Problem.Dispute.Sale of used Jaguar

     After thirty years as a used car dealer in San Jose, Sam Seller decided to retire. He gave timely notice of termination of his lease to the landlord. For the remaining six months of his lease Sam continued to operate his dealership, steadily reducing his inventory such that at the end of six months only one used car, a vintage Jaguar, remained.

     The landlord had found another used car dealer, Stella Seller, to become the new tenant. Stella assumed possession of the real property and moved in her inventory of used cars. For a small fee, Stella agreed with Sam to allow Sam to keep the Jaguar on the lot and agreed to try to sell it on Sam’s behalf while Sam vacationed for three months. Thus, Stella became Sam’s authorized agent.

     Before leaving, Sam signed off on the Certificate of Title to the Jaguar so that Stella could transfer title if she were able to sell it. A Certificate of Title is a form issued and required by the Department of Motor Vehicles to show ownership of a car. To transfer ownership, including in cases where the owner is making of gift of the car, the existing owner signs off in a designated space and delivers the Certificate of Title to the new owner. The new owner then submits the Certificate of Title to the Department of Motor vehicles together with a request that the Department of Motor Vehicles issue a new Certificate of Title in the new owner’s name.

     Boris Buyer was also a used car dealer. Boris spotted the Jaguar and told Stella that he might have a buyer for it. Boris orally proposed to Stella that he purchase the Jaguar for $16,000 cash, because he had a potential buyer for that model, and split with her any of his profit upon resale. Stella said that she’d think about it and get back to Boris.

     The next day Stella called Boris and said: "I need more room on my lot. Can I park the Jaguar on your lot?" Boris said "O.K." and Stella drove the Jaguar over to Boris’ lot.  He was busy with a customer and so she just caught his eye by waving the keys and shouting out: "If your customer still wants it, we can work something out." He waved back and shouted to leave the keys on his desk.

     That night Boris called Stella at work and left a message on her answering machine that the customer he had mentioned wanted the Jaguar and had offered $20,000 for it. Later that night Boris was hospitalized. The next day, without having spoken to Boris following the message on the answering machine, Stella delivered the Certificate of Title to the Jaguar to one of Boris’ employees.

     Because of the hospitalization, Boris didn’t see the Certificate of Title for two weeks. In the meantime, his prospective customer revoked the offer to buy the Jaguar. After Boris returned to work, he drove the car back to Stella’s lot and told her that he no longer could keep it because his customer had backed out and now he needed more room on his lot.

     When Sam returned from vacation, Stella informed him of the events described above. Sam drove the Jaguar to his house. He let his daughter borrow it for a weeklong trip to Southern California. A few weeks after his daughter’s return, and after having giving Boris notice of an intent to resell the car, Sam sold the car for $15,000 through an ad placed in the newspaper. Sam had originally paid $13,000 for the Jaguar. He spent $500 in conditioning it prior to originally storing it on his own lot for sale, $50 for storing the Jaguar with Stella, and $50 for advertising the Jaguar for sale after his daughter drove it.

     Sam wants to know from you whether he can hold Boris responsible for breach of contract.  Among other rules, consider the rules in U.C.C. 2-204, 2-206, and 2-305.   If you have already studied damages for breach of contract, what would be the amount of damages that Sam could recover if Boris has breached a contract?  If you are studying the Statute of Frauds, may Boris avoid liability by relying upon U.C.C. 2-201?