A retailer entered into a contract with a supplier to purchase 1,000 units of a specific product at $10 per unit, with delivery scheduled for June 1. On May 15, the supplier informed the retailer that they would not perform under the contract. The retailer, needing the products for its business, arranged for a substitute supplier who charged $12 per unit. The retailer also incurred $1,000 in additional shipping fees that would not have been required under the original supplier contract. What is the retailer's best remedy in this situation?
Recover $10,000 based on the total contract price, as that represents the retailer’s expectation interest under the original agreement.
Recover $2,000 for the increased cost of substitute goods, as additional shipping fees are considered separate from direct damages.
Recover no compensation because the retailer mitigated its damages by obtaining substitute goods.
Recover $3,000 as the sum of the increased cost of substitute goods and additional shipping expenses.
Under the principle of expectation damages, the non-breaching party is entitled to recover all damages that place them in the position they would have been in if the contract were performed as promised. Here, the retailer can recover (1) the increased cost of obtaining goods from the substitute supplier ($2 per unit Ă— 1,000 units = $2,000) and (2) the additional shipping expenses ($1,000). Together, this results in total damages of $3,000. Other answer choices either miscalculate or fail to include all compensable costs under the law. For example, the increased cost of substitute goods and shipping fees is not mutually exclusive, as both are recoverable. Furthermore, mitigation of damages by finding a substitute supplier does not bar recovery; it is part of the process of maintaining reasonable damages.
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