A sea captain owns an exceptionally seaworthy boat that she charters for sport fishing at a $500 daily rate. The fee includes the use of the boat operated by the captain and one other crew member, as well as fishing tackle and bait. On May 1, a fisherman agreed with the captain that the fisherman would have the full-day use of the boat on May 15 for himself and his family for $500. The fisherman paid an advance deposit of $200 and signed an agreement that the deposit could be retained by the captain as liquidated damages in the event that the fisherman canceled or failed to appear.
At the time of contracting, the captain told the fisherman to be at the dock at 5 a.m. on May 15. The fisherman and his family, however, did not show up on May 15 until noon. Meantime, the captain agreed at 10 a.m. to take a tourist and her family out fishing for the rest of the day. The tourist had happened to come by and inquire about the possibility of such an outing. In view of the late hour, the captain charged the tourist $400 and stayed out two hours beyond the customary return time. The fisherman’s failure to appear until noon was due to the fact that he had been trying to charter another boat across the bay at a lower rate and had gotten lost after he was unsuccessful in getting such a charter.
Which of the following is an accurate statement concerning the rights of the parties?
A. The captain can retain the $200 paid by the fisherman, because it would be difficult for the captain to establish her actual damages and the sum appears to have been a reasonable forecast in light of anticipated loss of profit from the charter.
B. The captain is entitled to retain only $50 (10% of the contract price) and must return $150 to the fisherman.
C. The captain must return $100 to the fisherman in order to avoid her own unjust enrichment at the fisherman’s expense.
D. The captain must return $100 to the fisherman, because the liquidated damage clause under the circumstances would operate as a penalty.
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