## Facts

- Walter Johnson, an experienced mechanic and farmer, bought a new John Deere 8630 tractor from dealer Nelson Implement, Inc. using a standard purchase-order form.
- The form disclaimed all express and implied warranties except a written warranty limiting remedies to repair or replacement of defective parts and excluding liability for incidental or consequential damages.
- After purchase, the tractor experienced repeated mechanical failures (including leaks, defective components, and transmission issues) and required multiple repair attempts by the dealer and manufacturer.
- Johnson alleged the persistent defects and substantial downtime deprived him of the tractor’s value for his custom-farming operation.
- Johnson sued the manufacturer (John Deere Company) and dealer for breach of warranty and sought damages, including losses tied to the tractor’s downtime.
- Deere counterclaimed for the unpaid balance on the installment contract and sought foreclosure on the tractor.
- The trial court granted defendants a directed verdict on Johnson’s warranty claims and entered judgment for Deere on its counterclaim, enforcing the limitation to repair/replacement and the consequential-damages exclusion.

## Issues

1. Whether the UCC limited remedy of repair or replacement failed of its essential purpose, requiring submission of the issue to the jury and allowing resort to other UCC remedies.
2. Whether the contractual exclusion of incidental and consequential damages was unconscionable and therefore unenforceable.

## Decision

- The court reversed the directed verdict insofar as it removed from the jury the question whether the repair-or-replacement remedy failed of its essential purpose.
- The court held there was substantial evidence from which a jury could find that repeated, unsuccessful repairs and extended loss of use deprived the buyer of the benefit of the bargain.
- The court affirmed enforcement of the clause excluding incidental and consequential damages, holding it was not unconscionable at the time of contracting.
- The case was remanded for a new trial on the failure-of-essential-purpose issue and related warranty claims, with the consequential-damages exclusion remaining effective.

## Legal Principles

- A seller may limit remedies to repair or replacement under UCC Article 2, but if that limited remedy fails of its essential purpose, the buyer may pursue general UCC remedies.
- Whether a limited repair-or-replace remedy failed of its essential purpose is typically a fact question for the jury when supported by evidence of repeated breakdowns and ineffective repairs.
- Unconscionability of a consequential-damages exclusion is assessed at the time of contracting, not based on later performance problems.
- Failure of essential purpose of a limited remedy does not automatically invalidate a separate exclusion of consequential damages; the exclusion remains enforceable absent unconscionability.

## Conclusion

The court required a jury determination on whether the repair-only remedy failed of its essential purpose in light of repeated defects and downtime, but it enforced the contractual exclusion of consequential damages because unconscionability must be shown as of contract formation and was not established.


Johnson v. John Deere Co., 306 N.W.2d 231 (S.D. 1981)