Cover Standard Clause Samples
The Cover Standard clause defines the requirements and procedures for obtaining substitute goods or services if the original supplier fails to deliver as agreed. In practice, this clause allows the non-breaching party to purchase replacement goods or services from another source and may specify how the costs of such cover are calculated and reimbursed. Its core function is to ensure that the affected party can mitigate losses and maintain business continuity by securing necessary goods or services elsewhere, while holding the defaulting party responsible for any additional costs incurred.
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Cover Standard. The sole and exclusive remedy of the parties in the event of a breach of an obligation to deliver or receive Product shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the positive difference, if any, between the purchase price paid by Buyer utilizing the Cover Standard and the Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Location(s), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s) excluding any quantity for which no replacement is available; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the positive difference, if any, between the Price and the price received by Seller utilizing the Cover Standard for the resale of such Product, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Locations(s), multiplied by the difference between the Contract Quantity and the quantity actually received by Buyer for such Day(s) excluding any quantity for which no sale is available; and (iii) in the event that Buyer has used commercially reasonable efforts to replace the Product or Seller has used commercially reasonable efforts to sell the Product to a third party, and no such replacement or sale is available for all or any portion of the Contract Quantity of Product, then in addition to (i) or (ii) above, as applicable, the sole and exclusive remedy of the performing party with respect to the Product not replaced or sold shall be an amount equal to any unfavorable difference between the Price and the Spot Price, adjusted for such transportation to the applicable Delivery Location, multiplied by the quantity of such Product not replaced or sold. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable within five Business Days after presentation of the performing party’s invoice, which shall set forth the basis upon which such amount was calculated.