The Situation: Sun and Fun Tours is a large, well-known tour operator based in London. Hotel la Playa is part of a chain of Spanish hotels in the Canary Islands. Sun and Fun tours contracted rooms (50 double - 25% of the hotel's capacity) at the four star Hotel de la Playa for the winter season. They agreed on a 90 Euro flat fee for each double room / per night including breakfast for 2. This means a total contract worth 405.000 Euros for the 90 day season. Sun & Fun have paid a 30% down-payment of 121.500 Euros which they would lose if they now decided to cancel the contract. When the contract was signed, the hotel gave a verbal guarantee that construction, which was in progress, would be completed on the new wing where the 50 rooms were located