Lost volume seller

From Wikipedia, the free encyclopedia

Contract Law
Part of the common law series
Contract
Contract formation
Offer and acceptance  · Mailbox rule
Mirror image rule  · Invitation to treat
Firm offer  · Consideration
Defenses against formation
Lack of capacity to contract
Duress  · Undue influence
Illusory promise  · Statute of frauds
Non est factum
Contract interpretation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Excuses for non-performance
Mistake  · Misrepresentation
Frustration of purpose  · Impossibility
Impracticability  · Illegality
Unclean hands  · Unconscionability
Accord and satisfaction
Rights of third parties
Privity of contract
Assignment  · Delegation
Novation  · Third party beneficiary
Breach of contract
Anticipatory repudiation  · Cover
Exclusion clause  · Efficient breach
Fundamental breach
Remedies
Specific performance
Liquidated damages
Penal damages  · Rescission
Quasi-contractual obligations
Promissory estoppel
Quantum meruit
Subsets: Conflict of law
Commercial law
Other areas of the common law
Tort law  · Property law
Wills and trusts
Criminal law  · Evidence

A lost volume seller is a term that arises in the law of contracts to describe a party whose capacity to produce the items sold is sufficient to meet the demands of all customers who seek to buy those items. Therefore, the failure to make one sale reduces the seller's profits by the amount of that one sale. This term arises in lawsuits where a party breaches a contract to purchase such an item. Simply the Seller has an inexhaustible supply of goods.

For example, suppose that a t-shirt maker has 100 t-shirts. If a customer agrees to buy a shirt from the seller, and then breaches that agreement (i.e. refuses to make the purchase), the seller will likely be able sell the shirt at the same price to the next customer who walks in. Therefore the seller has lost no actual profits.

However, if that seller has the ability to manufacture a brand new shirt for each customer that walks in, then the customer who breaches the agreement to buy has thereby prevented the seller from earning profits that the seller would have earned, had the agreement been honored.

Because of this, courts are willing to award expected profits to a lost volume seller, even though another merchant who was not a lost volume seller might not be entitled to any damages for such a breach.

See Neri v. Retail Marine Corp., 285 N.E.2d 311 (N.Y. 1972) and UCC §2-708(2).