If our repair-or-replace remedy fails, does the consequential-damages exclusion fall with it?
Not in a commercial sale. Minnesota applies UCC § 2-719 as quoted by its own Supreme Court: if a repair-and-replacement clause as a remedy fails of its essential purpose, Minn. Stat. § 336.2-719(2) entails that its function as a limitation of the seller's liability must also fail, and the buyer may cancel the contract and recover the purchase price (Durfee). An exclusive remedy fails of its essential purpose if circumstances arise to deprive the limiting clause of its meaning or one party of the substantial value of its bargain; so long as the seller repairs the goods each time a defect arises the clause does not fail, but if repairs are not successfully undertaken within a reasonable time the buyer may be deprived of the benefit of the exclusive remedy (Durfee). On the separate question of a consequential-damages exclusion, the Court held in Franz that the repair-or-replacement remedy and a consequential-damage exclusion are discrete and independent contractual provisions, so the exclusion is valid unless it is unconscionable.
The trap
Franz is a commercial-parties holding and the Court fenced it in itself: 'our decision is grounded in a commercial setting involving a contract between two merchants of relatively equal bargaining power and is not intended to establish that a consequential damage bar survives a failure of the limited repair remedy in consumer transactions that involve relatively commonplace or uncomplicated products such as automobiles and trucks'. Those, the Court said, continue to be governed by Jacobs and Durfee. Durfee itself was a consumer's new-car purchase, and the failed exclusive remedy there reopened the purchase price and incidental damages of $116.30 on tender of the car, nothing wider. Franz's own result was split: the exclusion did bar the consequential-damage claims, but the cost of building the controlled-environment room the seller required was 'a direct damage', and the judgment was reversed in part and remanded to fix those damages. So the answer flips with the setting, and quoting Franz in a consumer matter cites the case against yourself. What the Court actually found on the facts is worth knowing: two merchants, no great disparity in bargaining strength, a claim for commercial loss, and 'nothing that makes it unconscionable to enforce the allocation of risk'. Minn. Stat. ch. 336 is not among the statutes available for this rule, so the operative text here is only what these opinions quote: subsections (1)(b) and (2) as Durfee sets them out, and subsection (3) as Franz reproduces it in its footnote 4.
14 authorities
The words that state the rule
If the repair-and-replacement clause as a remedy fails of its essential purpose, Minn.St. 336.-2-719(2) entails that its function as a limitation of the seller’s liability must also fail. In such a circumstance, plaintiff may cancel the contract and recover his purchase price.
The words that state the rule
An exclusive remedy fails of its essential purpose if circumstances arise to deprive the limiting clause of its meaning or one party of the substantial value of its bargain.
The words that state the rule
So long as the seller repairs the goods each time a defect arises, a repair-and-replacement clause does not fail of its essential purpose. 10 But if repairs are not successfully undertaken within a reasonable time, the buyer may be deprived of the benefits of the exclusive remedy.
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
We too are of the opinion that the better reasoned approach is to treat the repair or replacement remedy and a consequential damage exclusion as discrete and independent contractual provisions. Accordingly, the consequential damage exclusion is valid unless it is unconscionable.
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
We emphasize, however, that our decision is grounded in a commercial setting involving a contract between two merchants of relatively equal bargaining power and is not intended to establish that a consequential damage bar survives a failure of the limited repair remedy in consumer transactions that involve relatively commonplace or uncomplicated products such as automobiles and trucks.
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
We anticipate that such consumer transactions will continue to be governed by the principles enunciated in Jacobs v. Rosemount Dodge-Winnebago South, 310 N.W.2d 71 (Minn.1981), and Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349 (Minn.1977).
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
Under the circumstances of this case, where the parties were both merchants and there was no great disparity in their bargaining strength and where the claim is for commercial loss, there is nothing that makes it unconscionable to enforce the allocation of risk incorporated into the parties’ contract. The consequential damages exclusion is valid and enforceable.
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
(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.
The words that state the rule
This statute provides in part: “(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section 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 chapter.” (Italics supplied.)
The words that state the rule
Minn.St. 336.2-719(2) provides that “[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this chapter.” Where a buyer has justifiably revoked acceptance, this clause precludes the invocation of a clause limiting liability with respect to the recovery of incidental damages. To withhold incidental damages from a buyer revoking acceptance is to make cancellation of the contract a less than adequate remedy.
The words that state the rule
Plaintiff appeals from an order 1 of the district court awarding him $600 damages for breach of warranty resulting from defects in his new Saab automobile which defendants failed to correct.
The words that state the rule
Plaintiff is entitled to recover the purchase price and $116.30 incidental damages upon tender of the Saab to defendants. Reversed and remanded with instructions to enter judgment for plaintiff in accordance with this opinion.
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
Although we agree with the trial court that the consequential damage exclusion effectively barred claims for such dam *270 ages, we believe the trial court erred in denying Franz the opportunity to prove damages resulting from the construction of the “clean room.” In eases of breach of warranty the cost of putting the offending product in place is a direct damage.
- case534 N.W.2d 261International Financial Services, Inc. v. FranzMinn.decided 1995read it at the source ↗
The words that state the rule
Reversed in part, affirmed in part, and remanded to the trial court for determination of the damages, if any, resulting from the preparation of the facility required for housing the Gerber Model 3235 photoplotter.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.