2. If the boater sues the retailer for restitution of the $4,000 advance payment, which of the following should the court decide?

Under the Uniform Commercial Code (UCC), when a buyer has breached a contract for the sale of goods, the seller may recover the difference between the contract price and the re-sale price or lost profits. When a buyer repudiates before the goods are shipped, the seller will typically re-sell them to a third party. If the re-sale is «made in good faith and in a commercially reasonable manner,» the seller may recover «the difference between the resale price and the contract price together with any incidental damages. .. but less expenses saved in consequence of the buyer's breach.» UCC § 2-706(1). This puts the seller in approximately the same position he would have been in had the buyer performed under the original contract. If the buyer paid a deposit, a typical seller can keep it up to a maximum of 20% of the original contract price or $500, whichever is less, even without a showing of actual damages, but must return the balance to the buyer. UCC § 2-718(2)(b).

A special situation arises when, in the course of business, a seller makes or acquires enough supply to meet all foreseeable demand, deeming him a «lost volume» seller. Someone who has a large volume of supply will typically be able to re-sell an item to another customer promptly and at the same price. However, as a result of the breach, the seller loses a customer (i.e., only sells one item instead of the two items he would have sold had the original contract been performed). As such, when a buyer breaches a contract with a lost volume seller, the seller will be entitled to damages in the amount of that lost sale. See UCC § 2-708(2).

C is correct. When the boater repudiated his duty to pay the remainder of the contract price, he breached the contract, which entitles the retailer to expectation damages. In the context of the sale of goods by a «lost volume» seller who re-sells the item at the same price to another customer, the seller will be entitled to the profits lost by selling one less item. As such, even though the retailer was able to sell the boat at the same price, he would be entitled to expectation damages in the amount of lost profit from selling one less boat. So, the boater would recover anything beyond that, meaning the $4,000 he paid as a deposit minus the lost profits.

A is incorrect. This is a misapplication of the law. The seller is entitled to lost profits in the course of selling a large volume of products, but any enrichment beyond that would be unjust. Furthermore, the UCC allows a normal buyer of goods to recover a percentage of a deposit in certain situations. This demonstrates that even buyers who have breached may be entitled to restitution. Here, denying any recovery to the buyer would unjustly enrich the seller, who is entitled only to lost profits, as explained above.

B is incorrect. This answer reaches the incorrect answer with the correct reasoning. It is true that without the buyer's repudiation, the seller would have made a profit from two boat sales rather than one, and he is entitled to those lost profits. However, the seller is not entitled to damages beyond that, with the remaining amount going to the boater.

D is incorrect. Although the UCC does generally allow for a buyer to recover a deposit less 20% of the original contract price or $500, whichever is less, this case is a special situation involving a «lost volume» seller. As explained above, this entitles the seller to lost profits from selling one less boat, with the remaining amount awarded to the boater as restitution.