If our limited repair-or-replace remedy fails, does the accompanying exclusion of consequential damages survive under Alaska law?
Usually yes, unless the exclusion is itself unconscionable: Alaska treats the two questions as independent. AS 45.02.719 lets an agreement substitute or limit remedies, including making a repair-or-replace remedy exclusive (AS 45.02.719(a)); if that exclusive remedy then "fail[s] of its essential purpose, remedy may be had as provided in the code" (AS 45.02.719(b)); but "[c]onsequential damages may be limited or excluded unless the limitation or exclusion is unconscionable" (AS 45.02.719(c)). Pierce v. Catalina Yachts, Inc. resolved the resulting tension by adopting what the majority of jurisdictions do, the approach it called independent: a separate consequential-damages bar survives a failed limited remedy unless the bar itself is unconscionable, assessed on the circumstances: there, "[t]he contract at issue was a consumer sale, not a commercial transaction between sophisticated businesses with equivalent bargaining power," and the seller's own bad-faith breach of the limited warranty was decisive: "we hold the superior court erred in ruling that it would be conscionable to enforce the warranty's bar against consequential damages."
The trap
A failed essential-purpose remedy does NOT, by itself, revive the buyer's right to consequential damages: subsection (b)'s "remedy ... as provided in the code" does not automatically override subsection (c)'s separate bar; Pierce expressly rejected reading (b) that way. The unconscionability inquiry that decides the exclusion's survival is fact-intensive and outcome-sensitive to exactly the kind of thing a merger or boilerplate clause cannot fix by drafting alone: whether the transaction was consumer or commercial, whether the parties had equal bargaining power, whether the exclusion was pre-printed and unilaterally imposed, and, critically in Pierce, whether the seller acted in bad faith in letting the primary remedy fail. A seller relying on this clause after its own bad-faith breach of the underlying warranty should not assume the consequential-damages bar will hold: Pierce did not merely remand, it "VACATE[d] the judgment" and sent the case back for a trial on the amount of consequential damages. Two further limits sit outside subsection (c). AS 45.02.719(a) is itself "[s]ubject to ... AS 45.02.718 on liquidation and limitation of damages," so a clause that fixes a substitute money remedy rather than repair must also survive AS 45.02.718(a): liquidation is permitted "only at an amount that is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy," and "[a] term fixing unreasonably large liquidated damages is void as a penalty." And a remedy is exclusive only where it "is expressly agreed to be exclusive"; absent those words resort to it "is optional" and the code's ordinary remedies stay available.
11 authorities
- statuteAS 45.02.719enactment date not established
The words that state the rule
Subject to (b) and (c) of this section and AS 45.02.718 on liquidation and limitation of damages, (1) the agreement may provide for remedies in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and (2) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
- statuteAS 45.02.719enactment date not established
The words that state the rule
If circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the code.
- statuteAS 45.02.719enactment date not established
The words that state the rule
Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable, but limitation of damages where the loss is commercial is not.
The words that state the rule
The contract at issue was a consumer sale, not a commercial transaction between sophisticated businesses with equivalent bargaining power.
The words that state the rule
For these reasons, we hold the superior court erred in ruling that it would be conscionable to enforce the warranty's bar against consequential damages and in declining to allow the Pierces to present their consequential damages claim to the jury.
The words that state the rule
We believe that the majority approach best serves the Uniform Commercial Code's underlying purposes
The words that state the rule
But the majority of jurisdictions view these subsections to be independent, ruling that when a warranty fails, a separate provision barring consequential damages will survive under subsection .T19(¢) as long as the bar itself is not uncon-seionable.
The words that state the rule
We therefore adopt the independent *623 approach as the most sensible rule in light of precedent, reason, and policy.
The words that state the rule
We agree, holding that because Catalina acted in bad faith when it breached the warranty, the company cannot conscionably enforce the warranty's provision barring consequential damages. Accordingly, we remand for a trial to determine consequential damages.
- statuteAS 45.02.718enactment date not established
The words that state the rule
Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
The words that state the rule
For these reasons, we VACATE the judgment and REMAND for a trial to determine the amount of the Pierces' consequential damages.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.