Nebraska Uniform Commercial Code 2-718

UCC 2-718

2-718.

Liquidation or limitation of damages; deposits.

(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.

(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds

(a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or

(b) in the absence of such terms, twenty percent of the value of the total performance for which the buyer is obligated under the contract or five hundred dollars, whichever is smaller.

(3) The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes

(a) a right to recover damages under the provisions of this article other than subsection (1), and

(b) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.

(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this article on resale by an aggrieved seller (section 2-706).

Source

  • Laws 1963, c. 544, Art. II, § 2-718, p. 1763.

Annotations

  • Section requires that seller paid in goods credits buyer with reasonable value of goods. Chicago Roller Skate Mfg. Co. v. Sokol Manuf. Co., 185 Neb. 515, 177 N.W.2d 25 (1970).

  • COMMENT

  • Prior Uniform Statutory Provision: None.

  • Purposes:

  • 1. Under subsection (1) liquidated damage clauses are allowed where the amount involved is reasonable in the light of the circumstances of the case. The subsection sets forth explicitly the elements to be considered in determining the reasonableness of a liquidated damage clause. A term fixing unreasonably large liquidated damages is expressly made void as a penalty. An unreasonably small amount would be subject to similar criticism and might be stricken under the section on unconscionable contracts or clauses.

  • 2. Subsection (2) refuses to recognize a forfeiture unless the amount of the payment so forfeited represents a reasonable liquidation of damages as determined under subsection (1). A special exception is made in the case of small amounts (20 percent of the price or $500, whichever is smaller) deposited as security. No distinction is made between cases in which the payment is to be applied on the price and those in which it is intended as security for performance. Subsection (2) is applicable to any deposit or downpayment or part payment. In the case of a deposit or turn-in of goods resold before the breach, the amount actually received on the resale is to be viewed as the deposit rather than the amount allowed the buyer for the trade-in. However, if the seller knows of the breach prior to the resale of the goods turned in, he or she must make reasonable efforts to realize their true value, and this is assured by requiring him or her to comply with the conditions laid down in the section on resale by an aggrieved seller.

  • Cross References:

  • Point 1: Section 2-302.

  • Point 2: Section 2-706.

  • Definitional Cross References:

  • "Aggrieved party". Section 1-201.

  • "Agreement". Section 1-201.

  • "Buyer". Section 2-103.

  • "Goods". Section 2-105.

  • "Notice". Section 1-201.

  • "Party". Section 1-201.

  • "Remedy". Section 1-201.

  • "Seller". Section 2-103.

  • "Term". Section 1-201.