Also known as: effect cover · effected cover · effects cover · effecting covers · obtaining cover · arranging cover
Written by attorneys — see sources below.
A buyer's procurement of substitute goods in good faith and without unreasonable delay after a seller's breach of a contract for the sale of goods. The purchase must be reasonable under the circumstances and allows recovery of the difference between the cover price and the contract price together with incidental and consequential damages.
Empire Logistics contracted to buy 10,000 widgets from Eclipse Manufacturing at a fixed price for an upcoming project. Eclipse repudiated the contract two weeks before delivery. Empire Logistics chose not to purchase replacements and instead sued for the difference between the market price at breach and the contract price plus lost profits. The court permitted recovery of those damages even though Empire Logistics never effected cover.
Evergreen Bank bought replacement servers from Enigma Technologies after its original supplier failed to deliver. The bank paid reasonable inspection fees and transportation charges for the new servers. The court allowed recovery of those amounts as incidental damages because they were commercially reasonable expenses incurred in connection with effecting cover.
Eugene Ellsworth contracted to buy corn from Emmett Egan for future delivery. Egan repudiated early. Ellsworth waited beyond a commercially reasonable time before purchasing replacements at a higher price. The court held that Ellsworth could not measure damages by the later cover price and was limited to market damages at the time of repudiation.
Richard Oloffson, doing business as Rich's Ag Service, entered into an agreement with Clarence Coomer on April 16, 1970, under which Coomer would sell and deliver 40,000 bushels of corn to Oloffson in October and December 1970. Oloffson described the deal as two separate contracts of 20,000 bushels each, priced at $1.12 3/4 per bushel for delivery by October 30 and $1.12 1/4 per bushel for delivery by December 15. Coomer confirmed the total quantity but stated he would deliver as much as possible by October 30 with the remainder by December 15. On June 3, 1970, Coomer notified Oloffson that he would not plant corn that season because of excessive wetness and instructed Oloffson to secure the corn from another source if Oloffson had commitments to third parties. The market price for corn for future delivery stood at $1.16 per bushel on that date. When Oloffson contacted Coomer again in September 1970 regarding the corn, Coomer repeated that delivery would not occur. Oloffson mailed confirmations of the April agreement to Coomer and had his attorney demand performance, but Coomer did not respond to either communication. Following the passage of both October 30 and December 15 without any deliveries, Oloffson obtained replacement corn by purchasing 20,000 bushels at $1.35 per bushel and 20,000 bushels at $1.49 per bushel. Oloffson brought suit against Coomer in the circuit court of Bureau County. After a trial without a jury, the court entered judgment for Oloffson in the amount of $1,500 plus costs. Oloffson appealed the judgment to the Illinois Appellate Court for the Third District.
View caseNo. A buyer may recover damages measured by the difference between market price and contract price or other remedies even if the buyer never purchases substitute goods. Failure to effect cover simply prevents the buyer from using the cover measure of damages.
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Incidental damages include any commercially reasonable charges, expenses, or commissions incurred in connection with the substitute purchase. Courts have allowed recovery of inspection, transportation, and similar outlays that arise directly from arranging cover.
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The buyer must act without unreasonable delay after learning of the breach. What counts as unreasonable depends on the market, the nature of the goods, and the surrounding commercial circumstances, but prompt action is required to preserve the right to cover damages.
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Yes. The UCC expressly preserves all other remedies when a buyer elects not to cover. Lost profits or other foreseeable losses that could not reasonably be prevented remain recoverable if they are proved with reasonable certainty.
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…care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. Towing back to Sioux Falls was properly allowed as a reasonably foreseeable expense, not only because the truck was…