When a seller fails to deliver a load in breach of contract, the buyer has two (2) options. First, the buyer can “cover” by buying the same or similar product. It is good practice for the buyer to notify the seller in writing before making substitute purchases. This gives the seller another opportunity to perform and avoids any later claim that the seller was not given a reasonable chance to perform before cover was pursued.
The cover purchases must be made without unreasonable delay, and they must be goods that truly substitute for the produce due from the seller.
After making the cover purchases, it is a good practice to send an invoice for the cover purchase to the seller, along with the new seller’s invoice to show the difference in price the buyer was required to pay for the cover purchases.
Second, if the buyer does not buy substitute product, it is still entitled to damages. The buyer’s damages are calculated as the difference between the market price of the produce, when the buyer learned of the breach, and the price the buyer would have paid the seller under the contract.
In cases of a failure to deliver, sellers sometimes claim they could not deliver because they could not obtain the product. PACA recognizes this as a defense, but only in very limited circumstances, such as: it was specified in the contract that the produce would come from a specified field or area, and that area or field was damaged; or there was absolutely no way for the seller to obtain the product. In the latter case, increases in price do not justify the seller in saying it could not obtain the product.
