## Facts

- Figgie International, Inc. sold Destileria Serralles, Inc. bottle-labeling equipment designed to apply a clear label to a clear “Cristal” rum bottle within a raised glass oval.
- The parties executed a written agreement in June 1993; the equipment was installed in April 1994 in Puerto Rico.
- The equipment malfunctioned immediately; Figgie attempted repairs and adjustments for months, but the labeler never performed properly.
- After about nine months, Serralles returned the equipment and received a refund of the purchase price.
- Serralles claimed additional losses (including business and consequential damages) allegedly caused by the malfunction and delay in obtaining a workable alternative.
- The contract record was disputed: Figgie lost its copy and asserted its standard reverse-side terms included an exclusive remedy and consequential-damages limitation; Serralles’s copy referenced reverse-side terms, but the reverse was blank.
- Figgie supported a remedy limitation through evidence of standard form practice and uncontradicted expert affidavits that, by trade usage in the bottle-labeling industry, sellers limit remedies to repair, replacement, or refund.

## Issues

1. Whether the parties’ “agreement” under the South Carolina UCC included a limitation of remedies term established through usage of trade (and related commercial practice) limiting Serralles to repair, replacement, or return/refund.
2. Whether, under UCC § 2-719, the limited/exclusive remedy failed of its essential purpose due to the equipment’s persistent malfunction and unsuccessful repair efforts, permitting consequential damages.

## Decision

- The Fourth Circuit affirmed summary judgment for Figgie.
- The court held the parties’ agreement included a limitation of remedies to repair, replacement, or return/refund based on uncontroverted evidence of industry usage of trade, regardless of the disputed reverse-side writing.
- The court held the limited remedy did not fail of its essential purpose because Serralles ultimately received the contractually provided relief—return of the equipment and a refund.
- Because the limitation remained effective, Serralles could not recover consequential damages beyond the refunded purchase price.

## Legal Principles

- Under the UCC, an “agreement” includes not only written terms but also terms implied from course of dealing and usage of trade, which may supplement or qualify the parties’ bargain.
- Usage of trade may be established through competent, uncontradicted evidence (including expert affidavits), and a party opposing summary judgment must produce counter-evidence to create a genuine dispute of material fact.
- UCC § 2-719 permits contractual limitation of remedies to repair, replacement, or refund; the limitation is displaced only if circumstances cause the limited remedy to fail of its essential purpose.
- A repair/replace/refund limitation does not fail of its essential purpose merely because goods are defective and the buyer experiences additional losses; where the buyer receives the promised minimum relief (here, a refund upon return), the limitation remains enforceable and bars consequential damages.

## Conclusion

The court enforced a remedies limitation incorporated through unrefuted trade usage and held that the remedy did not fail of its essential purpose because the buyer obtained a return-and-refund, precluding consequential damages.


Figgie Int’l, Inc. v. Destileria Serralles, Inc., 190 F.3d 252 (4th Cir. 1999)