Is this repair-or-replace-only remedy with a consequential-damages exclusion going to hold in a California goods contract?
Conditionally, and § 2719(3)'s burden sentences decide who must prove what. The agreement may substitute remedies and limit or alter the measure of damages, but resort to a stated remedy is OPTIONAL unless the remedy is expressly agreed to be exclusive, and where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the code (Com. Code § 2719(1)-(2)). Consequential damages may be limited or excluded unless the limitation is unconscionable, but in California, limitation of consequential damages for INJURY TO THE PERSON in the case of consumer goods 'is invalid unless it is proved that the limitation is not unconscionable', while limitation where the loss is COMMERCIAL 'is valid unless it is proved that the limitation is unconscionable' (§ 2719(3)). Section 2719(1) opens by making all of this subject to subdivisions (2) and (3) of its own section and to "the preceding section on liquidation and limitation of damages": a liquidated-damages clause in the same goods contract is governed by § 2718(1), which sends it to Civil Code § 1671 (valid unless the party attacking it proves it was unreasonable when made (§ 1671(b)), outside the consumer cases in § 1671(c)), and if it fails § 1671, remedy may be had as provided in the division.
The trap
Section 2719(3) allocates the burdens in terms: a limitation of consequential damages for injury to the person in the case of consumer goods 'is invalid unless it is proved that the limitation is not unconscionable' (the clause starts dead and the party defending it carries the burden of resurrecting it), while a limitation where the loss is commercial 'is valid unless it is proved that the limitation is unconscionable', which puts the burden on the party attacking it. The older trap still applies too: if the contract does not say the stated remedy is EXCLUSIVE, resort to it is optional and it adds a remedy instead of replacing any. That sentence is § 2719(1)(b) and it does not govern the consequential-damages exclusion, which is § 2719(3).
3 authorities
- statuteCal. Com. Code § 2719enactment date not established
The words that state the rule
(1) Subject to the provisions of subdivisions (2) and (3) of this section and of the preceding section on liquidation and limitation of damages, (a) The agreement may provide for remedies in addition to or in substitution for those provided in this division and may limit or alter the measure of damages recoverable under this division, 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 (b) 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) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this code. (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 invalid unless it is proved that the limitation is not unconscionable. Limitation of consequential damages where the loss is commercial is valid unless it is proved that the limitation is unconscionable.
- statuteCal. Com. Code § 2718enactment date not established
The words that state the rule
(1) Damages for breach by either party may be liquidated in the agreement subject to and in compliance with Section 1671 of the Civil Code. If the agreement provides for liquidation of damages, and such provision does not comply with Section 1671 of the Civil Code, remedy may be had as provided in this division. (2) Where the seller justifiably withholds delivery of goods because of the buyer’s breach, the buyer is entitled to restitution of any amount by which the sum of his or her payments exceeds: (a) The amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with subdivision (1), or (b) In the absence of such terms, 20 percent of the value of the total performance for which the buyer is obligated under the contract or five hundred dollars ($500), whichever is smaller. (3) The buyer’s right to restitution under subdivision (2) is subject to offset to the extent that the seller establishes: (a) A right to recover damages under the provisions of this chapter other than subdivision (1), and (b) The amount or value of any benefits received by the buyer directly or indirectly by reason of the contract. (4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subdivision (2); but if the seller has notice of the buyer’s breach before reselling goods received in part performance, his or her resale is subject to the conditions laid down in this division on resale by an aggrieved seller (Section 2706).
- statuteCal. Civ. Code § 1671enactment date not established
The words that state the rule
(a) This section does not apply in any case where another statute expressly applicable to the contract prescribes the rules or standard for determining the validity of a provision in the contract liquidating the damages for the breach of the contract. (b) Except as provided in subdivision (c), a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made. (c) The validity of a liquidated damages provision shall be determined under subdivision (d) and not under subdivision (b) where the liquidated damages are sought to be recovered from either: (1) A party to a contract for the retail purchase, or rental, by such party of personal property or services, primarily for the party’s personal, family, or household purposes; or (2) A party to a lease of real property for use as a dwelling by the party or those dependent upon the party for support. (d) In the cases described in subdivision (c), a provision in a contract liquidating damages for the breach of the contract is void except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.