Will this clause limiting our remedy to repair-or-replace (or otherwise capping remedies) hold up under Montana's UCC?
Yes, for a sale of goods, on three conditions the statute itself states. § 30-2-719(1), MCA opens “[s]ubject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages”, so two of the three conditions apply whatever the clause says. The preceding section it defers to is § 30-2-718, under which damages “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”, and “[a] term fixing unreasonably large liquidated damages is void as a penalty.” Within those limits the subsection lets the agreement “provide for remedies in addition to or in substitution for those provided in this chapter and … limit or alter the measure of damages recoverable…, 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 resort to that remedy is optional “unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.” Two limits then apply regardless of drafting: FIRST, “Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this code” (§ 30-2-719(2)), so a repair-or-replace clause that cannot actually make the buyer whole (the seller can't or won't fix the defect) stops being the sole remedy and the buyer regains the UCC's ordinary remedies. SECOND, consequential damages may be limited or excluded “unless the limitation or exclusion is unconscionable,” and “[l]imitation 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” (§ 30-2-719(3)): a consumer personal-injury consequential-damages exclusion starts out presumptively bad; a commercial-loss exclusion starts out presumptively fine.
The trap
Do not assume a court will treat your “exclusive remedy” clause as exclusive by default: § 30-2-719(1)(b) requires the exclusivity be EXPRESSLY agreed; silence makes the stated remedy merely optional, additional to the Code's ordinary remedies, not a cap on them. Beneficial Commercial Corp. v. Cottrell shows the consequence of not invoking the statute at all: the court noted the parties “could have further limited or modified the remedies available…either party upon breach (see section 30-2-719, MCA, and 2-719, UCC), they did not do so”, and so full UCC remedies applied. § 30-2-719(2)'s “fail of its essential purpose” doctrine is a real, unwaivable escape hatch for the buyer, and it is also almost entirely untested in Montana. The phrase “fail of its essential purpose” appears in NO published Montana opinion at any level, so there is no Montana decision drawing the line on when a repair-or-replace remedy has failed; the words are in the statute and nowhere in the case law. Kopischke v. First Continental Corp. is sometimes offered for the point and does not reach it: Kopischke quotes § 30-2-719(3) and connects it to an “as is” disclaimer under § 30-2-316, and does not mention subsection (2) at all.
7 authorities
- statuteMont. Code Ann. § 30-2-719enactment date not established
The words that state the rule
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.
- statuteMont. Code Ann. § 30-2-719enactment date not established
The words that state the rule
Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this code.
- statuteMont. Code Ann. § 30-2-719enactment 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
Although the parties could have further limited or modified the remedies available t.o either party upon breach (see section 30-2-719, MCA, and 2-719, UCC), they did not do so.
- statuteMont. Code Ann. § 30-2-719enactment date not established
The words that state the rule
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 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
The words that state the rule
This is especially the case in light of the legislature’s passage of section 30-2-719(3), MCA, which provides: “(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injuiry to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.”
- statuteMont. Code Ann. § 30-2-718enactment 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 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.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.