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					BLTC-8e Case Problem with Sample Answer
Chapter 15: Breach and Remedies
15.6 Case Problem with Sample Answer

Tyna Ek met Russell Peterson in Seattle, Washington. Peterson persuaded Ek to
buy a boat that he had once owned, the O’Hana Kai, which was in Juneau,
Alaska. Ek paid the boat’s current owner $43,000 for the boat, and in January
2000, she and Peterson entered into a contract, under which Peterson agreed to
make the vessel seaworthy so that within one month it could be transported to
Seattle, where he would pay its moorage costs. He would renovate the boat at
his own expense in return for a portion of the profit on its resale in 2001. On the
sale, Ek would recover her costs, and then Peterson would be reimbursed for his.
Ek loaned Peterson her cell phone so that they could communicate while he
prepared the vessel for the trip to Seattle. In March, Peterson, who was still in
Alaska, borrowed $4,000 from Ek. Two months later, Ek began to receive
unanticipated, unauthorized bills for vessel parts and moorage, the use of her
phone, and charges on her credit card. She went to Juneau to take possession of
the boat. Peterson moved it to Petersburg, Alaska, where he registered it under a
false name, and then to Taku Harbor, where the police seized it. Ek filed a suit in
an Alaska state court against Peterson, alleging breach of contract and seeking
damages. If the court finds in Ek’s favor, what should her damages include?
Discuss. [Peterson v. Ek, 93 P.3d 458 (Alaska 2004)]

Sample Answer:

Ek is entitled to recover damages in an amount that compensates her for the loss
of the bargain and reimburses her for any expenses she suffered as a result of
Peterson’s breach. The court held that Peterson breached the contract with Ek
and awarded her damages that included the loan to Peterson, the unauthorized
charges, the moorage costs to the date of the boat’s repossession, and the costs
to repossess it, offset by the increase in its value added by Peterson’s efforts.
Peterson appealed to a state intermediate appellate court, which affirmed the
lower court’s judgment. The appellate court stated that “the injured party is
entitled to recovery of all damages naturally accruing from the contractual
breach, and to be put in as a good a position as he would have been in had the
contract been performed. Parties in breach of contract are liable for foreseeable
damages or for damages resulting from special circumstances of which the
breaching party had reason to know.” In this case, “[b]ecause repossession of
the vessel was a foreseeable result of Peterson’s material breach of the contract
and his failure to surrender possession, it was appropriate for the trial court to
award Ek for costs associated with repossessing the vessel.” With respect to the
phone charges, the appellate court pointed out that “the charges were excessive
and . . . the phone would have been returned months earlier had Peterson not
breached the contract.”

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