the UCC's rejection of the 'election of remedies' doctrine, allowing sellers flexibility to pursue alternative damage remedies if one remedy is improperly executed.
