Contracts Cover Law and Legal Definition

Cover refers to an act to mitigate damages by a buyer when there has been a breach of a contract by a seller. It usually refers to a situation where a seller has agreed to sell goods to a buyer and fails to perform. The buyer may have a duty to "cover" by purchasing substitute goods to stem losses suffered. The buyer must not make any unreasonable or bad faith attempts to purchase substitute goods. In the case of cover, the buyer is entitled to damages of the difference between the contract goods and the substitute goods, plus incidental and consequential damages, but less any expenses saved due to the breach by the seller.

The following is an example of a state statute dealing with cover in contracts:

  1. "After a breach within Section 7-2-711, the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
  2. The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 7-2-715), but less expenses saved in consequence of the seller's breach.
  3. Failure of the buyer to effect cover within this section does not bar him from any other remedy."