Liquidated damages under the contract

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Reference no: EM131422921

The California and Hawaiian Sugar Company (C&H), a California corporation, is an agricultural cooperative owned by 14 sugar plantations in Hawaii. It transports raw sugar to its refinery in Crockett, California. Sugar is a seasonal crop, with about 70 percent of the harvest occurring between April and October. C&H requires reliable seasonal shipping of the raw sugar from Hawaii to California. Sugar stored on the ground or left unharvested suffers a loss of sucrose and goes to waste.

After C&H was notified by its normal shipper that it would be withdrawing its services at a specified date in the future, C&H commissioned the design of a large hybrid vessel—a tug of a catamaran design consisting of a barge attached to the tug. After substantial negotiation, C&H contracted with Sun Ship, Inc. (Sun Ship), a Pennsylvania corporation, to build the vessel for $25,405,000. The contract gave Sun Ship one and three quarter years to build and deliver the ship to C&H. The contract also contained a liquidated damages clause calling for a payment of $17,000 per day for each day that the vessel was not delivered to C&H after the agreed-upon delivery date. Sun Ship did not complete the vessel until eight and one-half months after the agreed-upon delivery date. Upon delivery, the vessel was commissioned and christened the Moku Pahu.

During the season that the boat had not been delivered, C&H was able to find other means of shipping the crop from Hawaii to its California refinery. Evidence established that actual damages suffered by C&H because of the nonavailability of the vessel from Sun Ship were $368,000. When Sun Ship refused to pay the liquidated damages, C&H filed suit to require payment of $4,413,000 in liquidated damages under the contract. Can C&H recover the liquidated damages from Sun Ship?

The California and Hawaiian Sugar Company (C&H), a California corporation, is an agricultural cooperative owned by 14 sugar plantations in Hawaii. It transports raw sugar to its refinery in Crockett, California. Sugar is a seasonal crop, with about 70 percent of the harvest occurring between April and October. C&H requires reliable seasonal shipping of the raw sugar from Hawaii to California. Sugar stored on the ground or left unharvested suffers a loss of sucrose and goes to waste.

After C&H was notified by its normal shipper that it would be withdrawing its services at a specified date in the future, C&H commissioned the design of a large hybrid vessel—a tug of a catamaran design consisting of a barge attached to the tug. After substantial negotiation, C&H contracted with Sun Ship, Inc. (Sun Ship), a Pennsylvania corporation, to build the vessel for $25,405,000. The contract gave Sun Ship one and three quarter years to build and deliver the ship to C&H. The contract also contained a liquidated damages clause calling for a payment of $17,000 per day for each day that the vessel was not delivered to C&H after the agreed-upon delivery date. Sun Ship did not complete the vessel until eight and one-half months after the agreed-upon delivery date. Upon delivery, the vessel was commissioned and christened the Moku Pahu.

During the season that the boat had not been delivered, C&H was able to find other means of shipping the crop from Hawaii to its California refinery. Evidence established that actual damages suffered by C&H because of the nonavailability of the vessel from Sun Ship were $368,000. When Sun Ship refused to pay the liquidated damages, C&H filed suit to require payment of $4,413,000 in liquidated damages under the contract. Can C&H recover the liquidated damages from Sun Ship?

Reference no: EM131422921

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