(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance, then with respect to any goods involved and with respect to the whole if the breach goes to the whole contract (Section 2-612 [55-2-612 NMSA 1978]), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid:

(a) "cover" and have damages under the next section [55-2-712 NMSA 1978] as to all the goods affected whether or not they have been identified to the contract; or

(b) recover damages for nondelivery as provided in this article (Section 2-713 [55-2-713 NMSA 1978]).

(2) Where the seller fails to deliver or repudiates, the buyer may also:

(a) if the goods have been identified recover them as provided in this article (Section 2-502 [55-2-502 NMSA 1978]); or

(b) in a proper case obtain specific performance or replevy the goods as provided in this article (Section 2-716 [55-2-716 NMSA 1978]).

(3) On rightful rejection or justifiable revocation of acceptance, a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (Section 2-706 [55-2-706 NMSA 1978]).

History: 1953 Comp., § 50A-2-711, enacted by Laws 1961, ch. 96, § 2-711.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

Prior uniform statutory provision. — No comparable index section; Subsection (3) - Section 69(5), Uniform Sales Act.

Changes. — The prior uniform statutory provision is generally continued and expanded in Subsection (3).

1. To index in this section the buyer's remedies, Subsection (1) covering those remedies permitting the recovery of money damages, and Subsection (2) covering those which permit reaching the goods themselves. The remedies listed here are those available to a buyer who has not accepted the goods or who has justifiably revoked his acceptance. The remedies available to a buyer with regard to goods finally accepted appear in the section dealing with breach in regard to accepted goods. The buyer's right to proceed as to all goods when the breach is as to only some of the goods is determined by the section on breach in installment contracts and by the section on partial acceptance.

Despite the seller's breach, proper retender of delivery under the section on cure of improper tender or replacement can effectively preclude the buyer's remedies under this section, except for any delay involved.

2. To make it clear in Subsection (3) that the buyer may hold and resell rejected goods if he has paid a part of the price or incurred expenses of the type specified. "Paid" as used here includes acceptance of a draft or other time negotiable instrument or the signing of a negotiable note. His freedom of resale is coextensive with that of a seller under this article except that the buyer may not keep any profit resulting from the resale and is limited to retaining only the amount of the price paid and the costs involved in the inspection and handling of the goods. The buyer's security interest in the goods is intended to be limited to the items listed in Subsection (3), and the buyer is not permitted to retain such funds as he might believe adequate for his damages. The buyer's right to cover, or to have damages for non-delivery, is not impaired by his exercise of his right of resale.

3. It should also be noted that this act requires its remedies to be liberally administered and provides that any right or obligation which it declares is enforceable by action unless a different effect is specifically prescribed (Section 1-106).

Point 1: Sections 2-508, 2-601(c), 2-608, 2-612 and 2-714.

Point 2: Section 2-706.

Point 3: Section 1-106.

"Aggrieved party". Section 1-201.

"Buyer". Section 2-103.

"Cancellation". Section 2-106.

"Contract". Section 1-201.

"Cover". Section 2-712.

"Goods". Section 2-105.

"Notifies". Section 1-201.

"Receipt" of goods. Section 2-103.

"Remedy". Section 1-201.

"Security interest". Section 1-201.

"Seller". Section 2-103.

Buyer may recover purchase price and incidental damages. — A buyer, who rightfully rejects or justifiably revokes acceptance of goods, has the right not only to rescind and recover back the purchase price paid, but, in addition, the right to recover incidental damages resulting from the seller's breach, including expenses reasonably incurred in the care and custody of such goods. Grandi v. LeSage, 1965-NMSC-017, 74 N.M. 799, 399 P.2d 285.

Punitive damages for fraudulent acts. — This section permits recovery of damages in an action for rescission, and punitive damages may likewise be recovered in such action where the breach is accompanied by fraudulent acts which are wanton, malicious and intentional. Grandi v. LeSage, 1965-NMSC-017, 74 N.M. 799, 399 P.2d 285.

Plus damages for nondelivery when proper. — Where plaintiff purchased used automobile but then revoked acceptance of the vehicle when defendant vendor failed to deliver clear title as warranted, damages were properly measured under this section to include the purchase price of the automobile, plus damages for nondelivery, which, as set forth in Section 55-2-713 NMSA 1978, would be the difference between the purchase price and the market value of the vehicle with clear title. Since Section 55-2-608(3) NMSA 1978 states that a buyer who revokes has same rights with regard to goods involved as if he had rejected them, physical delivery of the vehicle to the plaintiff did not eliminate the recovery of nondelivery damages. Gawlick v. American Builders Supply, Inc., 1974-NMCA-005, 86 N.M. 77, 519 P.2d 313.

Acceptance of partial shipment. — Notice is not a condition precedent to the remedy of "cover" for failure to make a complete delivery. Not until the buyer accepts a complete tender must he, within a reasonable time after he discovers or should have discovered any breach, notify the seller of a breach or be barred from any remedy. A buyer's mere acceptance of partial goods does not waive or otherwise affect his right to damages for the seller's failure to deliver the remainder under the contract of sale. State ex rel. Concrete Sales & Equip. Rental Co. v. Kent Nowlin Constr., Inc., 1987-NMSC-114, 106 N.M. 539, 746 P.2d 645.

Lost profits need not be proved with mathematical certainty, but where the only basis for awarding lost profits is the difference between the suggested retail price and the cost to the distributor, the business is entirely new and the distributor produces neither proof of potential buyers nor evidence of its cost of doing business, an award of lost profits is too speculative to be upheld. Deaton, Inc. v. Aeroglide Corp., 1982-NMSC-147, 99 N.M. 253, 657 P.2d 109.

Resale under Subsection (3) security interest not wrongful exercise of ownership. — Where the buyer rightfully rejects goods in his possession, it necessarily follows that he has a security interest in the goods pursuant to Subsection (3) of this section, in the entire amount spent for the goods, and he should not be required to return them for an amount less than the entire amount. Because the security interest entitles the buyer to hold the goods and resell them, such action cannot constitute a violation of 55-2-602(2)(a) NMSA 1978, which makes any exercise of ownership by the buyer after rejection wrongful. Deaton, Inc. v. Aeroglide Corp., 1982-NMSC-147, 99 N.M. 253, 657 P.2d 109.

Excessive delay in a resale is enough to make the sale commercially unreasonable. Deaton, Inc. v. Aeroglide Corp., 1982-NMSC-147, 99 N.M. 253, 657 P.2d 109.

Law reviews. — For article, "Special Property Under the Uniform Commercial Code: A New Concept in Sales," see 4 Nat. Resources J. 98 (1964).

For article, "Buyers and Sellers of Goods in Bankruptcy," see 1 N.M. L. Rev. 435 (1971).

For annual survey of New Mexico law relating to commercial law, see 13 N.M.L. Rev. 293 (1983).

For article, "New Mexico's 'Lemon Law': Consumer Protection or Consumer Frustration?", see 16 N.M.L. Rev. 251 (1986).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 67A Am. Jur. 2d Sales §§ 853 et seq., 1164 et seq.

Resale by buyer where seller has refused to receive property rejected for breach of warranty, 24 A.L.R. 1445.

Effect of action as an election of remedy or choice of substantive rights in case of fraud in sale of property, 35 A.L.R. 1153, 123 A.L.R. 378.

Assignability of right to rescind or of right to return of money or other property as incident of rescission, 110 A.L.R. 849, 162 A.L.R. 743.

Seller's waiver of sales contract provision limiting time within which buyer may object to or return goods, 24 A.L.R.2d 717.

Purchaser's use or attempted use of articles known to be defective as affecting damages recoverable for breach of warranty, 35 A.L.R.2d 1273.

Time within which buyer of goods must give notice in order to recover damages for seller's breach of express warranty, 41 A.L.R.2d 812.

Use of article by buyer as waiver of right to rescind for fraud, breach of warranty or failure of goods to comply with contract, 41 A.L.R.2d 1173.

Validity and enforceability of contract which expressly leaves open for future agreement or negotiation the terms of payment for property, 68 A.L.R.2d 1221.

Products liability: manufacturer's postsale obligation to modify, repair, or recall product, 47 A.L.R.5th 395.

77A C.J.S. Sales § 374 et seq.