Also known as: fails of its essential purpose · failed of its essential purpose · failing of its essential purpose · essential purpose failure
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine under which an exclusive or limited contractual remedy becomes unenforceable when circumstances prevent it from delivering the substantial value of the bargain to the aggrieved party. The buyer may then pursue any remedies otherwise available under the UCC.
CityCare Hospital purchased a surgical robot from Meditech under a contract limiting remedies to repair or replacement. The robot malfunctioned repeatedly during procedures and Meditech's technicians could not fix it after months of attempts. CityCare may now recover full breach-of-warranty damages because the repair remedy left the hospital without a functioning machine.
Bishop Logging bought specialized equipment from John Deere under an exclusive repair-or-replacement clause. The machines suffered repeated breakdowns that the seller could not cure despite multiple service calls. Bishop Logging may now seek the full range of UCC damages because the limited remedy never restored usable equipment.
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The remedy fails when repeated repair attempts do not produce a conforming product within a reasonable time. Courts focus on whether the buyer ultimately receives the substantial value of the bargain. Multiple unsuccessful service calls over months typically establish failure.
Supporting sources
No. The two doctrines are independent. A remedy limitation may be conscionable at formation yet still fail of its essential purpose when it does not work in practice. Buyers need not prove unconscionability to escape an ineffective exclusive remedy.
Supporting sources
The buyer may pursue any UCC remedies that would have been available without the limitation clause. This includes damages for breach of warranty and, subject to any separate valid exclusion, consequential damages.
Supporting sources
…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…