A-13810, APRIL 27, 1926, 5 COMP. GEN. 868

A-13810: Apr 27, 1926

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PAYMENTS - DISCOUNTS WHERE A CONTRACT PROVIDES THAT A CERTAIN DISCOUNT WILL BE ALLOWED IF PAYMENT FOR THE GOODS PURCHASED THEREUNDER IS MADE WITHIN A STIPULATED PERIOD. THE AMOUNT ALLOWED AS A DISCOUNT UNDER A CONTRACT IS THE SUM THE VENDOR IS WILLING TO PAY FOR PAYMENT OF THE ACCOUNT WITHIN A STIPULATED PERIOD AND IT IS IMMATERIAL WHETHER SUCH ACCOUNT REPRESENTS THE VALUE OF THE GOODS SOLD AT POINT OF ORIGIN OR INCLUDES OTHER EXPENDITURES MADE BY THE VENDOR IN ACCORDANCE WITH THE TERMS OF THE CONTRACT. WITH REQUEST FOR DECISION AS TO WHETHER PAYMENT ON SAID VOUCHER IS AUTHORIZED. BOTH OF WHICH WERE ATTACHED TO AND MADE A PART OF THE CONTRACT. IT WAS SPECIFICALLY PROVIDED IN THE SCHEDULE.

A-13810, APRIL 27, 1926, 5 COMP. GEN. 868

PAYMENTS - DISCOUNTS WHERE A CONTRACT PROVIDES THAT A CERTAIN DISCOUNT WILL BE ALLOWED IF PAYMENT FOR THE GOODS PURCHASED THEREUNDER IS MADE WITHIN A STIPULATED PERIOD, THE AMOUNT TO BE DEDUCTED AS DISCOUNT SHOULD BE BASED ON THE PRICE FIXED IN THE CONTRACT EVEN THOUGH SUCH PRICE SHOULD INCLUDE THE AMOUNT PAID BY THE VENDOR AS FREIGHT ON THE GOODS WHEN DELIVERED AT DESTINATION. THE AMOUNT ALLOWED AS A DISCOUNT UNDER A CONTRACT IS THE SUM THE VENDOR IS WILLING TO PAY FOR PAYMENT OF THE ACCOUNT WITHIN A STIPULATED PERIOD AND IT IS IMMATERIAL WHETHER SUCH ACCOUNT REPRESENTS THE VALUE OF THE GOODS SOLD AT POINT OF ORIGIN OR INCLUDES OTHER EXPENDITURES MADE BY THE VENDOR IN ACCORDANCE WITH THE TERMS OF THE CONTRACT.

COMPTROLLER GENERAL MCCARL TO CAPT. W. M. DIXON, UNITED STATES ARMY, APRIL 27, 1926:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF FEBRUARY 11, 1926, FORWARDED THROUGH THE OFFICE OF THE CHIEF OF FINANCE AND RECEIVED IN THIS OFFICE APRIL 2, 1926, TRANSMITTING AN UNPAID VOUCHER FOR $43.08 IN FAVOR OF THE PREMIER COAL CO., WITH REQUEST FOR DECISION AS TO WHETHER PAYMENT ON SAID VOUCHER IS AUTHORIZED.

THE VOUCHER SUBMITTED COVERS THE DIFFERENCE IN DISCOUNT OF 2 PERCENT ON 683.99 TONS OF COAL, AT $5.30 PER TON, PURCHASED UNDER CONTRACT DATED MAY 20, 1925, AND THE DISCOUNT AT THE SAME RATE ON THIS COAL AT $2.15 PER TON, THE DIFFERENCE BETWEEN THE TWO PRICES BEING THE FREIGHT PAID ON SAID COAL BY THE CONTRACTOR.

BY THE CONTRACT REFERRED TO THE CLAIMANT AGREED TO FURNISH 9,000 TONS OF COAL FOR THE WAR DEPARTMENT FOR THE SUM OF $21,555 IN ACCORDANCE WITH THE PROVISIONS OF SCHEDULE "A" AND ADVERTISEMENT AND CIRCULAR PROPOSAL NO. R.M. AND F. DATED APRIL 8, 1925, BOTH OF WHICH WERE ATTACHED TO AND MADE A PART OF THE CONTRACT. BY THE PROPOSAL OF APRIL 8, 1925, THE CONTRACTOR AGREED TO FURNISH AND DELIVER THE 9,000 TONS OF COAL, CONSISTING OF TWO LOTS OF 8,300 TONS AND 700 TONS, RESPECTIVELY, IN ACCORDANCE WITH THE FOLLOWING SCHEDULE:

FOR FORT D. A. RUSSELL, WYOMING * * *. 8,300 TONS OF 2,000 POUNDS EACH.

DELIVERY POINT: F.O.B. CARS, MINE. PRICE: $2.15 PER TON OF 2,000 POUNDS.

TOTAL PRICE: $17,845.00.

FOR FORT D. A. RUSSELL, WYOMING * * *. 700 TONS OF 2,000 POUNDS EACH.

DELIVERY POINT: F.O.B. CARS, FORT D. A. RUSSELL, WYOMING. PRICE: $5.30 PER TON OF 2,000 POUNDS.

TOTAL PRICE: $3,710.00.

SCHEDULE A REFERRED TO IN THE CONTRACT COVERED THE LOT OF 8,300 TONS AND STIPULATED THE PRICE TO BE PAID FOR SAID LOT AS $2.15 PER TON F.O.B. MINES, THE TOTAL PRICE TO BE PAID FOR SAID TONNAGE TO BE $17,845. IT ALSO COVERED THE LOT OF 700 TONS AND STIPULATED THE PRICE TO BE PAID FOR THIS LOT AS $5.30 PER TON AND DELIVERY POINT AS F.O.B. CARS, FORT D. A. RUSSELL, WYO., THE TOTAL PRICE TO BE PAID FOR THE TONNAGE OF 700 TONS TO BE $3,710. IT WAS SPECIFICALLY PROVIDED IN THE SCHEDULE, AS WELL AS IN THE PROPOSAL, THAT 2 PERCENT SHOULD BE DEDUCTED IF PAYMENT WAS MADE WITHIN 10 DAYS. DELIVERY WAS MADE OF 683.99 TONS OF THE 700 TONS BOUGHT F.O.B. FORT D. A. RUSSELL AND PAYMENT MADE THEREFOR AT $5.30 PER TON. AS PAYMENT WAS MADE WITHIN THE DISCOUNT PERIOD A DISCOUNT OF 2 PERCENT WAS TAKEN FROM THE PRICE OF $5.30 PER TON AND THE PAYMENTS THUS MADE ACCEPTED BY THE CONTRACTOR. THE CONTRACTOR NOW CONTENDS THAT THE DISCOUNT WAS ONLY ALLOWABLE ON THE MINE PRICE AND SHOULD HAVE BEEN BASED ON THE PRICE OF $2.15 PER TON INSTEAD OF $5.30 PER TON, THE PRICE FIXED IN THE CONTRACT AND PAID FOR THE COAL. THIS CONTENTION IS BASED ON THE FACT THAT THE DELIVERED PRICE OF $5.30 PER TON WAS THE MINE PRICE OF THE COAL PLUS THE FREIGHT RATE OF $3.15 PER TON WHICH WAS PAID BY THE CONTRACTOR. IN EVERY CASE WHEREVER AND WHENEVER GOODS ARE SOLD DELIVERED THE DELIVERED PRICE IS ASCERTAINED IN THIS MANNER, AND THE SUGGESTION AS TO THE EXISTENCE OF A TRADE CUSTOM TO THE EFFECT THAT IN SUCH CASES THE TRADE DISCOUNTS FOR PROMPT PAYMENT ARE ONLY TO BE ALLOWED ON THE PRICE OF THE GOODS AT THE POINT OF ORIGIN AND NOT ON THE INVOICE PRICES AT POINT OF DELIVERY DOES NOT APPEAR REASONABLE. THE CUSTOM OF ALLOWING DISCOUNTS FOR PROMPT PAYMENT, OR PAYMENT WITHIN A SPECIFIED TIME, IS BASED ON THE THEORY THAT USE OF THE MONEY TIED UP IN THE SHIPMENT WILL BE WORTH TO THE VENDOR THE AMOUNT OF THE DISCOUNT OFFERED. AND FROM THE STANDPOINT OF THE VENDEE, IN DETERMINING WHETHER THE OPTION TO PAY WITHIN THE DISCOUNT PERIOD SHALL BE EXERCISED, THERE IS FOR CONSIDERATION WHETHER THE USE OF THE MONEY BEYOND THE DISCOUNT PERIOD WILL BE OF MORE BENEFIT THAN THE AMOUNT OF THE DISCOUNT. THEREFORE, IT IS IMMATERIAL AS TO WHAT PART OF THE AMOUNT INVOLVED REPRESENTS TO THE VENDOR ORIGINAL COST, HANDLING CHARGES, PROFIT, DELIVERY CHARGES, ETC.

IN THE INSTANT CASE, BY QUOTING A DELIVERED PRICE, THE CONTRACTOR NOT ONLY AGREED TO DELIVER TO THE GOVERNMENT THE COAL PURCHASED BUT TO ADVANCE THE MONEY FOR THE FREIGHT. LIKEWISE, BY AGREEING TO A DISCOUNT OF 2 PERCENT IF PAYMENT WERE MADE WITHIN 10 DAYS IT, IN EFFECT, ACKNOWLEDGED THAT IT WAS WILLING TO ACCEPT IN FULL SETTLEMENT A PAYMENT OF 98 PERCENT OF THE TOTAL AMOUNT WITHIN THE 10 DAYS STIPULATED IN LIEU OF A PAYMENT OF 100 PERCENT OF THE AMOUNT DUE AT SOME LATER PERIOD; AND THERE IS NO REASON WHY THE AMOUNT DUE IT AS REIMBURSEMENT FOR FREIGHT SHOULD NOT HAVE THE SAME VALUE TO IT AS DID THE AMOUNT REPRESENTED BY THE MINE VALUE OF THE COAL. THE GOVERNMENT HAD THE SAME RIGHT TO DEFER MAKING REIMBURSEMENT OF THE AMOUNT ADVANCED BY THE CONTRACTOR FOR FREIGHT AS IT DID TO DELAY PAYING THE VALUE OF THE COAL AT THE MINE. THE BILL WAS RENDERED AS A WHOLE, AND PAYMENT OF THE ENTIRE AMOUNT LESS THE AUTHORIZED DISCOUNT WAS MADE WITHIN THE STIPULATED PERIOD.