Source: https://drivingvalue.com/2019/04/10/damages-and-disclaimers-the-finale/
Timestamp: 2019-04-24 03:00:14+00:00

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← Damages and Disclaimers cont’d.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable . . .
Relying on § 2-719(2), warranty plaintiffs generally contend that, if a limited warranty fails of its essential purpose, they are entitled to recover incidental and consequential damages. The courts are split on the issue of the proper interplay between subsections (2) and (3) of § 2-719. The majority trend is to construe § 2-719 in a manner consistent with its express terms and underlying policies and purposes. Under § 2-719(3), a damages exclusion is enforceable so long as it is not unconscionable.
In Rheem Mfg. v. Phelps Heating & Air Conditioning, the Indiana Supreme Court recognized that two lines of interpretation had developed under § 2-719. One line holds that the enforceability of a consequential damages exclusion is “dependent on whether a limited remedy fails of its essential purpose.” The second line takes “an ‘independent’ view and reason[s] that because § 2-719(2) and (3) are separate subsections with separate language and separate standards, the failure of a limited remedy has no effect on an exclusion of consequential damages.” Rheem Mfg. holds that the “independent” view is the correct one.
… harmonizes the language in § 2-719(2) that “remedy may be had as provided in [the U.C.C.]” with the unconscionability test imposed by § 2-719(3).” The “remedy” clause in § 2-719(2), which is crucial to the dependent argument, must be taken in its fullest sense. [Citation omitted.] On its face, the phrase refers to all of the UCC, not merely its remedy provisions. [Footnote omitted.] Therefore, “remedy may be had” under subsection (2) only to the extent that it is not limited by subsection (3), which is part of [the Code].
The Code’s policies, not a mechanical application of its damages provisions, should be utilized in actions claiming breach of a warranty to repair or replace. The courts should fashion a measure of damages that produces a result that (1) is consistent with the U.C.C.’s aim of placing the aggrieved party in as good a position as he would have been in but for the breach, and (2) comports with the warranty promise. Because it is a promise to repair that has been breached, these aims are met by measuring damages in terms of repair cost. And consistent with the Code’s policy of allowing the parties to shape their contractual relationship, the courts should enforce damages limitations and disclaimers unless unconscionable. Applying an appropriate measure of damages and enforcing proper damages disclaimers will promote fairness and efficiency. Damages awards will more accurately reflect the economic harm sustained, and will be more predictable. This in turn will facilitate prompt dispute resolution.
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