## Facts

- Lewis Refrigeration Co. sold an individually quick-frozen (IQF) freezer to Sawyer Fruit, Vegetable and Cold Storage Cooperative Co. under a contract selecting Washington law.
- The contract warranted specified processing capacity and a maximum Freon consumption rate, and included a “Freon Warranty” requiring Lewis to supply Freon consumed above the warranted rate for a stated period.
- The contract also limited remedies: Lewis could repair or replace malfunctioning parts, and rescission was the only other remedy.
- A separate clause excluded consequential damages.
- After installation, the freezer repeatedly malfunctioned; repairs and testing were delayed rather than prompt.
- Evidence supported that Lewis knew the freezer could not freeze cherries at warranted rates but did not disclose that limitation until Sawyer’s business commitments made rescission impracticable.
- Sawyer stopped paying the remaining balance; Lewis sued for the balance, and Sawyer counterclaimed for breach of contract, breach of warranty, and misrepresentation, seeking lost profits and excess Freon costs.

## Issues

1. Whether the contract’s limited repair-or-rescission remedy failed of its essential purpose under Washington UCC § 2-719(2), permitting recourse to general UCC remedies.
2. Whether consequential damages (lost profits) could be awarded despite a contractual consequential-damages exclusion, given the alleged failure of the limited remedy.
3. Whether Sawyer’s failure to amend or supplement discovery responses required a new trial.
4. Whether the trial court had to make an explicit judicial determination on unconscionability of the consequential-damages exclusion under Washington UCC § 2-302 and § 2-719(3).

## Decision

- Affirmed submission to the jury of whether the limited repair/rescission remedy failed of its essential purpose and affirmed denial of Lewis’s dispositive motions on that issue.
- Affirmed that, under Washington law, failure of essential purpose can permit resort to UCC remedies, including consequential damages in principle.
- Affirmed denial of a new trial based on alleged discovery violations, finding no abuse of discretion and no sufficient prejudice.
- Vacated the lost-profits award and remanded for the trial court to decide, as a matter of law, whether the consequential-damages exclusion was unconscionable.
- Left intact the award for excess Freon costs tied to the contract’s Freon warranty.

## Legal Principles

- Under Washington UCC § 2-719(2), a limited contractual remedy (such as repair or replacement, with rescission as an alternative) is ineffective if it fails of its essential purpose, allowing the buyer to pursue the UCC’s general remedies.
- Evidence of delayed or ineffective repairs, and seller conduct that makes rescission impracticable, can support a finding that a limited remedy failed of its essential purpose.
- A consequential-damages exclusion is analytically separate from a limited-remedy clause; even if the limited remedy fails, the exclusion remains enforceable unless it is unconscionable under Washington UCC § 2-719(3).
- Unconscionability under Washington UCC § 2-302 is a question of law for the court, requiring an explicit judicial determination rather than a jury finding.
- Trial courts have broad discretion over discovery management and new-trial requests; denial of a new trial is reviewed for abuse of discretion and requires a showing of substantial prejudice.

## Conclusion

The court held that a jury could find the contract’s repair-or-rescission remedy failed of its essential purpose, but it vacated the lost-profits award because the trial judge had not decided whether the separate consequential-damages exclusion was unconscionable; the case was remanded for that legal determination while the excess Freon award was affirmed.


Lewis Refrigeration Co. v. Sawyer Fruit, Vegetable & Cold Storage Co., 709 F.2d 427 (6th Cir. 1983)