legal remedy for money damages would have been significantly less than that paid by Sun Ship pursuant to the liquidated damages provision. Decision?
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California and Hawaiian Sugar Company (C and H) is an agricultural cooperative in the business of growing sugarcane in Hawaii and transporting the raw sugar to its refinery in California for processing. Because of the seasonal nature of the sugarcane crop, availability of ships to transport the raw sugar immediately after harvest is imperative. After losing the services of the shipping company it had previously used, C and H decided to build its own ship, a Macababoo, which had two components, a tug and a barge. C and H contracted with Halter Marine to build the tug and with Sun Ship to build the barge. In finalizing the contract for construction of the barge, both C and H and Sun Ship were represented by senior management and by legal counsel. The resulting contract called for a liquidated damages payment of $17,000 per day that delivery of the completed barge was delayed. Delivery of both the barge and the tug were significantly delayed. Sun Ship paid the $17,000 per day liquidated damages amount and then sued to recover it, claiming that without the liquidated damages provision, C and H’s legal remedy for money damages would have been significantly less than that paid by Sun Ship pursuant to the liquidated damages provision. Decision? |
Explanation
The charter provides that the dissolved damages may be considered sensible in light of the predicted or actual loss. Moreover, the exact damages to Companies C and H were impossible to calculate at the inception of the agreement. The provisions regarding liquidated damages may be adopted by the parties after an arm's-length negotiation wherein they all may be represented by experienced officials.
Verified Answer
The provisions regarding the dissolved charge may be justifiable. Although the actual damages sustained, $368,000, are less than the dissolved loss, $4,403,000, Companies C and H introduced proofs of consequential damages from the loss of charter revenues, which allegedly amounts to $3,732,000. These losses influenced the parties' agreement on the amount of liquidated implications.
