SW Legal studies in Business

Oral Modification of Contract Rejected; Buyer May Collect Consequential Damages from Seller's Breach
Description Appeals court held that an alleged oral modification of a contract, which would control the outcome of the claim of breach, was to be rejected because it was inconsistent with other evidence. Because of the seller's breach, the buyer could collect consequential damages.
Topic Sales
Key Words Breach; Buyer; Seller; Consequential Damages
C A S E   S U M M A R Y
Facts Best Buy, a retailer, sells household goods. It bought window unit air conditioners from Fedders. The parties agreed to a contract that included terms of cost, payment, freight charges, and an inventory assistance provision (IAP) which stated that "Any of the five 'core' models that Best Buy has in inventory on June 30th can be returned for full credit. The units must be in factory sealed cartons." In the third year of this agreement Best Buy invoked the IAP for the first time and told Fedders in mid-July that it would return unsold units. Fedders refused, contending that it had to be notified by June 30 for the IAP to be invoked. Fedders claimed that the notification date had been agreed to orally when the contract had been signed; Best Buy denied any oral modification to the contract. A complicated lower court decision was appealed.
Decision The evidence supported a finding that return deadline notice provisions were not included in the IAP in the contract between the seller-manufacturer and the buyer-retailer. The oral testimony of Fedder's representative was inconsistent with other evidence, so the alleged oral return notice requirements were not incorporated into the contract. Hence, Fedders breached the sales contract by refusing to accept the unsold inventory returns. Under the UCC, Best Buy is a buyer, not a person in the position of a seller, with respect to this contract. As a result, Best Buy may collect consequential damages that resulted from the breach. Such damages must be foreseeable. Those will be determined by the trial court.
Citation Best Buy Co. v. Fedders North America, Inc., 202 F.3d 1004 (8th Cir., 2000)

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