please demonstrate a INTERNAL OBJECTIVE memorandum using the attached facts and cases

Qkast

QKast is a hot hip-hop group with overtones from blues and soul, which performs against visual backgrounds with fog and laser effects. They appeared on July 25 in the new Nutmeg Dome in Bridgeport, Connecticut. This was the ninth of 16 concerts in QKast's North American tour, which began in June in Milwaukee. After the first concert was highly praised on late night cable television, all of the remaining performances except Bridgeport were sold out within hours after the time tickets became available.

Your client is the Bridgeport Cultural Authority (BCA), which owns the Nutmeg Dome and is now involved in a contract dispute with the Corvo Construction Company. BCA contracted with Corvo to build the Nutmeg Dome. Among other things, the contract required (in paragraph 4) that Corvo build the Dome "so as to be ready for full use on or before the first day of July" of this year. Paragraph 51 of the contract provided as follows: "Because of the difficulty of determining lost income in the entertainment industry, in the event of Corvo's failure to perform its obligations according to the schedule set out herein, Corvo shall be liable to BCA in the amount of two thousand dollars for each day of delay."

The Dome consists of an auditorium and the offices and facilities needed to run it. BCA moved into the offices on July 1, and the July 25 concert was the first event scheduled in the Dome. The offices constitute six percent of the cubic feet in the building.

Corvo concedes that, due to its own fault, the electrical and ventilation systems were not installed according to the specifications set out in paragraphs 23 and 28 of the contract. Corvo further concedes that, as a result, it would have been unsafe to use QKast's fog effects on July 25 and that there was inadequate electricity behind the stage on that date to use the group's laser effects.

These problems became apparent before the concert, and the local media reported throughout July that QKast might not be able to use its usual fog and laser effects. Eighteen hundred tickets went unsold, and BCA's profit from these tickets would have been $22,000. After the performance, QKast's guitarist told Rolling Stone:

Yo, man, what's up with that? No self-respecting band would play a gig in this place. Can you imagine just standing around on the stage and not being able to get down, no equipment, no nothing? C'mon, man, our performances usually be off the meter. They must think we're some rookies. This Dome is just wack!

On July 27, Corvo was able to complete the work to BCA's satisfaction. BCA believes that public confidence in the Nutmeg Dome is less that it would have been had Corvo performed on time, and that, to an unpredictable extent, it may become harder to book performances and to sell tickets than it otherwise would have been. BCA believes that performers' agents who might have considered booking into the Dome will now be reluctant to do so.

Before BCA decided to build the Dome, it studied the revenue generated by similar structures in other cities of comparable size. The study showed that these buildings have, on average, 12 to 15 bookings a month, of which two or three are concerts and the rest sports, conventions, and community events. The profitability of a booking varies considerably, depending on the nature of the events. But the average net daily income of the buildings studied was $1,500. Net income is profit after all expenses (mortgage, salaries, etc.) have been paid. (Average daily income is 1/365 of annual income - not the average income generated by each event.)

You're not being asked to determine the rights of QKast.

Your client is BCA. BCA wants to recover from Corvo liquidated damages of $52,000 (26 days at $2,000 per day). You are worried that where breach was only partial Corvo delivered on time a building that was usable for some but not all purposes liquidated damages might be held so disproportionate to BCA's injury that they would constitute an unenforceable penalty.

The issue is thus whether a partial breach can be remedied through liquidated damages.

From your library research, the three cases reproduced below are most closely on point.

Banta V. Stamford Motor Co.

92 A. 665 (Conn. 1914) PRENTICE, C.J.

[Stamford Motor Co. contracted with Banta to build him a yacht for

$5,500] to be paid in installments as the work of construction progressed. [If the yacht was not delivered by September 1, 1911, the contract provided that Stamford Motor should pay Banta $15 in liquidated damages] for each day of delay. The boat was [delivered on] November 25, 1911.

[Stamford Motor refused to pay Banta $15 per day of delay, for which Banta now sues.]

The boat was . . . intended by the plaintiff for use by him in cruising in Chesapeake Bay during the months of October and November, and later for a pleasure trip in Florida waters. [Stamford Motor knew this. Banta was unable to cruise in Chesapeake Bay. At the time, it would have cost $15 a day to rent a comparable yacht. Banta] did not rent another boat. . . .

[Stamford Motor argues that the daily rate payable for delay is so disproportionate as to constitute a penalty and not liquidated damages. A predetermined damages provision in a contract is really a penalty if its purpose is to insure timely performance by putting the tardy party in fear. But such a provision is liquidated damages if its purpose is to compensate the other party for loss due to delay.]

"[P]arties are allowed to . . . fix beforehand the amount to be paid as damages for a breach . . . but the courts [will not enforce such a provision if the amount is so excessive that it is actually a penalty. When, on the other hand,] the amount of damages would be uncertain or difficult of proof, and the parties have beforehand expressly agreed upon the amount of damages, and that amount is not greatly disproportionate to the presumable loss, their expressed intent will be carried out." [Citation omitted.]

[To determine whether a sum agreed to be paid in the event of breach is an unenforceable penalty or enforceable liquidated damages, the law does not compare that sum with the loss the plaintiff actually suffered, but instead with the loss that the parties] might reasonably have anticipated at the time the contract was made. [Banta is therefore] under no obligation to show actual damage suffered commensurate with the $15 a day rate. . . .

[Because Banta's injury was the loss of pleasure for a period of time, it would be difficult for a court to calculate an amount of money that would compensate for that loss. The parties agreed beforehand on an amount that would do that. And no fact suggests that this amount was greatly disproportionate to the possible loss which the parties imagined at the time they made the contract. Banta is entitled to liquidated damages of $15 per day of delay.]

Hungerford Construction Co. V. Florida Citrus Exposition, Inc.

410 F.2d 1229 (5th Cir.)

BELL, Circuit Judge.

[This diversity case concerns] the construction of a building at Winter Haven, Florida . . . which was to serve as an exhibition center for the citrus industry. [The roof leaked, and acoustical plaster inside] was damaged. The damaged plaster was replaced by the contractor but subsequent leaks left it in a discolored condition. . . .

. . . The building owner was awarded [damages based on] a . . . provision in the contract [that provided for] liquidated damages in the amount of

$200.00 per calendar day of delay [after the scheduled completion date. T]he building was delivered to the owner [on time and] was in continuous use thereafter. The owner contended that the liquidated damages clause was nevertheless applicable because of loss of secondary use due to the roof leak. . . .

. . . The building was to be used by the owner mainly for a year round office and for a citrus festival during February and March. [The owners also hoped to rent it for exhibitions, and to charge the public for tours of the structure.]

[We conclude that under Florida law this liquidated damages clause is an unenforceable penalty clause if used] as a basis for damages for loss of secondary use under the facts here.

"[T]he courts . . . allow [parties] to agree upon such a sum as will probably be the fair compensation for the breach of a contract. But when they go beyond this, and . . . stipulate . . . a sum entirely disproportionate to the measure of liability which the law regards as compensatory, the courts will refuse to give effect to the stipulation and will confine the parties to such actual damages as may be pleaded and proved." [Citation omitted.]

[Here, t]he evidence as to loss of secondary use was entirely speculative. One auto show may have been lost but there is no evidence as to the amount of rent which would have been realized out of this transaction or whether the loss occurred during the period in suit. The only other loss of use claimed was in the form of a daily admission charge to the public to see the building and its contents. [But there is no evidence that a significant number of people would actually have wanted to tour this building. This is] entirely disproportionate to the sum of $200.00 . . . per day. . . .

Sides Construction Co. V. City of Scott City

581 S.W.2d 443 (Mo. Ct. App. 1979)

GREENE, Judge.

Plaintiff [contracted to build a swimming complex for] defendant city. The contract provided [that if construction was completed after the scheduled delivery date, the plaintiff would be liable for liquidated damages of $50 per

day of delay.]

[T]he contract provided that [the liquidated damages were intended to compensate the city and the public] "for loss to the Owner and the public due to the obstruction of traffic, interference with use of existing or new facilities, and increased cost of engineering, administration, supervision, inspection, etc. . . ."

[The work was completed five and a half months late. The defendant deducted $50 per day from its payments to the plaintiff, which claims] that the liquidated damages provision in the contract was, in reality, a penalty since defendant failed to show that it sustained any actual damages by plaintiff's failure to complete the contract [on time].

The right to stipulate for liquidated damages for delay in completing construction of public works is generally recognized, and the stipulated amount may be recovered, if reasonable. Provisions for fixed per diem payments for delay in the performance of such contracts are usually construed as stipulations for liquidated damages, and not as penalties, where the actual damages are uncertain or are difficult of ascertainment, and where the stated sum is a reasonable estimate of probable damages or is reasonably proportionate to actual damages.

. . . Although we doubt . . . that any proof of actual damages were necessary to bring the liquidated damages provision to life, the defendant has shown damage by the necessity of having to hire additional engineering personnel to inspect the project; by being inconvenienced by the regrading of the parking lot; and, by the loss of interest on its capital investment during the delay period in question.

It is true that the precise amount of such damages is difficult to ascertain. That is why a liquidated damages provision in a construction contract is beneficial to both parties. It protects the owner from a future laborious recitation of item by item damage, and it protects the contractor from a potential lump sum claim of substantial sums of money in the event of breach of the completion provision. Here, . . . the amount of liquidated damages . . . was not greatly disproportionate . . . , and should not be considered as a penalty. . . .

Considering the above cases, how will a court rule if BCA sues Corvo? This is your final prediction.