Question: A contract for the sale of goods has been breached. Can the dispute be settled without a trip to court? The answer depends on the willingness of the parties to agree on an appropriate remedy. Contractual Clauses on Applicable Remedies Often, the parties to sales and lease contracts agree in advance, in their contracts, on what remedies will be applicable in the event of a breach. This may take the form of a contract provision restricting or expanding remedies available under the Uniform Commercial Code [UCC 2-719]. Such clauses help to reduce uncertainty and the necessity for costly litigation.
When the Contract Is Silent on Applicable Remedies If your agreement does not cover a breach of contract and you are the nonbreaching party, the UCC gives you a variety of alternatives. What you need to do is analyze the remedies that are available if you choose to go to court, put these remedies in order of priority, and then predict how successful you might be in pursuing each remedy. Next, look at the position of the breaching party to determine the basis for negotiating a settlement. For example, when defective goods are delivered and accepted, usually it is preferable for the buyer and seller to reach an agreement on a reduced purchase price. Practically speaking, the buyer may be unable to obtain a partial refund from the seller. UCC 2-717 allows the buyer in such circumstances to give notice of the intention to deduct the damages from any part of the purchase price not yet paid. If you are a buyer who has accepted defective goods and has not yet paid in full, it may be appropriate for you to exercise your rights under UCC 2-717 and not pay in full when you make your final payment. Remember that most breaches of contract do not end up in court-they are settled beforehand.
CHECKLIST FOR THE NONBREACHING PARTY TO A CONTRACT
1 Ascertain if a remedy is explicitly written into your contract. Use that remedy, if possible, to avoid litigation.
2 If no specific remedy is available, look to the UCC.
3 Assess how successful you might be in pursuing a remedy if you go to court.
4 Analyze the position of the breaching party.
5 Determine whether a negotiated settlement is preferable to a lawsuit, which is best done by consulting your attorney.