Alright Construction, Inc., signs a contract with Casa DelMonte, Inc., to build five new 20-room modules for a largetourist resort in a Caribbean country. Casa Del Monte establishesliquidated damages of $30,000 for each day over thecontractual deadline of December 1. The damages are consideredreasonable, based on a net income of $300 for eachof the 100 new rooms. However, political instability in thecountry keeps tourists off the resort. It has an occupancyrate of just 20% during December. Alright Constructiondoes have a delay of 15 days. Can this contractor claim thatthe liquidated damages should be limited to 20% × $30,000= $6,000 per day?
Alright Construction, Inc., signs a contract with Casa DelMonte, Inc., to build five new 20-room modules for a largetourist resort in a Caribbean country. Casa Del Monte establishesliquidated damages of $30,000 for each day over thecontractual deadline of December 1. The damages are consideredreasonable, based on a net income of $300 for eachof the 100 new rooms. However, political instability in thecountry keeps tourists off the resort. It has an occupancyrate of just 20% during December. Alright Constructiondoes have a delay of 15 days. Can this contractor claim thatthe liquidated damages should be limited to 20% × $30,000= $6,000 per day?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Alright Construction, Inc., signs a contract with Casa Del
Monte, Inc., to build five new 20-room modules for a large
tourist resort in a Caribbean country. Casa Del Monte establishes
liquidated damages of $30,000 for each day over the
contractual deadline of December 1. The damages are considered
reasonable, based on a net income of $300 for each
of the 100 new rooms. However, political instability in the
country keeps tourists off the resort. It has an occupancy
rate of just 20% during December. Alright Construction
does have a delay of 15 days. Can this contractor claim that
the liquidated damages should be limited to 20% × $30,000
= $6,000 per day?
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