Under UCC 2-708, a seller whose buyer refuses the goods or repudiates the contract can recover damages one of two ways: the difference between the market price at the time and place of delivery and the unpaid contract price, or, when that gap fails to make the seller whole, the profit the seller would have earned on the sale. Either figure is then adjusted upward for incidental costs caused by the breach and downward for expenses the seller saved by not performing.1Legal Information Institute. Uniform Commercial Code 2-708 – Seller’s Damages for Non-acceptance or Repudiation Picking the right formula is the whole game, because the wrong one can produce a recovery of zero on a sale where the seller lost real money.
The Market Price Formula
Section 2-708(1) is the default. Damages equal the market price at the time and place where delivery was supposed to happen, minus the unpaid contract price, plus incidental damages, minus expenses the breach let the seller avoid.1Legal Information Institute. Uniform Commercial Code 2-708 – Seller’s Damages for Non-acceptance or Repudiation A seller who contracted to deliver steel beams for $100,000 and faces an $85,000 market on the delivery date starts with a $15,000 base figure.
Pay attention to the word “unpaid.” If the buyer put $20,000 down before walking away, the unpaid contract price is $80,000. Comparing $85,000 against $80,000 flips the math and can wipe out market-price damages entirely. The deposit itself is handled under a separate section, discussed further below.
The formula quietly assumes the seller can turn around and clear the goods on the open market at the current price. When that assumption holds, the market-price gap captures the seller’s economic loss reasonably well. When it doesn’t, the lost-profit formula takes over.
Timing When the Buyer Backs Out Early
If the buyer repudiates the deal well before the delivery date and the case reaches trial before that date arrives, market price is measured as of the date the seller learned of the repudiation, not the originally scheduled delivery date.2Legal Information Institute. Uniform Commercial Code 2-723 – Proof of Market Price Time and Place That rule stops post-notice market swings from distorting the number once the seller already knows the deal is dead.
Incidental Costs and Saved Expenses
On top of the base figure, Section 2-710 lets the seller add commercially reasonable costs the breach caused: stopping shipments in transit, storing refused goods, insuring them while they sit, and the cost of finding another buyer.3Legal Information Institute. Uniform Commercial Code 2-710 – Seller’s Incidental Damages Spent $1,200 warehousing rejected inventory for three months? That gets added. Rent premium climate-controlled storage for goods that didn’t need it, and a court will likely trim the figure to what a sensible operator in the same spot would have paid.
The subtraction side matters just as much. Costs the seller avoided because performance never happened come off the total. The $2,000 you would have spent on final delivery and specialized packaging is gone from the recovery, because it never left your pocket.1Legal Information Institute. Uniform Commercial Code 2-708 – Seller’s Damages for Non-acceptance or Repudiation
The Lost Profit Formula
Sometimes 2-708(1) produces zero even when the seller plainly lost money. The classic case is the lost volume seller: a dealer with effectively unlimited supply who could have made both the breached sale and the replacement sale. Section 2-708(2) steps in when the market-price measure is “inadequate to put the seller in as good a position as performance would have done,” awarding the profit (including reasonable overhead) that the seller would have made on full performance, together with incidental damages and costs reasonably incurred, less due credit for payments received or proceeds of resale.1Legal Information Institute. Uniform Commercial Code 2-708 – Seller’s Damages for Non-acceptance or Repudiation
Neri v. Retail Marine Corp. is the standard illustration. A buyer ordered a boat, deposited $4,250, then canceled. The dealer resold the identical boat four months later at the same price, so the market-price formula would have yielded nothing. But the dealer showed it could get as many boats from the manufacturer as it had buyers, meaning the second buyer would have purchased a boat regardless and the breach cost the dealer one of two sales. The court awarded lost profit of $2,579 plus $674 in incidental costs for storage, upkeep, financing, and insurance during the months the boat sat.4Open Casebook. Neri v. Retail Marine Corp.
Who Counts as a Lost Volume Seller
Not every seller qualifies. The seller typically has to show capacity to make an additional sale, probability that the additional sale would have happened, and a profit on it. A dealership that can order whatever its customer base demands fits. A homeowner selling a one-off antique does not. The question is whether supply is effectively unlimited relative to demand.
What “Profit Including Reasonable Overhead” Covers
The recovery is not just net margin on the item. It includes a proportional share of fixed costs like rent, utilities, and staff salaries that would have been allocated to that sale. Those overhead costs don’t vanish when the buyer cancels, so excluding them would leave the seller short. Clean financial records matter here, and expert accounting testimony is often needed to prove per-unit profit and the overhead allocation.
The statutory language about “due credit for payments or proceeds of resale” works differently depending on the seller. For a true lost volume seller, resale proceeds don’t reduce damages because the resale would have happened anyway. For a seller who resells component parts custom-made for the breaching buyer, those proceeds do offset the recovery.1Legal Information Institute. Uniform Commercial Code 2-708 – Seller’s Damages for Non-acceptance or Repudiation
Proving the Market Price
The market-price formula is only as good as the proof behind it. Section 2-723 sets the ground rules. The default is the price at the time and place of tender. If reliable data for that exact time or location doesn’t exist, the seller can use prices from a nearby market or a slightly different date, with adjustments for transportation costs.2Legal Information Institute. Uniform Commercial Code 2-723 – Proof of Market Price Time and Place A procedural trap: a seller planning to introduce a substitute market price must give the opposing side enough advance notice to avoid unfair surprise. Dropping alternative pricing data at trial without warning can get it excluded.
For goods traded on established commodity markets, Section 2-724 makes official market reports, trade journals, and exchange publications admissible as evidence of the going price. The other side can attack how the report was prepared to reduce its weight, but cannot keep it out entirely.5Legal Information Institute. Uniform Commercial Code 2-724 – Admissibility of Market Quotations For non-commodity goods, sellers typically rely on comparable transactions, dealer quotes, or expert appraisals.
What 2-708 Does Not Give You
Article 2 authorizes consequential damages only for buyers, through Section 2-715. There’s no parallel provision for sellers.6Legal Information Institute. Uniform Commercial Code 2-715 – Buyer’s Incidental and Consequential Damages If the buyer’s breach caused you to lose a separate profitable deal with a third party, those downstream losses generally aren’t recoverable under Article 2.
Attorney fees also aren’t on the menu. Section 2-708 limits recovery to the market-price or lost-profit figure plus the incidental damages defined in 2-710. Each side pays its own lawyers unless the contract contains a fee-shifting clause or a separate state statute applies. For smaller disputes, that reality can make the litigation cost exceed the potential recovery.
Interaction With the Buyer’s Deposit
Even a breaching buyer has a restitution claim for money already paid. Section 2-718 lets the seller keep whatever a valid liquidated damages clause provides and return the rest. Without such a clause, the seller may keep the lesser of 20 percent of the contract value or $500, and must refund the remainder, offset by the seller’s actual damages under 2-708.7Legal Information Institute. Uniform Commercial Code 2-718 – Liquidation or Limitation of Damages Deposits
In Neri, the buyer had deposited $4,250 and the seller’s damages totaled $3,253 ($2,579 lost profit plus $674 incidental), so the buyer recovered the $997 difference.4Open Casebook. Neri v. Retail Marine Corp. A seller cannot simply keep the full deposit and also collect full 2-708 damages. The two figures interact, and overlooking that can produce a counterclaim the seller didn’t anticipate.
If You Actually Resold the Goods
Section 2-708 is not the only path. If the seller actually resold the goods, Section 2-706 provides a separate formula based on contract price minus resale price, which can be easier to prove because both numbers are real transaction prices rather than contested market figures. A resale under 2-706 must be conducted in good faith and in a commercially reasonable manner, with notice to the buyer.8Legal Information Institute. Uniform Commercial Code 2-706 – Seller’s Resale Including Contract for Resale Whether a reselling seller can elect between 2-706 and 2-708(1) is genuinely unsettled, and courts split on the question, so jurisdiction matters.
Deadline to Sue
Section 2-725 gives a seller four years from the date of breach to file suit, running regardless of when the breach was discovered.9Legal Information Institute. Uniform Commercial Code 2-725 – Statute of Limitations in Contracts for Sale The original contract can shorten the window to as little as one year but cannot extend it past four. Some states have adopted variations, so check the controlling period in your jurisdiction.
For a buyer who simply refuses delivery, the breach date is usually clear. For anticipatory repudiation, the clock starts when the repudiation occurs. Delay after learning of the breach is one of the most avoidable ways an otherwise solid claim gets lost.