In the Iowa Supreme Court
No. 24–1158
Submitted February 18, 2026—Filed April 24, 2026
CMT Highway, LLC,
Appellant,
vs.
Logan Contractors Supply, Inc.,
Appellee.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Cedar County, Jeffrey D. Bert,
business specialty court judge.
Breaching seller in a sale of goods challenges whether a buyer’s purchase
of “cover” goods complied with Iowa Code section 554.2712. Decision of the
Court of Appeals Affirmed in Part and Vacated in Part; District Court
Judgment Affirmed in Part, Vacated in Part, and Case Remanded.
Oxley, J., delivered the opinion of the court, in which all justices joined.
Molly M. Parker (argued), Steven J. Pace, Samuel E. Jones, and Kate
Thorne of Shuttleworth & Ingersoll, Cedar Rapids, and Joseph C. Creen of Bush,
Motto, Creen, Koury & Halligan, PLC, Davenport, for appellant.
Michael W. Thrall (argued) and Matthew A. McGuire of Nyemaster Goode,
P.C., Des Moines, and Roy Leaf of Nyemaster Goode, P.C., Cedar Rapids, for
appellee. 2
Oxley, Justice.
When a seller breaches a contract for the sale of goods, the buyer can
choose to “cover” its loss by procuring substitute goods. Iowa Code § 554.2712(1)
(2022). If the buyer makes “any reasonable purchase of . . . goods in substitution
for those due from the seller,” then the buyer can recover damages from the seller
for the difference between the more expensive substitute and the parties’ original
contract. Id. § 554.2712(1)–(2); accord Kanzmeier v. McCoppin, 398 N.W.2d 826,
831–32 (Iowa 1987). This dispute concerns how a breaching seller’s offer to sell
the same goods from the initial contract at a higher price affects the buyer’s cover
remedy under section 554.2712. We hold that an aggrieved buyer is not required
to deal with the breaching seller in exercising its right to cover. We also hold that
substantial evidence supports the district court’s finding that the buyer properly
mitigated its damages for the breach because its purchase of substitute goods
from other vendors at then-current market prices was reasonable, despite the
breaching seller’s lower offer.
I. Factual Background and Proceedings.
A. The Parties’ Relationship. A five-year business relationship between
CMT Highway, LLC (CMT) and Logan Contractors Supply, Inc.
(Logan Contractors) came to an end in 2021. The parties worked together on
road-construction projects, manufacturing and supplying materials to general
contractors who build or repair roads and highways for government entities.
CMT manufactures dowel baskets, tie bar assemblies, loose dowel bars and tie
bars, and other wire products. When concrete is poured for a road, dowel baskets
are used at the saw joints to hold the adjoining slabs of concrete together, and
the dowel bar assemblies help prevent the road from buckling. 3
Logan Contractors supplies goods and materials, including the dowel products
like those produced by CMT, to general contractors for concrete paving projects.
The bidding process for public road projects is competitive. Government
entities post sets of plans with a specified completion date, requesting quotes
from general contractors. General contractors then solicit quotes from suppliers
like Logan Contractors, who in turn solicit quotes from manufacturers like CMT.
The relationships between contractors in the paving industry tend to be
collaborative because government entities ordinarily select the lowest bid. It is
understood in the industry that contractors rely on the quotes they receive to
make bids, though reasonable modifications to quotes are not uncommon after
a quote has been accepted.
On any given project, CMT and Logan Contractors operated on a rolling
delivery schedule for the goods because delivery dates in the industry are often
a moving target and depend on factors outside the control of the manufacturer
and supplier. When Logan Contractors was awarded a project, it would notify
CMT and confirm the price included in CMT’s quote. CMT’s quotes generally
limited the length of time it would honor a price under the “TERMS” provision.
Many of the quotes covering the projects at issue in this dispute set a “firm
through” date of December 31, 2021, and noted that “deliveries occurring after
this date are subject to an additional charge to be determined.” Two quotes CMT
provided in 2021 also laid out a set percentage increase (four percent in one, five
percent in the other) “[s]tarting January 1, 2022 and every 6 months thereafter.”
A project could take several months to complete, and the government contractor
only needed a portion of the products at a time, which CMT delivered directly to
the project site. So CMT used a just-in-time manufacturing process to avoid
storage costs, waiting to begin manufacturing until it received a purchase order 4
from Logan Contractors that confirmed a delivery date and the required load.
Given the different delivery dates for the products, several purchase orders
covered a single project.
CMT and Logan Contractors fulfilled more than three hundred purchase
orders from 2018 to 2021, which generated well over $10 million in revenue for
CMT. Logan Contractors was CMT’s biggest customer, receiving as much as
forty-five percent of the dowel baskets that CMT produced in a year. CMT was
one of four contractors that Logan Contractors solicited for quotes on
road-construction projects. CMT’s ability to produce goods at low cost made
Logan Contractors highly competitive in bidding for projects. The arrangement
was mutually beneficial: CMT had a reliable stream of orders while
Logan Contractors received quality product at a low price.
B. The COVID-19 Pandemic’s Effects on the Market. The business
relationship unraveled in 2021. Global supply chain issues stemming from the
COVID-19 pandemic caused the availability of steel to decline and the price of
steel to skyrocket, and trucking shortages disrupted the parties’ production
schedule. These challenges made it difficult for CMT to perform on time and at
the price that it had previously agreed to with Logan Contractors. CMT began
missing delivery dates because of the supply chain issues in June 2021. CMT
assured Logan Contractors over a phone conversation that things would be fine
despite the supply chain issues and that CMT would honor the prices on existing
projects. Logan Contractors reached out in September to set up a meeting to
discuss the “tough year” and “follow up on the challenges of this year with CMT
and how/if there is a remedy for th[o]se.” That meeting never occurred.
CMT shortly thereafter declined to provide a quote for a new project that
Logan Contractors requested in late October. Instead, CMT emailed 5
Logan Contractors the following ultimatum on October 27, demanding a price
increase on its existing orders or the parties would stop working with each other
altogether:
After studying the numbers and reviewing our notes from the conversation this morning, I have come up with the following proposals:
1. CMT will continue to quote Logan [Contractors] on jobs they are sent quotes for and manufacture and deliver everything they currently have orders for with the following increases:
1.5 material will be billed at $6.95 a foot delivered price
1.25 material will be billed at $5.25 a foot delivered price
1.00 material will be billed at $3.90 a foot delivered price
[0].75 material will be billed at $2.80 a foot delivered price
Basket Stakes will be at $[0].06 higher than current cost
These prices represent a cost that is well below current pricing but allows us to pass on the impact of our higher material cost and would pertain to all existing orders on the books as of today. We would not pass on any shipping cost as CMT will eat the cost of the freight.
All material currently on the backlog would be manufactured and paid for by March 31, 2022. Any new work moving forward would be billed at negotiated price at time of order. Also, any additional orders will receive a $1,000 rebate per order (minimum a truckload of material) until the difference on original price and new price is made up.
2. Logan [Contractors] rejects proposal 1 as written, at which time CMT Highway LLC[] and Logan [Contractors] decide to end their working relationship and go their separate ways.
Also, if you decide to move on, I want to thank you for your business over the years. I wish you continued success on the personal and business side. The ball is in your court and I will need an answer by EOB on Friday. Thanks!
Logan Contractors sought clarification about CMT’s email the next day. CMT
confirmed that existing projects at Offutt Air Force Base would be excluded from 6
the first option’s price increases but that the Offutt projects would be included
in the second option ending all business relations between the parties. Legal
counsel for Logan Contractors informed CMT the following week that
Logan Contractors considered CMT to be in breach of its existing purchase
orders, so Logan Contractors would procure substitute goods from other
companies.
Within a couple of weeks, Logan Contractors solicited bids from three other
manufacturers for the twelve projects that CMT refused to perform at the original
contract price. Logan Contractors selected the bid from the alternative
manufacturer offering the lowest price that could also meet the time demands of
each project. Logan Contractors bought substitute goods from two
manufacturers: CMC Paving Solutions and American Highway. The substitute
goods were purchased at or slightly below the standard market rate in 2021,
amidst the pandemic-induced supply chain issues. A representative for CMC
Paving Solutions testified at trial that the company reduced its margin by “about
two to three percent” to “try[] to help minimize the damage” from
Logan Contractors’ fallout with CMT. Ultimately, Logan Contractors spent
$1,529,264.57 over CMT’s original contract price purchasing substitute goods
after CMT’s failure to perform on the twelve projects. In contrast, CMT’s
demanded price increases totaled $310,082.08 above the contracted prices, but
even those higher prices would have reflected a fifteen to twenty percent loss for
CMT on each job.
C. Legal Proceedings. In March 2022, CMT sued Logan Contractors for
breach of contract because Logan Contractors withheld payments to CMT for
materials it provided before the parties’ relationship broke down.
Logan Contractors filed a countersuit, alleging claims for breach of contract and 7
promissory estoppel. The case was placed on the business court docket and
proceeded to a four-day bench trial, after which the district court issued a
thorough thirty-six-page opinion. It concluded that Logan Contractors was liable
to CMT for breach of contract in the amount of $965,232.21, while CMT was
liable to Logan Contractors on the breach-of-contract counterclaim in the
amount of $1,529,264.57. The court offset CMT’s liability by the amount
Logan Contractors owed for wrongfully withholding payments after CMT’s
breach.
Both parties appealed, and we transferred the case to the court of appeals.
CMT argued that the district court erred in three ways: (1) by finding that
contracts were formed on the projects CMT allegedly breached and that CMT in
fact breached the contracts if they were formed; (2) by concluding that
Logan Contractors’ acceptance of cover goods was reasonable when it did not
accept the cheapest alternative bid (referring to its own price-increase proposal);
and (3) by miscalculating the damages CMT owed. Logan Contractors’
cross-appeal challenged the trial court’s awards of prejudgment and
postjudgment interest.
The court of appeals affirmed the district court with respect to CMT’s
appeal. It held that, based on the parties’ course of dealing since 2016, CMT and
Logan Contractors were contractually bound to the quoted prices once
Logan Contractors was awarded a project and accepted CMT’s quote, despite the
lack of firm delivery dates. The court of appeals then held that CMT breached
those contracts when it sent the October 27 email demanding a price increase
on existing projects or an end to the parties’ working relationship. As the district
court found, that email was not an attempt to renegotiate the contracts’ terms
but rather a notification that CMT would not perform under the key pricing term 8
of the contracts. And the contracts were not successive performance contracts
under Iowa Code section 554.2309(2) that CMT could terminate through
reasonable notification. The court of appeals also concluded that
Logan Contractors’ damages included the Offutt projects. Even if those projects
were not subject to price increases, CMT refused to perform the Offutt projects
unless Logan Contractors accepted higher prices on the other existing projects.
The court of appeals held that the plain language of Iowa Code
section 554.2712 defeated CMT’s argument that Logan Contractors acted
unreasonably when it spent over $1.5 million to cover, even though it could have
received the same products from CMT for just over $300,000. According to the
court of appeals, CMT’s postbreach offer to sell the same goods at a higher price
could not be considered cover because “identical” goods cannot be “substitute”
goods. So Logan Contractors complied with section 554.2712 by purchasing
reasonable alternatives that were priced at or slightly below market rate. The
court of appeals further reasoned that, notwithstanding section 554.2712, CMT’s
postbreach offer was not a suitable alternative under common law principles
from Restatement (Second) of Contracts section 350 comment e. The court
construed CMT’s rebate provision as a surrender of Logan Contractors’ right to
seek damages for the breach.
Regarding Logan Contractors’ cross-appeal concerning the district court’s
interest calculations, CMT did not dispute that the district court’s order
improperly double-counted prejudgment interest. The district court included
$192,716.85 of interest in the total amount of the judgment against
Logan Contractors, but then imposed interest on the total judgment amount,
awarding interest on interest. The court of appeals vacated the judgment and
ordered a remand to correct the inflated judgment. As for postjudgment interest, 9
the court of appeals held that Logan Contractors did not preserve error on its
claim that the district court used the wrong interest rate and wrong start date.
CMT sought further review, and we granted its application. We limit our
opinion to the issues raised in CMT’s application for further review concerning
Logan Contractors’ mitigation efforts in purchasing cover goods. Having reviewed
the other issues raised in the parties’ respective appeals, we let the court of
appeals’ decision stand as to contract formation, breach, damages for the Offutt
projects, and Logan Contractors’ cross-appeal on prejudgment and
postjudgment interest. See Iowa R. App. P. 6.1103(1)(a)(3); see also Holmes
v. Pomeroy, 959 N.W.2d 387, 389 (Iowa 2021) (“We have discretion to choose
which issues we review when we take a case on further review.”); Hills Bank &
Tr. Co. v. Converse, 772 N.W.2d 764, 770 (Iowa 2009) (exercising discretion to
address one issue on further review while letting the court of appeals’ opinion
stand as the final decision on all remaining issues).
II. Analysis.
CMT’s appeal raises the application of “cover” as set forth in Iowa Code
section 554.2712. CMT argues that Logan Contractors failed to mitigate its
damages following CMT’s breach by rejecting CMT’s offered price increases
($310,082.08) and instead purchasing goods from other manufacturers for
nearly five times its proposed increase ($1,529,264.57). Relying on a comment
to Restatement (Second) of Contracts section 350, CMT claims that rejecting the
lowest-priced substitute to the original deal—i.e., its own offer at the increased
prices—was unreasonable cover under section 554.2712. See Restatement
(Second) of Conts. § 350 cmt. e, at 130 (A.L.I. 1981). As explained below, CMT’s
argument goes to mitigation of damages—a common law affirmative defense that
supplements Iowa’s codification of the Uniform Commercial Code (IUCC). That 10
argument is distinct from whether a breaching seller’s higher-priced demand
should be considered “cover” under section 554.2712. Understood in the proper
context, we affirm the district court’s finding of fact that Logan Contractors’
mitigation efforts were reasonable.
“The standard of review for a breach of contract action is for correction of
errors at law.” Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110
(Iowa 2013). The trial court’s factual findings have the force of a special verdict
because this case was tried to the bench. E.g., Metro. Prop. &
Cas. Ins. v. Auto-Owners Mut. Ins., 924 N.W.2d 833, 839 (Iowa 2019); Grall
v. Meyer, 173 N.W.2d 61, 63 (Iowa 1969). Those findings bind our review “if
supported by substantial evidence.” Iowa R. App. P. 6.904(3)(a); accord UE Loc.
893/IUP v. State, 997 N.W.2d 1, 15 (Iowa 2023); Metro. Prop. & Cas. Ins., 924
N.W.2d at 839. “Evidence is substantial if a reasonable mind would accept it as
adequate to reach the same findings.” Meyers v. Delaney, 529 N.W.2d 288, 289–
90 (Iowa 1995). “We view the evidence ‘in the light most favorable to the trial
court’s judgment.’ ” Brokaw v. Winfield-Mt. Union Cmty. Sch. Dist., 788 N.W.2d
386, 388 (Iowa 2010) (quoting Miller v. Rohling, 720 N.W.2d 562, 567
(Iowa 2006)); accord Grall, 173 N.W.2d at 63 (“[W]e construe the evidence broadly
to uphold, rather than defeat, the trial court’s judgment.”).
A. The IUCC’s “Cover” Remedy. Chapter 554 of the Iowa Code contains
the IUCC. Article 2 of the IUCC “applies to transactions in goods.” Iowa Code
§ 554.2102. “ ‘Goods’ means all things (including specially manufactured goods)
which are movable at the time of identification to the contract for sale . . . .” Id.
§ 554.2105(1). It is undisputed that Article 2 of the IUCC governs this case. As
the district court concluded and the court of appeals affirmed, CMT was bound
to provide goods for twelve projects but breached its agreements when it refused 11
to perform unless Logan Contractors paid a higher price for the contracted
products.
Under the IUCC, when a seller breaches a contract for the sale of goods by
refusing to provide the goods, the aggrieved buyer generally has two options for
seeking damages from the seller. See Iowa Code § 554.2711(1). It can sue the
seller for nondelivery or repudiation, see id. § 554.2711(1)(b), and then recover
as damages the difference between the market price at the time it learns of the
breach and the contract price, see id. § 554.2713(1). Or it can procure substitute
goods, id. § 554.2711(1)(a), and then recover as damages the difference between
the cost of the substitute goods and the contract price, id. § 554.2712(2). This
second option is called “cover.” Id. § 554.2711(1)(a).
The parties disagree about whether a breaching seller’s offer of the same
goods at a higher price can be considered “cover” for purposes of
section 554.2712. Logan Contractors argues that it cannot, urging that the
language of section 554.2712—defining “cover” as the “purchase [of] goods in
substitution for those due from the seller”—necessarily excludes identifying the
breaching seller’s own goods as a proper cover. Identical goods from the original
contract, it argues, are the opposite of substitute goods. CMT counters that a
comment to Restatement (Second) of Contracts section 350 rejects
Logan Contractors’ position by recognizing a breaching seller’s goods as a
“suitable alternative.” See Restatement (Second) of Conts. § 350 cmt. e, at 130
(“If the party in breach offers to perform the contract for a different price, this
may amount to a suitable alternative. But this is not the case if the offer is
conditioned on surrender by the injured party of his claim for breach.” (citation
omitted)). The court of appeals rejected CMT’s argument and concluded that Iowa
Code section 554.2712 “displaced” the common law, see Iowa Code 12
§ 554.1103(2), such that a breaching seller’s offer of the same goods is not
“cover” as a matter of law. So, according to the court of appeals, CMT’s offer had
no relevance to Logan Contractors’ damages remedy.
The IUCC gives an aggrieved buyer broad remedies for a seller’s breach.
See U.C.C. § 2-711 cmt. 3, 1C U.L.A. 343 (A.L.I. & Unif. L. Comm’n 2012) (“[T]his
Act requires its remedies to be liberally administered . . . .”). The purpose for
allowing a buyer to cover by purchasing substitute goods is to “provide[] the
buyer with a remedy aimed at enabling him to obtain the goods he needs thus
meeting his essential need.” Id. § 2-712 cmt. 1, 1C U.L.A. 389. Yet, nothing in
the relevant IUCC provisions requires an aggrieved buyer to give in to a breaching
seller’s demand for a higher price as a matter of cover. Indeed, the aggrieved
buyer has no obligation to cover at all. See Iowa Code § 554.2712(3) (“Failure of
the buyer to effect cover within this section does not bar the buyer from any
other remedy.”); see also U.C.C. § 2-712 cmt. 3, 1C U.L.A. 389 (“[C]over is not a
mandatory remedy for the buyer. The buyer is always free to choose between
cover and damages for non-delivery under the next section.”). Thus, we agree
with Logan Contractors: when an aggrieved buyer chooses to cover under
section 554.2712, the buyer is not obligated to accept the breaching seller’s
demand for a higher price—even if that demand is the least costly alternative to
the original agreement.
That said, a buyer like Logan Contractors who elects to cover has “a duty
to act reasonably to mitigate its damages.” BRC Rubber & Plastics, Inc. v. Cont’l
Carbon Co., 981 F.3d 618, 634 (7th Cir. 2020); see also Iowa Code § 554.2712(1)
(“[T]he buyer may ‘cover’ by making in good faith and without unreasonable delay
any reasonable purchase of . . . goods in substitution for those due from the
seller.” (emphasis added)). CMT’s reliance on the Restatement goes to mitigation, 13
not to cover in the first instance. Mitigation is “an affirmative defense that [the
breaching seller] ha[s] the burden of proving.” BRC Rubber & Plastics, Inc.,
981 F.3d at 634; see also UE Loc. 893/IUP, 997 N.W.2d at 15 (“[T]he burden of
pleading and proving inadequate mitigation is on ‘the asserting party,’ the party
who breached.” (quoting R.E.T. Corp. v. Frank Paxton Co., 329 N.W.2d 416, 422
(Iowa 1983))). We thus address CMT’s argument as one of mitigation.
B. Restatement (Second) of Contracts Section 350 Addresses
Consequential Damages, Not Cover Damages. Principles of law and equity
supplement our interpretation of the IUCC “[u]nless displaced by the particular
provisions of th[e] chapter.” Iowa Code § 554.1103(2). “Article 2 does not, of
course, entirely eliminate the common law of contracts.” Bartlett Grain Co., LP
v. Sheeder, 829 N.W.2d 18, 23 (Iowa 2013) (quoting Flanagan v. Consol.
Nutrition, L.C., 627 N.W.2d 573, 578 (Iowa Ct. App. 2001)).
The IUCC does not displace the common law requirement that an
aggrieved buyer must mitigate its damages. See, e.g., F.S. Credit Corp. v. Shear
Elevator, Inc., 377 N.W.2d 227, 233 (Iowa 1985) (considering a mitigation of
damages defense in a conversion case governed by the IUCC). Section 350 of the
Restatement explains that, generally, “damages are not recoverable for loss that
the injured party could have avoided without undue risk, burden or humiliation.”
Restatement (Second) of Conts. § 350(1), at 126. This is a matter of mitigation,
cf. Clinton Physical Therapy Servs., P.C. v. John Deere Health Care, Inc.,
714 N.W.2d 603, 606 n.1 (Iowa 2006) (describing Restatement (Second) of
Contracts section 350 as the basis for a failure-to-mitigate argument), so CMT’s
reliance on the Restatement goes to whether Logan Contractors reasonably
mitigated its damages. 14
According to CMT, we should apply the common law principle that a
breaching seller’s “offer[] to perform the contract for a different price . . . may
amount to a suitable alternative.” Restatement (Second) of Conts. § 350 cmt. e,
at 130. Despite the Restatement comment, CMT is hard-pressed to identify
courts actually applying that principle—other than a case from 1894. See
Lawrence v. Porter, 63 F. 62, 65–68 (6th Cir. 1894). In Lawrence v. Porter, when
a lumber supplier refused to continue deliveries unless a mill agreed to different
payment terms, the mill rejected the new terms and sought to recover damages
in the form of lost profits from its planned resale of the lumber. Id. at 64–65. The
court rejected the claim for special—i.e., consequential—damages: “The fact that
they could only buy from the defendants does not affect the duty of plaintiffs to
minimize their loss as far as they reasonably could. . . . The obligation on the
buyer to mitigate his loss, by reason of the seller’s refusal to carry out such a
sale, is not relaxed because the delinquent seller affords the only opportunity for
such reduction of the buyer’s damage.” Id. at 66. Thus, the buyer could not
recover special damages in the form of lost profits without first mitigating its
losses, even if that meant purchasing lumber from the breaching seller when it
was the only available source. Id. at 66–68.
This general concept is carried forward into the IUCC with respect to
consequential damages, which are limited to losses that “could not reasonably
be prevented by cover or otherwise.” Iowa Code § 554.2715(2)(a) (emphasis
added); see also U.C.C. § 2-715 cmt. 2, 1C U.L.A. 503 (recognizing that a buyer
seeking to recover consequential damages must “attempt to minimize his
damages in good faith, either by cover or otherwise”). This principle does not
apply here because Logan Contractors does not seek consequential damages.
Nonetheless, we cannot ignore the fact that recovering consequential damages is 15
conditioned on the buyer’s cover efforts. See Iowa Code § 554.2715(2)(a); see also
U.C.C. § 2-712 cmt. 3, 1C U.L.A. 389 (“[S]ubsection [(3) of section 2-712,
governing cover,] must be read in conjunction with the section which limits the
recovery of consequential damages to such as could not have been obviated by
cover.”).
That an aggrieved buyer might need to purchase goods from a breaching
seller to recover consequential damages in certain circumstances follows from
Lawrence, which served as the basis for the Restatement’s illustration of the
principle:
A contracts to sell to B a used machine from A’s factory for $10,000. A breaks the contract by refusing to deliver the machine at that price, but offers to sell it to B for $11,000 without prejudice to B’s right to damages. B refuses to buy it at that price and, since he cannot find a similar machine elsewhere, loses a profit of $25,000 that he would have made from use of the machine. B’s damages do not include the loss of the $25,000 profit, but he can recover $1,000 from A.
Restatement (Second) of Conts. § 350, illus. 14, at 130. This illustration reflects
that the concept of cover plays some role in the buyer’s obligation to mitigate
consequential damages. Id.; see Iowa Code § 554.2715(2)(a).
A leading treatise on the UCC identifies a handful of cases involving
situations analogous to Lawrence. See 1 James J. White, Robert S. Summers &
Robert A. Hillman, Uniform Commercial Code § 7:14 (6th ed.), Westlaw (database
updated Dec. 2025) (discussing Eberspaecher North America, Inc. v. Van–Rob, Inc.,
544 F. Supp. 2d 592 (E.D. Mich. 2008); Kelsey–Hayes Co. v. Galtaco Redlaw
Castings Corp., 749 F. Supp. 794 (E.D. Mich. 1990); and B. B. Walker Co.
v. Ashland Chemical Co., 474 F. Supp. 651 (M.D. N.C. 1979)). Like Lawrence,
those cases raise issues not present here, where the breaching seller was the
sole supplier of the goods at issue and the buyer sought relief beyond cover 16
damages. See Eberspaecher N. Am., Inc., 544 F. Supp. 2d at 601 (dissolving a
temporary injunction requiring specific performance by the seller because the
buyer could not show irreparable harm when it could “cover” by purchasing the
goods at the seller’s higher demanded price and sue for damages); Kelsey–Hayes
Co., 749 F. Supp. at 795 (addressing a buyer’s argument that it agreed to a price
hike under duress because it “would not have been able to obtain a sufficient
supply of castings from alternative sources for 18–24 weeks”); B. B. Walker Co.,
474 F. Supp. at 655 (calculating damages where the buyer chose to cover from
the breaching seller as the only available supplier to keep from closing its
business).
Under these cases, the buyer’s duty to mitigate damages may require it to
continue to do business with the seller before it is entitled to certain types of
damages or relief where the breaching seller is the only available supplier. But
those issues are not present in the case before us, so we need not decide them.
See Dobbs v. Jackson Women’s Health Org., 597 U.S. 215, 348 (2022)
(Roberts, C.J., concurring in the judgment) (“If it is not necessary to decide more
to dispose of a case, then it is necessary not to decide more.”). We mention them
here only to note that, after considering the parties’ arguments, “[w]e are not
prepared to say that an injured party may never be obligated to minimize his
loss by entertaining a subsequent and less favorable offer from the breaching
party.” Cain v. Grosshans & Petersen, Inc., 413 P.2d 98, 102–03 (Kan. 1966).
This case is more like BRC Rubber & Plastics, Inc. v. Continental
Carbon Co., where the Seventh Circuit faced a nearly identical situation involving
cover damages. See 981 F.3d at 633. A breaching seller offered to sell the same
goods at a higher price after the buyer terminated the initial contract and filed
suit based on the seller’s repudiation. Id. In determining whether the buyer 17
properly covered, the court treated the breaching seller’s new offer as an issue of
mitigation and considered whether the buyer’s “cover” from a competitor at a
price higher than the seller’s new proposal was unreasonable as a factual matter.
Id. So too here, we must determine whether substantial evidence supports the
district court’s finding that Logan Contractors acted reasonably when it rejected
CMT’s unilateral price hike and instead purchased substitute goods from a ready
market of alternative sellers.
C. Substantial Evidence Supports the District Court’s Finding That
Logan Contractors’ Purchases of Cover Goods Were Reasonable. This brings
us back to our review of the district court’s finding that Logan Contractors’
purchase of cover goods from other sellers was reasonable, even though it spent
nearly five times more than CMT’s offer. That “finding has ‘the force of a special
verdict’ and is ‘binding on us if supported by substantial evidence.’ ”
UE Loc. 893/IUP, 997 N.W.2d at 15 (quoting R.E.T. Corp., 329 N.W.2d at 419).
CMT’s argument that it was unreasonable not to accept the lowest-priced
substitute misstates Logan Contractors’ obligations under section 554.2712.
“The test of proper cover is whether at the time and place the buyer acted in good
faith and in a reasonable manner, and it is immaterial that hindsight may later
prove that the method of cover used was not the cheapest or most effective.”
U.C.C. § 2-712 cmt. 2, 1C U.L.A. 389. A buyer’s procurement of substitute goods
complies with the statute so long as the buyer, at the time it covered, made “any
reasonable purchase” while acting “in good faith and without unreasonable
delay.” Iowa Code § 554.2712(1).
We agree with the court of appeals that “substantial evidence supports the
business court’s conclusion that Logan Contractors acted reasonably when it
contracted with other manufacturers to produce and deliver the cover materials 18
despite the higher cost.” Even before the breach, CMT already had problems with
production and delivery that led it to describe its own performance on projects
with Logan Contractors in 2021 as “debacles.” When Logan Contractors asked
to meet with CMT to discuss its “tough year” and how to remedy the challenges
it had with delivery and production, CMT responded with an ultimatum: pay
more or end the relationship. Further, CMT’s “offer” to make up the difference
through a $1,000 rebate per order would have required Logan Contractors to
work with CMT well beyond the twelve projects at issue in this case. CMT’s
breach—which would have been sufficient by itself—only gave Logan Contractors
additional reason to lose confidence in CMT. See U.C.C. § 2-609 cmt. 1,
1C U.L.A. 102 (“[A] continuing sense of reliance and security that the promised
performance will be forthcoming when due[] is an important feature of the
bargain.”).
BRC Rubber & Plastics, Inc. involved similar facts. The district court found
that “BRC reasonably believed both that Continental’s unilateral price increase
would affect all future shipments of carbon black for years to come, and that
Continental would withhold future shipments if BRC did not pay the price
increase.” BRC Rubber & Plastics, Inc., 981 F.3d at 630. “In other words,” the
court continued, “Continental had shown BRC that it was not a trustworthy
business partner and supplier for a commodity essential for BRC’s business.” Id.
After considering whether BRC’s cover was reasonable, the Seventh Circuit
found no clear error in the district court’s finding “that [the buyer] was not
required to trust its fate to [the breaching seller] any longer” where the buyer
“engaged in reasonable negotiations with other potential suppliers and agreed to
commercially reasonable terms.” Id. at 634. Here, not only did Logan Contractors
have reason to lose faith in CMT, but it also solicited replacement bids from 19
multiple suppliers and purchased substitute goods at or slightly below the then-
current market rate amidst global pandemic-induced supply chain issues. The
district court’s finding that Logan Contractors acted in a commercially
reasonable manner is supported by substantial evidence. See id. at 630;
UE Loc. 893/IUP, 997 N.W.2d at 15.
CMT’s fallback argument—that even setting aside its own offer, Logan
Contractors still did not appropriately cover—also fails. CMT contends that
Logan Contractors failed to choose the least expensive option among the other
alternative sellers for three of the twelve breached projects. Logan Contractors
rebuts that claim as a factual matter because CMT omitted freight costs from its
calculation of one supplier’s bid to argue it was lower than the bid that
Logan Contractors accepted. Either way, section 554.2712 does not hinge on
whether cover goods were the cheapest substitute. Rather, it requires
“reasonable negotiations” and “commercially reasonable terms.” BRC Rubber &
Plastics, Inc., 981 F.3d at 634; accord Iowa Code § 554.2712(1) (allowing “any
reasonable purchase”). Each purchase of cover goods from a different seller was
at or slightly below market rate at the time, and there is no evidence that the
purchases were not made in good faith and without unreasonable delay. That
Logan Contractors solicited multiple bids for each project and did not always
choose the same supplier is sufficient to support the district court’s conclusion
that the cover purchases were reasonable.
We affirm the district court’s finding that Logan Contractors’ cover
purchases were reasonable. See UE Loc. 893/IUP, 997 N.W.2d at 15.
III. Conclusion.
We affirm the district court’s judgment except for the part of the order that
awarded double prejudgment interest to CMT. We remand for the district court 20
to incorporate the paragraph drafted by the court of appeals in its remand order
concerning prejudgment interest.
Decision of the Court of Appeals Affirmed in Part and Vacated in Part;
District Court Judgment Affirmed in Part, Vacated in Part, and Case
Remanded.