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Cal. & Hawaiian Sugar Co. v. Sun Ship, Inc. - 794 F.2d 1433 (9th Cir. 1986)

Rule:

Promising to pay damages of a fixed amount, the parties normally have a much better sense of what damages can occur. Courts must be reluctant to override the parties' judgment. Where damages are real but difficult to prove, injustice will be done the injured party if the court substitutes the requirements of judicial proof for the parties' own informed agreement as to what is a reasonable measure of damages. A seller is bound to pay consequential damages if the seller had reason to know of the buyer's special circumstances.

Facts:

Plaintiff sugar company contracted with defendant ship company to deliver to it a barge on a certain date, and with a marine corporation to deliver to it a tug boat on a certain date in order to produce an integrated tug barge. Defendant and marine corporation defaulted by not delivering timely. Defendant denied liability, and plaintiff brought an action against defendant seeking liquidated damages as provided for in the contract.  The United States District Court for the Northern District of California awarded damages to plaintiff sugar company for defendant's failure to deliver a barge to plaintiff by a certain date pursuant to a contract, and defendant ship compny appealed.

Issue:

Were the liquidated damages unreasonably disproportionate to the net actual damages?

Answer:

No

Conclusion:

The court affirmed the district court's judgment. The court held that the damages were not penal because liquidated damages were considered reasonable in the light of anticipated or actual harm, that defendant was the substantial cause of the damages because even if the tug had been delivered timely, it would have been of no use to plaintiff without the barge, and that the liquidated damage clause of the contract functioned in lieu of a court's determination because contracting parties usually had a better sense of what damages could occur.

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