Bertha Moneybucks is considering the purchase of a large pleasure boat form Maryland Marine Sales. She is satisfied that the price quoted, $34,000, is a good one for the boat in question, but is very concerned that she wont get the boat in time for the prime boating season even though the seller is willing to promise delivery by May 1. In order to make the sale, the president of M.M.S. writes into the contract the following provision:

Seller promises to deliver the boat as provided for herein on or before May 1. In recognition of the distress and inconvenience which will be cause Buyer should delivery be delayed, it is agreed that the price to be paid by Buyer is to be reduced by $100 for each day delivery may be delayed beyond May 1.

The boat is not delivered until June 15. Is Bertha entitled to deduct $4,500 from the purchase price of the boat? See

-- Anonymous, November 02, 1998

Answers

'2-718(1).

-- Anonymous, November 02, 1998

Unless I am missing something in what seems to be a relatively straightforward application of 2-718, I think Bertha should be entitled to deduct $4,500 from the purchase price of the boat, provided this amount passes the "reasonable" test.

The contract was to provide the boat by May 1. When the boat was not provided by then, the contract was breached. Therefore, Bertha should be allowed, according to 2-718, to collect damages as liquidated in the agreement ($100/day) so long as these damages are (1) reasonable, and (2) the reason for stipulating these liquidated damages in the contract is because of the difficulty of proof of loss, etc.

$100/day sounds like a reasonable recompense for Bertha's not being able to use the boat for each incremental day that summer -- one could make the case for this being the amount due to Bertha to put her in the same position she would have been in had the contract been correctly performed (i.e. $100/day might be the cost of renting a similar boat). $4,500 represents 13% of the full boat price, which seems to be a reasonable price for the delay of the boat delivery, rather than an unreasonable amount tending towards punishment. Thus, I think the amount passes the reasonableness test.

Furthermore, this seems to be just the sort of situation where due to the difficulty of assessing damages, the court would want to encourage parties to specifically include liquidated damages in the contract (like the wedding photographer case.)

Therefore, unless there is some body of authority that would indicate this to NOT be a reasonable calculation of damages to put Bertha in the same place she would have been in had the contract been performed, she should be entitled to deduct $4,500 from the purchase price.

-- Anonymous, November 09, 1998