Law School Case Brief
E. S.S. Lines, Inc. v. United States - 125 Ct. Cl. 422, 112 F. Supp. 167 (1953)
When one is under a contract to become obligated to pay money after the other party has performed, and he advises the other party that even after he has performed, the payment will not be made in the amount agreed upon, except possibly after a lawsuit, the party so notified has the right, if his interpretation of the contract is correct, to treat the contract as breached, and recover his damages resulting therefrom.
The United States chartered the Steamship Acadia from the plaintiff ship owner. The charter provided that the United States would return the ship in the same condition as on the date of delivery, ordinary wear and tear excepted, and would either make all necessary repairs, or would return the unrepaired ship and pay the ship owner a reasonable amount for repairs. The United States returned the ship unrepaired. It was determined that the cost of repairs would have been $4 million while the ship's value after restoration would be $2 million. The United States refused to pay the estimated cost of repairing the ship, asserting that it would pay the ship owner just compensation for the value of the restored ship. Plaintiff and United States filed cross-motions for summary judgment on the plaintiff’s claim to recover the estimated cost of repair.
Should either party's motion for summary judgment be granted?
The Court denied both parties' motions for summary judgment because neither party offered a reasonable interpretation of the charter. The Court held that it would be uneconomical for the United States to pay the estimated value of the repairs when the ship owner did not intend to repair the ship. The Court found that it would be unconscionable to require the ship owner to restore the ship for $4 million and then pay the ship owner only $2 million for the value of the restored ship.
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