Sun Ship, Inc.: Case Study
This case begins with the relationship between California and Hawaiian Sugar Company (C&H), the purchaser, and Sun Ship, Inc., the contractor for the design and delivery of a vessel to ship raw sugar for C&H from Hawaii to California. Sun Ship went into contract with C&H on November 14, 1979 and agreed upon the delivery of the vessel on June 30, 1981, one and three quarter years, for the agreed upon amount of $20,405,000 . According to Cheeseman (2013) a liquidated damages clause, defined as “damages that parties to a contract agree in advance should be paid if the contract is breached”, was included and called for $17,000 per day for each day that the vessel was not delivered. Additional details from Court of Appeals, 9th Circuit 1986 indicate that C&H went into another agreement with a company by the name of “Halter” for the purchase of "one oceangoing catamaran tug boat" that was, unbeknownst to Sun Ship, supposed to connect with the vessel that Sun Ship was contracted to deliver. Sun completed the vessel, which was
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Is the liquidated damages clause valid in this case? (Hill, 2014) Now 17,000 was valid and reasonable in light of the language of the contract and to what both Sun Ship and C & H agreed on. But to further penalize was not reasonable. I agree with Sun Ship that in that they tried to invoke the hindsight rule, claiming that “it shouldn't have to pay liquidated damages that were so far out of proportion to the actual damages” (Mihai,n.d.) The situation as it developed was different from the anticipation and the barge was not ready but neither was the tug. C and H were, in fact, able to find other shipping and their crop did not rot, nor were their customers left without sugar. I do believe in the claim by Sun that the actual damages suffered, does not justify the liquidated damages enforced by
Is the liquidated damages clause valid in this case? (Hill, 2014) Now 17,000 was valid and reasonable in light of the language of the contract and to what both Sun Ship and C & H agreed on. But to further penalize was not reasonable. I agree with Sun Ship that in that they tried to invoke the hindsight rule, claiming that “it shouldn't have to pay liquidated damages that were so far out of proportion to the actual damages” (Mihai,n.d.) The situation as it developed was different from the anticipation and the barge was not ready but neither was the tug. C and H were, in fact, able to find other shipping and their crop did not rot, nor were their customers left without sugar. I do believe in the claim by Sun that the actual damages suffered, does not justify the liquidated damages enforced by