If you want to do this with sed (which you shouldn't, see below), use
sed "/fooy/c\\$var"
This is a shell expansion problem. \$ in a doubly quoted string means a literal dollar, so $var is not expanded. GNU sed also accepts
sed "/fooy/c$var"
as long as you don't specify --posix, but BSD sed (as you may have on FreeBSD or MacOS X) will complain about it.
However, doing this with sed is not a good idea. Substituting shell variables into sed code is almost never a good idea, because it makes you vulnerable to code injection. Take, for example,
$ var=$(echo -e 'something\nd')
$ echo -e "foo bar\nfooy bary\nfoot bart" | sed --posix "/fooy/c\\$var"
something
That wasn't what we expected, was it? What happens here is that sed, since it is unable do distinguish what you want it to treat as data ($var) and code, treats $var as code, and therefore it treats the d after the \n in it as a command (to delete the current line). A better way is to use awk:
$ var=$(echo -e 'something\nd')
$ echo -e "foo bar\nfooy bary\nfoot bart" | awk -v var="$var" '/fooy/ { print var; next } 1'
foo bar
something
d
foot bart
This sidesteps the code injection issue by not treating $var as code.
\It escapes the meaning of$c\and not justc. Thought it was syntax.sed "s/foo/bar/"to only replacefoowithbar.sed, since it was where you got stuck at