Will our repair-or-replace-only remedy and consequential-damages exclusion hold in Nebraska?
Only while the repair actually works, and the damages exclusion is separately attackable as unconscionable. Nebraska follows the Code on both, and the Nebraska UCC is not in the statutes we publish, so both rules come from Nebraska opinions quoting it. On failure of essential purpose, John Deere Co. v. Hand states the rule and the consequence in one breath: “Where the seller is given a reasonable chance to correct defects and the equipment still fails to function properly, the limited remedy of repair or replacement of defective parts fails of its essential purpose”, and then “In such an event, the buyer may then invoke any remedies available under the Uniform Commercial Code, including breach of warranties of merchantability or fitness for a particular purpose”, adding, and this is the part that costs money, “The same would be true regarding provable consequential damages, even though specifically excluded by the written warranty.” What reads § 2-719 against its own purpose is the Official Comment, which the Court quotes, and it is published with a broken bracket and a space inside the word, “ [W] here an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this article.” The Code sentence it construes is § 2-719(2), which the Court quotes too: “Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act.” On the exclusion itself, Koperski v. Husker Dodge, Inc. locates the authority (“The authority to limit a *47 buyer’s remedies under a warranty is found in Neb. U.C.C. § 2-719 (Reissue 1971)”), and Adams v. American Cyanamid Co. quotes the test: “Consequential damages may be limited or excluded unless the limitation or exclusion is *353 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 trap
Nebraska will strike a commercial consequential-damages exclusion, notwithstanding the sentence that says a commercial limitation is not prima facie unconscionable. Adams did exactly that to a farmer's crop loss, a commercial loss by the statute's own words, finding the clause substantively unconscionable because it “would leave the herbicide user without any substantial recourse for his loss” and procedurally unconscionable because the buyer could not have bought any manufacturer's herbicide without the same exclusion, could not bargain over the preprinted label and could not test the product first: “Having found the exclusion both substantively and procedurally unconscionable, we decline to enforce it.” Not prima facie unconscionable means the buyer has to prove it, not that it cannot be proved. Second trap: unconscionability has to be PLEADED. Adams applies Guaranteed Foods v. Rison (“the issue of unconscionability must be pleaded in order to be considered by the court”), so a defendant who meets the argument for the first time at trial, or a plaintiff who never pleads it, loses the point on procedure. Third: the exclusion rides on the disclaimer. Adams holds “Because we have held that the disclaimer of the warranty is conspicuous as a matter of law, we also hold that the limitation of remedies is conspicuous”: the two stand or fall together on form. That the receipt problem in the warranty-disclaimer row therefore reaches this clause too is an inference, not a holding: nothing read for this rule decides it. Fourth, and it is the drafting point: John Deere makes the consequential-damages exclusion fall WITH the failed repair remedy rather than surviving it. If you want the exclusion to have an independent life in Nebraska, nothing in the authorities read here says it will; John Deere says the opposite on its facts.
18 authorities
The words that state the rule
Where the seller is given a reasonable chance to correct defects and the equipment still fails to function properly, the limited remedy of repair or replacement of defective parts fails of its essential purpose.
The words that state the rule
In such an event, the buyer may then invoke any remedies available under the Uniform Commercial Code, including breach of warranties of merchantability or fitness for a particular purpose. The same would be true regarding provable consequential damages, even though specifically excluded by the written warranty.
The words that state the rule
The Comment under § 2-719 further provides, in referring to subsection (2): *554 “ [W] here an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this article.
The words that state the rule
The purpose of an exclusive remedy of ‘‘repair or replacement” from a buyer's viewpoint is to give him goods which conform to the contract within a reasonable time after a defect is discovered.
The words that state the rule
The clause provides both a remedy to the buyer, whereby he may obtain goods conforming to the contract, and a limitation of the liability of the manufacturer.
The words that state the rule
Consequential damages may be limited or excluded unless the limitation or exclusion is *353 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
We conclude that under the circumstances presented here, the exclusion is procedurally unconscionable. Having found the exclusion both substantively and procedurally unconscionable, we decline to enforce it.
The words that state the rule
In the present case, the limitation of consequential damages clause would leave the herbicide user without any substantial recourse for his loss.
The words that state the rule
Guaranteed Foods v. Rison, 207 Neb. 400, 407 , 299 N.W.2d 507, 512 (1980), states that “the issue of unconscionability must be pleaded in order to be considered by the court.”
The words that state the rule
Because we have held that the disclaimer of the warranty is conspicuous as a matter of law, we also hold that the limitation of remedies is conspicuous.
The words that state the rule
The authority to limit a *47 buyer’s remedies under a warranty is found in Neb. U.C.C. § 2-719 (Reissue 1971), which provides in pertinent part as follows:
The words that state the rule
Limitations of remedy are governed by § 2-719(3), which states that “ [consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable.”
The words that state the rule
However, §2-719(2) also provides: “Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act.”
The words that state the rule
In this case it is clear that there is some evidence that Deere may not have effectively performed its obligation to repair the equipment properly and within a reasonable time. There is, therefore, a question of fact to be determined by the trier of fact as to whether the limited warranties have failed in their purpose so as to deprive Hand of the substantial value of the bargain and thus give Hand the right to pursue other remedies provided by the Uniform Commercial Code.
The words that state the rule
We conclude that the provision excluding consequential damages is substantively unconscionable. Substantive unconscionability in a commercial setting, standing alone, is insufficient to void a contract or clause.
The words that state the rule
V. CONCLUSION We reverse that portion of the district court’s judgment overruling the defendant’s motions for directed verdict on the strict liability count. We affirm that portion of the district court’s judgment overruling the defendant’s motions for directed verdict and for judgment notwithstanding the verdict on the Adamses’ theory of recovery based on breach of the implied warranty of merchantability, but we remand because the district court improperly submitted the issue of the disclaimer’s conspicuousness to the jury. Affirmed in part, and in part reversed AND REMANDED FOR A NEW TRIAL.
The words that state the rule
An agreement between parties may provide remedies in addition to, or in substitution for, those remedies provided in article 2 of the U.C.C. Neb. U.C.C. § 2-719(1)(a) (Reissue 2001). 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. § 2-719(1)(b). Section 2-719(1)(b) creates a presumption that contract clauses prescribing remedies are cumulative rather than exclusive. § 2-719, comment 2. If the parties intend that the contract term describes the sole remedy under the contract, this must be clearly expressed.
The words that state the rule
In the present case, the parties’ purchase agreement provides that Albrecht, as the buyer, may reject any cattle that are not in a merchantable condition. However, the agreement does not describe this remedy as the sole remedy under the contract. In the absence of such clear expression of exclusivity, a remedy is presumed cumulative—not exclusive—under § 2-719(1)(b).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.