Goal of Contract Remedies - Recall that the fundamental goal in fashioning a remedy to a breach of contract is to put the non-breaching party in as good a position as he or she would have been in had the contract been performed as expected.
Typically, this involves some sort of remedy for money damages. In the context of a breach of contract that involves a sale of goods, the UCC provides the basis for money damages.
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This content is drawn from our Contracts Remedies Tutorial 19: Buyer’s Damages (Basics), which contains numerous interactive and visual hypotheticals on the topic. If you are interested in this content, you may want to try our free Contracts Advisor Course. You will need to register for our free account. It's fast, easy and, of course, free.
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UCC Buyer Remedy: Overview - Under UCC §2-601, when the seller delivers goods that are not as warranted, the buyer may (1) accept the whole delivery; (2) reject the whole delivery; (3) accept in part and reject in part.
Buyer Rejects the Delivery in Whole: UCC §2-602 - What happens if the buyer rejects the delivery in whole?
Under §2-602, the buyer must reject the goods in a reasonable amount of time, and must “seasonably” notify the seller of the rejection. “Seasonable” in the UCC means “in the time specified in the contract, or, if the contract does not specify a time, then in a reasonable time.”
If the buyer does not comply with §2-602, the buyer cannot recover damages.
”Cover” and UCC §2-712 - What happens if the buyer complies with the requirements of §2-602 (reject in a reasonable time and seasonably notify)? That depends on whether the buyer “covers.”
To cover is to make a reasonable purchase of substitute goods. If the buyer covers, UCC §2-712 applies. Thus, §2-712 awards the difference between the cover price of the goods (CP) and the contract price (KP).
What Counts as “Cover?” - Cover is the reasonable purchase of substitute goods. What do the words “reasonable” and “substitute” mean in this context?
A purchase is reasonable if:
(1) The buyer reasonably expected to cut losses by making the purchase; and,
(2) The buyer did not delay too long after the rejection of the goods before making the purchase.
What Counts as a “Substitute?” - To count as substitute goods the goods need not be identical to those in the contract, but they must be commercially reasonable substitutes.
Consequence of Not Covering - When a buyer does not cover, the buyer is entitled to damages under §2-713. Under §2-713, the buyer recovers the difference between (a) the market price (MP) of the goods at the time and place the buyer learned of the breach and (b) the contract price (KP).
Like §2-714 and §2-712, §2-713 also awards incidental and consequential damages and subtracts expenses saved.
Ways Not To Cover - A buyer may fail to cover by making an unreasonable purchase, or by purchasing goods that are not substitute goods, or by not making any purchase at all.
The Law School Experience - These and related topics are covered in our tutorials on Contract Remedies.
To explore some of our free materials, go to The Law School Experience.