Cover is a term used in the
law
Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been vario ...
of
contracts
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
to describe a remedy available to a buyer who has received an
anticipatory repudiation
Anticipation is an emotion involving pleasure or anxiety in considering or awaiting an expected event. Anticipatory emotions include fear, anxiety, hope and trust. When the anticipated event fails to occur, it results in disappointment (if posit ...
of a contract for the receipt of goods. Under the
Uniform Commercial Code
The Uniform Commercial Code (UCC), first published in 1952, is one of a number of Uniform Acts that have been established as law with the goal of harmonizing the laws of sales and other commercial transactions across the United States through UC ...
, the buyer is permitted (but not required) to find another source of the same type of goods. The buyer may then file a
lawsuit
-
A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil actio ...
against the breaching seller to recover the difference, if any, between the cost of the goods offered and the cost of the goods actually purchased.
The possibility of cover will prevent a party from being able to sue for
specific performance
Specific performance is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. It is typically available in the sale of land law, ...
, which is an equitable remedy that requires the buyer have no adequate remedy at law. If the buyer is able to buy elsewhere and sue for the difference, that provides an adequate remedy. This prohibition does not apply, however, to the sale of unique goods such as original works of art, collectibles,
real estate
Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...
, and
exclusive right
In Anglo-Saxon law, an exclusive right, or exclusivity, is a de facto, non-tangible prerogative existing in law (that is, the power or, in a wider sense, right) to perform an action or acquire a benefit and to permit or deny others the right to p ...
s.
Judge
Richard Posner
Richard Allen Posner (; born January 11, 1939) is an American jurist and legal scholar who served as a federal appellate judge on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chica ...
has suggested that the availability of cover allows for
efficient breach
In legal theory, particularly in law and economics, efficient breach is a voluntary breach of contract and payment of damages by a party who concludes that they would incur greater economic loss by performing under the contract.
Development of th ...
- that is, that it encourages the most efficient allocation of resources by allowing a seller to breach a contract to sell goods to one buyer when another, more lucrative opportunity comes along. The seller may thus be able to realize a sufficiently increased profit to make more money even after repaying the difference to the original buyer. Therefore, no value is lost in the transaction because the original buyer is in the same position he would have been in but for the breach, and the seller is in a better position.
Contract law
{{law-term-stub