A-19591, SEPTEMBER 1, 1927, 7 COMP. GEN. 178

A-19591: Sep 1, 1927

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OTHER LUMBER NOT IN ACCORDANCE WITH THE SPECIFICATIONS IS DELIVERED. WITH NOTIFICATION TO THE CONTRACTOR THAT IT WAS NOT BEING ACCEPTED AS IN COMPLIANCE WITH THE CONTRACT. MEASURED BY THE DIFFERENCE IN PRICE BETWEEN THAT PAID THE CONTRACTOR FOR THE SUBSTITUTED LUMBER AND THE PRICE FOR WHICH SIMILAR MATERIAL COULD HAVE BEEN PURCHASED AT THE TIME THE CONTRACT WAS ENTERED INTO. WHEREIN WAS DEDUCTED FROM ITS CLAIM OF $1. THE DEDUCTION WAS MADE FOR THE REASON THAT CLAIMANT'S HIGHER BID WAS ACCEPTED BECAUSE IT PROPOSED TO FURNISH LUMBER "GRADE MARKED IN ACCORDANCE WITH RULES OF THE SOUTHERN PINE ASSOCIATION. " AND THAT WHEN IT FAILED TO DELIVER SUCH LUMBER IT WAS ENTITLED TO PAYMENT ON THE BASIS OF THE LOWEST BID FOR LUMBER NOT GRADE MARKED OF THE SAME QUALITY.

A-19591, SEPTEMBER 1, 1927, 7 COMP. GEN. 178

CONTRACTS - BREACH - DAMAGES WHERE A CONTRACT PROVIDES FOR THE DELIVERY OF LUMBER OF CERTAIN PRESCRIBED QUALITIES FOR A CERTAIN PRICE, BUT OTHER LUMBER NOT IN ACCORDANCE WITH THE SPECIFICATIONS IS DELIVERED, AND THE GOVERNMENT USES SAME, WITH NOTIFICATION TO THE CONTRACTOR THAT IT WAS NOT BEING ACCEPTED AS IN COMPLIANCE WITH THE CONTRACT, A REASONABLE COMPENSATION, MEASURED BY THE MARKET PRICE, MAY BE PAID FOR SUCH LUMBER, LESS THE AMOUNT OF ANY DAMAGES SUSTAINED BY THE GOVERNMENT, MEASURED BY THE DIFFERENCE IN PRICE BETWEEN THAT PAID THE CONTRACTOR FOR THE SUBSTITUTED LUMBER AND THE PRICE FOR WHICH SIMILAR MATERIAL COULD HAVE BEEN PURCHASED AT THE TIME THE CONTRACT WAS ENTERED INTO.

DECISION BY COMPTROLLER GENERAL MCCARL, SEPTEMBER 1, 1927:

THE C. G. HULL LUMBER CO. REQUESTED JULY 30, 1927, REVIEW OF SETTLEMENT NO. 0156253, DATED JUNE 9, 1927, WHEREIN WAS DEDUCTED FROM ITS CLAIM OF $1,786.98 FOR LUMBER DELIVERED TO THE UNITED STATES FOR USE AT FLORENCE, ALA., THE SUM OF $492.56, AS THE DIFFERENCE BETWEEN THE INVOICE PRICE AND THE MARKET PRICE FOR DELIVERY OF THE LUMBER. THE DEDUCTION WAS MADE FOR THE REASON THAT CLAIMANT'S HIGHER BID WAS ACCEPTED BECAUSE IT PROPOSED TO FURNISH LUMBER "GRADE MARKED IN ACCORDANCE WITH RULES OF THE SOUTHERN PINE ASSOCIATION," AND THAT WHEN IT FAILED TO DELIVER SUCH LUMBER IT WAS ENTITLED TO PAYMENT ON THE BASIS OF THE LOWEST BID FOR LUMBER NOT GRADE MARKED OF THE SAME QUALITY. THE CLAIMANT ALLEGES THAT WHEN IT NOTIFIED THE PROPER OFFICER OF THE UNITED STATES IT WAS UNABLE TO DELIVER GRADE- MARKED LUMBER, SAID OFFICER REQUESTED DELIVERY OF LUMBER NOT SO MARKED AND AGREED TO PAY THE PRICE CLAIMED THEREFOR, WHICH HAPPENS TO BE THE PRICE STIPULATED IN THE PROPOSALS DATED JUNE 11 AND 14, 1926, AND ACCEPTANCE THEREOF DATED JUNE 19 AND 22, 1926, RESPECTIVELY, FOR GRADE-MARKED LUMBER OF THE SAME QUALITY, AND CONTENDS THAT BECAUSE OF SUCH ARRANGEMENT IT IS ENTITLED TO THE FULL AMOUNT OF ITS CLAIM.

BY ADVERTISEMENTS DATED JUNE 9 AND 19, 1926, THE UNITED STATES ENGINEER OFFICE AT FLORENCE, A., SOLICITED BIDS FOR DELIVERY AT THE EARLIEST POSSIBLE DATE OF CERTAIN SPECIFIED QUANTITIES OF SPECIFIED DIMENSIONS AND OF CERTAIN SPECIFIED GRADES, NOT HERE MATERIAL, OF YELLOW PINE LUMBER, ALL QUANTITIES TO BE "GRADE MARKED IN ACCORDANCE WITH RULES OF THE SOUTHERN PINE ASSOCIATION.' CLAIMANT SUBMITTED BIDS FOR DELIVERY OF SAME AND AGREED TO MAKE DELIVERY UNDER THE ACCEPTANCE OF JUNE 19, 1926, WITHIN FIVE DAYS AND UNDER THE ACCEPTANCE OF JUNE 22, 1926, WITHIN TWO DAYS. THESE BIDS WERE ACCEPTED, THOUGH THEY LARGELY EXCEEDED THE LOWEST BID, WHICH DID NOT OFFER TO DELIVER LUMBER GRADE MARKED BY THE SOUTHERN PINE ASSOCIATION.

THE SUBSEQUENT FACTS IN THE MATTER ARE REPORTED IN LETTER DATED SEPTEMBER 11, 1926, FROM THE ENGINEER OFFICER AS FOLLOWS:

3. UPON DELIVERY OF THE LUMBER IT WAS FOUND TO BE OF THE GRADE SPECIFIED BUT NOT GRADE MARKED, AS REQUIRED. IT WAS THEREFORE REJECTED AS A DELIVERY UNDER THE ORDER, BUT IN VIEW OF URGENT NEED TO AVOID COSTLY DELAY OF CONSTRUCTION WORK, AND NO OTHER SUITABLE LUMBER BEING AVAILABLE, IT WAS USED AND THE VENDOR WAS NOTIFIED THAT IT WOULD BE PURCHASED FROM HIM AT A PRICE TO BE FIXED BY NEGOTIATION. HE STATES THAT THE ONLY PRICE HE IS WILLING TO ACCEPT IS $45, AND A NEW PURCHASE ORDER WAS ISSUED ACCORDINGLY.

4. AT THE TIME THE GRADE-MARKED LUMBER WAS ORDERED THIS OFFICE COULD HAVE PURCHASED UNGRADE-MARKED MATERIAL AT $39.50 PER THOUSAND. ON THIS BASIS, THE UNGRADE-MARKED LUMBER SHIPPED WITHOUT AUTHORITY OR ADVANCE EXPLANATION OR NOTICE, AND OFFERED AS A DELIVERY UNDER THE TERMS OF THE PURCHASE ORDER, WAS WORTH NO MORE THAN $39.50.

5. IT IS BELIEVED THAT THE VENDOR HAS A RIGHT TO CHARGE A REASONABLE PRICE FOR THE REJECTED LUMBER WHICH WAS USED, AND IN VIEW OF THE EMERGENCY EXISTING ON THE WORK THE PRICE OF $45 IS REASONABLE. AS TO DELIVERY UNDER THE ORIGINAL ORDER, HOWEVER, IT IS BELIEVED THAT THE VENDOR IS LIABLE FOR THE DIFFERENCE BETWEEN THE AMOUNT CLAIMED AND THE AMOUNT AT WHICH LUMBER TO THE SAME SPECIFICATIONS COULD HAVE BEEN PURCHASED. IT IS RECOMMENDED, THEREFORE, THAT SETTLEMENT BE MADE ACCORDINGLY.

THE FACTS OF THIS STATEMENT ARE SUBSTANTIALLY CORROBORATED IN AN AFFIDAVIT DATED JUNE 29, 1927, EXECUTED BY THE PRESIDENT OF CLAIMANT COMPANY, AND, FOR THE PURPOSE OF THIS DECISION ONLY, IT MAY BE CONCEDED THAT SAID COMPANY IS ENTITLED TO BE PAID AS STATED IN AMENDED ORDERS DATED JULY 28, 1926, AT THE RATE OF $49 PER M FOR 18,331 FEET OF S4S LUMBER DELIVERED NOT MEETING THE SPECIFICATIONS AND TO $45 PER M FOR 19, 748 FEET OF T AND G FLOORING NOT MEETING THE SPECIFICATIONS. HOWEVER, BY THE BREACH OF THE AGREEMENT TO FURNISH LUMBER IN ACCORDANCE WITH THE TERMS THEREOF, THE UNITED STATES HAS BEEN DAMAGED AS STATED BY THE DISTRICT ENGINEER IN LETTER DATED APRIL 22, 1927, AS FOLLOWS:

IT IS THE CONTENTION OF THIS OFFICE THAT THE ACTUAL DAMAGES SUSTAINED BY THE GOVERNMENT ON ACCOUNT OF THE FAILURE OF THE CLAIMANT TO DELIVER LUMBER IN ACCORDANCE WITH THE AGREEMENTS ARE THE DIFFERENCE BETWEEN THE PRICE CLAIMED AND THE PRICE AT WHICH LUMBER OF EQUAL GRADE COULD HAVE BEEN PURCHASED. IN ONE CASE WE WERE OFFERED AT $28 MATERIAL FOR WHICH VENDOR IS CLAIMING $49. IN THE OTHER CASE WE WERE OFFERED AT $39.50 MATERIAL FOR WHICH VENDOR IS CLAIMING $45.

THERE CAN BE NO QUESTION THAT CLAIMANT BREACHED THE AGREEMENTS TO FURNISH LUMBER GRADE MARKED BY THE SOUTHERN PINE ASSOCIATION AND WHICH AGREEMENTS WERE ENTERED INTO WITH IT IN PREFERENCE TO OTHER BIDDERS WHO PROPOSED TO FURNISH AT LOWER PRICES LUMBER OF EQUAL QUALITY OR GRADE NOT SO GRADE MARKED AND THE ONLY QUESTION IS AS TO THE AMOUNT OF THE DAMAGES RESULTING FROM SUCH BREACH. THE DISTRICT ENGINEER REPORTED THAT AT THE TIME OF THESE ACCEPTANCES OF CLAIMANT'S BIDS, UNGRADED LUMBER OF THE SAME QUALITY AS DELIVERED BY CLAIMANT, COULD HAVE BEEN PURCHASED FOR $28, AND $39.50 PER M, RESPECTIVELY, AND THERE HAVE BEEN SUBMITTED BIDS WHEREIN IT WAS PROPOSED TO FURNISH UNGRADED LUMBER OF THE REQUIRED DIMENSIONS, ETC., AT THESE PRICES. THE GOVERNMENT UNDOUBTEDLY HAS SUSTAINED DAMAGES EQUAL TO THE DIFFERENCE BETWEEN $49 AND $28 PER M AND BETWEEN $45 AND $39.50 PER M FOR THE UNMARKED LUMBER DELIVERED. IN OTHER WORDS, THE GOVERNMENT IS AT LEAST ENTITLED TO DAMAGES MEASURED BY THE DIFFERENCE BETWEEN THE SUMS CHARGED BY CLAIMANT FOR THE UNMARKED LUMBER AND THE SUMS FOR WHICH SIMILAR LUMBER COULD HAVE BEEN PURCHASED ON THE OPEN MARKET AT THE TIME OF THE RESPECTIVE ACCEPTANCES OF JUNE 19 AND 22, 1926.

THE CLAIMANT HAS BEEN ALLOWED PAYMENT FOR THE UNMARKED LUMBER DELIVERED ON THE BASIS OF $49 PER M FOR ONE CLASS OF LUMBER AND $45 PER M FOR THE OTHER CLASS, LESS DAMAGES SUSTAINED BY THE GOVERNMENT, MEASURED BY THE DIFFERENCE BETWEEN SAID PRICES AND $28 PER M AND $39.50 PER M, RESPECTIVELY, AND THE SETTLEMENT MUST BE AND IS SUSTAINED. SEE 5 COMP. GEN. 993; ALSO DECISION OF DECEMBER 8, 1926, A-13505.