If a non-breaching party seeks damages for a substitute performance, the measure is generally the difference between the cost of the substitute and the contract price. Which of the following is the correct damage measure?

• A. The difference between substitute cost and contract price.
• B. The full contract price.
• C. The market price at time of breach.
• D. No damages allowed.

Answer: (A)

When a non-breaching party covers by obtaining substitute performance, damages are measured by the extra amount paid for the substitute over the contract price. This puts the injured party in the position they would have been in if the contract had been performed, by reimbursing the breach-related additional cost, not the entire contract price.

For example, if the contract price is 1,000 and you obtain a substitute at 1,200, your damages are 200. If the substitute costs less than the contract price, damages are not based on the contract price in full; you’re only entitled to the difference if any, reflecting the extra cost of cover.

The full contract price overstates damages when a substitute was actually obtained, the market price at breach is a different measure used in other contexts, and there are remedies for breach—no damages is not correct here.