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Pine Island Auto Wholesalers, Inc. v. Concours Motors, Inc.

A-1519-03T2 (N.J. Super. App. Div. 2004) (Unpublished)

UCC; DAMAGES — The calculation of breach of contract damages under the Uniform Commercial Code is dependent on whether the supplier resold the goods with or without notice to the defaulting buyer.

An auto wholesaler entered into an oral contract with a car dealer for the sale of a car for $200,000. The parties agreed to a “non-title attached deal” and the dealer paid an initial deposit of $12,500. At the time of contract, the vehicle had not yet been manufactured. The wholesaler entered into a separate contract to purchase the car from another source, which placed an order with the manufacturer. Approximately two months later, the car was delivered to the buyer’s home. The dealer then paid the remaining price to the wholesaler by check. Five days later, the dealer stopped payment on the check and returned the vehicle to the wholesaler. Because the exotic automobile market is a volatile market, when the dealer returned the vehicle, its market value was less than the original price. The wholesaler resold the vehicle for $155,000 and sued the dealer for the difference between the contract price and that amount.

The lower court found that the dealer breached the oral contract. It calculated damages in accordance with Uniform Commercial Code (UCC) Section 12A:2-708(1), instead of in accordance with Section 2-706, because the wholesaler had failed to give the dealer notice prior to the sale of the vehicle. The lower court first looked at the value of similar vehicles sold at the time of the breach. It then averaged those values with the wholesaler’s claimed value for the one that it sold to the dealer. Finally, it subtracted this average from the contract price to reach a damage award of $20,750. After subtracting the dealer’s initial deposit, the court found the balance owed to be $8,250.

On appeal, the wholesaler contended that the lower court improperly considered inadmissible evidence and also erred in using an average to determine the market value of the vehicle at the time of the dealer’s breach.

The Appellate Division first concluded that because the wholesaler failed to give the dealer notice of its subsequent resale of the vehicle, the lower court correctly used Section 2-708(1) to calculate damages. Under that section, the measure of the damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price. In order to determine the market price at the time of the breach, the lower court had requested additional submissions from the parties and the parties agreed to a more informal hearing on the issue. The dealer submitted certain unauthorized invoices, the authenticity of which were disputed by the wholesaler. The Appellate Division was satisfied, based in part on the parties’ acceptance of, and participation in, the informal process, and subject to authentication of the invoices on remand, that the lower court acted properly when it determined damages. Also subject to authentication on remand, the Court was satisfied that the lower court’s findings were supported by substantial evidence.

The wholesaler also contended that the lower court improperly relied on Section 2-708 to calculate the damages because they should have been determined pursuant to Section 2-709 in an action for the price. The Court noted that the wholesaler failed to raise this issue at trial and therefore it could not rule on the matter. But, even if it were to consider the question, the wholesaler’s claim would have failed to meet its burden under Section 2-709(1)(b) that resale of the vehicle was impractical. The fluctuation in the price of the vehicle between the contract price and the eventual selling price resulted not from the wholesaler’s inability to sell the car, but from the decline in the vehicle’s price when dealers could no longer charge a premium above the car’s list price. Accordingly, the Court held that the lower court correctly applied Section 2-708 when calculating damages.

The Appellate Division remanded the matter to the lower court to determine the authenticity of the disputed documents. If the documents were authentic, the judgment was to be affirmed; if not, the damage award was to be recalculated.


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