California & Hawaiian Sugar Co. v. Sun Ship, Inc.
United States Court of Appeals for the Ninth Circuit
794 F.2d 1433 (9th Cir. 1986)
C&H (plaintiff) contracted with Sun Ship (defendant) to build a barge and separately with Halter to build a tug meant to connect with it, with Sun Ship's contract — negotiated by sophisticated managers with counsel — including a $17,000-per-day liquidated damages clause for late delivery, expressly labeled a reasonable measure of anticipated damages rather than a penalty. Sun Ship delivered the barge nearly nine months late; Halter also delivered the tug late, and C&H sued Sun Ship to collect the liquidated damages, which the trial court awarded. Sun Ship appealed, arguing the clause was really an unenforceable penalty because a timely barge would have been useless without Halter's (also late) tug.
Whether a court will enforce a liquidated damages clause negotiated by sophisticated parties as a reasonable measure of anticipated, hard-to-calculate damages, notwithstanding a co-contractor's separate, concurrent delay in a related contract.