California And Hawaiian Sugar Company v. Sun Ship, Inc.

794 F.2d 1433 (9th Cir. 1986)

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Nature of the Case

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Facts

P has an imperative need for assured carriage for raw sugar from the islands. Sugar is a seasonal crop with almost nothing is harvestable during December and January. Transportation must not only be available, but seasonably available. Storage capacity in Hawaii accommodates not more than a quarter of the crop. Left stored on the ground or left unharvested, sugar suffers the loss of sucrose and goes to waste. Shipping ready and able to carry the raw sugar is a priority for P. For guaranteed reliability of shipping P wanted to build its own push boat. It solicited bids from shipyards, indicating as an essential term a 'preferred delivery date' of June 1981. P accepted D's offer to build the barge and Halter's offer to build the tug for their new push boat. P entered into negotiations on the precise terms of the contracts. Each company was represented by a vice-president with managerial responsibility in the area of negotiation; each company had a team of negotiators; each company had the advice of counsel in drafting the agreement that was signed on November 14, 1979. P signed a contract to buy the barge from D with delivery of the Vessel on June 30, 1981. The contract price was $25,405,000. Liquidated damages for non-delivery on June 30, 1981, was $17,000 per day. P also entered into an agreement with Halter to purchase 'one oceangoing catamaran tugboat' for $20,350,000. The tug was to be delivered on April 30, 1981, at D's shipyard. Liquidated damages of $10,000 per day were provided for Halter's failure to deliver. Halter did not complete the tug until July 15, 1982. D did not complete the barge until March 16, 1982. P settled its claim against Halter. D paid P $17,000 per day from June 30, 1981, until January 10, 1982, it ultimately denied liability for any damages, and P sued D. D contends the $17,000 per day is a penalty. D points out, was useless to D without the tug. The situation as it developed was different from the anticipation. The barge was not ready, but neither was the tug. P was, in fact, able to find other shipping. The crop did not rot. The customers were not left sugarless. D argues that measured by the actual damages suffered, the liquidated damages were penal. The trial court ruled against D and D appealed.