Also known as: fail of its essential purpose · failing of its essential purpose · failed of its essential purpose · remedy fails of its essential purpose
Written by attorneys — see sources below.
A circumstance in which an exclusive or limited contractual remedy does not provide the buyer with the substantial value of the bargain. The buyer may then pursue the full range of remedies otherwise available under the UCC.
CityCare Hospital purchased a surgical robot from Meditech under a contract that limited remedies to repair or replacement. The robot malfunctioned repeatedly during operations, and Meditech's multiple repair efforts over several months left the equipment unreliable. Because the limited remedy never delivered a functioning machine, CityCare may recover full breach-of-warranty damages.
Bishop Logging bought specialized swamp equipment from John Deere under a contract limiting remedies to repair. After repeated unsuccessful repair attempts the equipment still could not operate in the intended conditions. The limited remedy therefore failed of its essential purpose, allowing Bishop Logging to pursue other UCC remedies for the nonconforming goods.
Bishop Logging Company, a family-owned logging contractor formed in 1980 in South Carolina, traditionally harvested pine timber. In 1988, after its main customer Stone Container Corporation decided to expand hardwood production, Bishop Logging began investigating the feasibility of a fully mechanized hardwood swamp logging operation to meet increased demand while minimizing labor and accident risks. The planned system included a feller-buncher to cut timber, a mobile stroke delimber to process felled trees, and grapple skidders to remove logs from the swamp. Bishop Logging approached John Deere Industrial Equipment Company, Construction Equipment Sales, Inc., and Denharco, formerly known as Hurricana, to determine if existing equipment could be modified for swamp conditions. Adrian Bishop, the company's president, investigated equipment from several manufacturers and observed demonstrations of a Hurricana delimber in Maine and grapple skidders in the Salkehatchee swamp. No fully mechanized swamp logging package was available for purchase at the time. Bishop Logging ultimately purchased a Model 693D excavator equipped with a Koehring feller-buncher, a Model 690D excavator with an attached Hurricana stroke delimber, and three Model 548D grapple skidders with oversized tires. The gross sales price of the machinery totaled $608,899. John Deere provided its standard New Equipment Warranty, which limited remedies to repair or replacement of defective parts and disclaimed warranties of suitability, but agreed to extend the warranties despite the modifications and unusual swamp use. The equipment experienced numerous mechanical problems shortly after being placed in operation in the swamp. John Deere, through CES, performed over $110,000 in warranty repairs. Bishop Logging filed suit against John Deere, CES, and Denharco alleging fraud, negligent misrepresentation, and breach of express warranty. Denharco was dismissed after filing for bankruptcy. The jury returned a verdict for Bishop Logging on all claims against John Deere, awarding $1,000,000 in actual damages and $1,200,000 in punitive damages. The trial court denied John Deere's motions for judgment notwithstanding the verdict, new trial, and new trial nisi. John Deere appealed the judgment to the Court of Appeals of South Carolina. The appeal was heard on December 7, 1994, and decided on February 13, 1995, with rehearing denied on March 31, 1995.
View caseA repair-or-replacement remedy fails of its essential purpose when repeated repair attempts do not produce conforming goods within a reasonable time. The buyer then regains access to all UCC remedies.
Supporting sources
No. Failure of essential purpose is a distinct inquiry from unconscionability. A conscionable repair clause still fails of its essential purpose if the seller cannot cure the defect after a reasonable opportunity.
Supporting sources
The UCC requires that every sales contract provide at least a minimum adequate remedy. When an agreed limitation leaves the buyer without the substantial value of the bargain, the limitation yields to the general remedial provisions.
…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 Act. (3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages…