[The plaintiff, Bigelow-Sanford, Inc., contracted with defendant Gunny Corp. for the purchase of 100,000 linear yards of

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[The plaintiff, Bigelow-Sanford, Inc., contracted with defendant Gunny Corp. for the purchase of 100,000 linear yards of jute at $0.64 per yard. Gunny delivered 22,228 linear yards in January 1979. The February and March deliveries required under the contract were not made, though 8 rolls (each roll containing 66.7 linear yards) were delivered in April. With 72,265 linear yards undelivered, Gunny told Bigelow-Sanford that no more would be delivered. In mid-March, Bigelow-Sanford turned to the jute spot market to replace the balance of the order at a price of $1.21 per linear yard. Since several other companies had also defaulted on their jute contracts with Bigelow-Sanford, the plaintiff purchased a total of 164,503 linear yards on the spot market. Plaintiff sues defendant to recover losses sustained as a result of the breach of contract.]

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   Gunny contends that appellee’s [Bigelow-Sanford] alleged cover purchases should not have been used to measure damages in that they were not made in substitution for the contract purchases, were not made seasonably or in good faith and were not shown to be due to Gunny’s breach. [W]e disagree. Again, we quote UCC §2–711 providing in part for cover damages where the seller fails to make delivery or repudiates the contract:

(a) ‘‘cover’’ and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or
(b) recover damages for non-delivery as provided in this Article (2–713).

UCC §2–712 defines cover:

(1) After a breach within the preceding section 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 (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.

In addition, the purchaser may recover under 2–713:

(1) Subject to the provisions of this Article with respect to proof of market price (2– 723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (2–715), but less expenses saved in consequence of the seller’s breach.
(2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

   Most importantly, ‘‘whether a plaintiff has made his cover purchases in a reasonable manner poses a classic jury issue.’’ [Citation.] The district court thus acted properly in submitting the question of cover damages to the jury, which found that Gunny had breached, appellee had covered, and had done so in good faith without unreasonable delay by making reasonable purchases, and was therefore entitled to damages under §2–712. Gunny argues Bigelow is not entitled to such damages on the ground that it failed to make cover purchases without undue delay and that the jury should not have been permitted to average the cost of Bigelow’s spot market purchases totalling 164,503 linear yards in order to arrive at the cost of cover for the 72,265 linear yards Gunny failed to deliver. Both arguments fail. Gunny notified Bigelow in February that no more jute would be forthcoming. Bigelow made its first spot market purchases in mid-March. Given that it is within the jury’s province to decide the reasonableness of the manner in which cover purchases were made, we believe the jury could reasonably decide such purchases, made one month after the date the jury assigned to Gunny’s breach, were made without undue delay. The same is true with respect to Gunny’s second argument: Bigelow’s spot market purchases were made to replace several vendors’ shipments. Bigelow did not specifically allocate the spot market replacements to individual vendors’ accounts, however, nor was there a requirement that they do so. The jury’s method of averaging such costs and assigning them to Gunny in proportion to the amount of jute if [sic] failed to deliver would, therefore, seem not only fair but well within the jury’s permissible bounds.

   Gunny also argues that the court erroneously charged the jury regarding damages under both §§2–712 and 2–713. We disagree. Whether Bigelow covered was a question of fact submitted to the jury. In the event that it had not, alternative damages were available to Bigelow under §2–713. [Citation.] The jury found that Bigelow had covered and awarded damages under §2–712; §2–713 then became irrelevant. Since either was applicable until that time, the court’s charge as to both sections was not error.

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   [ Judgment for Bigelow is affirmed.]

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Smith and Roberson Business Law

ISBN: 978-0538473637

15th Edition

Authors: Richard A. Mann, Barry S. Roberts

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