A-26529, APRIL 6, 1929, 8 COMP. GEN. 530

A-26529: Apr 6, 1929

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A CONTRACTOR IS NOT CHARGEABLE WITH LIQUIDATED DAMAGES FOR DELAY RESULTING FROM THE EXCEPTED CAUSES. WHEREIN THERE WAS DEDUCTED AS LIQUIDATED DAMAGES THE SUM OF $1. IT IS CONTENDED THAT DEDUCTION OF LIQUIDATED DAMAGES IN EXCESS OF $690 FOR DELAYS IN COMPLETION OF THE CONTRACT IS IMPROPER. THE CONTRACT WAS ON STANDARD FORM NO. 23. THE WORK WAS REQUIRED TO BE COMMENCED ON AUGUST 4. LIQUIDATED DAMAGES WERE STIPULATED AT THE RATE OF $10 PER DAY FOR EACH OF THE TWO SCHEDULES FOR EACH CALENDAR DAY'S DELAY UNTIL THE WORK WAS SATISFACTORILY COMPLETED OR UNTIL SUCH TIME AS THE GOVERNMENT COULD REASONABLY PROCURE THE COMPLETION OF THE WORK BY ANOTHER CONTRACTOR OR COMPLETE THE WORK ITSELF. IN WHICH EVENT THE ACTUAL DAMAGES FOR THE DELAY WILL BE IMPOSSIBLE TO DETERMINE AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED.

A-26529, APRIL 6, 1929, 8 COMP. GEN. 530

CONTRACTS - LIQUIDATED DAMAGES - DELAYS FROM EXCEPTED CAUSES UNDER ARTICLE 9 OF THE STANDARD GOVERNMENT CONSTRUCTION CONTRACT, THE CONTRACT CONTINUES UNTIL COMPLETION UNLESS TERMINATED BY THE ADMINISTRATIVE OFFICERS BECAUSE OF DELAY OF THE CONTRACTOR. A CONTRACTOR IS NOT CHARGEABLE WITH LIQUIDATED DAMAGES FOR DELAY RESULTING FROM THE EXCEPTED CAUSES, WHETHER SUCH DELAY OCCURRED BEFORE OR AFTER THE STIPULATED DATE FOR COMPLETION.

DECISION BY COMPTROLLER GENERAL MCCARL, APRIL 6, 1929:

THE BARNARD-CURTISS CO. REQUESTED MARCH 2, 1929, REVIEW OF SETTLEMENT NO. 0190474, DATED OCTOBER 15, 1928, WHEREIN THERE WAS DEDUCTED AS LIQUIDATED DAMAGES THE SUM OF $1,590 FROM A BALANCE OF $5,623.72 OTHERWISE DUE IT UNDER CONTRACT NO. I 2R-.713, DATED JUNE 14, 1927, FOR THE CONSTRUCTION OF CERTAIN DRAINS IN THE LOWER YELLOWSTONE PROJECT, MONTANA-NORTH DAKOTA, OF THE RECLAMATION SERVICE. IT IS CONTENDED THAT DEDUCTION OF LIQUIDATED DAMAGES IN EXCESS OF $690 FOR DELAYS IN COMPLETION OF THE CONTRACT IS IMPROPER.

THE CONTRACT WAS ON STANDARD FORM NO. 23, STANDARD GOVERNMENT FORM OF CONSTRUCTION CONTRACT, AND PROVIDED THAT THE CONTRACTOR SHOULD FURNISH LABOR AND MATERIALS AND PERFORM ALL WORK REQUIRED FOR THE EARTHWORK AND STRUCTURES FOR OPEN DRAINS, LOWER YELLOWSTONE PROJECT, MONTANA-NORTH DAKOTA, IN ACCORDANCE WITH CERTAIN SCHEDULES. THE WORK WAS REQUIRED TO BE COMMENCED ON AUGUST 4, 1927, AND TO BE COMPLETED ON OR BEFORE JUNE 4, 1928. LIQUIDATED DAMAGES WERE STIPULATED AT THE RATE OF $10 PER DAY FOR EACH OF THE TWO SCHEDULES FOR EACH CALENDAR DAY'S DELAY UNTIL THE WORK WAS SATISFACTORILY COMPLETED OR UNTIL SUCH TIME AS THE GOVERNMENT COULD REASONABLY PROCURE THE COMPLETION OF THE WORK BY ANOTHER CONTRACTOR OR COMPLETE THE WORK ITSELF, WITH THE STIPULATION, IN ARTICLE 9 OF THE CONTRACT, THAT:

* * * IF THE GOVERNMENT DOES NOT TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED, THE CONTRACTOR SHALL CONTINUE THE WORK, IN WHICH EVENT THE ACTUAL DAMAGES FOR THE DELAY WILL BE IMPOSSIBLE TO DETERMINE AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED, AGREED, AND LIQUIDATED DAMAGES FOR EACH CALENDAR DAY OF DELAY UNTIL THE WORK IS COMPLETED OR ACCEPTED THE AMOUNT AS SET FORTH IN THE SPECIFICATIONS OR ACCOMPANYING PAPERS AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE FOR THE AMOUNT THEREOF: PROVIDED, THAT THE RIGHT OF THE CONTRACTOR TO PROCEED SHALL NOT BE TERMINATED OR THE CONTRACTOR CHARGED WITH LIQUIDATED DAMAGES BECAUSE OF ANY DELAYS IN THE COMPLETION OF THE WORK DUE TO UNFORSEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD, OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, AND UNUSUALLY SEVERE WEATHER OR DELAYS OF SUBCONTRACTORS DUE TO SUCH CAUSES: PROVIDED FURTHER, THAT THE CONTRACTOR SHALL WITHIN TEN DAYS FROM THE BEGINNING OF ANY SUCH DELAY NOTIFY THE CONTRACTING OFFICER IN WRITING OF THE CAUSES OF DELAY, WHO SHALL ASCERTAIN THE FACTS AND THE EXTENT OF THE DELAY, AND HIS FINDINGS OF FACTS THEREON SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO, SUBJECT ONLY TO APPEAL, WITHIN THIRTY DAYS, BY THE CONTRACTOR TO THE HEAD OF THE DEPARTMENT CONCERNED, WHOSE DECISION ON SUCH APPEAL AS TO THE FACTS OF DELAY SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO.

THE WORK WAS COMPLETED ON SCHEDULE 1 ON AUGUST 22, 1928, AND ON SCHEDULE 2 ON AUGUST 23, 1928, OR AFTER A DELAY OF 79 DAYS ON SCHEDULE 1 AND 80 DAYS ON SCHEDULE 2. THERE OCCURRED ON JUNE 22, 1928, A VERY HEAVY RAINSTORM OR CLOUDBURST WITH SUCH VIOLENCE THAT MUCH OF THE EARTHWORK, ETC., THAT HAD BEEN CONSTRUCTED BY THE CONTRACTOR WAS WASHED AWAY, AND SAME WAS REQUIRED TO BE REBUILT. THE CONTRACTING OFFICER, WITH THE APPROVAL OF THE CHIEF OF THE BUREAU, HAS FOUND THAT BECAUSE OF THE CONDITION RESULTING FROM THE FLOOD OR CLOUDBURST THE CONTRACTOR WAS DELAYED 60 DAYS ON SCHEDULE 1 AND 30 DAYS ON SCHEDULE 2. IF LIQUIDATED DAMAGES DID NOT ACCRUE TO THE GOVERNMENT DURING SUCH PERIOD, THE CONTRACTOR IS ENTITLED TO AN ALLOWANCE OF THE DIFFERENCE BETWEEN THE SUM OF $1,590, DEDUCTED IN THE SETTLEMENT, AND $690, THE AMOUNT OF LIQUIDATED DAMAGES FOR 19 DAYS' DELAY UNDER SCHEDULE 1 AND 50 DAYS' DELAY UNDER SCHEDULE 2 OF THE CONTRACT.

WHILE THE STORM OR CLOUDBURST WAS AN UNFORSEEABLE CAUSE OF DELAY WITHIN THE MEANING OF ARTICLE 9 OF THE CONTRACT, IT OCCURRED AFTER THE DATE WHEN THE CONTRACT SHOULD HAVE BEEN COMPLETED, AND THE QUESTION IS WHETHER THE CONTRACTOR IS ENTITLED TO REMISSION OF LIQUIDATED DAMAGES FOR DELAY RESULTING FROM AN UNFORSEEABLE CAUSE OCCURRING AFTER THE DATE WHEN THE CONTRACT SHOULD HAVE BEEN COMPLETED.

THERE IS STATED IN 4 COMP. GEN. 306, PARTICULARLY PAGES 308 TO 309, SOMETHING OF THE HISTORY OF THE LIQUIDATED-DAMAGE STIPULATION IN GOVERNMENT CONTRACTS AND THE EVOLUTION OF THE JUDICIAL VIEW OF SUCH STIPULATIONS. IT IS STATED IN VOLUME 2, PAGE ON CONTRACTS, PARAGRAPH 1160, THAT: "AT LAW THE GENERAL RULE IS THAT TIME IS OF THE ESSENCE OF THE CONTRACT UNLESS A CONTRARY INTENT APPEARS FROM THE FACE OF THE CONTRACT; " AND PARAGRAPH 1153 THAT: "THE INTENTION OF THE PARTIES CONTROLS IN QUESTIONS OF TIME OF PERFORMANCE. ACCORDINGLY, IT IS DANGEROUS TO ATTEMPT TO LAY DOWN ARBITRARY RULES FOR ASCERTAINING SUCH INTENTION.' IT APPEARS ON THE FACE OF THIS CONTRACT--- THAT IS, IN ARTICLE 9--- THAT IF THE CONTRACTOR FAILS TO PROSECUTE THE WORK WITH SUCH DILIGENCE AS TO INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED OR FAILS TO COMPLETE THE WORK WITHIN SUCH TIME THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE ITS RIGHT TO PROCEED WITH THE WORK OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN DELAY. AND THAT, IF THE GOVERNMENT DOES NOT TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED, THE CONTRACTOR SHALL CONTINUE THE WORK AND BE CHARGED WITH LIQUIDATED DAMAGES FOR SUCH OF THE DELAY IN THE COMPLETION AS DID NOT RESULT FROM THE EXCEPTED CAUSES STATED IN THE CONTRACT. IT THUS APPEARS THAT THE DEFAULT OF A CONTRACTOR IN THE COMPLETION OF A CONTRACT WITHIN THE STIPULATED TIME DOES NOT, IPSO FACTO, TERMINATE THE CONTRACT. IT REQUIRES AN AFFIRMATIVE ACT OF THE GOVERNMENT TO TERMINATE THE CONTRACT, AND IF THE CONTRACT IS NOT TERMINATED IT CONTINUES IN EFFECT UNTIL COMPLETION, SUBJECT, AS STATED, TO THE DEDUCTION OF LIQUIDATED DAMAGES FOR SUCH OF THE DELAYS AS DO NOT RESULT FROM THE EXCEPTED CAUSES STATED IN THE CONTRACT.

THERE GREW UP A PROCEDURE UNDER THE OLD FORMS OF CONTRACTS OF HOLDING THE CONTRACT TERMINATED UNLESS THE TIME OF PERFORMANCE WAS ADMINISTRATIVELY EXTENDED AND THIS PROCEDURE GAVE RISE TO A PRACTICE OF GRANTING EXTENSIONS OF TIME WHERE THE CONTRACT IS NOT TERMINATED. AND IN SUCH CASE, WHAT WAS TERMED AN EXTENSION OF TIME WAS IN FACT AN ACT OF THE ADMINISTRATIVE OFFICERS ATTEMPTING TO ADJUST THE LIABILITY OF THE CONTRACTOR TO DEDUCTION OF LIQUIDATED DAMAGES FOR DELAY. IN OTHER WORDS, UNDER MANY OF THE CONTRACT FORMS IN USE PRIOR TO THE PRESIDENT'S ACTION IN PRESCRIBING STANDARD FORM NO. 23, THE LIQUIDATED DAMAGE PROVISION SOUGHT TO CONFER ON ADMINISTRATIVE OFFICERS THE DUTY AND RESPONSIBILITY OF DETERMINING THE LIABILITY OF A CONTRACTOR FOR LIQUIDATED DAMAGES AND THE "EXTENSION" OF TIME WAS NOT FOR THE PURPOSE OF PERMITTING THE CONTRACTOR TO CONTINUE WITH THE PROSECUTION OF THE WORK BUT WAS FOR THE PURPOSE OF DETERMINING HIS RESPONSIBILITY TO RESPOND IN DAMAGES FOR HIS DELAY THEREIN. THIS PROVISION OF THE CONTRACT WAS NOT ONLY AN ATTEMPTED DEROGATION OF THE EXPRESS AUTHORITY CONFERRED BY SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE BUDGET AND ACCOUNTING ACT OF JUNE 10, 1921, 42 STAT. 24, ON THE ACCOUNTING OFFICERS OF THE UNITED STATES TO SETTLE AND ADJUST CLAIMS FOR AND AGAINST THE GOVERNMENT, BUT IT WAS, ALSO, IN DEROGATION OF THE AUTHORITY OF THE COURTS UNDER THE JUDICIAL CODE OF MARCH 3, 1911, 36 STAT. 1043, 1136, TO HEAR AND DETERMINE CLAIMS AGAINST THE UNITED STATES. ITS FURTHER EFFECT WAS TO REQUIRE CONTRACTORS WITH THE UNITED STATES TO SURRENDER TO AN ADMINISTRATIVE OFFICER THE RIGHT TO DETERMINE FINALLY THEIR CLAIMS WITH RESPECT TO LIQUIDATED DAMAGES UNDER THE CONTRACTS, AND, UNLESS IT COULD BE SHOWN THAT SUCH DETERMINATION WAS ARBITRARY--- ALWAYS A DIFFICULT TASK--- SUCH DETERMINATION WAS HELD TO BE CONCLUSIVE ON THE CONTRACTOR. SEE PENN BRIDGE COMPANY V. UNITED STATES, 59 CT.CLS. 892, AND CASES CITED ON PAGE 897.

THE STANDARD FORMS OF CONSTRUCTION CONTRACTS HAVE CHANGED THIS PROCEDURE, AND ADMINISTRATIVE OFFICERS OF THE GOVERNMENT MAY NO LONGER DETERMINE FINALLY THE LIABILITY OF CONTRACTORS TO DEDUCTION OF LIQUIDATED DAMAGES UNDER THE GUISE OF EXTENSION OF TIME. CONSTRUCTION CONTRACTS ON THE STANDARD FORMS CONTINUE TO COMPLETION UNLESS THEY ARE TERMINATED BY THE ADMINISTRATIVE OFFICERS BECAUSE OF THE DELAY OF THE CONTRACTOR, AND, AS THE CONTRACTS SO CONTINUE, IT IS IMMATERIAL WHETHER THE DELAY RESULTED BEFORE OR AFTER THE DATE FIXED FOR COMPLETION. IN EITHER EVENT, THE CONTRACTOR IS EXCUSABLE UNDER THE EXPRESS TERMS OF THE CONTRACT IF THE DELAYS RESULT FROM THE CAUSES STIPULATED IN ARTICLE 9 OF THE STANDARD FORM. WHETHER THE CLOUDBURST IN THIS CASE BE VIEWED AS AN UNFORSEEABLE CAUSE OR AN ACT OF GOD, THE CONTRACTOR IS NOT CHARGEABLE WITH THE DELAY RESULTING THEREFROM.

IT FOLLOWS THAT THE CONTRACTOR IS CORRECT IN ITS CONTENTION THAT IT SHOULD NOT BE CHARGED WITH LIQUIDATED DAMAGES FOR MORE THAN 19 DAYS UNDER SCHEDULE 1 AND 50 DAYS UNDER SCHEDULE 2, IN THE COMPLETION OF THE CONTRACT. ACCORDINGLY, THERE IS HEREBY CERTIFIED DUE THE CONTRACTOR THE DIFFERENCE BETWEEN $1,590, DEDUCTED IN THE SETTLEMENT, AND $690, WHICH SHOULD HAVE BEEN DEDUCTED, OR $900, WHICH WILL BE ALLOWED AND PAID IN DUE COURSE. THE CHECK FOR $4,033.72, INCLOSED WITH THE REQUEST FOR REVIEW, WILL BE RETURNED TO THE CONTRACTOR.