If our repair-or-replace remedy fails, does the consequential-damages exclusion fall with it?
No, not without more: Virginia treats the two clauses as independent. In Envirotech the Supreme Court of Virginia held that "the consequential damages disclaimer in this case should be treated as an independent contractual provision, valid unless unconscionable", explaining: "A number of logical, sound reasons mandate why, without more, the failure of a limited remedy of repair should not invalidate a wholly distinct clause of the contract excluding recovery for consequential damages. In the first place, the substantive content of subsections (2) and (3) of the statute are distinctly different. Subsection (2) focuses on failure of essential purpose while subsection (3) depends on a judicial determination of unconscionability." Virginia also does not require a remedy limitation to be conspicuous: "We adopt what we believe to be the sounder and better reasoned rule that conspicuous language is not required in a writing to create a valid limitation of remedy" (Flintkote), unlike a warranty exclusion under Va. Code § 8.2-316(2). The two subsections, as Envirotech sets them out, read: “(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act. “(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable . . . .” And the result followed from the independence: "we conclude that the clauses are valid and enforceable. Thus, the trial court erred in submitting Halco’s claim for consequential damages to the jury; judgment in favor of Envirotech should have been entered at the conclusion of the evidence." The judgment for Halco was annulled, final judgment was entered for Envirotech in the Supreme Court, and Envirotech's own counterclaim judgment was affirmed: "Affirmed in part, reversed in part, and final judgment."
The trap
The Virginia trap runs the other way from the drafting advice most states invite. Because § 8.2-719(2) and § 8.2-719(3) are independent, the consequential-damages exclusion survives the failure of the repair remedy, but it survives only until someone shows it is UNCONSCIONABLE, which is a different and separately litigable attack. Envirotech itself turned partly on an unchallenged trial-court finding that the principals were sophisticated businessmen with access to legal counsel; between parties who are not, the same clause has a live unconscionability question, and § 8.2-719(3)'s second sentence pre-answers one slice of it: "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." And Flintkote's conspicuousness holding is confined to the remedy limitation: the warranty disclaimer sitting next to it still has to be conspicuous. Nor is conspicuousness the only hurdle the limitation has to clear: Flintkote reversed the warranty judgments and remanded because "the testimony of Kidwell and Wilkinson’s president raises an issue of fact whether the limitation of remedy became a part of the bargain between the parties", so a limitation that no one had to set in large type still has to be shown to have become part of the bargain, and on that record it was a jury question.
10 authorities
The words that state the rule
A number of logical, sound reasons mandate why, without more, the failure of a limited remedy of repair should not invalidate a wholly distinct clause of the contract excluding recovery for consequential damages. In the first place, the substantive content of subsections (2) and (3) of the statute are distinctly different. Subsection (2) focuses on failure of essential purpose while subsection (3) depends on a judicial determination of unconscionability.
The words that state the rule
We adopt what we believe to be the sounder and better reasoned rule that conspicuous language is not required in a writing to create a valid limitation of remedy.
The words that state the rule
The question then becomes whether the *593 failure of the essential purpose of the limited remedy automatically results in abrogation of the consequential damages disclaimer. We hold that it does not. Although there is a split of authority on this issue, see Chatlos Systems v. National Cash Register Corp., 635 F.2d 1081 , 1086 (3rd Cir. 1980), cert. dismissed, 457 U.S. 1112 (1982), we conclude that the consequential damages disclaimer in this case should be treated as an independent contractual provision, valid unless unconscionable.
The words that state the rule
Noting that the principals of the parties to this contract were “sophisticated businessmen with access to legal counsel,” the trial court ruled that the contract was not unconscionable, a ruling Halco does not attack.
The words that state the rule
Unlike Code § 8.2-316(2) 1 which requires conspicuous language to exclude or modify the implied warranties of merchantability or of fitness for a particular purpose, Code § 8.2-719 2 , which expressly *569 recognizes that the contracting parties may bargain for a limitation of remedy, contains no such requirement.
The words that state the rule
UCC § 8.2-719, dealing with contractual modification or limitation of remedy, provides, in part, “(1) Subject to the provisions of subsections (2) and (3) of this section . . . (a) the agreement may provide for remedies in addition to or in substitution for those provided in this title and may limit or alter the measure of damages recoverable under this title, 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 “(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act. “(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable . . . .”
The words that state the rule
Consequently, in view of the unchallenged ruling by the trial court that the damage exclusion clauses were not unconscionable at inception of the contract and there being no circumstances *594 in the failure by defendant to perform that make it unconscionable to enforce the parties’ allocation of risk, we conclude that the clauses are valid and enforceable. Thus, the trial court erred in submitting Halco’s claim for consequential damages to the jury; judgment in favor of Envirotech should have been entered at the conclusion of the evidence.
The words that state the rule
Because the testimony of Kidwell and Wilkinson’s president raises an issue of fact whether the limitation of remedy became a part of the bargain between the parties, we hold that the trial court erred *570 in refusing to submit that issue to the jury. Therefore, we will reverse the judgment against Flintkote in favor of Wilkinson and Kidwell on their breach of warranty claims and remand those claims for a new trial.
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
For these reasons, the judgment in favor of Halco on the main claim will be annulled and final judgment will be entered here for *595 Envirotech. The judgment in favor of Envirotech on the counterclaim will be affirmed. Affirmed in part, reversed in part, and final judgment.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.