Boats Unlimited (BU) is a business in Marina del Rey that rents out all types of boats to people who would like to go boating in the marina or out into the ocean. Skipper, the owner of BU, reads about a small start-up company called GPS-Works (GW). GW has designed a new type of boat that can essentially steer itself (after a proper course is entered on a keyboard). It uses a sophisticated computer that has maps of a particular area, sensors to locate oncoming traffic and other obstacles, and a global positioning system that uses satellites to determine its exact location. GW has already made some prototypes. It has only one competitor, a German Company called GPS-Schiffe, which has also made some prototypes and has a contract to make similar boats for the German and Dutch navies.
Skipper visits the GW plant and takes a ride in one of the boats, which takes him and three of his employees on a brief excursion on the ocean, without anyone having to steer or do anything. Skipper thinks this would be a great addition to his offering of rental boats, because he believes that many tourists who are not qualified to steer boats would nonetheless love to take an excursion on the ocean or around the harbor on a boat that steers itself. He explains his plan to GW and they agree that the boats should perform very well under these circumstances. Skipper also pays a company to do some market research, which suggests there would be a substantial market for rentals of such boats. Based on his observations and the market research, Skipper contracts with GW to buy 10 boats at a cost of $100,000 per boat, including delivery costs, to be delivered on December 30, 2004. He makes a down payment of $200,000.
By January 30, 2005, the boats have not been delivered and Skipper calls GW to find out why. They tell him that some of the critical components were far more expensive than they originally thought, so they severely underestimated the building cost. More importantly, they recently adopted a new business plan, which is to try to land a large contract with the U.S. Navy, and GW wants to focus all its attention on that plan. GW informs Skipper that although they could build the 10 boats for him by March 30, 2005 if they devoted all their energy to doing so, they are no longer interested in dealing with him because, “to be honest, you’re small potatoes compared to the Navy.”
Skipper then calls GPS-Schiffe (the only other company in the world capable of making this type of boat). They tell him that they are willing and able to build the boats, but they will cost him $200,000 each, and because of previous commitments to the Dutch and German navies, cannot be delivered until the end of 2007, and possibly later. In addition, Skipper will have to transport the boats from Hamburg, Germany, to Marina del Rey (i.e., transportation is not included in the price).
You have just passed the bar and gotten a job as an associate with a small law firm in Santa Monica that specializes in boat law. Skipper is a client and has come to the firm for advice. Senior Partner comes to you, recites the facts, and tells you to assume that the UCC applies, if it matters. She asks you to write a memo that objectively evaluates the following issues:
1. If BU sues for money damages, how much is it likely to recover? Do not consider lost profits in answering this question. [roughly one-third of total points].
2. Skipper claims that if the boats had been delivered on schedule, he could have grossed $10,000 in rental fees per month ($1000 per boat). His costs (labor and interest on the loan he took out to pay for the boats) would have been $5,000 per month, for a net lost profit of $5,000 per month. He would like to recover this amount for the month of January, 2005, and the same amount for each month until time of judgment. How likely is he to be successful on this claim? Do not consider the possibility of specific performance in answering this question [roughly one-third of total points].
3. If BU sues for specific performance, how likely is it that this remedy will be granted? [roughly one-third of total points].