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Law School Case Brief

Kearney & Trecker Corp. v. Master Engraving Co. - 107 N.J. 584, 527 A.2d 429 (1987)

Rule:

It is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract. Thus any clause purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed. Similarly, under subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article. 

Facts:

Plaintiff seller filed suit against defendant buyer to recover consequential damages under the Uniform Commercial Code, N.J. Stat. Ann. § 12A:1-101 et seq. for the cost of service calls made after the warranty had expired; defendant buyer filed a counterclaim for consequential damages due to the failure of the equipment to perform. The trial court entered judgment for the buyer. The  Superior Court, Appellate Division (New Jersey) affirmed the decision of the trial court assessing damages against the seller on defendant buyer's counterclaim. The seller appealed.

Issue:

Did the trial court err when it ruled that the Uniform Commercial Code, N.J.S.A. 12A:1-101 to 10-106, did not permit the enforcement of a contractual exclusion of consequential damages where the buyer's limited remedy authorized in the contract of sale has failed to achieve its essential purpose? 

Answer:

Yes

Conclusion:

The Supreme Court of New Jersey reversed the judgment of the lower courts and remanded the case to the trial court for a new trial. It concluded that N.J. Stat. Ann. § 12A:2-719, a provision of the Uniform Commercial Code (U.C.C.), N.J. Stat. Ann. § 12A:1-101 et seq., did not require the invalidation of an exclusion of consequential damages when limited contractual remedies failed of their essential purpose. It stated that it was fully satisfied that the availability of damages for breach of the repair and replacement warranty under N.J. Stat. Ann. § 12A:2-714(2), combined with the return and refund provision contained in the contract of sale, adequately fulfilled the U.C.C.'s mandate that at least minimum adequate remedies be available when a limited remedy failed to achieve its purpose.

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