Exclusive remedy clause: sample and the UCC 2-719 test

Sample clause

Written for equipment sale terms of Prairie Ag Equipment, a fictional Iowa dealer selling grain handling machinery to farms.

Exclusive Remedy. (a) If any Equipment does not conform to the warranty in clause 9 and the Buyer notifies the Seller in writing within the warranty period, the Seller will, at its option, repair or replace the nonconforming part within 30 days of receiving notice. (b) If the Seller is unable to repair or replace the part within 30 days, or the same defect recurs after two repair attempts, the Seller will refund the price paid for the nonconforming Equipment on its return. (c) The remedies in this clause are the Buyer's sole and exclusive remedies for breach of warranty. (d) This clause does not limit any remedy for personal injury.

Sample wording, not legal advice.

Variants

What to negotiate

• Failure of essential purpose

  Section 2-719(2) says that where an exclusive or limited remedy fails of its essential purpose, the buyer may use the other remedies the UCC provides. Courts apply it when a seller cannot or will not make the goods work within a reasonable time, after repeated failed repairs, or unreasonably delays. Buyers should insist on a time limit and a refund fallback; sellers should build both in so the clause does not collapse.

• Interaction with a consequential loss exclusion

  Section 2-719(3) allows consequential damages to be limited or excluded unless that is unconscionable, and a limitation of consequential damages for personal injury from consumer goods is prima facie unconscionable. Courts are divided on whether a consequential damages exclusion survives when the exclusive remedy fails, so the two should be drafted as independent clauses that say each stands alone.

• Saying the remedy is exclusive

  A stated remedy is optional unless the contract says it is exclusive. The words sole and exclusive remedy, or equivalent, are what turn repair or replace from one option into the only option. Buyers who see a remedy clause without those words keep their other remedies; sellers should make the exclusivity express and conspicuous.

The risk of leaving it out

Without an exclusive remedy clause, a buyer of faulty equipment can claim damages for the difference in value and, in many cases, for lost production while the machine was down, which can far exceed the price of the machine. With the clause, the seller's exposure is the cost of a repair or a refund, which is what most equipment pricing assumes.

How section 2-719 works

Article 2 of the UCC, adopted with variations in every US state except Louisiana, governs sales of goods. Section 2-719 lets the parties limit or alter the buyer's remedies, for example to return and refund or repair and replacement, and makes the stated remedy exclusive if the contract expressly says so. If the remedy fails of its essential purpose, the buyer regains the general remedies of Article 2. The clause sits alongside the warranty itself, and any disclaimer of implied warranties must separately meet section 2-316. Law checked on 21 October 2026. This page explains how the clause works and is not legal advice.

A failure test with repair attempts

Consider how a court might see Prairie Ag's clause after a grain auger fails in harvest. First repair within 10 days, auger works: remedy working. Same fault two weeks later, second repair within 7 days: still likely working, because the seller is responding promptly. Third failure, seller says parts are on back order for 60 days: the remedy is probably failing of its essential purpose, because the buyer is deprived of the machine through the season the remedy was meant to protect. The sample's refund after two failed attempts or 30 days avoids reaching that point.

Services and software

Article 2 applies to goods, not services, so exclusive remedy clauses in services contracts are governed by general contract law. Courts usually enforce clear exclusive remedy terms between businesses, such as service credits as the only remedy for missed availability targets, but a remedy that leaves the customer with nothing meaningful can be attacked as illusory. Allowing termination if service failures persist gives the clause a backstop.

Outside the US

The UK and Australia have no direct equivalent of section 2-719. A clause limiting a buyer to repair or replacement is treated as a limitation or exclusion clause, tested under the Unfair Contract Terms Act 1977 in the UK, and limited by the consumer guarantees in the Australian Consumer Law, which allow a consumer to reject goods with a major failure regardless of what the contract says.

Documents that carry this clause

Equipment sale agreement with serial numbers and an inspection windowUsed machinery changes hands on a workshop floor, and the argument afterwards is always about condition or about who damaged the door frame on the way out. This agreement records the serial numbers and the known faults, gives the buyer two days to power the machines up, and puts the rigging, the making good and the storage charge in writing.Master services agreementA data consultancy and an insurer sign this once and then buy work under it for three years. It is the rare contract whose whole purpose is to make the next twenty contracts short.Software licence agreement template with seats, term and supportA software licence agreement has to answer three questions before anything else: what a seat is, what happens when the software is down, and who gets the data at the end. This one licenses a hosted practice management suite to a medical practice for 25 named users at $9,600 a year, with a support table, uptime credits and a 30 day export.

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