Opinion ID: 815021
Heading Depth: 2
Heading Rank: 2

Heading: Liquidated Damages and Related Provisions

Text: The VSA contains two relevant contract provisions. The first, Paragraph 11F, is a non-competition clause between International (Buyer) and Delta (Seller), which reads as follows: F. Covenant Regarding Name/Use of Vessels/Hiring of Crews. . . . Buyer represents that it is purchasing the Vessels for use with Buyer’s owned or chartered equipment in support of Buyer’s internal operations. 1 International Offshore Services, L.L.C. served as International Marine, L.L.C.’s guarantor in the subsequently signed Vessel Sales Agreement. Collectively, we refer to both companies as “International.” 2 Case: 12-30280 Document: 00512105709 Page: 3 Date Filed: 01/08/2013 No. 12-30280 Inasmuch, Buyer covenants and agrees that neither it nor any of its affiliated companies will charter out or enter into towing contracts or otherwise utilize or permit anyone else to utilize the Vessels for hire (collectively “Charters Out”) in the inland or offshore waters of the U.S. Gulf of Mexico . . . (the “Covered Trade”) for a period of five (5) years from the date of this Agreement (the “Covered Term”). . . . Notwithstanding the foregoing, in the event Buyer or its affiliated companies wish to Charter Out either or both of the Vessels in the Covered Trade during all or part of the Covered Term, Buyer shall be obligated to time charter the applicable Vessels to Seller for Seller to enter into Charters Out with customers acceptable to Seller . . . . VSA ¶ 11F (emphasis added). Thus, in the event International decided to compete with Delta for third-party charters, it was first obligated to notify Delta and give it the option of operating charters itself. If Delta chose to operate the charter, it would remit ninety percent of the gross charter fee to International. If Delta was unable to secure charter customers for the vessels within a reasonable period of time, International was permitted to operate its own charters and would remit ten percent of the charter fee to Delta. Additionally, the charter hire rate charged to customers had to be reasonably agreeable to both Delta and International. The VSA’s LD Provision, Paragraph 11G, reads as follows: G. Liquidated Damages. The consideration for the provisions in paragraph 11F and this paragraph 11G is that the above Purchase Price is below the fair market price of the Vessels at the time of sale and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and confessed. In the event Buyer or its affiliated companies or other subsequent owner, manager, or charter of the Vessels violates any of the covenants and agreements in paragraph 11F, Buyer shall pay to 3 Case: 12-30280 Document: 00512105709 Page: 4 Date Filed: 01/08/2013 No. 12-30280 Seller as liquidated damages, and not as a penalty, the greater of (i) the sum of Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00) per incident or occurrence or (ii) if applicable the gross amount of revenue earned in violation of such covenant and agreement with respect of the incident or occurrence in question . . . . All liquidated damages shall be payable within 30 days of notice of the violation. It is understood that the resultant damages of any such breach of the covenants and agreements contained in paragraph 11F would be difficult to ascertain with certainty but that the amount stipulated herein is a good faith reasonable estimate of the damages Seller would suffer. . . . In no event shall any party or the affiliated companies thereof or the respective shareholders, officers, directors, employees, agents, or representatives thereof circumvent or attempt to circumvent the provisions of paragraph 11F or this paragraph 11G by any means, direct or indirect. VSA ¶ 11G (emphasis added).