A retailer agreed to purchase 1,000 gaming consoles from a manufacturer at $200 per unit for delivery on November 1, but on October 1 the manufacturer unequivocally repudiated the contract. The retailer immediately bought substitute consoles from another supplier at $230 per unit and can demonstrate with records that it would have earned $50,000 in net profits from reselling the consoles during the holiday season. The manufacturer was aware when the contract was signed that the consoles were intended for holiday resale. Assuming the retailer can prove the amount of the lost profits with reasonable certainty, which of the following best describes the damages the retailer may recover as part of its expectation interest?
Both the $30,000 price difference and the $50,000 lost profits, because each is part of the retailer's expectation interest and both were foreseeable and provable with reasonable certainty.
Only the $30,000 difference between the cover price and the contract price; lost profits are not recoverable because they are consequential.
Neither the price difference nor the lost profits; the retailer is limited to restitution of any benefit conferred on the manufacturer.
Only the $50,000 lost profits; the retailer cannot recover the price difference once it has successfully covered.
Expectation damages aim to put the injured party in the position it would have occupied had the contract been performed. Under UCC § 2-712, when a buyer reasonably covers, it may recover the difference between the cost of cover ($230,000) and the contract price ($200,000), here $30,000, plus incidental and consequential damages. Lost profits arising from the buyer's resale are consequential damages. UCC § 2-715 and Restatement (Second) of Contracts §§ 347 and 351 allow recovery of consequential damages if they were reasonably foreseeable at the time of contracting and can be proven with reasonable certainty. Because the manufacturer knew the consoles were for holiday resale, the $50,000 in lost profits was foreseeable, and the retailer can recover both the $30,000 price-difference and the $50,000 lost profits as part of its expectation interest. The other choices misstate the availability of either category of damages.
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