Will Alabama enforce a repair-or-replace remedy and a consequential-damages exclusion in a sale of goods?
Within the limits the section itself sets, and when the exclusive remedy fails, Alabama lets the consequential-damages exclusion fall with it. Subject to subsections (2) and (3) and to § 7-2-718, the agreement may provide for remedies in addition to or in substitution for those in the article and may limit or alter the measure of damages, 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; 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 (Ala. Code § 7-2-719(1)). Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title (§ 7-2-719(2)). 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 (§ 7-2-719(3)). Alabama adds a subsection the uniform text does not have: nothing in § 7-2-719 or in § 7-2-718 shall be construed so as to limit the seller's liability for damages for injury to the person in the case of consumer goods (§ 7-2-719(4)). The § 7-2-718 that § 7-2-719(1) is subject to permits liquidated damages only at an amount 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 makes a term fixing unreasonably large liquidated damages void as a penalty (§ 7-2-718(1)). On how (2) and (3) interact, Alabama has decided the question. In Massey-Ferguson, Inc. v. Laird the seller's warranty made its repair remedy exclusive and barred incidental, special and consequential damages; the repair attempts failed over an extended period, the jury could find the limited warranty had failed of its essential purpose, and the buyer's damages were therefore the difference between the value of the goods as warranted and as delivered PLUS incidental and consequential damages. The Court was shown federal authority that inability to repair does not eliminate a bar on consequential damages, said in terms that the holding was contrary to its own, and affirmed the buyer's verdict. Barko Hydraulics, LLC v. Shepherd ran the same essential-purpose analysis in 2014 on a warranty that likewise made the parts-and-labour remedy exclusive and said the seller "shall in no event be liable for incidental, consequential, or special damages": the jury could properly have concluded the loader was never repaired and the warranty had failed of its essential purpose, and under the Code the jury could award difference-in-value plus incidental or consequential damages. The buyer still lost his judgment. The trial court should not have instructed on mental anguish, and because the verdict was a single general one the Court could not tell how much of the $450,000 was properly awardable, so it reversed the judgment IN ITS ENTIRETY and remanded for a new trial.
The trap
Three Alabama-specific points. Subsection (4) is not the uniform rule: for personal injury from consumer goods it is not a presumption that the limitation is unconscionable but a direction that neither § 7-2-719 nor § 7-2-718 is to be construed to limit the seller's liability at all. Exclusivity is a drafting act, not a default: a repair-or-replace clause that does not say the remedy is exclusive leaves the buyer every other Article 2 remedy as well. And a consequential-damages exclusion in Alabama is only as durable as the exclusive remedy sitting beside it: Massey-Ferguson put Alabama on the side of the split that lets the exclusion go when the repair remedy fails of its essential purpose, and declined to follow authority holding the opposite (resting instead on Winchester v. McColloch Brothers Garage, 388 So.2d 927 (Ala. 1981), the earlier Alabama case it said it was bound by), so a seller does not buy permanent immunity from consequential damages by also promising repairs it then fails to deliver. The repair window is not open-ended either: the seller does not have an unlimited period of time to repair or replace parts, and repeated failed attempts over an extended period let a jury find the essential purpose failed. Where the loss is commercial the exclusion still stands (§ 7-2-719(3) says so in terms), and the liquidation route carries its own ceiling, because an amount under § 7-2-718(1) must be reasonable in the light of the anticipated or actual harm and an unreasonably large figure is void as a penalty.
16 authorities
- statuteAla. Code § 7-2-719enactment date not established
The words that state the rule
(1) Subject to the provisions of subsections (2) and (3) of this section and of Section 7-2-718 on liquidation and limitation of damages: (a) The agreement may provide for remedies in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article, 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 (b) 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. (2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title. (3) 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.
- statuteAla. Code § 7-2-719enactment date not established
The words that state the rule
(4) Nothing in this section or in Section 7-2-718 shall be construed so as to limit the seller’s liability for damages for injury to the person in the case of consumer goods.
- statuteAla. Code § 7-2-718enactment date not established
The words that state the rule
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which 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.
- statuteAla. Code § 7-2-316enactment date not established
The words that state the rule
(4) Remedies for breach of warranty can be limited in accordance with the provisions of this article on liquidation or limitation of damages and on contractual modification of remedy (Sections 7-2-718 and 7-2-719).
The words that state the rule
We now turn to the issue of whether Laird's damages were limited by the terms of the manufacturer's express warranty. Massey-Ferguson argues that they were. We disagree. As permitted by Code 1975, §§ 7-2-316 (4) and 7-2-719 (1), Massey-Ferguson attempted to contractually limit its buyer's remedies for breach of warranty in its "New Agricultural Equipment Warranty," which states: EXCLUSIVE EFFECT OF WARRANTY AND LIMITATION OF LIABILITY THIS WARRANTY IS IN LIEU OF ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PURPOSE OR OTHER REPRESENTATIONS, WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED. The remedies of the Owner set forth herein are exclusive. The Company neither assumes nor authorizes any person to assume for it any other obligation or liability in connection with the sale of covered machines. Correction of defects in the manner and for the applicable period of time provided above shall constitute fulfillment of all responsibilities of the Company to the Owner and the Company shall not be liable for negligence, under contract or any other manner with respect to such machines. IN NO EVENT SHALL THE OWNER BE ENTITLED TO RECOVER FOR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES SUCH AS BUT NOT LIMITED TO, LOSS OF CROPS, LOSS OF PROFITS OR REVENUE, OTHER COMMERCIAL LOSSES, INCONVENIENCE OR COST OF RENTAL OR REPLACEMENT EQUIPMENT.
The words that state the rule
In effect, Massey-Ferguson argues that it had the right to remedy defects in the combine for an unlimited period of time. To the contrary, the seller does not have an unlimited period of time to repair and/or replace parts under a warranty.
The words that state the rule
Given the numerous attempts at repair over the extended time period, the jury could properly conclude (as it presumably did, since it obviously awarded consequential damages) that the combine was not repaired within a reasonable time and that the limited warranty had failed of its essential purpose. (See Volkswagen of America, Inc. v. Harrell , 431 So.2d 156 (Ala. 1983), and Winchester v. McColloch Brothers Garage , 388 So.2d 927 (Ala. 1981)). This determination invokes Code 1975, § 7-2-719 (2), which states: "Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title." The general rule for damages for breach of warranty is stated in Code 1975, §§ 7-2-714 (2), and 7-2-714 (3): (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount, and nothing in this section shall be construed so as to limit the seller's liability for damages for injury to the person in the case of consumer goods. Damages in an action for injury to the person include those damages ordinarily allowable in such actions at law. (3) In a proper case any incidental and consequential damages under section 7-2-715 may also be recovered. Therefore, Laird's damages are the difference between the value of the goods as warranted and the value as delivered, plus incidental and consequential damages.
The words that state the rule
Massey-Ferguson calls our attention to S.M. Wilson Co. v. Smith International, Inc. , 587 F.2d 1363 (9th Cir. 1978) which stands for the proposition that the inability to repair the machine does not eliminate the disclaimer of implied warranties barring the recovery of consequential damages. We recognize that the holding in S.M. Wilson is contrary to the holding in this case. However, we are bound by the law as set forth in Winchester v. McColloch Brothers Garage, supra.
The words that state the rule
We have herein concluded that the jury could properly award consequential damages, here, damages for the loss of crops. Since the jury could properly have arrived at the amount of its award from evidence adduced at trial, we conclude that the trial court did not abuse its discretion in allowing Laird's counsel to use the blackboard, and that the use thereof did not constitute prejudicial error to Massey-Ferguson. For the reasons stated herein, the judgment of the trial court is affirmed. AFFIRMED.
The words that state the rule
The issues were submitted to a jury, which rendered a verdict in favor of Laird in the amount of $64,884.24 against Massey-Ferguson only. The jury also rendered a verdict in favor of MFCC against Laird in the amount of $29,779.28, which included the balance financed plus interest. The trial court entered judgments accordingly.
The words that state the rule
Barko failed to correct the problems with the 495ML loader after repeated complaints and servicings. Given the numerous attempts at repair over the extended period, the jury could properly have concluded that the 495ML loader had not been repaired and that the warranty had failed 14 1121479 of its essential purpose.4 Barko breached its contract during the warranty period. As is the case with any contract that is breached, Shepherd's damages were precipitated by Barko's failure to perform. Mere passage of time did not cure or excuse that breach or failure to perform. Accordingly, the trial court did not err in submitting the breach-of-express- warranty claim to the jury.
The words that state the rule
The warranty limited Barko's potential liability under the warranty as follows: "Remedies available to any person claiming under this warranty are exclusive and expressly limited to obtaining the parts and the labor, where applicable, in accordance with terms of this warranty. "Barko['s] liability for losses, damages, or expenses of any kind arising from the design, manufacture or sale of the product covered by this warranty, whether based on warranty, negligence, contract, tort or otherwise, is limited to an amount not exceeding the cost of correcting the defects as herein provided, and, at the expiration of the 3 1121479 applicable warranty period, all such liability shall terminate. "Barko shall in no event be liable for incidental, consequential, or special damages [for] losses of use of the Barko product, a loss or damage to property other than the Barko product, a loss of profits or other commercial loss, or any special or consequential damages (except liability for consequential damages which by law may not be disclaimed).
The words that state the rule
SHAW, Justice (concurring in the result). I concur in the result reached by the main opinion. I write specially to explain why the trial court did not err in submitting to the jury the issue of incidental and consequential damages. Incidental and consequential damages can be recovered for a seller's breach. Ala. Code 1975, §§ 7-2-714(3) and -715. Under Ala. Code 1975, § 7-2-719(1), parties may agree to limit remedies for breaches, including damages. However, § 7-2-719(2) states that "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title." Under the authority of Massey-Ferguson, Inc. v. Laird, 432 So. 2d 1259 (Ala. 1983), when a limited remedy fails of its essential purpose, the damages available in § 7-2-714, including incidental and consequential damages, can be recovered, despite the limitations in the contract.
The words that state the rule
We reverse the judgment entered against Barko, and we remand the case for entry of an order granting Barko's motion for a new trial.
The words that state the rule
There must be some nexus between the mental-anguish damages and the intention and contemplation of the parties at the time the contract was made; there is not substantial evidence to support the award of such damages under the circumstances of this case. In this case, the jury returned a general verdict. Because general damages were awarded, there is no way to determine the amount the jury attributed to each type of damages, some of which were properly awardable, and some of which were not. Accordingly, we reverse the judgment in its entirety and remand the case for a new trial.
The words that state the rule
Moore, C.J., and Bolin and Main, JJ., concur. Murdock, J., concurs specially. Shaw, J., concurs in the result. Parker and Bryan, JJ., concur in part and dissent in part. Stuart, J., concurs in the result in part and concurs in part and dissents in part as to the rationale.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.