Clashing Policies or Confusing Precedents: The Gross Negligence Exception to Consequential Damages Disclaimers

Consequential damages can easily amount to millions of dollars. Commercial parties often disclaim consequential damages in their contracts. This Article posits that such disclaimers between commercial parties under the Uniform Commercial Code (UCC) should not be found unenforceable based on gross negligence. Article 2 of the UCC promotes the policy of freedom of contract. Consistent with that policy, section 2-719 of the UCC provides that contractual consequential damages disclaimers should be enforceable absent a finding of unconscionability. This Article analyzes the interplay among UCC section 2-719, “public policy” exceptions to enforcing limitations of liability, and the law of gross negligence. This Article concludes that but for those rare circumstances in which a commercial buyer may invoke unconscionability, courts should uphold consequential damages disclaimers absent a clear showing of willful misconduct. This standard provides a more discernible “bright-line” that comports with the general treatment of economic losses under the UCC