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This entry was published on 2014-09-22
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Liquidation or Limitation of Damages; Deposits
Uniform Commercial Code (UCC) CHAPTER 38, ARTICLE 2, PART 7
Section 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 per cent of the value of

the total performance for which the buyer is obligated under

the contract or $500, 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).