A Buyer Cancelled or Refused the Goods: What a California Seller Can Recover

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

When a buyer cancels or refuses goods without justification, a California seller may withhold delivery, resell the goods and recover the difference from the contract price, or sue for damages. If the goods were made to order and cannot be resold at a reasonable price after reasonable effort, the seller may recover the full price. Where the market-price measure would not make the seller whole, the measure is lost profit, including reasonable overhead. (Com. Code, §§ 2703, 2706, 2708, 2709.) Kolmogorov Law, P.C. represents sellers and buyers in these disputes.

Call (909) 235-6116 or contact us online to discuss a cancelled order or refused shipment.

The situation: the buyer backs out

A metal fabricator builds enclosures to a customer's drawings. Two days before shipment, the customer emails that its project is cancelled.

The seller's remedies arise when the buyer wrongfully rejects goods, wrongfully revokes acceptance, fails to make a payment due on or before delivery, or repudiates. (Com. Code, § 2703.)

If the buyer says the goods were defective, see our page on rejecting nonconforming goods. If the buyer backed out before the delivery date, see anticipatory breach.

The seller's menu under Commercial Code 2703

The aggrieved seller may withhold delivery, stop delivery by a carrier, resell, recover damages or in a proper case the price, and cancel. (Com. Code, § 2703.)

A seller may stop delivery of any shipment on discovering that the buyer is insolvent. For a repudiation or a failure to make a payment due before delivery, the right reaches only carload, truckload, planeload, or larger shipments. (Com. Code, § 2705, subd. (1).)

With half-built goods, the seller may complete the manufacture and identify the goods to the contract, or stop and resell for scrap or salvage value, or proceed in any other reasonable manner. The standard is "reasonable commercial judgment for the purposes of avoiding loss and of effective realization." (Com. Code, § 2704, subd. (2).) See mitigation of damages.

Resale and the notice it requires

If the resale is made in good faith and in a commercially reasonable manner, the seller recovers the difference between the resale price and the contract price. Incidental damages are added and expenses saved by the breach are subtracted. (Com. Code, § 2706, subd. (1).)

The sale may be public or private, but every aspect of it must be commercially reasonable: method, manner, time, place, and terms. It must also be reasonably identified as referring to the broken contract. (Com. Code, § 2706, subd. (2).)

For a private sale, the seller "must give the buyer reasonable notification of his intention to resell." (Com. Code, § 2706, subd. (3).) For a public sale, the seller must give reasonable notice of the time and place unless the goods are perishable or threaten to decline in value speedily. (Com. Code, § 2706, subd. (4).) The Court of Appeal has stated that rule for a private sale, in a case where the buyer had in fact been notified. (Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 448.) It did not decide what follows when no notice is given. A seller that skipped the notice should expect to fall back on the damages measures in section 2708.

The seller is not accountable to the buyer for any profit made on a resale. (Com. Code, § 2706, subd. (6).)

Damages without a resale: market price or lost profit

The default measure compares two numbers: the unpaid contract price and the market price at the time and place for tender. Incidental damages are added and expenses saved are deducted. (Com. Code, § 2708, subd. (1).)

If that measure is "inadequate to put the seller in as good a position as performance would have done," the measure becomes the profit the seller would have made from full performance, including reasonable overhead. Costs reasonably incurred are allowed, and payments or resale proceeds are credited. (Com. Code, § 2708, subd. (2).)

In one California decision, a manufacturer running well below capacity resold the units the buyer did not take to another customer. The Court of Appeal agreed that it would have made both sales and upheld an award of lost profit on the first contract with no offset for the resale. (National Controls, Inc. v. Commodore Business Machines, Inc. (1985) 163 Cal.App.3d 688.)

When the seller can sue for the full price

An action for the price is available for goods the buyer accepted, and for conforming goods lost or damaged within a commercially reasonable time after risk of loss passed to the buyer. It is also available for goods identified to the contract if the seller cannot resell them at a reasonable price after reasonable effort, or the circumstances reasonably indicate that the effort will be unavailing. (Com. Code, § 2709, subd. (1).)

For custom work, keep a record of the resale attempts and the responses.

A seller that sues for the price must hold the identified goods for the buyer. If a resale becomes possible, the net proceeds are credited to the buyer. (Com. Code, § 2709, subd. (2).) A seller found not entitled to the price is still awarded damages for nonacceptance. (Com. Code, § 2709, subd. (3).) For goods delivered, accepted, and unpaid, see our page on collecting unpaid invoices.

Incidental damages and the buyer's deposit

Incidental damages include commercially reasonable charges, expenses, and commissions incurred in stopping delivery, in the transportation, care, and custody of the goods after the breach, and in connection with their return or resale. (Com. Code, § 2710.)

When the seller justifiably withholds delivery, the buyer is entitled to restitution of the amount by which its payments exceed a valid liquidated damages figure. With no such clause, restitution covers payments above 20 percent of the value of the buyer's total performance or $500, whichever is smaller. (Com. Code, § 2718, subd. (2).) The seller may offset the damages it proves under the other remedies. (Com. Code, § 2718, subd. (3).) On whether a deposit clause is valid, see liquidated damages.

If you are the buyer who cancelled

Ask for proof of the resale, the notice, and the price. Ask what expenses the seller saved by not finishing or shipping. Request an accounting of any deposit above the seller's proven damages. A seller that still holds custom goods and sues for the price must show reasonable efforts to resell them, or why the effort would be unavailing.

What to bring to the first meeting

Bring the quote, purchase order, acknowledgment, and each side's terms. Add the cancellation or refusal in whatever form it came, production and cost records for the order, photographs of the goods, and every resale inquiry, notice, and offer. Include the deposit and payment history.

Frequently asked questions

A customer cancelled a custom order after we built it. What can we recover?

Under California Commercial Code section 2709, a seller may recover the contract price for goods identified to the contract if it cannot resell them at a reasonable price after reasonable effort. If the seller resells them in good faith and in a commercially reasonable manner, it recovers the shortfall from the contract price under section 2706, plus incidental damages, less expenses saved.

What can a seller do when a buyer refuses delivery?

California Commercial Code section 2703 lets the seller withhold delivery, stop goods in transit in some cases, resell and recover the difference, sue for damages for nonacceptance, sue for the price in a proper case, and cancel the contract. The remedies apply when the refusal was wrongful, meaning the buyer had no right to reject the goods.

Can a seller keep the deposit when the buyer cancels?

Only up to a point. Under California Commercial Code section 2718, the buyer is entitled to restitution of payments above a valid liquidated damages amount or, without such a clause, above the smaller of 20 percent of the contract's value or $500. The seller may offset that restitution with the actual damages it proves.

We resold the goods the buyer refused but never told the buyer about the resale. Can we still recover the difference?

The resale measure is at risk. California Commercial Code section 2706 requires reasonable notification to the buyer of the seller's intention to resell at a private sale. A seller that skipped the notice may have to fall back on section 2708, which measures damages by the market price at the time and place for tender, or by lost profit.

What is a lost volume seller?

It is a seller that would have made both the original sale and the later resale, so the resale does not replace the lost deal. Under California Commercial Code section 2708, subdivision (2), such a seller may recover the profit it would have made on the breached contract, including reasonable overhead, when the market measure is inadequate.

Talk to a California sale of goods attorney

To discuss a cancelled order, a refused shipment, or a claim for the price, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is a business litigation firm in Irvine, California. Related pages: breach of contract, sale of goods disputes, and mitigation of damages.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the resale and its notice, the proof of loss, and the court.