California and Hawaiian Sugar Company (C&H), a California corporation, is an agricultural cooperative owned by 14 sugar plantations in Hawaii. It transports raw sugar to its refinery in Crockett, California. Sugar is a seasonal crop, with about 70 percent of the harvest occurring between April and October. C&H requires reliable seasonal shipping of the raw sugar from Hawaii to California. Sugar stored on the ground or left unharvested suffers a loss of sucrose and goes to waste. After C&H was notified by its normal shipper that it would be withdrawing its services at a specified date in the future, C&H commissioned the design of a large hybrid vessela tug of a catamaran design consisting of a barge attached to the tug. After substantial negotiation, C&H contracted with Sun Ship, Inc. (Sun Ship), a Pennsylvania corporation, to build the vessel for $25,405,000. The contract gave Sun Ship 1 years to build and deliver the ship to C&H. The contract also contained a liquidated damages clause calling for a payment of $17,000 per day for each day that the vessel was not delivered to C&H after the agreed-on delivery date. Sun Ship did not complete the vessel until 8 months after the agreed-on delivery date. On delivery, the vessel was commissioned and christened the Moku Pahu. During the season that the boat had not been delivered, C&H was able to find other means of shipping the crop from Hawaii to its California refinery.

-Evidence established that actual damages suffered by C&H because of the nonavailability of the vessel from Sun Ship were $368,000. When Sun Ship refused to pay the liquidated damages, C&H filed suit to require payment of $4,413,000 in liquidated damages under the contract. Can C&H recover the liquidated damages from Sun Ship? California and Hawaiian Sugar Company v. Sun Ship, Inc., 794 F.2d 1433, 1986 U.S. App. Lexis 27376 (United States Court of Appeals for the Ninth Circuit)