Snyder v. Herbert Greenbaum & Associates, Inc.
380 A.2d 618, 22 U.C.C. Rep. Serv. (West) 1104, 38 Md. App. 144 (1977)
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Rule of Law:
Under UCC § 2-708(2), a 'lost volume seller' who can prove they had the capacity to make both the breached sale and a subsequent resale is entitled to recover their lost profit from the breach without deducting the proceeds from the resale of the goods.
Facts:
- Twin Lakes Partnership, managed by Alvin Snyder and others, planned to build 228 garden apartments and began negotiations with Herbert Greenbaum and Associates, Inc. to supply and install carpeting.
- During negotiations, Herbert Greenbaum estimated that the job would require approximately 19,000 to 20,000 yards of carpeting.
- On April 4, 1972, Twin Lakes and Greenbaum entered into a contract for Greenbaum to supply and install carpet in all 228 apartments for a total price of $87,600; the contract did not specify a total yardage.
- Following the contract's execution, Greenbaum purchased large amounts of carpet from wholesalers specifically for the Twin Lakes job.
- At some point, it was determined that the actual amount of carpet needed was between 17,000 and 17,500 yards.
- In September 1973, before any carpet was installed, Twin Lakes cancelled the contract.
Procedural Posture:
- Herbert Greenbaum and Associates, Inc. (plaintiff) sued Twin Lakes Partnership (defendant) for breach of contract in the Circuit Court for Baltimore County, a trial court.
- The trial court, sitting without a jury, entered a judgment in favor of Greenbaum for $19,407.20 in damages.
- Twin Lakes Partnership (appellants) appealed the judgment to the Court of Special Appeals of Maryland, the state's intermediate appellate court, with Greenbaum as the appellee.
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Issue:
Does UCC § 2-708(2)'s requirement to give 'due credit for payments or proceeds of resale' apply to a 'lost volume seller,' thereby reducing their recovery of lost profits by the amount received from reselling the goods?
Opinions:
Majority - Couch, J.
No, the requirement to give 'due credit for payments or proceeds of resale' under UCC § 2-708(2) is inapplicable to a proven 'lost volume seller.' A lost volume seller is a seller whose supply is large enough that they could have made both the breached sale and the resale to a different buyer. To put such a seller in as good a position as performance would have, they are entitled to recover the profit lost from the breached sale without reduction. The court reasoned that applying the 'due credit' clause to a lost volume seller would be logically inconsistent with the concept, as it would deny them the profit from the sale they lost due to the breach, effectively nullifying the purpose of the lost profit remedy under § 2-708(2). The court found that the 'due credit' provision was intended for other classes of sellers, such as component assemblers who can only realize junk value for unused, specially manufactured parts. Before reaching the damages issue, the court also determined that (1) the UCC applies because the 'predominant thrust' of the mixed contract was the sale of goods (carpet), not the service (installation), (2) the buyer could not rescind based on misrepresentation because the seller's yardage estimate was an 'opinion' not a 'fact', and (3) evidence of an alleged oral agreement allowing unilateral cancellation was properly excluded under the parol evidence rule because such a major term would 'certainly have been included' in the final writing and was not in 'reasonable harmony' with the seller's contractual obligations.
Analysis:
This decision provides a significant clarification of the UCC § 2-708(2) damages formula in Maryland, specifically for 'lost volume sellers.' By holding that the 'due credit for proceeds of resale' clause does not apply to this class of seller, the court protects the profits of high-volume retailers and manufacturers who lose a sale due to breach. The ruling ensures that the remedy of lost profits actually makes the seller whole by allowing them to recover for the specific transaction that was breached, independent of their other sales. Additionally, the court's adoption of a broad definition of 'inconsistent' under the parol evidence rule makes it more difficult for parties to introduce evidence of prior agreements that are not in 'reasonable harmony' with the written contract's obligations, thereby strengthening the finality of written agreements.
