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b. Expenses of Implementing Cover Incidental damages include expenses of implementing cover. These expenses generally involve costs related to locating and obtaining substitute goods, such as costs to find an alternative seller or to store substitute goods. Incidental damages do not include direct cover damages (the difference between the contract price and the cost of the substitute goods). Direct cover damages, again, are a distinct category of damages. [U.C.C. § 2-715(1) (1951); 2 Hawkland UCC Series § 2-715:2, Westlaw (database updated June 2021).] Example : Corporation A sold carpeting mats. Corporation A generally obtained the face material from Corporation B and the backing from Corporation C under open accounts. Corporation C would combine the face material and backing and then forward the completed mats to Corporation A. Eventually, the backing started to bleed dark colors into the face material. At the time, it was unclear whether the defect lay in the face material, the backing, or some other factor. Thus, before implementing cover, Corporation A incurred expenses testing the face material and backing to determine the problem and understand precisely how to implement cover. On similar facts, a state appellate court held that a jury could find that the testing expenses were recoverable incidental damages in connection with implementing cover. [ Adapted from Mitchell Family Development Co., Inc. v. Universal Textile Technologies, LLC , 602 S.E.2d 878 (Ga. Ct. App. 2004).] c. Catchall Category of Incidental Damages Apart from expenses of handling nonconforming goods and implementing cover, § 2-715 permits the buyer to recover, as incidental damages, “any other reasonable expense incident to the delay or other breach.” [U.C.C. § 2-715(1) (1951).] Example : A broker contracted to buy coal from a mining company for resale to a power plant. The broker was to pay to deliver the coal to the power plant by ship. The mining company delivered the coal, and the broker loaded it onto the ship. The ship took the coal to the relevant port. About that time, the broker discovered that the coal was contaminated in a way that made it less volatile and, thus, less useful to the plant. While the three parties disputed about what to do with the coal, the ship sat at the dock, laden with the coal, for longer than scheduled under the broker’s contract with the shipper. As a result, the broker had to compensate the shipper for the extra docking time. On similar facts, the Fifth Circuit held that the broker could recover this extra compensation as incidental damages arising from the delay attributable to the mining company’s tender of nonconforming coal. [ Adapted from Carbontek Trading Co. v. Philbro Energy, Inc. , 910 F.2d 302 (5th Cir. 1990).]
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