If the buyer does not cover in good faith or at all, which damages apply?

If the buyer does not cover in good faith or at all, which damages apply?

• A. Resale damages
• B. Cover damages
• C. Lost profits
• D. Market damages = market price - contract price

Answer: (D)

When a buyer breaches by not covering, the damages are measured by the market price difference rather than the cost to cover. Under the UCC, there are two potential measures for a buyer’s damages for non-delivery or repudiation by the seller: if the buyer covers in good faith and without unreasonable delay, damages are the cost to cover minus the contract price (plus incidental and consequential damages, minus savings). If the buyer does not cover in good faith or at all, the damages are based on the market price: the market price at the time of breach minus the contract price (plus incidental and consequential damages, minus savings). So, since the buyer did not cover, the applicable damages are the market price difference—market price minus contract price. Resale damages and lost profits relate to other contexts (usually seller-oriented or different breach scenarios) and aren’t the applicable measure here.

When a buyer breaches by not covering, the damages are measured by the market price difference rather than the cost to cover. Under the UCC, there are two potential measures for a buyer’s damages for non-delivery or repudiation by the seller: if the buyer covers in good faith and without unreasonable delay, damages are the cost to cover minus the contract price (plus incidental and consequential damages, minus savings). If the buyer does not cover in good faith or at all, the damages are based on the market price: the market price at the time of breach minus the contract price (plus incidental and consequential damages, minus savings). So, since the buyer did not cover, the applicable damages are the market price difference—market price minus contract price. Resale damages and lost profits relate to other contexts (usually seller-oriented or different breach scenarios) and aren’t the applicable measure here.