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, with its precise definition a matter of longstanding debate. It has been variously described as a science and as the ar ...

contracts A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...

to describe a remedy available to a buyer who has received an anticipatory repudiation 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 U ...

, 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 one or more parties (the plaintiff or claimant) against one or more parties (the defendant) in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today ...

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, in which a court issues an order requiring a party to perform a specific act, such as to complete performance of a contract. It is typically available in the sale of land law, b ...

, 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, and

exclusive right 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 perform the same ...

s. Judge

Richard Posner Richard Allen Posner (; born January 11, 1939) is an American legal scholar and retired United States circuit judge who served on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chicag ...

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.

References

Contract law {{law-term-stub