Will a Utah court enforce a repair-or-replace or other exclusive remedy clause in a sale of goods?
Yes if expressly agreed to be exclusive, and a separate exclusion of consequential damages can survive that remedy's failure. Subject to subsections (2) and (3) and to § 70A-2-718 on liquidation and limitation of damages, the agreement may provide remedies in addition to or in substitution for the Code's and may limit the measure of damages, as by limiting the buyer to return and refund or to repair and replacement, but resort to the agreed remedy is optional unless it is expressly agreed to be exclusive, in which case it is the sole remedy. Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, the Code's remedies are available; consequential damages may be limited or excluded unless unconscionable, and limiting consequential damages for injury to the person with consumer goods is prima facie unconscionable while limiting damages where the loss is commercial is not (§ 70A-2-719). In Schurtz v. BMW of North America (1991, a three to two decision) the Utah Supreme Court read subsections (2) and (3) independently: where the contract carries both a limited warranty and an express limitation of incidental and consequential damages, the failure of the limited remedy opens the Code's other remedies but not incidental and consequential damages, unless the court first finds that limitation unconscionable.
The trap
A remedy clause that does not say 'exclusive' (or equivalent) is only an extra option. The failure of a repair or replace remedy does not by itself free the buyer from a separate consequential damages exclusion: under Schurtz the buyer has to show that exclusion is unconscionable, which the court decides case by case on the disparity in bargaining power, the negotiation process and whether the contract was one of adhesion, and which it said a trial court will generally find in consumer settings and not in commercial ones. A consequential-damages exclusion that is valid commercially is prima facie unconscionable for personal injury from consumer goods. The section is also subject to § 70A-2-718, which voids a term fixing unreasonably large liquidated damages as a penalty.
7 authorities
- statuteUtah Code § 70A-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, 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 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.
- statuteUtah Code § 70A-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 act. 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.
- statuteUtah Code § 70A-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.
The words that state the rule
The fundamental question before us is whether the trial court correctly held that the failure of essential purpose of a repair or replace provision in a limited warranty does not affect the validity of a companion provision in the warranty precluding incidental and consequential damages or, in other words, that subparts (2) and (3) should operate independently.
The words that state the rule
Under Devore , if the seller provides a limited warranty under subpart (2) and that warranty fails of its essential purpose, all damages provided in the act are available, including incidentals and consequen-tials. However, if the contract containing the limited warranty also contains a limitation of incidental and consequential damages, then upon proof of the failure of the limited warranty of its essential purpose, the buyer may be entitled to other remedies provided in the act, but not incidental and consequential damages, unless the court first finds that that limitation would be unconscionable.
The words that state the rule
Under such an approach, the trial court confronted with an issue of unconscionability takes into account any disparities in bargaining power between the parties, the negotiation process, if any, and the type of contract entered into by the parties, specifically addressing whether the contract was one of adhesion. As noted above, in practice after these factors are examined and weighed, a trial court will generally find that provisions limiting incidental and consequential damages are unconscionable in consumer settings and conscionable in commercial settings.
The words that state the rule
In light of the foregoing, we conclude that the trial court erred in ruling on the motion for partial summary judgment that, as a matter of law, Schurtz was not entitled to incidental and consequential damages. Although the trial court correctly held that subparts (2) and (3) of section 2-719 are to be read independently, it erred by not then determining whether the facts of this case warrant a finding that the limitation of incidental and consequential damages is unconscionable under subpart 2-719(3).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.