Opinion ID: 2226194
Heading Depth: 1
Heading Rank: 3

Heading: seller's right to cancel

Text: The elevator strenuously argues that Svihovec was not entitled to resell his grain under Section 41-02-85, N.D.C.C. (UCC § 2-706), without giving reasonable notice of his intent to resell. The argument also is made that Section 41-02-26(3), N.D.C.C. (UCC § 2-309), imposes a duty on Svihovec to give reasonable notice to the other party that he was terminating the contract. We find these arguments to be without merit. Before discussing these questions, it may be helpful to reiterate the remedies available to the seller following breach by the buyer. Under Section 41-02-82, N.D. C.C. (UCC § 2-703), which is quoted above in full, the seller is entitled to, among other remedies, withhold delivery, resell and recover damages, recover damages for nonacceptance, or cancel. Svihovec pursued the remedy of cancellation, as was his right. He thereafter resold his grain to another buyer, as was his right. The parties have confused Svihovec's right to dispose of his grain as he wished under a canceled contract with the Code remedy allowing a seller to resell and recovery damages under Section 41-02-82(4), N.D.C.C. (UCC § 2-703), and Section 41-02-85, N.D.C.C. (UCC § 2-706). The seller's right to resell and recover damages is, of course, available to a seller in addition to his right to cancel; subsection 1, b of Section 41-02-98, N.D. C.C. (UCC § 2-719), creates a presumption that clauses prescribing remedies are cumulative rather than exclusive. Official Code Comment, UCC § 2-719. The only condition precedent to the seller's right to resell is a breach by the buyer within Section 41-02-82, N.D.C.C. (UCC § 2-703). The trial judge found that Svihovec had a right to pursue this remedy when he sold his grain directly to the Grain Terminal Association. We would agree that Svihovec did have such a right if it were necessary to apply this section to the seller's conduct in reselling his grain in this case. But the section does not apply. In a falling market Svihovec would probably have desired to resell and recover damages. To recover damages under this section he would be required to act in good faith, sell in a commercially reasonable manner, and give reasonable notice to the buyer of his intention to resell (if the sale was at private sale). Failure to act properly under this section merely deprives the seller of the measure of damages provided in subsection 1. Official Code Comment, UCC § 2-706. In any event, the seller is not accountable to the buyer for any profit made on any resale under Section 41-02-85, N.D.C.C. (UCC § 2-706), where, as here, the resale occurred in a rising market and the contract had been canceled. In this case, involving a rising market, Svihovec suffered no damages and thus did not need to resort to this Code remedy. We hold that the buyer breached the agreement in not accepting delivery within a reasonable time, giving rise to Svihovec's right to cancel under Section 41-02-82(6), N.D.C.C. (UCC § 2-703). Cancellation is defined in Section 41-02-06(4), N.D.C.C. (UCC § 2-106), as follows: `Cancellation' occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of `termination' except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance. The elevator's next argument is that Section 41-02-26(3), N.D.C.C. (UCC § 2-309), obligated Svihovec to notify the elevator of his intent to terminate the contract. This section does not apply to the facts of this case. Svihovec did not terminate the contract; he pursued the Code remedy of cancellation following breach by the buyer. These are two separate things under the Uniform Commercial Code. The Official Code Comment to UCC § 2-309 makes it clear that this section does not apply to cases of justifiable cancellation: 9. Justifiable cancellation for breach is a remedy for breach and is not the kind of termination covered by the present subsection. In fact, under Section 41-02-06(3), N.D. C.C. (UCC § 2-106), `Termination' occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. . . . In this case, the elevator was in breach, and Section 41-02-26(3), N.D.C.C. (UCC § 2-309), does not apply. The contract was canceled, not terminated. The elevator makes the argument that Svihovec is not entitled to any windfall he might have received when he sold his grain in June to another buyer. The elevator claims that Svihovec acted in bad faith by failing to notify the elevator of his intention to resell his grain. From the record, we cannot find any evidence that Svihovec acted in bad faith when he trucked his wheat directly the Grain Terminal Association and sold it for a slightly higher price than provided under the contract. There is no duty to notify of a resale where the contract is canceled. Svihovec appears to have made every effort to deliver his grain to the elevator. In fact, testimony at trial revealed that he was desperate to deliver his grain to the elevator. It must be remembered that the entire time Svihovec held the grain in storage on his farm, he suffered the risk of loss upon casualty to the grain. In fact, some of the contract grain had to be discarded due to insect damage. Svihovec was not a seller out to take advantage of a rising market. He made arrangements to market his wheat immediately upon Munch's refusal in late May to accept delivery. When Svihovec sold the grain in June, the market price had risen to only $2.20 per bushel. The elevator, on the other hand, seeks to collect damages at the price of $4.40 per bushel, the market price in September 1973, when it contends Svihovec breached the contract. We find no bad faith on the part of Svihovec. Affirmed. ERICKSTAD, C. J., and SAND, PAULSON and PEDERSON, JJ., concur.