Meaning
Financial remedy allowing a buyer to recover the increased cost of purchasing substitute goods from a different supplier after a breach of contract. The re-sourcing cover is a standard calculation used to place the non-breaching party in the same economic position as if the original delivery had occurred.
Price Differential
Claimable damages equal the difference between the original contract price and the price paid for the replacement items. If the market price has risen since the signing of the agreement, the original supplier must pay the excess. The buyer must act in good faith and without unreasonable delay when seeking the replacement goods to ensure the cost remains defensible.
Documentation of the search for the lowest available market price is required to support the claim for reimbursement during a legal dispute.
Market Verification
Proof of the prevailing market rate at the time of the breach is necessary to prevent the buyer from overcharging for premium alternatives. Quotes from multiple vendors provide the necessary evidence for this calculation.
Seller Liability
Breaching parties often attempt to limit these costs by proposing their own substitute sources or citing force majeure events. The right to cover remains a powerful tool for maintaining the continuity of production.
