The Law of the Sale of Goods

Rod Harmon Attorney at Law rodharmon@abusivechargebacks.com 425.402.7800

The law of the sale of goods, including sales by vendors to department stores,  is governed by Article 2 of the Uniform Commercial Code. [1]  When a department store has accepted a vendor's goods, and then alleges that the goods do not conform to the contract, the department store:

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is barred from deducting a chargeback for the nonconformity unless:

the store notifies the vendor of the nonconformity within a reasonable time, and the store provides the vendor with an opportunity to inspect the allegedly nonconforming goods,

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has the burden of proving that the goods did not conform to the contract terms, and has the burden of proving the amount of the actual loss it suffered as a result of the nonconformity, and may only deduct liquidated damages [2] if they are not so unreasonably large as to constitute a penalty.

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Notes 1.  The Uniform Commercial Code has been adopted by every state in the union except Louisiana.  For a complete text of the UCC, and a link to the version enacted by particular states, click here >UCC, Article 2. 2.  Damages are liquidated when the contract specifies their amount in advance.  For example, a department store's schedule of expense offset charges, if incorporated into a purchase order or vendor agreement, is a schedule of  liquidated damages.  If one of those charges is $25 for a nonconformity that only costs the store $5 to correct, then $25 is an unreasonably large amount and is void because it is really a penalty.  The store would only be entitled to deduct $5 because that is the measure of its actual loss.