Also known as: incidental losses · incidental damages
Written by attorneys — see sources below.
Expenses reasonably incurred by an aggrieved party in reacting to another's breach or wrong. These costs arise after the breach occurs and include outlays for inspection, transportation, care of goods, effecting cover, stopping delivery, or resale.
Ironclad Industries contracted to sell custom machinery to Ivan Ivanov. After Ivanov repudiated, Ironclad stored the identified goods for three months and paid a broker to locate a new buyer. The storage fees and commission qualify as recoverable incidental loss because they were commercially reasonable charges incurred after the breach in caring for and reselling the goods.
Infinity Bank ordered specialized servers from Inertia Dynamics. Upon delivery the bank discovered defects during inspection, rejected the goods, and paid a premium to a substitute supplier for immediate cover. The inspection costs and extra cover charges constitute incidental loss because they were reasonable expenses triggered by the seller's breach.
Insight Consulting agreed to purchase a fleet of vehicles from a marine dealer. After the buyer repudiated, the dealer retained the identified vehicles in its lot and incurred ongoing security and maintenance expenses while seeking a replacement purchaser. These holding costs count as incidental loss because they resulted directly from the buyer's breach and the dealer's need to care for the goods.
Plaintiffs contracted with defendant Retail Marine Corp. to purchase a new boat of a specified model for $12,587.40, initially depositing $40 and later increasing the deposit to $4,250 to obtain immediate delivery on a firm sale basis instead of the originally specified four-to-six-week period. Plaintiffs' attorney sent defendant a letter rescinding the contract on the ground that plaintiff Neri faced imminent hospitalization and surgery that would make payments impossible. The boat had already been ordered from the manufacturer and was delivered to defendant at or before receipt of the rescission letter. Plaintiffs commenced an action to recover their deposit after defendant declined to refund it. Defendant counterclaimed for breach of contract and damages in the amount of $4,250. Defendant obtained summary judgment on the issue of liability, after which Special Term directed an assessment of damages to determine whether plaintiffs were entitled to return of any portion of their down payment. At the damages hearing, the boat was shown to have been sold four months later to another buyer for the same price negotiated with plaintiffs. Defendant proved without contradiction that its profit on the contract sale would have been $2,579 and that it had incurred $674 in expenses for storage, upkeep, finance charges, and insurance during the period the boat remained unsold; defendant also sought $1,250 in attorneys' fees. The trial court awarded defendant $500 on its counterclaim and directed that plaintiffs recover the $3,750 balance of their deposit. The judgment was affirmed without opinion by the Appellate Division, and defendant appealed to the Court of Appeals by leave.
View caseDirect loss measures the reduction in value of the promised performance itself. Incidental loss instead captures the separate out-of-pocket costs the aggrieved party incurs while responding to the breach, such as storage, inspection, or cover expenses.
Yes. UCC § 2-710 awards an aggrieved seller commercially reasonable charges incurred after the buyer's breach in stopping delivery, caring for goods, or reselling. UCC § 2-715(1) awards a buyer expenses for inspection, receipt, transportation, care of rejected goods, and effecting cover.
Yes. Like other contract damages, incidental losses must be shown with reasonable certainty and must have been foreseeable at the time of contracting. Courts routinely allow recovery when the expenses are documented and directly traceable to the breach.
Supporting sources
Yes. When a landlord's breach forces a tenant to terminate and relocate, reasonable moving, storage, and reconfiguration expenses qualify as incidental loss and are recoverable as part of the tenant's expectation damages.
Supporting sources
…components on hand at the time plaintiff learns of breach” (Harris, Seller’s Damages, 18 Stanf. L. Rev. 66, 104). : “Incidental damages to an aggrieved seller include any commercially Reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer’s…