What is UCC 2-713?

Last updated on August 16, 2023

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The UCC is a set of laws designed to govern commercial transactions in the United States. Many articles exist in the code, each with information governing a different aspect of a business. One law is UCC 2-713, but not everyone knows what is defined in this area.

UCC 2-713 defines the amount of money a buyer needs to be compensated if their goods are not delivered. Believe it or not, a buyer, if they do not receive the items they ordered, is actually owed more than the purchase cost of their undelivered goods.

If you’re curious about UCC 2-713, you’ve come to the right place. It’s critical to know about various UCC laws if you’re going to be executing commercial transitions, are seeking a business law degree, or are buying goods as a commercial company. Read on to learn more about this section of the Uniform Commercial Code.

What is UCC 2-713?

UCC 2-713 is a section of the commercial code which governs the price a business must pay to a customer if they do not deliver goods. The section is called the Buyer’s Damages for Non-Delivery or Repudiation is written as follows:

(1)Subject to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (Section 2-715), but less expenses saved in consequence of the seller's breach.

(2)Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

What Does Section 2-713 Mean?

Of course, the legal jargon isn’t the easiest to read, so what does this section mean? In summary, if you are a business and you do not deliver the goods a buyer has already ordered and paid for, not only must you refund the cost of the goods, but you also must cover the company for the costs they may have incurred related to the goods not being delivered–but only if the buyer has already incurred the expenses.

A good example of this article is when a publishing company orders special copies of books from a printing company, but before the books are delivered, they sell several pre-orders of the copies of the books. This means if the printer, who is printing the pre-ordered books, does not deliver, they must reimburse the publishing company both for the cost of the books ordered, as well as reimburse from any costs the publishing company has incurred by selling pre-orders of the undelivered goods.

Obviously, the publishing company can refund the pre-order customers, but there may be other costs they incurred from preparing to ship the pre-ordered books, such as specialty boxes, envelopes, or prepaid postage labels–and all of these costs must be covered by the printing company that didn’t deliver the books.

But remember, the seller is only responsible for the costs which have already been incurred. This means that if the publisher was planning to order specialty labels but has not at the time the books haven’t been delivered (and they’ve been notified of the non-delivery), the printer is not responsible for these costs as they have not yet been incurred.

This section limits the power of the buyer to manipulate the seller to pay for additional and not incurred damages at the breach of a sales contract.

Why is UCC 2-713 Important?

Prior to this section being added to the UCC, buyers were able to easily manipulate sellers at the breach of a sales contract to pay them far beyond what they were actually owed. While it isn’t fair that a seller should cancel an order in the first place, it also isn’t fair that they have to pay the buyer more than they were due.

UCC 2-713 provides a level of fairness between the buyer and the seller in the case of a broken contract, specifying exactly what costs must be covered by the seller while also specifying that a buyer cannot continue to prepare for the arrival of goods once they have been notified of a breach of contract for the purpose of inflating the cost the seller owes to the buyer for the breach of contract.

We hope this article has increased your understanding of UCC 2-713 and the costs a business is and is not responsible for if there is a breach of contract which results in a non-delivery of goods. If you still have questions, it is best to contact a lawyer who can better help you navigate the UCC and tricky sales contracts.

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