Mermaid owns an exceptionally seaworthy boat that she charters for sport fishing at a $500 daily rate. The fee includes the use of the boat with Mermaid as the captain, and one other crew member, as well as fishing tackle and bait. On May 1, Phinney agreed with Mermaid that Phinney would have the full-day use of the boat on May 15 for himself and his family for $500. Phinney paid an advance deposit of $200 and signed an agreement that the deposit could be retained by Mermaid as liquidated damages in the event Phinney canceled or failed to appear. For this question only, assume the following facts. At the time of contracting, Mermaid told Phinney to be at the dock at 5 a.m. on May 15. Phinney and his family, however, did not show up on May 15 until noon. Meantime, Mermaid agreed at 10 a.m. to take Tess and her family out fishing for the rest of the day. Tess had happened to come by and inquire about the possibility of such an outing. In view of the late hour, Mermaid charged Tess $400 and stayed out two hours beyond the customary return time. Phinney's failure to appear until noon was due to the fact that he had been trying to charter another boat across the bay at a lower rate and had gotten lost after he was unsuccessful in getting such a charter. Which of the following is an accurate statement concerning the rights of the parties? 
Mermaid can retain the $200 paid by Phinney, because it would be difficult for Mermaid to establish her actual damages and the sum appears to have been a reasonable forecast in light of anticipated loss of profit from the charter.  Mermaid is entitled to retain only $50 (10% of the contract price) and must return $150 to Phinney. Mermaid must return $100 to Phinney in order to avoid her own unjust enrichment at Phinney's expense. Mermaid must return $100 to Phinney, because the liquidated-damage clause under the circumstances would operate as a penalty. 
Question: Mermaid owns an exceptionally seaworthy boat that she charters for sport fishing at a $500 daily rate. The fee includes the use of the boat with Mermaid as the captain, and one other crew member, as well as fishing tackle and bait. On May 1, Phinney agreed with Mermaid that Phinney would have the full-day use of the boat on May 15 for himself and his family for $500. Phinney paid an advance deposit of $200 and signed an agreement that the deposit could be retained by Mermaid as liquidated damages in the event Phinney canceled or failed to appear. For this question only, assume the following facts. At the time of contracting, Mermaid told Phinney to be at the dock at 5 a.m. on May 15. Phinney and his family, however, did not show up on May 15 until noon. Meantime, Mermaid agreed at 10 a.m. to take Tess and her family out fishing for the rest of the day. Tess had happened to come by and inquire about the possibility of such an outing. In view of the late hour, Mermaid charged Tess $400 and stayed out two hours beyond the customary return time. Phinney's failure to appear until noon was due to the fact that he had been trying to charter another boat across the bay at a lower rate and had gotten lost after he was unsuccessful in getting such a charter. Which of the following is an accurate statement concerning the rights of the parties? 
A. Mermaid can retain the $200 paid by Phinney, because it would be difficult for Mermaid to establish her actual damages and the sum appears to have been a reasonable forecast in light of anticipated loss of profit from the charter. 
B. Mermaid is entitled to retain only $50 (10% of the contract price) and must return $150 to Phinney.
C. Mermaid must return $100 to Phinney in order to avoid her own unjust enrichment at Phinney's expense.
D. Mermaid must return $100 to Phinney, because the liquidated-damage clause under the circumstances would operate as a penalty. 
Answer: