Article

Prior History: Cruise Connections Charter Mgmt. 1, LP v. Ag. of Can., No. 08-2054, 2013 WL 4780092 (D.D.C., Sept. 9, 2013) [USA], noted in 2014 at 430; Cruise Connections Charter Mgmt. 1, LP v. Ag. of Can., 634 F.Supp.2d 86 (D.D.C. 2009) [USA], noted in 2010 ANNUAL REVIEW OF INTERNATIONAL BANKING LAW & PRACTICE at 476.

Note: Cruise Connections Charter Management 1, LP (Broker) successfully bid on a contract with the Royal Canadian Mounted Police (RCMP) to act as the Broker to negotiate charters for ships to be used as floating hotels during the 2010 Vancouver Winter Olympic Games. The bid was supported by a standby letter of credit provided by John Sessions ("Issuer"). When RCMP terminated its contract, Broker sued for breach of contract. Upon finding RCMP liable, the case was remanded to a bench trial for a determination of damages.

At trial, RCMP contended that Broker failed to include certain expenditures it would have incurred in performance of the contract, which would have reduced the total damage. In particular, RCMP noted the letter of credit provided by Issuer for the purpose of supporting Broker's bid, which was essential for Broker to secure the contract. Specifically, Issuer agreed to provide "an unredeemable, nonpayable Letter of Credit in the amount of $5,057,500 [USD]." In exchange, Broker would, if it secured the contract, pay Issuer "[a] special limited partnership interest" or "allocations and distributions of the amounts described above [i.e., $5,057,500]" within 10 days after it received payment from RCMP. However, due to the termination of the contract, Issuer did not provide the letter of credit.

Applying British Columbia law, the United States District Court for the District of Columbia, Collyer, J., ruled that Broker was not required to deduct USD 5,057,500 as an anticipated expense of Contract performance. The Judge noted that the "self-identified 'nonpayable Letter of Credit' intimates that [Issuer] never put any money at risk, which could complicate any prospective effort to collect."

[ABS/mjb]

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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.