Limitation of Remedies

• Author: autor
• Pages: 241-251

241

Chapter 17. Limitation of Remedies

17.1. Freedom of Contract. Under the principle of “freedom of contract,” the parties to a

contract may agree to expand or limit otherwise available remedies. However, as we will discuss

in more detail below, the principle of freedom of contract is not without limitations. For

example, an unconscionable limitation of a remedy is not enforceable.

17.1.1. Parties to a contract may agree to expand or limit remedies otherwise available

(§ 2-719(1)(a)). For example, a pizza restaurant owner who orders a custom-built brick

oven may agree to the limited remedy of repair or replacement if the oven doesn’t work

properly.

Problem 17-1. Section 2-709 allows a seller to sue for the purchase price in only a few

situations. Can the buyer agree to a clause allowing an action for the price in circumstances other

than those listed in § 2-709?

17.1.2. Parties to a contract may agree to expand or limit damages (§ 2-719(1)(a)). For

example, the parties can agree to cap damages to the purchase price of the goods

involved.

Problem 17-2. The various seller remedy provisions of the UCC, such as § 2-708, limit a seller’s

damages to direct and incidental damages; consequential damages are excluded. Under the

principle of “freedom of contract,” will an agreement allowing a seller to seek consequential

damages be enforced?

17.1.3. Parties to a contract may agree (i) to specify how damages will be calculated, or

(ii) to the liquidation of damages (§ 2-718(1)). For example, if a supplier fails to timely

deliver a pre-fabricated concrete form necessary to complete construction of a bridge, the

contractor and supplier can agree to liquidated damages of $500 per day of delay.

17.1.4. Parties to a contract may agree to expand or limit warranties otherwise

applicable. By limiting a warranty, you, in effect, limit a remedy. For example, a dealer

selling a used car may properly disclaim any and all express and implied warranties

relating to the car.

17.2. Liquidated Damages Clauses. Both common law and the UCC allow the parties to

determine in advance what damages are payable in the event of breach, referred to as a

“liquidated damages” clause. However, limitations apply.