A-11573, NOVEMBER 21, 1925, 5 COMP. GEN. 363

A-11573: Nov 21, 1925

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CONTRACTS - LIQUIDATED DAMAGES WHERE A CONTRACT PROVIDING FOR THE DEDUCTION OF LIQUIDATED DAMAGES BY REASON OF DELAYS IN COMPLETION CONTAINS A FURTHER PROVISION THAT THE CONTRACTOR SHALL NOT BE CHARGED THEREWITH WHEN THE HEAD OF THE DEPARTMENT CERTIFIES THAT NO ACTUAL DAMAGES WERE SUSTAINED BY THE UNITED STATES ON ACCOUNT OF SUCH DELAYS. WHERE A CONTRACT FOR THE CONSTRUCTION OF TWO IRON FIRE ESCAPES ON A BUILDING OCCUPIED BY A VETERANS' BUREAU HOSPITAL PROVIDED THAT CLAIMS FOR EXTENSIONS OF TIME BECAUSE OF DELAYS CAUSED BY CHANGES MUST BE SUBMITTED IN WRITING WITHIN 10 DAYS FROM THE DATE THE CHANGE IS ORDERED AND THAT NOTICE IN WRITING OF OTHER DELAYS SHALL BE GIVEN PROMPTLY BY THE CONTRACTOR AND NO SUCH NOTICES WERE GIVEN OR EXTENSIONS OF TIME GRANTED FOR SUCH DELAYS.

A-11573, NOVEMBER 21, 1925, 5 COMP. GEN. 363

CONTRACTS - LIQUIDATED DAMAGES WHERE A CONTRACT PROVIDING FOR THE DEDUCTION OF LIQUIDATED DAMAGES BY REASON OF DELAYS IN COMPLETION CONTAINS A FURTHER PROVISION THAT THE CONTRACTOR SHALL NOT BE CHARGED THEREWITH WHEN THE HEAD OF THE DEPARTMENT CERTIFIES THAT NO ACTUAL DAMAGES WERE SUSTAINED BY THE UNITED STATES ON ACCOUNT OF SUCH DELAYS, SUCH PROVISION DOES NOT CONVERT THE LIQUIDATED- DAMAGE CLAUSE INTO ONE FOR A PENALTY. WHERE A CONTRACT FOR THE CONSTRUCTION OF TWO IRON FIRE ESCAPES ON A BUILDING OCCUPIED BY A VETERANS' BUREAU HOSPITAL PROVIDED THAT CLAIMS FOR EXTENSIONS OF TIME BECAUSE OF DELAYS CAUSED BY CHANGES MUST BE SUBMITTED IN WRITING WITHIN 10 DAYS FROM THE DATE THE CHANGE IS ORDERED AND THAT NOTICE IN WRITING OF OTHER DELAYS SHALL BE GIVEN PROMPTLY BY THE CONTRACTOR AND NO SUCH NOTICES WERE GIVEN OR EXTENSIONS OF TIME GRANTED FOR SUCH DELAYS, THE CONTRACTOR IS CHARGEABLE WITH LIQUIDATED DAMAGES THEREFOR.

DECISION BY COMPTROLLER GENERAL MCCARL, NOVEMBER 21, 1925:

THE GREELEY IRON WORKS REQUESTED REVIEW OF SETTLEMENT NO. US-877-W, DATED FEBRUARY 21, 1925, WHEREIN IT WAS CHARGED WITH $1,810 ACCRUED LIQUIDATED DAMAGES FOR 181 DAYS' DELAY IN THE CONSTRUCTION OF TWO IRON FIRE ESCAPES ON BUILDING NO. 3 AT THE UNITED STATES VETERANS' BUREAU HOSPITAL NO. 81, BRONX, N.Y.

PURSUANT TO CONTRACT DATED SEPTEMBER 26, 1923, THE CONTRACTOR AGREED TO COMPLETE THE WORK WITHIN 75 CALENDAR DAYS FROM DATE OF RECEIPT OF NOTICE TO BEGIN WORK WITH A PROVISION FOR THE DEDUCTION OF LIQUIDATED DAMAGES AT THE RATE OF $10 PER DAY FOR EACH AND EVERY CALENDAR DAY OF DELAY IN COMPLETION, SUBJECT TO THE STIPULATION THAT---

* * * FOR ANY UNAVOIDABLE DELAY IN THE COMPLETION OF THE WORK (NOT THE RESULT OF THE FAULT OR NEGLIGENCE OF THE CONTRACTOR) ARISING FROM CAUSES BEYOND THE CONTROL OF THE CONTRACTOR, TO BE DETERMINED BY THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT, OR AN AUTHORIZED REPRESENTATIVE THEREOF, WHICH CAUSES SHALL INCLUDE, BUT SHALL NOT BE RESTRICTED TO, ACTS OF GOD, THE GOVERNMENT, THE PUBLIC ENEMY OR COMMON CARRIERS, FIRES, EPIDEMICS, QUARANTINE RESTRICTIONS, AND STRIKES, WHEREVER ANY OF THESE CAUSES OF DELAY OCCUR, THERE SHALL BE ALLOWED SUCH EXTENSION OF TIME FOR COMPLETION AS MAY BE FOUND BY THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT, OR AUTHORIZED REPRESENTATIVE THEREOF TO BE EQUIVALENT TO THE DELAY OR DELAYS SO OCCASIONED, NOT LESS, HOWEVER, THAN ONE DAY FOR EVERY DAY OF SUCH DELAY. IF AN EXTENSION OF TIME SHALL BE GRANTED FOR ANY OF THE CAUSES SPECIFIED ABOVE, THE NEW DATE ESTABLISHED BY SUCH EXTENSION SHALL BE THE DATE FOR COMPLETING THE WORK, AND ALL OF THE PROVISIONS OF THIS CONTRACT SHALL BE ENFORCEABLE AS THOUGH SUCH DATE HAD BEEN ORIGINALLY SPECIFIED: PROVIDED, THAT NOTICE IN WRITING OF THE CAUSE OR CAUSES OF DELAY SHALL BE GIVEN PROMPTLY BY THE CONTRACTOR TO THE CONTRACTING OFFICER: PROVIDED FURTHER, THAT DELAY ON THE PART OF A SUBCONTRACTOR SHALL NOT ENTITLE THE CONTRACTOR TO AN EXTENSION OF TIME UNLESS SUCH DELAY ARISES FROM A CAUSE HEREIN SPECIFIED AND COULD NOT HAVE BEEN AVOIDED BY THE CONTRACTOR. NO DELAY SHALL BE CHARGED AGAINST THE CONTRACTOR WHERE THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CERTIFIES THAT SUCH DELAY HAS CAUSED NO DAMAGE TO THE UNITED STATES. THE EXTENSION OF TIME PROVIDED IN THIS ARTICLE MAY BE ALLOWED OR SUCH CERTIFICATE MAY BE MADE AT ANY TIME BEFORE FINAL PAYMENT, BUT NOT THEREAFTER.

RECEIPT OF NOTICE TO COMMENCE WORK WAS ACKNOWLEDGED BY THE CONTRACTOR OCTOBER 16, 1923, RECKONING FROM WHICH WOULD MAKE THE AUTHORIZED TIME FOR COMPLETION EXPIRE DECEMBER 30, 1923. CONTENTION IS MADE, HOWEVER, THAT BECAUSE OF CERTAIN CHANGES IN SPECIFICATIONS, APPROVAL OF WHICH WAS GIVEN ON OCTOBER 23, 1923, WORK WAS NOT ACTUALLY COMMENCED UNTIL OCTOBER 24, 1923.

THE CONTRACT PROVIDES IN ARTICLE IV, WITH RESPECT TO CHANGES, THAT:

ARTICLE IV. CHANGES.--- CHANGES IN THE DRAWINGS AND SPECIFICATIONS FORMING PART OF THIS CONTRACT AND WITHIN THE GENERAL SCOPE OF THE WORK MAY BE MADE FROM TIME TO TIME BY THE CONTRACTING OFFICER BY GIVING WRITTEN NOTICE OF SUCH CHANGES TO THE CONTRACTOR WITHOUT NOTICE TO THE SURETIES ON THE CONTRACTOR'S BOND. THE CONTRACT PRICE OR COMPENSATION OF ANY ARTICLE OR WORK SHALL BE MODIFIED TO CONFORM TO ANY INCREASE OR DECREASE IN THE COST OF MANUFACTURE OR PERFORMANCE DUE TO SUCH CHANGES. THE CONTRACTOR'S TIME FOR PERFORMANCE OF THIS CONTRACT SHALL BE EXTENDED OR DIMINISHED ON ACCOUNT OF ANY DIFFERENCE IN TIME OF MANUFACTURE, PERFORMANCE, OR DELIVERY OF ANY ARTICLES OR WORK REQUIRED BY THIS CONTRACT AS A RESULT OF ANY SUCH CHANGES. ANY INCREASE OF COST OR COMPENSATION AND THE APPROXIMATE AMOUNT THEREOF OR ANY EXTENSION OF TIME CLAIMED BY THE CONTRACTOR OWING TO SUCH CHANGES MUST BE ASSERTED BY WRITTEN NOTICE TO THE CONTRACTING OFFICER WITHIN TEN DAYS FROM THE DATE THE CHANGE IS ORDERED UNLESS THE CONTRACTING OFFICER SHALL FOR PROPER CAUSE EXTEND SUCH TIME, IN WHICH CASE THE NOTICE SHALL BE FILED WITHIN THE EXTENDED TIME. THE AMOUNT OF SUCH INCREASE OR DECREASE IN PRICE OR COMPENSATION, AS WELL AS OF ANY CHANGE IN TIME FOR PERFORMANCE, SHALL BE DETERMINED BY AGREEMENT BETWEEN THE PARTIES HERETO, PROVIDED THAT NO CHANGE INVOLVING AN INCREASE OR DECREASE IN PRICE OR COMPENSATION OF MORE THAN FIVE HUNDRED DOLLARS SHALL BECOME EFFECTIVE UNLESS APPROVED BY THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT OR HIS DULY AUTHORIZED REPRESENTATIVE. IF THE PARTIES CAN NOT AGREE THE DISPUTE SHALL BE ADJUSTED IN THE MANNER ELSEWHERE PROVIDED IN THIS CONTRACT FOR THE ADJUSTMENT OF OTHER CLAIMS AND DISPUTES. THE FAILURE TO AGREE SHALL NOT RELIEVE THE CONTRACTOR FROM HIS OBLIGATION TO PROCEED WITH THE PROSECUTION OF THE WORK PENDING THE SETTLEMENT OF THE QUESTION INVOLVED. CHANGES IN THIS CONTRACT SHALL BE COVERED BY SUPPLEMENTAL AGREEMENT WHEN SUCH AGREEMENT IS DEEMED NECESSARY.

THE WORK APPEARS TO HAVE BEEN ACTUALLY COMPLETED ON JUNE 28, 1924, OR AFTER A DELAY OF 181 DAYS AFTER DECEMBER 30, 1923. THE CONTRACTOR SUBMITTED NO WRITTEN CLAIM, PROMPTLY OR OTHERWISE, FOR EXTENSIONS OF TIME BY REASON OF CHANGES OR BY REASON OF ANY OF THE DELAY CAUSES SPECIFIED IN THE CONTRACT. AS TO THE EFFECT OF SUCH OMISSION WHERE THE CONTRACT REQUIRES THAT SUCH CLAIMS BE SUBMITTED IN WRITING WITHIN A CERTAIN PERIOD, SEE PLUMLEY V. UNITED STATES, 226 U.S. 545.

SUBSEQUENT TO THE COMPLETION OF THE WORK ON JUNE 28, 1924, THE CONTRACTOR SUBMITTED A VOUCHER FOR $1,785 AS THE UNPAID BALANCE OF THE CONTRACT PRICE, AND BY LETTER OF AUGUST 15, 1924, THE VETERANS' BUREAU INFORMED THE CONTRACTOR THAT THE UNPAID BALANCE OF THE CONTRACT PRICE WOULD BE WITHHELD AGAINST THE SUM OF $1,810 DUE THE UNITED STATES FOR LIQUIDATED DAMAGES, AND REQUESTED THE CONTRACTOR TO REMIT THE SUM OF $25 TO COVER THE BALANCE DUE THE UNITED STATES ON ACCOUNT THEREOF. THIS THE CONTRACTOR FAILED TO DO AND SUBMITTED CLAIM TO THIS OFFICE FOR THE UNPAID BALANCE OF THE CONTRACT PRICE. SAID CLAIM WAS DISALLOWED IN THE SETTLEMENT UNDER REVIEW AND A BALANCE OF $25 WAS CERTIFIED DUE THE UNITED STATES.

IT IS URGED (1) THAT WHEN THE BID WAS SUBMITTED AND ACCEPTED IT WAS BELIEVED A NOTICE TO COMMENCE WORK WOULD BE GIVEN SHORTLY THEREAFTER AND THAT THE WORK WOULD BE COMPLETED WITHIN THE FOLLOWING 75 DAYS; THAT IS, DURING THE WARM AND FAVORABLE WEATHER; AND (2) THAT THE UNITED STATES SUFFERED NO ACTUAL DAMAGE AND THAT THE PROVISION IN ARTICLE X OF THE CONTRACT TO THE EFFECT NO DELAY SHOULD BE CHARGED AGAINST THE CONTRACTOR WHEN THE HEAD OF THE DEPARTMENT CERTIFIED THAT SUCH DELAY CAUSED NO DAMAGE TO THE UNITED STATES AND THE PROVISION IN ARTICLE XI FOR THE DEDUCTION OF LIQUIDATED DAMAGES FOR DELAY CONVERTS THE STIPULATION INTO ONE FOR A PENALTY WHICH CAN NOT BE ENFORCED. THESE CONTENTIONS WILL BE CONSIDERED IN THE ORDER STATED.

IT MAY BE POSSIBLE THAT THE DELAY IN SIGNING THE CONTRACT AND IN GIVING NOTICE TO COMMENCE WORK REQUIRING PERFORMANCE DURING THE LATE FALL AND WINTER MONTHS RESULTED IN SOME OF THE DELAY, BUT NO ALLOWANCE ON THAT ACCOUNT CAN NOW BE MADE FOR TWO REASONS--- (1) SUCH OF THE DELAY AS OCCURRED PRIOR TO THE EXECUTION OF THE CONTRACT CAN NOT BE CONSIDERED, FOR NO ALLOWANCE THEREFOR WAS MADE IN THE CONTRACT WHICH MERGED ALL PRIOR NEGOTIATIONS (SEE 3 COMP. GEN. 9), AND THERE APPEARS NO UNREASONABLE DELAY FROM SEPTEMBER 26, 1923, DATE OF THE CONTRACT, AND OCTOBER 13, 1923, DATE OF GIVING NOTICE TO COMMENCE WORK; (2) THE CONTRACTOR DID NOT SUBMIT CLAIM IN WRITING FOR AN EXTENSION OF TIME BY REASON OF SUCH DELAYS. UNITED STATES V. PLUMLEY, SUPRA, AND FURTHERMORE NO EXTENSION OF TIME WAS IN FACT GRANTED BY THE VETERANS' BUREAU. SEE KIHLBERG V. UNITED STATES, 97 U.S. 398; UNITED STATES V. GLEASON, 175 U.S. 588.

WITH RESPECT TO THE SECOND CONTENTION, SUPRA, THE CONTRACTOR SEEMS TO RELY ON PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 48 CT.CLS. 399. THE CONTRACT IN THAT CASE CONTAINED PROVISIONS SOMEWHAT SIMILAR TO THE PROVISIONS HERE, AND THE DEFENDANT INTERPOSED A DEMURRER TO THE PETITION. THE COURT OVERRULED THE DEMURRER WITH LEAVE TO BOTH PARTIES TO TAKE FURTHER TESTIMONY IF DESIRED. THE DEFENDANT MOVED FOR THE DEMURRER, AND DISMISSED THE PETITION, STATING THAT THE PROVISION WITH RESPECT TO REMISSION OF LIQUIDATED DAMAGES WHEN NO DAMAGE HAD BEEN CAUSED TO THE UNITED STATES---

WAS INSERTED FOR THE BENEFIT OF THE CONTRACTOR, AS THE PRIOR CLAUSE SECURED THE BASIS OF DEDUCTION ALLOWED THE GOVERNMENT, AND THE DEFENDANTS ARE NOT NOW ATTACKING THE PROVISO. BUT THE CLAIMANT'S CONTENTION THAT THE PROVISO IS CONTRARY TO PUBLIC POLICY AND THEREFORE VOID MAY IGNORE A WELL- ESTABLISHED PRINCIPLE IN THE CONSTRUCTION AND ENFORCEMENT OF CONTRACTS, NAMELY, THAT WHERE A CONTRACT CONTAINS DISTINCT AND SEPARABLE STIPULATIONS SOME OF WHICH ARE VALID AND OTHERS ILLEGAL OR CONTRARY TO PUBLIC POLICY, AND THEY ARE NOT SO INTERDEPENDENT AS THAT THE ONE CANNOT STAND WITHOUT THE OTHER, THE ILLEGAL OR VOID PARTS WILL NOT NECESSARILY VITIATE THE PARTS WHICH ARE GOOD, BUT MAY THEMSELVES BE DISCARDED.

THE CONTRACT HERE UNDER CONSIDERATION MORE CLEARLY PROVIDES FOR LIQUIDATED DAMAGES THAN DID THE CONTRACT BEFORE THE COURT IN THAT CASE. AS THE DIRECTOR OF THE VETERANS' BUREAU DID NOT CERTIFY THAT THE DELAY IN THIS CASE CAUSED NO DAMAGE TO THE UNITED STATES, IT IS NOT NECESSARY AT THIS TIME TO DETERMINE THE VALIDITY OR EFFECT OF THE CLAUSE IN ARTICLE X OF THE CONTRACT THAT "NO DELAY SHALL BE CHARGED AGAINST THE CONTRACTOR WHERE THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CERTIFIES THAT SUCH DELAY HAS CAUSED NO DAMAGE TO THE UNITED STATES," OTHER THAN TO HOLD THAT SAID CLAUSE DOES NOT AFFECT THE VALIDITY OF THE LIQUIDATED DAMAGE PROVISION.