Aries v. Palmer Johnson, Inc.

Facts

P is a sophisticated and experienced real estate developer. From 1966 to 1975 he owned a series of relatively moderately priced yachts. In 1978 he purchased a 70-foot sailing yacht named 'Varuna' for approximately $420,000. He made substantial personal use of Varuna which he also chartered, for a fee, to a corporation of which he was the president and sole shareholder. D is a Wisconsin corporation with its principal place of business in Sturgeon Bay, Wisconsin. It is engaged in the business of constructing, storing, repairing, and selling custom sailing yachts throughout the United States, including Arizona, and holds itself out as being internationally famous for constructing yachts of the finest quality. P entered into a contract with D for the purchase of an Alden 75 for $925,000. P was unable to obtain financing, and the parties agreed to cancel the contract. A few years later, P sent D $100,000 as a deposit toward the purchase of an Alden 75 yacht, to be called 'Scheherazade.' P sent a letter to D, which contained a list of specifications for the new yacht. D signed and mailed one of its standard form contracts for Aries' signature. The contract price was $1,237,500. The delivery date was 'on or about June 25, 1983' in accordance with prior discussions between P and D wherein Aries told d of his intended use of the yacht for the summer of 1983. One day after mailing the contract, D wrote P in response to his September 1 letter. D stated that construction was already underway and that D expected no problem in completing the yacht by the scheduled delivery date of June 25, 1983. P signed the contract. The parties were in constant contact but D was less than honest about the true progress and had decided to shift work to other yachts, which had per day penalties for later delivery. In late May or early June of 1983, P sent his yacht captain to be present for what P believed to be the final weeks of construction. The captain advised P that the boat was not even near completion. The boat was not delivered until November 23, 1983, five months late, depriving P of all use during the summer and fall of 1983. After delivery, it promptly broke down. It was dry-docked in a repair facility for approximately 168 days during the year following delivery. Defects in quality and material were wide-ranging, from delaminating paint, to drill holes in the hull, to a jerry-rigged sewage tank system, which was vented near the cabin portholes. P sued D in part for consequential damages. Without a doubt, D knew both before and after executing the contract, of P's intended use of the boat during the summer and fall of 1983. D repeatedly assured P that construction was proceeding in a timely manner and that delivery would be timely. The record shows that D relied on those representations to his detriment. For example, d decommissioned the yacht he then owned and did not secure a substitute vessel for his intended use during the summer and fall of 1983. D testified that chartering a comparable yacht would normally cost $1,500 a day and that he would have charged $2,000 a day to charter the Scheherazade. P’s expert testified that $1,500 a day was reasonable and D testified that the reasonable value was $1,200 a day. The court ruled that $1,000 a day was proper for the value of the use of the yacht. It awarded d loss-of-use damages for two-thirds of the five-month pre-delivery delay, amounting to $100,000. It also awarded loss-of-use damages for 20 of the 168 post-delivery days spent repairing the yacht. D appealed. D contends damages for loss of use were speculative, D had no knowledge of the intended use of the boat when it entered into the contract, no substitute vessel was actually rented, and the loss of rental value used to compute the damages for loss of use failed to take into account expenses which were necessary in order to rent the vessel.

Issues

Rule of Law

Holding and Decision

Legal Analysis

© 2007-2024 ABN Study Partner.