Book contents
- Frontmatter
- Contents
- Preface
- Readings in the economics of contract law
- Part I Some preliminaries
- Part II Contract law and the least cost avoider
- Part III The expectation interest, the reliance interest, and consequential damages
- Part IV The lost-volume seller puzzle
- 4.1 An economic analysis of the lost-volume retail seller
- Questions and notes on the seller's lost profits
- Part V Specific performance and the cost of completion
- Part VI Power, governance, and the penalty clause puzzle
- Part VII Standard forms and warranties
- Part VIII Duress, preexisting duty, and good faith modification
- Part IX Impossibility, related doctrines, and price adjustment
- Questions and notes on impossibility and price adjustment
- References
- Index of cases
- Author index
- Subject index
4.1 - An economic analysis of the lost-volume retail seller
Published online by Cambridge University Press: 10 November 2010
- Frontmatter
- Contents
- Preface
- Readings in the economics of contract law
- Part I Some preliminaries
- Part II Contract law and the least cost avoider
- Part III The expectation interest, the reliance interest, and consequential damages
- Part IV The lost-volume seller puzzle
- 4.1 An economic analysis of the lost-volume retail seller
- Questions and notes on the seller's lost profits
- Part V Specific performance and the cost of completion
- Part VI Power, governance, and the penalty clause puzzle
- Part VII Standard forms and warranties
- Part VIII Duress, preexisting duty, and good faith modification
- Part IX Impossibility, related doctrines, and price adjustment
- Questions and notes on impossibility and price adjustment
- References
- Index of cases
- Author index
- Subject index
Summary
Suppose that a customer agrees to buy a boat and before it is delivered, he reneges. The dealer subsequently resells the boat to another customer at the same price. Has the seller suffered damages (aside from incidental damages) and, if so, should he be compensated? This question, dubbed the lost-volume seller problem, has been the subject of considerable legal analysis, usually in the context of explicating section 2–708(2) of the Uniform Commercial Code (U.C.C.). …
[I will use the case of Neri v. Retail Marine Corp. as a vehicle for analysis.] Professors Goetz and Scott [1979, p. 332] … summarize the Neri facts and decision concisely:
Retail Marine, a dealer in marine equipment and supplies, contracted to sell a new boat to Neri for $12,500. Marine then ordered and received the boat from its supplier. Six days after the agreement Neri repudiated the contract. Four months later Marine sold the boat to another buyer for the same price. When Neri sued to recover his downpayment, Marine counterclaimed for lost profits of $2,500 under U.C.C. 2–708(2), arguing that absent Neri's default it would have earned two profits rather than one. The New York Court of Appeals sustained Marine's lost-volume claim, holding that “the conclusion is clear from the record – indeed with mathematical certainty – that [market damages are] inadequate to put the seller in as good a position as performance … and hence … the seller is entitled to its [profit].” The court categorized Retail Marine's situation as that of a dealer with an “inexhaustible” supply of boats; consequently, the second buyer did not replace the first.
- Type
- Chapter
- Information
- Readings in the Economics of Contract Law , pp. 106 - 113Publisher: Cambridge University PressPrint publication year: 1982
- 1
- Cited by