A-55618, A-57248, OCTOBER 25, 1934, 14 COMP. GEN. 333

A-55618,A-57248: Oct 25, 1934

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THE EXPENDITURES FOR WHICH THE CONTRACTOR IS TO BE REIMBURSED AND THE COMPENSATION TO BE PAID BY THE GOVERNMENT FOR SERVICES RENDERED IN THE STORAGE. AS FOLLOWS: ATTACHED HERETO IS A COPY OF A CONTRACT DATED THE 15TH DAY OF FEBRUARY 1934. THE ORIGINAL OF WHICH IS ON FILE IN YOUR DEPARTMENT. THERE IS ALSO ATTACHED COPY OF A PROPOSED LETTER FROM THE MANAGER. WHICH IS SELF-EXPLANATORY. YOUR ATTENTION IS CALLED TO THE FOLLOWING PARAGRAPH QUOTED FROM THE MANAGER'S LETTER: "IN RECOGNITION OF THE NECESSITY. YOU ARE AUTHORIZED TO PAY SUCH BROKERS' FEE OR COMMISSION NOT TO EXCEED IN ANY CASE $1 PER BALE. AS IN YOUR JUDGMENT IS NECESSARY TO ENABLE YOU TO MAKE DIRECT MILL SALES. YOU WILL BE REIMBURSED FOR SUCH COMMISSIONS OR BROKERS' FEES AS ARE PAID IN ACCORDANCE WITH THIS AUTHORIZATION.

A-55618, A-57248, OCTOBER 25, 1934, 14 COMP. GEN. 333

CONTRACTS - REIMBURSEMENT FOR EXPENDITURES OF CONTRACTORS WHEN A CONTRACT OF A GOVERNMENT AGENCY WITH A PRIVATE PERSON, FIRM, OR CORPORATION DEFINITELY FIXES THE OBLIGATION OF THE CONTRACTOR, THE EXPENDITURES FOR WHICH THE CONTRACTOR IS TO BE REIMBURSED AND THE COMPENSATION TO BE PAID BY THE GOVERNMENT FOR SERVICES RENDERED IN THE STORAGE, SERVICING, MARKETING, AND SALE OF COTTON, THE CONTRACTOR CANNOT BE PAID ANY ADDITIONAL AMOUNT BY WAY OF REIMBURSEMENT FOR BROKERS' COMMISSIONS EXPENDED IN EFFECTING THE SALE OF COTTON AT THE BEST PRICES OBTAINABLE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, OCTOBER 25, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF SEPTEMBER 21, 1934, WITH ENCLOSURES, AS FOLLOWS:

ATTACHED HERETO IS A COPY OF A CONTRACT DATED THE 15TH DAY OF FEBRUARY 1934, THE ORIGINAL OF WHICH IS ON FILE IN YOUR DEPARTMENT. THERE IS ALSO ATTACHED COPY OF A PROPOSED LETTER FROM THE MANAGER, COTTON POOL, TO W. M. GARRARD, WHICH IS SELF-EXPLANATORY.

YOUR ATTENTION IS CALLED TO THE FOLLOWING PARAGRAPH QUOTED FROM THE MANAGER'S LETTER:

"IN RECOGNITION OF THE NECESSITY, IN SOME INSTANCES, FOR PAYING A BROKERAGE FEE OR COMMISSION TO MILL BROKERS FOR NEGOTIATING DIRECT SALES TO MILLS, YOU ARE AUTHORIZED TO PAY SUCH BROKERS' FEE OR COMMISSION NOT TO EXCEED IN ANY CASE $1 PER BALE, AS IN YOUR JUDGMENT IS NECESSARY TO ENABLE YOU TO MAKE DIRECT MILL SALES. YOU WILL BE REIMBURSED FOR SUCH COMMISSIONS OR BROKERS' FEES AS ARE PAID IN ACCORDANCE WITH THIS AUTHORIZATION. THIS IS IN ADDITION TO THE ITEMS FOR WHICH YOU ARE ENTITLED TO REIMBURSEMENT UNDER PARAGRAPH (1) SECTION 2 OF THE CONTRACT OF FEBRUARY 15, 1934.'

IN ORDER TO OBTAIN THE BEST POSSIBLE PRICES FOR COTTON TO BE MARKETED AND TO COMPETE WITH THE TRADE GENERALLY, IT IS DEEMED NECESSARY AND EXPEDIENT TO AUTHORIZE THE SELLING AGENT TO PAY, IN SOME INSTANCES, BROKERS' FEES OR COMMISSIONS, SUCH FEES BEING REGARDED AS CHARGES INCIDENT TO THE OPERATION OF THE POOL AND THE MARKETING OF THE COTTON. THIS AUTHORIZATION TO THE SELLING AGENT IS IN ACCORDANCE WITH PARAGRAPH (2) SECTION 1 OF THE CONTRACT BETWEEN THE MANAGER AND THE SELLING AGENT.

A RULING IS REQUESTED OF YOU AS TO WHETHER OR NOT THERE IS ANYTHING WHICH WILL REQUIRE YOU TO INTERPOSE AN OBJECTION TO THE AUTHORIZATION TO THE SELLING AGENT TO PAY THE FEE OR COMMISSION AS STIPULATED IN THE LETTER FROM THE MANAGER, COTTON POOL.

THE CONTRACT OF FEBRUARY 15, 1934, OF THE MANAGER, COTTON POOL, WITHW. M. GARRARD, FOLLOWING THE PREAMBLE, PROVIDES IN SECTION 1, IN SUBSTANCE, THAT W. M. GARRARD, IS TO PROPERLY RECEIVE, WAREHOUSE, AND INSURE IN THE NAME OF THE MANAGER, COTTON POOL, AND OTHERWISE SERVICE SUCH LONG-STAPLE COTTON AS MAY BE DESIGNATED BY THE MANAGER, COTTON POOL, IN THE APPROXIMATE AMOUNT OF 120,000 BALES, SERVICING TO INCLUDE ITEMS AS SET OUT IN THE CONTRACT; TO SELL THE COTTON FROM TIME TO TIME AS DIRECTED BY THE MANAGER, COTTON POOL, AT THE BEST PRICE OBTAINABLE UNDER EXISTING MARKETING CONDITIONS, UNDER SUCH TERMS AND CONDITIONS AS THE MANAGER, COTTON POOL, MAY PRESCRIBE, AND TO DEPOSIT AND PROPERLY ACCOUNT FOR THE PROCEEDS OF SALE. ARTICLE 4 OF SECTION 1 PROVIDES:

4. THAT THE MANAGER, COTTON POOL, SHALL NOT BE OR BECOME CHARGEABLE WITH ANY COST OR EXPENSE INCIDENT TO THE HANDLING, CLASSING, MARKETING, OR ANY OTHER SERVICING WITH RESPECT TO SUCH COTTON EXCEPT AS PROVIDED IN SECTION II.

SECTION II OF THE CONTRACT OBLIGATES THE MANAGER, COTTON POOL, TO REIMBURSE MR. GARRARD FOR ALL STORAGE AND WAREHOUSE CHARGES AND/OR THE INSURANCE PREMIUMS ADVANCED BY HIM FOR THE ACCOUNT OF THE MANAGER, COTTON POOL, WITH RESPECT TO SUCH COTTON, AND TO PAY MR. GARRARD A HANDLING CHARGE OF 25 CENTS PER BALE ON COTTON WITHDRAWN BY THE MANAGER, COTTON POOL, WITHOUT THE FAULT OF MR. GARRARD.

PARAGRAPH 4, SECTION II OF THE CONTRACT PROVIDES:

(4) THAT THE SOLE COMPENSATION TO BE PAID TO SAID GARRARD BY THE MANAGER, COTTON POOL, FOR SERVICES TO BE RENDERED FOR THE SALE, HANDLING, CLASSING, MARKETING, AND OTHERWISE SERVICING SUCH COTTON NOT SO WITHDRAWN SHALL BE A COMMISSION OF 3 PERCENT UPON THE GROSS SALE PRICE OF THE COTTON SOLD IN COMPLIANCE WITH THE TERMS OF THIS CONTRACT. SUCH COMPENSATION SHALL BE DUE AND PAYABLE IF AND WHEN THE COTTON IS SOLD AND THE PROCEEDS RECEIVED BY THE COTTON POOL MANAGER.

THE LANGUAGE OF THE CONTRACT IS CLEAR AND UNAMBIGUOUS. IT FIXES BOTH THE OBLIGATION AND THE COMPENSATION OF THE CONTRACTOR AND IT ESTABLISHES THE EXTENT AND LIMITATION OF THE GOVERNMENT'S UNDERTAKING. THE RESPONSIBILITY FOR THE SALE OF THE COTTON AT THE BEST MARKET PRICES OBTAINABLE IS THAT OF THE CONTRACTOR UPON THE DIRECTION OF THE MANAGER, COTTON POOL. UPON THE RECORD IT APPEARS THAT IF PAYMENT OF A BROKER'S COMMISSION IS NECESSARY IN ORDER TO OBTAIN THE BEST MARKET PRICES FOR THE COTTON, THE BURDEN IS UPON MR. GARRARD, AND ANY AMOUNT SO EXPENDED IS CHARGEABLE AGAINST THE 3 PERCENT COMPENSATION PROVIDED BY THE CONTRACT, AND NOT AGAINST THE GOVERNMENT.

THE WELL-ESTABLISHED RULE OF LAW IS THAT A CONTRACT ONCE ENTERED INTO BY PROPER AUTHORITY CANNOT BE CHANGED TO THE PREJUDICE OF THE GOVERNMENT WITHOUT ADEQUATE CONSIDERATION THEREFOR. SEE, IN THIS CONNECTION, MY LETTER TO YOU OF MAY 23, 1934, A-55618, WHEREIN A SIMILAR QUESTION WAS INVOLVED. IN THAT LETTER YOU WERE ADVISED THAT THERE WAS NO AUTHORITY FOR PAYMENT OF BROKER'S COMMISSIONS TO MR. GARRARD UNDER CONTRACT OF AUGUST 16, 1933. THE CONTRACT OF FEBRUARY 15, 1934, MAKES NO PROVISION FOR THE PAYMENT OF COMMISSIONS TO BROKERS AND THE PROPOSED LETTER FROM THE MANAGER, COTTON POOL, TO MR. GARRARD FORWARDED WITH YOUR SUBMISSION IS IN EFFECT A MODIFICATION OF THE CONTRACT OBLIGATING THE GOVERNMENT TO PAY AN ADDITIONAL AMOUNT FOR THE DOING OF SOMETHING WHICH THE CONTRACTOR IS REQUIRED TO DO UNDER THE CONTRACT FOR THE COMPENSATION THEREIN PROVIDED.

IN THE CIRCUMSTANCES I HAVE TO ADVISE THAT IN VIEW OF THE CLEAR PROVISIONS OF THE CONTRACT THERE IS NO AUTHORITY FOR THE PAYMENT OF ANY AMOUNT FOR BROKERAGE FEES OR COMMISSIONS TO MR. GARRARD AS CONTEMPLATED IN PROPOSED LETTER FROM THE MANAGER, COTTON POOL, TO MR. GARRARD.