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U.C.C. § 2-715 provides that consequential damages may be recovered by the buyer for any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise. There need not be a conscious acceptance of an insurer's liability on the seller's part, nor is his obligation for consequential damages limited to cases in which he fails to use due effort in good faith. Thus, any seller who does not wish to take the risk of consequential damages has available U.C.C. § 2-719 on contractual limitation of remedy. Also, the material alteration analysis involves the two separate components of surprise or hardship.
Plaintiff Architectural Glass & Metal Company was a corporation engaged in the business of installing and glazing commercial glass products. Plaintiff was a subcontractor on a construction site. Plaintiff then ordered a glass product from defendant Falconer Glass Industries Inc. that plaintiff needed to install within a certain time in order to avoid incurring substantial penalties. Defendant sent plaintiff a standard form to confirm the order. The form contained fine print on the reverse which limited consequential damages. However, the glass delivered was defective. Hence, plaintiff incurred costs in installing and then replacing the defective glass and sought recovery of consequential damages for an alleged breach of warranty by defendant under the Uniform Commercial Code.
Could plaintiff recover consequential damages for an alleged breach of warranty by defendant?
The court entered judgment in favor of plaintiff. In this case, the court held that the standard used to resolve the question of whether the terms in defendant's form became part of the contract was whether it would result in surprise or hardship. And because plaintiff should have expected its suppliers to attempt to exclude consequential damages, the court held it could not show surprise. However, the court found that the shift in liability would impose a hardship on plaintiff and that such hardship would materially alter the original agreement. Accordingly, the terms in defendant's form did not become part of the contract under U.C.C. § 2-207 and plaintiff was entitled to consequential damages.