Also known as: salvage losses · salvage
Written by attorneys · grounded in primary & secondary sources — see below
A remedy available to an aggrieved seller or lessor of unfinished goods that permits cessation of manufacture and disposition of the goods for scrap or salvage value when reasonable commercial judgment indicates that completion would not avoid loss.
Southland Foods contracted to manufacture custom sorting equipment for Sierra Solutions over eighteen months. After Sierra Solutions repudiated, Southland Foods assessed that completing the machines would increase its losses. It ceased manufacture and sold the unfinished components for scrap value under its right to salvage.
Sapphire Holdings leased specialized vehicles to a buyer that later repudiated. With the vehicles only partially assembled, Sapphire Holdings exercised reasonable judgment and sold the incomplete units for salvage rather than finishing them at greater expense.
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Skyline Construction ordered phased delivery of compactors. When the buyer repudiated mid-production, the seller used reasonable commercial judgment to cease manufacture and resell the partially built units for salvage value rather than completing them.
Atlas Capital LP leased custom machinery that the lessee repudiated before completion. The lessor suspended its performance and, exercising reasonable judgment to avoid loss, disposed of the unfinished goods for salvage value under the lease remedy.
An art dealer contracted to produce a commissioned sculpture. After the buyer repudiated, the dealer assessed that finishing would increase net loss and therefore ceased work, selling the raw materials for salvage value in reasonable commercial judgment.
After a buyer repudiated a contract for custom equipment, the seller considered awaiting performance for a reasonable time but instead elected to salvage the unfinished goods immediately, selling components for scrap to minimize damages under the code.
An aggrieved seller may cease manufacture and resell unfinished goods for scrap or salvage value when reasonable commercial judgment shows that completion would not avoid loss. The rule requires the seller to act to minimize damages rather than complete goods that the buyer has repudiated.
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The same salvage right extends to aggrieved lessors under Article 2A. A lessor facing repudiation of a lease for unfinished goods may stop manufacture and dispose of the goods for salvage value using reasonable commercial judgment to avoid further loss.
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The seller must exercise reasonable commercial judgment aimed at avoiding loss and realizing value. The decision turns on whether finishing the goods would increase net loss compared with salvaging them in their unfinished state.
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After repudiation the aggrieved party may await performance for a commercially reasonable time or immediately resort to remedies including suspension of its own performance and salvage of unfinished goods. The code expressly permits both courses of action without requiring an election between them.
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…Air Force bombing range for years. Morissette had entered the range, collected the casings, had them flattened at a nearby salvage yard, and sold them as scrap metal for approximately $84. He claimed that he believed the casings had been abandoned and that he had no intent to steal them. At trial, the District Court…