A paralegal is assisting with a case where a local bakery contracted with a flour supplier for 1,000 pounds of specialty organic flour at $2.00 per pound, to be delivered on June 1st. On May 15th, the supplier informed the bakery that they would not be able to deliver the flour due to an unexpected crop failure, and offered a refund of the $200 deposit. The bakery immediately purchased substitute flour from another supplier for $2.50 per pound, incurring an additional $50 delivery fee. What are the bakery's total damages for breach of contract?
- A$750
- B$700
- C$500
- D$550
Show answer & explanationAnswer & explanation
Correct answer: D. $550
The bakery's damages include the difference between the contract price and the cover price (the cost of substitute goods), plus any incidental damages. Original contract: 1000 lbs * $2.00/lb = $2,000. Cover cost: 1000 lbs * $2.50/lb = $2,500. Difference = $500. Incidental damages = $50 delivery fee. Total damages = $500 (cover) + $50 (incidental) = $550. The $200 deposit refund is separate and reduces the bakery's out-of-pocket, but not the damages owed by the breaching party.
Why the other options are wrong
- A. Incorrect. This overestimates the damages.
- B. Incorrect. This may incorrectly include the deposit in the calculation or miscalculate the difference.
- C. Incorrect. This only accounts for the difference in price, not the incidental delivery fee.
Buyer's Remedies (UCC - Cover)
Under the UCC, if a seller breaches a contract for goods, the buyer can 'cover' by purchasing substitute goods and recover the difference between the cover price and the contract price, plus incidental and consequential damages.
- Cover must be made in good faith and without unreasonable delay.
- Damages = (Cover Price - Contract Price) + Incidental & Consequential Damages - Expenses Saved.
- Buyer is also entitled to recover any prepaid portion of the price.
Memory trick: When the seller 'Screws Up', the buyer can 'C.R.E.A.M.' (Cover, Recover, Expenses, All Money).