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Sprague v. Sumitomo Forestry Company

The Supreme Court of Washington, En Banc
104 Wash.2d 751, 709 P.2d 1200 (1985)
ELI5:

Rule of Law:

Under the Uniform Commercial Code (UCC), a seller who fails to provide the required notice of intent to resell under § 2-706 is not barred from recovering damages and may still recover the difference between the market price and the contract price under § 2-708(1). The price from the subsequent resale can serve as evidence of the market price.


Facts:

  • In June 1979, Clyde Sprague, a logger, purchased a timber tract known as the 'Flip Blowdown' from the U.S. Forest Service.
  • In the summer of 1980, representatives from Sumitomo Forestry Company expressed interest in buying the timber.
  • Sprague informed Sumitomo's representative, Hiro Munakata, of his precarious financial situation and his need to complete the contract promptly in 1980 to meet other logging commitments.
  • On August 27, 1980, Sprague and Sumitomo signed a contract for the purchase and sale of the logs, with delivery specified for 1980.
  • By early October 1980, Sprague had begun performance, felling a significant quantity of logs to Sumitomo's specifications.
  • On October 20, 1980, Sumitomo sent Sprague a letter unequivocally canceling the contract.
  • Following the cancellation, Sprague mitigated his damages by reselling the timber to five different purchasers in private sales.

Procedural Posture:

  • Clyde Sprague filed a complaint against Sumitomo Forestry Company in a Washington state trial court for breach of contract.
  • Sumitomo filed an answer asserting that Sprague had a duty to mitigate damages.
  • The case proceeded to a jury trial.
  • The jury returned a special verdict in favor of Sprague, finding a breach and awarding $52,280 in net contractual damages and $216,498 in incidental damages.
  • The trial court entered a judgment for Sprague totaling $280,693.03.
  • Sumitomo, as the appellant, appealed the judgment to the Supreme Court of Washington.

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Issue:

Does a seller's failure to provide reasonable notification of an intent to resell under UCC § 2-706(3) preclude them from recovering damages calculated by the difference between the contract price and the market price under UCC § 2-708(1)?


Opinions:

Majority - Dore, J.

No. A seller's failure to comply with the notice requirement of UCC § 2-706 does not preclude recovery under the alternative remedy provided by UCC § 2-708. The court reasoned that providing 'reasonable notification of his intention to resell' under RCW 62A.2-706(3) is a mandatory prerequisite for a seller to recover damages based on the resale price. Because Sprague failed to give this specific notice—filing a lawsuit is not sufficient notice—he cannot recover damages under this section. However, the court emphasized that UCC remedies are cumulative, not exclusive, and a seller is not required to elect a remedy. Therefore, Sprague could still recover damages under RCW 62A.2-708(1), which measures damages as the difference between the market price at the time of tender and the unpaid contract price. The court held that the actual resale price, though obtained after the time for tender, was appropriate evidence of the market price. The court affirmed the contract damages but struck down a portion of the incidental damages, finding that the 'loss of logging time' was actually consequential damages (lost profits from a third-party contract), which are not recoverable by a seller under the UCC.



Analysis:

This decision solidifies the principle that the seller's remedies under the UCC are cumulative and that a procedural failure under one remedy does not automatically bar recovery under another. It provides a safety net for sellers who may inadvertently fail to give proper notice of resale, allowing them to still pursue market-based damages. The case also offers a crucial clarification on the distinction between incidental and consequential damages for sellers, establishing that losses stemming from dealings with third parties (consequential damages) are not recoverable, even if they are a foreseeable result of the breach. This reinforces the UCC's general policy of denying consequential damages to aggrieved sellers.

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