A-26790, APRIL 26, 1929, 8 COMP. GEN. 561

A-26790: Apr 26, 1929

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CONTRACTS - LIQUIDATED DAMAGES - DELAYS NOT RESULTING FROM EXCEPTED CAUSES WHERE A CONTRACT PROVIDES FOR THE DEDUCTION OF LIQUIDATED DAMAGES "IN CASE OF FAILURE ON THE PART OF THE CONTRACTOR TO COMPLETE ANY DELIVERY" UNDER THE CONTRACT AND THERE IS A DELAY IN DELIVERY. THE CONTRACTOR IS CHARGEABLE WITH LIQUIDATED DAMAGES FOR SUCH DELAY. THE CONTRACT WAS FOR FURNISHING AND DELIVERING. ALL BIDDERS WERE ADVISED IN THE ADVERTISEMENT THAT "IF BIDDER CAN COMPLETE THE ONE-HALF QUANTITY DELIVERIES IN LESS TIME HE MUST SO STATE IN HIS PROPOSAL. OR IF BIDDER CAN NOT COMPLETE THE ONE-HALF QUANTITY DELIVERIES WITHIN THE TIME SPECIFIED A BID IS REQUESTED EVEN IF TIME BUT BE EXCEEDED.'. THE DISTRICT OF COLUMBIA WILL BE DAMAGED THEREBY AND THE AMOUNT OF SAID DAMAGES.

A-26790, APRIL 26, 1929, 8 COMP. GEN. 561

CONTRACTS - LIQUIDATED DAMAGES - DELAYS NOT RESULTING FROM EXCEPTED CAUSES WHERE A CONTRACT PROVIDES FOR THE DEDUCTION OF LIQUIDATED DAMAGES "IN CASE OF FAILURE ON THE PART OF THE CONTRACTOR TO COMPLETE ANY DELIVERY" UNDER THE CONTRACT AND THERE IS A DELAY IN DELIVERY, NOT RESULTING FROM THE EXCEPTED CAUSES STATED THEREIN, THE CONTRACTOR IS CHARGEABLE WITH LIQUIDATED DAMAGES FOR SUCH DELAY.

COMPTROLLER GENERAL MCCARL TO THE PRESIDENT OF THE BOARD OF COMMISSIONERS OF THE DISTRICT OF COLUMBIA, APRIL 26, 1929:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 9, 1929, TRANSMITTING A REPORT OF THE SAME DATE FROM THE AUDITOR OF THE DISTRICT OF COLUMBIA CONCERNING QUESTIONS OF DEDUCTION OF LIQUIDATED DAMAGES UNDER CONTRACT DCF -9798, DATED AUGUST 10, 1928, WITH THOMAS J. MCCORMICK PAPER CORPORATION FOR THE DELIVERY OF CERTAIN PAPER FOR USE OF THE PUBLIC SCHOOLS OF THE DISTRICT OF COLUMBIA. YOU REQUEST DECISION AS TO WHETHER THERE MAY BE APPROVED A SUGGESTION THAT THE CONTRACTOR BE PAID THE SUM OF $2,700 DEDUCTED AS LIQUIDATED DAMAGES BECAUSE OF DELAYS IN DELIVERY.

THE CONTRACT WAS FOR FURNISHING AND DELIVERING, ALL CHARGES PREPAID, UNDER ITEM 3-A, 120,000 REAMS OF UNRULED PAPER, 6 BY 9 INCHES, PUT UP IN PACKAGES OF 500 SHEETS EACH, AT $0.074 PER REAM, AND 1,000 REAMS OF UNRULED PAPER, 18 BY 24 INCHES, PUT UP IN PACKAGES OF 500 SHEETS EACH, AT $0.592 PER REAM. THE CONTRACT PROVIDED WITH RESPECT TO DELIVERY THAT---

DELIVERY.--- DELIVERY OF ALL PAPER COVERED BY THE FOLLOWING SCHEDULE TO BE MADE AT AND WITHIN THE DOORS OF THE PUBLIC SCHOOL WAREHOUSE, 429 O STREET, NORTHWEST, WASHINGTON, D.C., ALL CHARGES PREPAID.

DELIVERY OF PAPER COVERED BY THE FOLLOWING SCHEDULE TO BE COMPLETED AS FOLLOWS:

ONE-HALF OF THE FULL QUANTITY CALLED FOR UNDER ITEM NUMBERED 3A TO BE DELIVERED ON AUGUST 1, 1928.

ONE-HALF OF THE FULL QUANTITY CALLED FOR UNDER ITEM NUMBERED 3B TO BE DELIVERED ON SEPTEMBER 1, 1928.

ONE-HALF OF THE FULL QUANTITY CALLED FOR UNDER EACH ITEM TO BE DELIVERED ON NOVEMBER 15, 1928.

ALL BIDDERS WERE ADVISED IN THE ADVERTISEMENT THAT "IF BIDDER CAN COMPLETE THE ONE-HALF QUANTITY DELIVERIES IN LESS TIME HE MUST SO STATE IN HIS PROPOSAL, OR IF BIDDER CAN NOT COMPLETE THE ONE-HALF QUANTITY DELIVERIES WITHIN THE TIME SPECIFIED A BID IS REQUESTED EVEN IF TIME BUT BE EXCEEDED.'

THE CONTRACT STIPULATED THAT:

OVERTIME AND DELAY.--- TIME SHALL BE CONSIDERED AS AN ESSENTIAL FEATURE OF THIS CONTRACT; AND IN CASE OF FAILURE ON THE PART OF THE CONTRACTOR TO COMPLETE ANY DELIVERY UNDER THIS CONTRACT WITHIN THE TIME SPECIFIED AND AGREED UPON, THE DISTRICT OF COLUMBIA WILL BE DAMAGED THEREBY AND THE AMOUNT OF SAID DAMAGES, BEING DIFFICULT IF NOT IMPOSSIBLE OF DEFINITE ASCERTAINMENT AND PROOF, IT IS HEREBY AGREED THAT THE AMOUNT OF SUCH DAMAGES SHALL BE ESTIMATED, AGREED UPON, LIQUIDATED, AND FIXED IN ADVANCE; AND THEY ARE HEREBY AGREED UPON, LIQUIDATED, AND FIXED AT THE AMOUNT OF TWENTY-FIVE ($25.00) FOR EACH AND EVERY DAY THE CONTRACTOR SHALL DELAY IN THE COMPLETION OF ANY DELIVERY UNDER THIS CONTRACT, AND CONTRACTOR HEREBY AGREES TO PAY TO THE DISTRICT OF COLUMBIA AS LIQUIDATED DAMAGES, AND NOT BY WAY OF PENALTY, THE SUM OF TWENTY-FIVE ($25.00) FOR EACH AND EVERY DAY THE CONTRACTOR SHALL DELAY IN ANY DELIVERY UNDER THIS CONTRACT, WHICH SHALL BE DEDUCTED FROM ANY PAYMENT DUE OR TO BECOME DUE THE CONTRACTOR: PROVIDED, HOWEVER, THAT NO LIQUIDATED DAMAGES SHALL BE MADE FOR SUCH PERIOD, AFTER THE DATE OF ANY DELIVERY UNDER THIS CONTRACT, AS, IN THE JUDGMENT OF SAID COMMISSIONERS SHALL EQUAL THE TIME WHICH SHALL HAVE BEEN LOST THROUGH ANY CAUSE FOR WHICH THE DISTRICT OF COLUMBIA IS RESPONSIBLE, EITHER IN THE BEGINNING OR PROSECUTION OF THE WORK, OR IN THE PERFORMANCE OF EXTRA WORK ORDERED BY THE PURCHASING OFFICER, D.C., OR ON ACCOUNT OF UNUSUAL FRESHETS, ICE, UNUSUAL RAINFALL, OR OTHER ABNORMAL FORCE OR VIOLENCE OF THE ELEMENTS, BY STRIKES, EPIDEMICS, LOCAL OR STATE QUARANTINE RESTRICTIONS, FREIGHT EMBARGOES AND SIMILAR CONDITIONS, WHICH PREVENT THE DELIVERY OF MATERIALS WHICH HAVE BEEN ORDERED IN DUE TIME FOR THIS WORK, OR OTHER UNFORSEEABLE CAUSE OR DELAY ARISING THROUGH NO FAULT OF THE CONTRACTOR, AND WHICH ACTUALLY PREVENTED SUCH CONTRACTOR FROM COMMENCING OR COMPLETING THE WORK OR DELIVERING THE MATERIAL WITHIN THE PERIOD REQUIRED FOR ANY DELIVERY UNDER THIS CONTRACT. UNDER NO CONDITIONS WILL LIQUIDATED DAMAGES BE WAIVED EXCEPT FOR THE REASONS STATED ABOVE, AND THE CONTRACTOR SHALL NOTIFY THE PURCHASING OFFICER, D.C., IN WRITING, OF ANY EVENT THAT WOULD LEAD TO A CLAIM OF WAIVER OF LIQUIDATED DAMAGES AT THE TIME THE EVENT OCCURS. THE FINDINGS OF THE SAID COMMISSIONERS SHALL BE ACCEPTED BY THE PARTIES HERETO AS FINAL; BUT ANY ALLOWANCE OF TIME AND REMISSIONS OF CHARGES SHALL IN NO OTHER MANNER AFFECT THE RIGHT OR OBLIGATIONS OF THE PARTIES UNDER THIS CONTRACT.

THE PAPER WHICH SHOULD HAVE BEEN DELIVERED UNDER THE TERMS OF THE CONTRACT ON AUGUST 1, 1928, WAS NOT FULLY DELIVERED UNTIL NOVEMBER 8, 1928, PARTIAL DELIVERIES BEING MADE OF 19,200 REAMS ON AUGUST 20, 10,272 REAMS ON AUGUST 24, 19,696 REAMS ON SEPTEMBER 19, AND 10,832 REAMS ON NOVEMBER 8, 1928. THE PAPER WHICH SHOULD HAVE BEEN DELIVERED NOT LATER THAN NOVEMBER 15, 1928, WAS DELIVERED ON NOVEMBER 24, 1928. BY AUDIT NO. 142147 THERE WAS DEDUCTED $2,475 LIQUIDATED DAMAGES FOR THE DELAY IN DELIVERY OF THE PAPER WHICH SHOULD HAVE BEEN DELIVERED ON AUGUST 1, 1928, AND THERE WAS ALSO DEDUCTED $225 AS LIQUIDATED DAMAGES AT THE STIPULATED RATE FOR THE DELAY IN DELIVERY OF THE PAPER WHICH SHOULD HAVE BEEN DELIVERED ON OR BEFORE NOVEMBER 15, 1928. NO QUESTION HAS BEEN RAISED AS TO THE ACCURACY OF THE COMPUTATION OF LIQUIDATED DAMAGES, BUT IT IS CONTENDED IN LETTER DATED JANUARY 14, 1929, OF THE CONTRACTOR, THAT:

DURING OUR TIME IN THE SCHOOL SUPPLY BUSINESS WE HAVE EXECUTED A GREAT MANY CONTRACTS FOR SCHOOLS, AND AS YOU UNDOUBTEDLY KNOW, MOST OF THESE CONTRACTS COME IN DURING THE SUMMER MONTHS. PRACTICALLY EVERY SCHOOL MANUFACTURER IS TAXED BEYOND HIS CAPACITY TO GET OUT ORDERS, AND IN CONSEQUENCE, THEY START SHIPMENTS OF THE MATERIAL AS SOON AS THE MATERIAL IS OFF THE MACHINES, TO GIVE THE SCHOOLS PAPER TO START THE TERM ON. NEVER IN OUR EXPERIENCE HAVE WE BEEN TAXED FOR POOR DELIVERY NOR WOULD WE ACCEPT AN ORDER DURING THE SUMMER MONTHS WERE WE AWARE OF ANY PENALTY. SOLICITED THESE ORDERS LAST YEAR TO KEEP OUR MACHINES FULL AND THE PRICE WAS VERY LOW.

THE CONTRACT, IN PLAIN AND UNAMBIGUOUS TERMS, REQUIRED THE CONTRACTOR TO SUBMIT IN WRITING A NOTIFICATION OF "ANY EVENT THAT WOULD LEAD TO A CLAIM OF WAIVER OF LIQUIDATED DAMAGES AT THE TIME THE EVENT OCCURS.' OBVIOUSLY, A STATEMENT IN WRITING ON JANUARY 14 AND 18, 1929, WHEN DELIVERIES WERE TO BE MADE ON AUGUST 1 AND NOVEMBER 15, 1928, DOES NOT COMPLY WITH THE TERMS OF THE CONTRACT. SEE PLUMLEY V. UNITED STATES, 226 U.S. 545; 5 COMP. GEN. 363. FURTHERMORE, THE CONTRACT, IN EQUALLY PLAIN AND UNAMBIGUOUS TERMS, PROVIDED THAT "UNDER NO CONDITIONS WILL LIQUIDATED DAMAGES BE WAIVED EXCEPT FOR THE REASONS STATED; " THAT IS, BECAUSE DELIVERY WAS PREVENTED BY THE DISTRICT OF COLUMBIA "OR ON ACCOUNT OF UNUSUAL FRESHETS, ICE, UNUSUAL RAINFALL, OR OTHER ABNORMAL FORCE OR VIOLENCE OF THE ELEMENTS, BY STRIKES, EPIDEMICS, LOCAL OR STATE QUARANTINE RESTRICTIONS, FREIGHT EMBARGOES, AND SIMILAR CONDITIONS.' SEE CARNEGIE STEEL COMPANY V. UNITED STATES, 240 U.S. 156.

THE REASON GIVEN BY THE CONTRACTOR FOR THE DELAY IS, IN SUBSTANCE, THAT ITS PLANT WAS TAXED BEYOND ITS CAPACITY TO GET OUT THE ORDER. THE ADVERTISEMENT NOTIFIED ALL PROSPECTIVE BIDDERS WHEN THE DELIVERIES WOULD BE REQUIRED AND INFORMED THEM THAT TIME WAS AN ESSENTIAL ELEMENT OF THE CONTRACT. ATTENTION IS INVITED TO REPORT DATED JANUARY 21, 1929, OF THIS OFFICE TO THE CHAIRMAN OF THE COMMITTEE ON THE JUDICIARY, HOUSE OF REPRESENTATIVES, PUBLISHED IN SERIAL 16, PART 3--- HEARING BEFORE THE COMMITTEE ON THE JUDICIARY, HOUSE OF REPRESENTATIVES, SEVENTIETH CONGRESS, SECOND SESSION, PAGES 136-137, IN PERTINENT PART AS FOLLOWS:

A LIQUIDATED-DAMAGE PROVISION APPEARS IN A GOVERNMENT CONTRACT WHEN THE GOVERNMENT'S SPENDING AGENCY HAS DETERMINED IN ADVANCE THAT THE CONTRACT MUST BE FULFILLED WITHIN A FIXED AND STATED PERIOD OF TIME, AND THERE HAS BEEN AGREED UPON (LIQUIDATED IN ADVANCE), BY SUCH SPENDING AGENCY AND CONTRACTOR, THE EXACT AMOUNT OF DAMAGE--- A DAY, A MONTH, OR OTHERWISE--- THE GOVERNMENT WILL SUFFER AND CONTRACTOR MUST PAY TO THE UNITED STATES IN THE EVENT OF HIS FAILURE TO SO FULFILL WITHIN SUCH STIPULATED PERIOD OF TIME.

WHERE TIME IS THUS MADE THE ESSENCE OF A CONTRACT, WITH THE AMOUNT OF DAMAGE FOR DELAY LIQUIDATED AND FIXED IN ADVANCE, IT WOULD BE TO SUSPECT THE SANITY OF A FINANCIALLY RESPONSIBLE BIDDER TO IMAGINE FOR A MOMENT HE WOULD NOT, IN FIXING THE AMOUNT OF HIS BID, ADEQUATELY PROTECT HIMSELF AGAINST POSSIBLE LOSS THROUGH ANY EXIGENCY DEVELOPING DURING THE WORK, SUCH AS NEED TO HIRE EXTRA OR SPECIAL LABOR, TO PAY FOR RUSH OR SPECIAL DELIVERY OF NEEDED MATERIALS, ETC., TO COMPLETE HIS CONTRACT ON TIME.

THUS WE MAY BE ASSURED THE GOVERNMENT HAS PAID, PAID ADEQUATELY IN MOST INSTANCES, FOR THE THING IT HAS DEMANDED OF THE CONTRACTOR--- THE RIGHT TO HAVE THE CONTRACT FULFILLED IN ALL RESPECTS WITHIN THE STIPULATED PERIOD OF TIME--- ON OR BEFORE A FIXED AND STATED DATE. AND THE COURTS HAVE SETTLED FOR US, BEYOND ROOM FOR DEBATE, THAT DAMAGE SO LIQUIDATED AND FIXED IN ADVANCE BY THE TERMS OF A CONTRACT IS PAYABLE IN THE EVENT OF FAILURE TO FULFILL WITHIN THE TIME FIXED REGARDLESS OF WHETHER ANY ACTUAL DAMAGE IS SUSTAINED.

THE COURTS HAVE SETTLED FOR US, TOO, THAT NO OFFICIAL OF THE GOVERNMENT IS EMPOWERED TO GIVE AWAY OR REMIT A CLAIM DUE THE GOVERNMENT. SEE PACIFIC HARDWARE CO. V. UNITED STATES (49 CT.CLS. 327, 335), WHEREIN THE COURT SAID:

"IT IS UNQUESTIONABLY TRUE THAT AN OFFICIAL OF THE GOVERNMENT IS NOT AUTHORIZED TO GIVE AWAY OR REMIT A CLAIM DUE THE GOVERNMENT. THE RULE IS GROUNDED IN A SOUND PUBLIC POLICY AND IS NOT TO BE WEAKENED.'

THE CLAIM HERE IS UNLIKE THAT CONSIDERED IN DECISION DATED MAY 10, 1928 (A-22707), OF THIS OFFICE, WHERE THE CONTRACT PROVIDED FOR DEDUCTION OF LIQUIDATED DAMAGES WHEN THERE WAS FAILURE "TO COMPLETE THIS CONTRACT WITHIN THE TIME SPECIFIED AND AGREED UPON.' SAID DECISION APPLIES TO THE ITEM OF $225 ONLY, WHICH WAS DEDUCTED FOR DELAYS AFTER NOVEMBER 15, 1928, IN COMPLETION OF DELIVERIES. THE CONTRACT HERE UNDER CONSIDERATION PROVIDED THAT "IN CASE OF FAILURE ON THE PART OF THE CONTRACTOR TO COMPLETE ANY DELIVERY UNDER THIS CONTRACT" HE SHOULD BE CHARGED WITH LIQUIDATED DAMAGES THEREFOR.

ANSWERING YOUR QUESTION SPECIFICALLY, YOU ARE ADVISED THAT, ON THE BASIS OF THE FACTS SUBMITTED, LIQUIDATED DAMAGES ACCRUED BECAUSE OF THE FAILURE TO MAKE DELIVERY IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND THAT THERE IS NO AUTHORITY FOR REMISSION THEREOF, EITHER IN WHOLE OR IN PART.