Opinion ID: 2024672
Heading Depth: 3
Heading Rank: 1

Heading: Failure of Essential Purpose.

Text: Hall Farms argues that limiting recovery to the cost of the seed fails of its essential purpose because: (1) the presence of the bacteria was a novel circumstance not contemplated by the parties; and (2) Hall Farms bargained for seed which would produce a money crop, it will be deprived of the substantial value of its bargain if the limitation is enforced. We hold that limitation on the measure of damages does not fail of its essential purpose. Commentators have suggested that § 2-719, as it relates to failure of essential purpose, is not concerned with arrangements which were oppressive at the inception which is a question of unconscionability, but with the application of an agreement to novel circumstances not contemplated by the parties. White & Summers, § 10-12. In addition, they have suggested that this provision should be triggered when the remedy fails of its essential purpose, not the essential purpose of the UCC, contract law, or of equity. Id. One author suggests that the method used to decide whether a particular limitation fails of its essential purpose is to identify the purpose underlying the provision and determine whether application of the remedy in the particular circumstances will further that purpose. If not, then, and only then, is there a failure of essential purpose. Jonathan A. Eddy, On The Essential Purposes of Limited Remedies: The Metaphysics of UCC § 2-719(2), 65 Cal.L.Rev. 28, 36-40 (1978). Thus, for example, where the sale of a car was accompanied by the exclusive remedy of repair and replacement of defective parts but attempted repairs were ineffective in correcting the problems, the purchaser was entitled to recover an amount in excess of the cost of repairs. Riley v. Ford Motor Co., 442 F.2d 670 (5th Cir.1971). The exclusive remedy of repair and replacement of defective parts failed of its essential purpose because the car could not be repaired so as to operate free of defects as promised in the express warranty. Id. Petoseed. Here, the label on the Petoseed can stated in pertinent part: 2. LIMITATION OF LIABILITY: Purchaser's exclusive compensation for loss or damage arising from purchase or use of seed from Petoseed Co., Inc., shall be limited to an amount equal to the purchase price of the seed. There shall not be included any amount for incidental or consequential damages, nor for amounts expended in using or growing such seed, nor for harvesting the produce of such seed. This limitation of liability shall be applicable to any claims presented to Petoseed, regardless of the legal theory forming the basis of such claim, and whether such theory involves negligence, contractual liability, or otherwise. This provision clearly states that liability is limited to the purchase price of the seed, and does not allow any amount for incidental or consequential damages such as Hall Farms' lost profits. Obviously, the purpose of the limitation was to limit contract liability to the purchase price of the seed. The contract term has not failed of its essential purpose; rather, enforcement of the limitation will serve precisely the purpose intended. Rispens. Rispens' contract conditions on the reverse side of the invoice provided: Paragraph 10... . In [any] event, however, the seller shall not be liable to the purchaser for any loss or damages in a sum greater than the invoice price of the individual lot of seed which is the cause of the complaint, arbitration or action at law. Paragraph 11... . Our liability, in all instances, is limited to the purchase price of the seed. The intent of this limitation of liability is also clear. Limiting any warranty recovery to the price of the seed serves the intended purpose of the limitation. We do not accept Hall Farms' assertion that the presence of the watermelon fruit blotch was a novel circumstance not contemplated by the parties because the fact that the seeds might not conform to the warranties is a possibility that should occur to both buyer and seller. As to the benefit of the bargain argument, Hall Farms bargained for seed, not, as its argument suggests, for a full-grown crop of watermelons. If Hall Farms deemed recovery of the purchase price inadequate, then it was free to bargain for a more comprehensive remedy. Therefore, the terms limiting Hall Farms' remedy against Petoseed to the purchase price of the seeds have not failed of their essential purpose.