Question

Imagine that Mark contracts with the fictional J.B. Used Cars to purchase a used 2009 red, automatic Toyota Camry for $14,988 through a special two-day sale. Mark pays in full for the car and is told that the car lot will deliver the Camry to Mark's house free of charge as soon as the transfer of title is cleared. However, the seller begins making excuses and fails to ever deliver the car. Thus, the seller is in breach of contract because Mark already paid for the Camry and never received his vehicle. Mark needs a new car soon, so he decides to obtain cover instead of cancelling the contract with the seller. He searches at other local car dealers and, two days after finding J.B. Used Cars in breach of contract, he finds another Camry that he is satisfied with. It is a 2009 silver Camry that costs $17,982; it is an automatic, and it has roughly the same number of miles as the Camry from J.B. Used Cars. This price is comparable to the standard Blue Book price for a 2009 Camry.

1. What does it mean to obtain cover after a seller breaches a contract? Why does the buyer in this situation obtain cover?

2. What are the four criteria that a buyer must meet to obtain cover? In this case, do Mark's actions appear to meet those criteria?

3. What is the formula used to determine damages in cover cases? How much in damages would Mark be awarded by the courts in this situation?

Answer 1

Question one

In the law of contract, the cover is a remedy available to a customer who receives anticipatory repudiation of contract involving delivery of goods. Under the Uniform Commercial Code, the client has legal right to find another source of the same types of products. Afterwards, he may file a lawsuit against the seller to recover the difference in the value of goods.

The possibility of a cover prevents one party from the lawsuit by a part performance which makes the buyer lack adequate remedy. The fact that Mark was able to buy the vehicle elsewhere and sue the difference in value makes him have an adequate remedy at law. Otherwise, the Uniform Commercial Code will not offer protection to him and cannot receive damages in the courts.

Question two

The law does not apply to goods that are unique for original example works of art and exclusive rights. The vehicle was second-hand and, therefore, rule applied. The buyer should also obtain the cover in good faith and without unreasonable delay in purchase to get the cover. Also, he should not cancel the initial contract so as to get the cover. In the above case, Mark never terminated the original contract he had with J.B. motors, and this qualifies him for the protection of the law.

Question three

The formula for obtaining damages is by computing the difference between costs of goods offered with the expenses of goods purchased. In the case study, Mark had an initial contract requiring him to pay $14,988 to get the Toyota Camry, but the cost of the cover is $17,982. As such he will get damages of $2,994. That will be the remedy due to a breach of the contract.