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contractdamagesliability

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Chatlos Systems, Inc. v. National Cash Register Corp., 635 F.2d 1081, 30 UCC Rep.Serv. 416

Facts

Chatlos Systems, Inc. decided to purchase a computer system in 1974 and engaged National Cash Register Corp. (NCR) to provide a system that would meet their operational needs. NCR promised that the system would be fully operational within six months, but after a year and a half, only one of the promised functions was working. Despite multiple attempts by NCR to correct the issues, the system remained largely non-functional, leading Chatlos to seek cancellation of the lease and damages for breach of warranty.

Chatlos Systems, Inc. decided to purchase a computer system in 1974 and engaged National Cash Register Corp. (NCR) to provide a system that would meet their operational needs.

Issue

Did the seller's failure to provide a fully operational computer system constitute a breach of warranty, and were the limitations on consequential damages enforceable?

Did the seller's failure to provide a fully operational computer system constitute a breach of warranty, and were the limitations on consequential damages enforceable?

Rule

Under the Uniform Commercial Code, a limited remedy fails its essential purpose if the seller is unable to provide the goods as warranted within a reasonable time, allowing the buyer to seek damages despite any contractual limitations on consequential damages.

Under the Uniform Commercial Code, a limited remedy fails its essential purpose if the seller is unable to provide the goods as warranted within a reasonable time, allowing the buyer to seek damages despite any contractual limitations on consequential damages.

Analysis

The court determined that NCR's repeated failures to deliver a fully operational computer system constituted a failure of the repair remedy's essential purpose. As a result, the limitation on consequential damages was deemed unenforceable. The court also noted that the damages should be calculated based on the difference between the value of the goods accepted and the value they would have had if they had been as warranted.

The court determined that NCR's repeated failures to deliver a fully operational computer system constituted a failure of the repair remedy's essential purpose.

Conclusion

The court affirmed the finding of liability against NCR for breach of warranty but remanded the case for recalculation of damages, enforcing the exclusion of consequential damages.

The court affirmed the finding of liability against NCR for breach of warranty but remanded the case for recalculation of damages, enforcing the exclusion of consequential damages.

Who won?

Chatlos Systems, Inc. prevailed in the case because the court found that NCR breached its warranty by failing to provide a functional computer system as promised.

Chatlos Systems, Inc. prevailed in the case because the court found that NCR breached its warranty by failing to provide a functional computer system as promised.

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