California Code, Commercial Code - COM § 2718




(1) Damages for breach by either party may be liquidated in the agreement subject to and in compliance with Section 1671 of the Civil Code .  If the agreement provides for liquidation of damages, and such provision does not comply with Section 1671 of the Civil Code , remedy may be had as provided in this division.

(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his or her payments exceeds:

(a) The amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subdivision (1), or

(b) In the absence of such terms, 20 percent of the value of the total performance for which the buyer is obligated under the contract or five hundred dollars ($500), whichever is smaller.

(3) The buyer's right to restitution under subdivision (2) is subject to offset to the extent that the seller establishes:

(a) A right to recover damages under the provisions of this chapter other than subdivision (1), and

(b) The amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.

(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subdivision (2);  but if the seller has notice of the buyer's breach before reselling goods received in part performance, his or her resale is subject to the conditions laid down in this division on resale by an aggrieved seller ( Section 2706 ).





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