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Clarkson-11e: Case Problem with Sample Answer Chapter 22: Performance and Breach of Sales and Lease Contracts 22–6. Case Problem with Sample Answer Eaton Corp. bought four air-conditioning units from Trane Co., an operating division of American Standard, Inc., in 1998. The contract stated in part, “NEITHER PARTY SHALL BE LIABLE FOR . . . CONSEQUENTIAL DAMAGES.” Trane was responsible for servicing the units. During the last ten days of March 2003, Trane’s employees serviced and inspected the units, changed the filters and belts, and made a material list for repairs. On April 3, a fire occurred at Eaton’s facility, extensively damaging the units and the facility, although no one was hurt. Alleging that the fire started in the electric motor of one of the units, and that Trane’s faulty servicing of the units caused the fire, Eaton filed a suit in a federal district court against Trane. Eaton asserted a breach of contract, among other claims, seeking consequential damages. Trane filed a motion for summary judgment, based on the limitation-of-remedies clause. What are consequential damages? Can these be limited in some circumstances? Is the clause valid in this case? Explain. [Eaton Corp. v. Trane Carolina Plains, 350 F.Supp.2d 699 (D.S.C. 2004)] Sample Answer: Consequential damages are foreseeable damages that result from a party’s breach of contract but are caused by special circumstances beyond the contract. Under UCC 2– 719, the parties to a contract can agree to modify or limit the recovery of consequential damages as long as the limitation is not unconscionable. In this case, the factors for making this determination include any disparity in the parties’ bargaining power—which would be influenced by the relative size of their business organizations and related business sophistication—and the conspicuousness and clarity of the clause in the contract. Here, the limitation of remedies provision is not unconscionable. Eaton is a substantial business concern that negotiated the contract at arm’s length with Trane, another sophisticated party. Also, there was no surprise regarding the limitations clause, which was clear and conspicuously printed in large, bold capital letters. Thus, under the limitation-of-remedies clause in the parties’ agreement, the court should grant Trane’s motion for summary judgment on Eaton’s breach-of-contract claim.