A-56141, JULY 13, 1934, 14 COMP. GEN. 37

A-56141: Jul 13, 1934

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1934: I HAVE YOUR LETTER OF JUNE 13. ENGAGED THE STANDARD ELETTRICA ITALIANA TO MOVE TELEPHONE EQUIPMENT OWNED BY THE UNITED STATES FROM RENTED QUARTERS WHICH WERE THEN BEING VACATED TO THE GOVERNMENT-OWNED BUILDINGS WHICH ARE NOW OCCUPIED BY THE AMERICAN DIPLOMATIC AND CONSULAR OFFICES AT ROME. INCLUDED IN THE CONTRACT IS THE FOLLOWING PROVISION: "THE CONTRACTOR FOR MOVING THE TELEPHONE INSTALLATION GUARANTEES PROPER INSTALLATION AND PERFECT FUNCTIONING OF THE TELEPHONE INSTALLATION AFTER IT HAS BEEN INSTALLED IN THE NEW QUARTERS. IF A CONTRACT IS ENTERED INTO FOR FURNISHING MAINTENANCE ON A YEARLY BASIS. THE STANDARD ELETTRICA ITALIANA WILL ASSUME ALL RESPONSIBILITIES OF MAINTENANCE BOTH AS TO LABOR AND MATERIAL UPON A PAYMENT OF 2.

A-56141, JULY 13, 1934, 14 COMP. GEN. 37

CONTRACTS - INDEFINITE - MAINTENANCE SERVICE A STIPULATION IN A CONTRACT FOR THE REMOVAL OF TELEPHONE EQUIPMENT AND REINSTALLMENT IN ANOTHER BUILDING CALLING FOR MAINTENANCE OF THE EQUIPMENT FREE OF CHARGE INDEFINITELY DOES NOT REQUIRE THE CONTRACTOR TO MAINTAIN THE EQUIPMENT FREE OF CHARGE PERPETUALLY. THE PERFORMANCE OF MAINTENANCE SERVICES FREE OF CHARGE MAY BE REQUIRED FOR A REASONABLE TIME AND IN DETERMINING SUCH PERIOD CONTEMPORANEOUS TRANSACTIONS AND CIRCUMSTANCES MAY BE CONSIDERED IN ORDER TO ASCERTAIN THE INTENT OF THE PARTIES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF STATE, JULY 13, 1934:

I HAVE YOUR LETTER OF JUNE 13, 1934, AS FOLLOWS:

ON DECEMBER 16, 1932, UNDER CONTRACT NO. S-28FA-17, THE AMERICAN EMBASSY AT ROME, ITALY, ENGAGED THE STANDARD ELETTRICA ITALIANA TO MOVE TELEPHONE EQUIPMENT OWNED BY THE UNITED STATES FROM RENTED QUARTERS WHICH WERE THEN BEING VACATED TO THE GOVERNMENT-OWNED BUILDINGS WHICH ARE NOW OCCUPIED BY THE AMERICAN DIPLOMATIC AND CONSULAR OFFICES AT ROME. INCLUDED IN THE CONTRACT IS THE FOLLOWING PROVISION:

"THE CONTRACTOR FOR MOVING THE TELEPHONE INSTALLATION GUARANTEES PROPER INSTALLATION AND PERFECT FUNCTIONING OF THE TELEPHONE INSTALLATION AFTER IT HAS BEEN INSTALLED IN THE NEW QUARTERS, AND AGREES TO FURNISH MAINTENANCE OF THE TELEPHONE EQUIPMENT FREE OF CHARGE INDEFINITELY.'

BY A DESPATCH DATED FEBRUARY 14, 1934, THE AMERICAN AMBASSADOR AT ROME REPORTED THAT THE STANDARD ELETTRICA ITALIANA HAD STATED THAT MAINTENANCE IN THE SENSE OF THE CONTRACTUAL PROVISION JUST QUOTED COMPRISED INSPECTION AND SUPERVISION AND THAT IT WOULD BE UNREASONABLE TO EXPECT THE COMPANY TO PROVIDE INDEFINITELY REPAIR WORK AND ALL REPLACEMENTS, SUCH AS LAMPS, FUSES, AND WORN PARTS. THE STANDARD ELETTRICA ITALIANA ACCORDINGLY NOTIFIED THE EMBASSY THAT SERVICE, INCLUDING LABOR AND MATERIAL, HAVING BEEN PROVIDED WITHOUT COST SINCE THE DATE OF THE INSTALLATION OF THE EQUIPMENT IN THE NEW PREMISES, IT COULD NO LONGER CONTINUE TO FURNISH MATERIALS OR LABOR WITHOUT PAYMENT; THAT AFTER MARCH 1, 1934, IT WOULD MAKE A CHARGE OF 10.00 LIRE PER HOUR FOR LABOR, WITH A MINIMUM CHARGE OF 50.00 LIRE; AND THAT ALL REPLACEMENT OF PARTS MUST BE PAID FOR IN ADDITION.

IF A CONTRACT IS ENTERED INTO FOR FURNISHING MAINTENANCE ON A YEARLY BASIS, THE STANDARD ELETTRICA ITALIANA WILL ASSUME ALL RESPONSIBILITIES OF MAINTENANCE BOTH AS TO LABOR AND MATERIAL UPON A PAYMENT OF 2,500.00 LIRE PER ANNUM. THE REPRESENTATIVE OF THE COMPANY SAYS THAT IN THE PAST THE EMBASSY'S TELEPHONE INSTALLATION HAS REQUIRED THE SERVICES OF A TECHNICIAN ONCE A WEEK FOR THREE HOURS IN ORDER TO MAINTAIN THE MECHANISM IN WORKING CONDITION AND IN GOOD ORDER.

IN THE CIRCUMSTANCES, THE AMBASSADOR RECOMMENDED THAT AUTHORIZATION BE GRANTED HIM TO CONCLUDE A CONTRACT WITH THE STANDARD ELETTRICA ITALIANA TO TAKE EFFECT MARCH 1, 1934, PROVIDING FOR MAINTENANCE OF THE TELEPHONE INSTALLATION ON A YEARLY BASIS AT THE RATE OF 2,500.00 LIRE PER ANNUM.

BEFORE AUTHORIZING THE NEGOTIATION OF A NEW CONTRACT, THE DEPARTMENT FELT THAT THE QUESTION OF THE RESPONSIBILITY OF THE CONTRACTOR UNDER THE PROVISION TO FURNISH MAINTENANCE FREE OF CHARGE INDEFINITELY SHOULD BE RESOLVED. THEREFORE, THE AMBASSADOR WAS REQUESTED TO EXAMINE THE RECORDS PERTAINING TO THE NEGOTIATION OF THE CONTRACT IN DECEMBER 1932 AND TO CONFER WITH THE OFFICERS AND EMPLOYEES IN THE EMBASSY ACQUAINTED WITH THE DETAILS OF THE ARRANGEMENT WITH THE STANDARD ELETTRICA ITALIANA, AND TO INFORM THE DEPARTMENT OF THE EXACT UNDERSTANDING OF THE EMBASSY AND THE CONTRACTOR WHEN NEGOTIATING THE CONTRACT OF THE INTENT OF THE CLAUSE REQUIRING INDEFINITE MAINTENANCE. THE AMBASSADOR WAS FURTHER ASKED TO ASCERTAIN WHAT PROVISION AGAINST THE COST OF MAINTAINING THIS PART OF THE AGREEMENT WAS INCLUDED BY THE CONTRACTOR IN ESTIMATING HIS PRICE OF 22,000 LIRE FOR THE WHOLE JOB, AND ALSO TO REPORT JUST WHAT GUARANTEES WERE STIPULATED BY THE EMBASSY AT THE TIME BIDS WERE CALLED FOR. THE REPLY RECEIVED FROM ROME TO THESE QUESTIONS IS QUOTED:

"IN RESPONSE TO THE DEPARTMENT'S INSTRUCTION NO. 202 OF APRIL 30, 1934, REQUESTING INFORMATION CONCERNING CONTRACT NO. S28FA-17, DATED DECEMBER 16, 1932, WITH SPECIAL REGARD TO THE UNDERSTANDING OF THE EMBASSY AND THE CONTRACTOR OF THE INTENT OF THE CLAUSE REQUIRING THE CONTRACTOR "TO FURNISH MAINTENANCE OF THE TELEPHONE EQUIPMENT FREE OF CHARGE INDEFINITELY," I HAVE THE HONOR TO INFORM THE DEPARTMENT THAT AT THE TIME OF MAKING THE CONTRACT IN QUESTION THE EMBASSY WAS PAYING THE ROME CITY TELEPHONE COMPANY APPROXIMATELY LIRE 4,000.00 PER ANNUM FOR MAINTENANCE, AND THAT THERE APPEARED TO BE NO LIKELIHOOD OF HAVING THESE CHARGES WAIVED, OR EVEN REDUCED, SINCE THE REGULATIONS OF THE COMPANY PROVIDED THAT MAINTENANCE CHARGES MUST BE PAID IN CONNECTION WITH THE FURNISHING OF SERVICE. THEREFORE, IN MAKING A CONTRACT FOR THE REMOVAL OF THE EQUIPMENT IT WAS NECESSARY, IN ORDER TO PROTECT THE EMBASSY AGAINST HAVING TO PAY TWO SEPARATE MAINTENANCE CHARGES, THAT A CLAUSE BE INSERTED IN THE CONTRACT FOR MOVING THE EQUIPMENT PROVIDING FOR FREE MAINTENANCE, AND, OBVIOUSLY, NO TIME LIMIT COULD BE SPECIFIED REGARDING COMPLIANCE WITH THIS REQUIREMENT. THE REPRESENTATIVES OF THE STANDARD COMPANY PROTESTED AT THE TIME OF THE DRAFTING OF THE CONTRACT AGAINST THE USE OF THE WORD "MAINTENANCE" AND ENDEAVORED TO HAVE THE WORD "SUPERVISION" SUBSTITUTED THEREFOR, BUT THE EMBASSY WAS OBLIGED TO REFUSE TO ACCEDE TO THIS.

"SINCE THE STANDARD COMPANY WAS FURNISHING MAINTENANCE WITHOUT COST AT THE TIME THE CONTRACT WAS ENTERED INTO FOR MOVING THE EQUIPMENT, THEY MADE NO PROVISION IN THEIR BID LOOKING TO THE COST OF PROVIDING MAINTENANCE AFTER THE EQUIPMENT HAD BEEN INSTALLED IN THE NEW QUARTERS. THEIR FIRST ESTIMATE WAS LIRE 26,550.00, WHICH WAS SUBSEQUENTLY REDUCED TO LIRE 25,000.00, AND FINALLY, AFTER CONSIDERABLE PRESSURE, TO LIRE 22,000.00. IF THE LABOR INVOLVED AND THE AMOUNT OF NEW MATERIAL REQUIRED IN CONNECTION WITH MOVING THE TELEPHONE EQUIPMENT AND INSTALLING IT IN THE TWIN VILLAS IS TAKEN INTO CONSIDERATION, NECESSITATING THE CONSTRUCTION OF AN UNDERGROUND, BRICK LINED TRENCH AND PROVIDING AN ARMORED CABLE PROTECTED BY IRON PIPING TO CONNECT THE TWO BUILDINGS, A DISTANCE OF MORE THAN 150 YARDS, THE FURNISHING OF NEW WIRES THROUGHOUT FOR BOTH SWITCHBOARDS AND TO CONNECT THEM WITH THE EXCHANGES, AND THE PROVIDING OF OTHER NEW PARTS TOO NUMEROUS TO LIST, THE CONTRACT PRICE APPEARS QUITE REASONABLE.

"WITH REGARD TO THE GUARANTEE STIPULATED BY THE EMBASSY AT THE TIME BIDS WERE INVITED FOR MOVING THE EQUIPMENT, THEY WERE IDENTICAL WITH THOSE CONTAINED IN THE CONTRACT CONCLUDED WITH THE STANDARD COMPANY, I.E., THE PROPER INSTALLATION AND PERFECT FUNCTIONING OF THE TELEPHONE EQUIPMENT AFTER BEING INSTALLED IN THE NEW PREMISES; LIABILITY FOR ANY DAMAGES INCIDENTAL TO MOVING; THAT TELEPHONIC COMMUNICATION WOULD NOT BE INTERRUPTED DURING THE PROCESS OF REMOVAL; AND THAT MAINTENANCE SHOULD BE FURNISHED WITHOUT COST INDEFINITELY.'

IN THE DESCRIBED CIRCUMSTANCES IT SEEMS TO ME THAT THE CONTRACTOR HAVING FURNISHED MAINTENANCE OF THE TELEPHONE INSTALLATION WITHOUT COST FROM THE DATE THE EQUIPMENT WAS PLACED IN SERVICE IN THE NEW QUARTERS, WHICH WAS ON OR ABOUT JANUARY 3, 1933, UNTIL MARCH 1, 1934, HAS FULFILLED REASONABLY THE TERMS OF HIS CONTRACT OF DECEMBER 16, 1932, WITH THE EMBASSY, AND THAT THE AMBASSADOR WOULD NOT BE JUSTIFIED IN ATTEMPTING TO OBTAIN AN EXTENSION OF THE INDEFINITE PERIOD OF FREE MAINTENANCE. OF COURSE, BEFORE APPROVING ANY NEW CONTRACT FOR MAINTENANCE AT 2,500.00 LIRE PER ANNUM (APPROXIMATELY $216 AT CURRENT EXCHANGE) OR ANY SIMILAR SUM, THE DEPARTMENT WOULD REQUIRE THAT COMPETITIVE BIDS BE OBTAINED. I SHALL APPRECIATE AN EXPRESSION OF YOUR VIEWS REGARDING THE STATUS OF THE EMBASSY UNDER CONTRACT NO. S 28FA- 17.

IT APPEARS THAT BY CONTRACT S-28FA10, DATED JUNE 2, 1930, THE STANDARD ELETTRICA ITALIANA CONTRACTED TO FURNISH AND INSTALL CERTAIN TELEPHONE EQUIPMENT IN QUARTERS RENTED FOR THE UNITED STATES EMBASSY AT ROME; THAT THE CONTRACTOR AGREED TO MAINTAIN SUCH EQUIPMENT FREE OF CHARGE FOR THE PERIOD OF 1 YEAR FROM THE DATE OF INSTALLATION; THAT INSTALLATION WAS REQUIRED BY THE CONTRACT TO BE COMPLETED IN JULY 1930; THAT PAYMENT WAS TO BE MADE UPON COMPLETION OF THE INSTALLATION AND THAT PAYMENT FOR THE EQUIPMENT AND INSTALLATION WAS MADE ON JUNE 26, 1931, IN THE AMOUNT OF $1,246.32 (VOUCHER 268 OF THE JUNE 1931 ACCOUNTS OF W. H. A. COLEMAN). FURTHER APPEARS THAT DURING 1932 IT WAS FOUND NECESSARY TO MOVE THE TELEPHONE EQUIPMENT FROM THE RENTED QUARTERS TO THE GOVERNMENT-OWNED BUILDINGS AT ROME; THAT IN A DISPATCH ADDRESSED TO THE SECRETARY OF STATE, DATED SEPTEMBER 8, 1932, THE EMBASSY REPORTED THAT THE TELEPHONE EQUIPMENT WAS A SPECIALLY MANUFACTURED UNIT OF THE INTERNATIONAL TELEPHONE AND TELEGRAPH CO. OF AMERICA, AND THAT IT WAS VITALLY IMPORTANT THAT IN CONTRACTING FOR THE REMOVAL OF THE EQUIPMENT TO THE GOVERNMENT-OWNED BUILDINGS THAT THE WORK BE PERFORMED BY THE MANUFACTURERS UNDER A GUARANTY OF EXPERT INSTALLATION, AND REQUESTED AUTHORITY TO CONTRACT FOR THE REMOVAL OF THE EQUIPMENT WITHOUT SECURING COMPETITIVE BIDS, AS REQUIRED BY SECTION 3709, REVISED STATUTES. IN A DECISION OF THIS OFFICE, DATED SEPTEMBER 20, 1932, A-44551, THE SECRETARY OF STATE WAS ADVISED THAT NO REASON WAS APPARENT WHY THE EQUIPMENT COULD NOT BE REMOVED AND REINSTALLED AS THE RESULT OF COMPETITIVE BIDS. THEREAFTER BIDS WERE REQUESTED FOR THE REMOVAL OF THE EQUIPMENT, THE REQUEST STIPULATING AMONG OTHER THINGS, THAT THE CONTRACTOR FOR MOVING THE TELEPHONE INSTALLATION GUARANTEES PROPER INSTALLATION AND PERFECT FUNCTIONING OF THE TELEPHONE INSTALLATION AFTER IT HAS BEEN INSTALLED IN THE NEW QUARTERS AND AGREES TO FURNISH MAINTENANCE OF THE TELEPHONE EQUIPMENT FREE OF CHARGE INDEFINITELY. THE BID OF THE STANDARD ELETTRICA ITALIANA, BEING THE LOWEST BID RECEIVED, WAS ACCEPTED AND CONTRACT S 28FA17, DATED DECEMBER 16, 1932, WAS ENTERED INTO.

FROM THE FACTS STATED, IT APPEARS THAT WHEN THE BIDS WERE REQUESTED FOR REMOVING THE TELEPHONE EQUIPMENT, SUCH EQUIPMENT WAS BEING MAINTAINED EITHER BY THE ROME CITY TELEPHONE CO., IN CONNECTION WITH THE RENDERING OF SERVICE OR BY THE STANDARD ELETTRICA ITALIANA, UNDER THE TERMS OF ITS CONTRACT OF JUNE 2, 1930, AND THAT IN ORDER TO SAVE TO THE UNITED STATES THE RIGHT OF MAINTENANCE AND IN ORDER TO PREVENT THE POSSIBILITY OF INCURRING A SECOND OBLIGATION FOR MAINTENANCE, THE REQUEST FOR BIDS REQUIRED BIDDERS TO AGREE TO FURNISH MAINTENANCE FREE OF CHARGE INDEFINITELY. COMPLETION OF THE MOVING OF THE EQUIPMENT TO THE GOVERNMENT -OWNED BUILDINGS IS STATED TO HAVE BEEN ACCOMPLISHED ON OR ABOUT JANUARY 3, 1933, AND THAT SAID EQUIPMENT WAS MAINTAINED FREE OF CHARGE UNTIL MARCH 1, 1934, WHEN THE STANDARD ELETTRICA ITALIANA CALLED ATTENTION TO THE PROVISION FOR INDEFINITE MAINTENANCE AND STATED THAT IT WOULD BE UNREASONABLE TO EXPECT SAID COMPANY TO PROVIDE INDEFINITE REPAIR WORK AND ALL REPLACEMENTS, AND ACCORDINGLY, THAT IT WOULD NO LONGER CONTINUE TO FURNISH MATERIALS OR LABOR WITHOUT PAYMENT.

IT IS SETTLED THAT IN CONSTRUING CONTRACTS, PREVIOUS AND CONTEMPORANEOUS TRANSACTIONS AND FACTS PROPERLY MAY BE TAKEN INTO CONSIDERATION TO ASCERTAIN THE SUBJECT MATTER AS WELL AS THE SENSE IN WHICH THE PARTIES MAY HAVE USED PARTICULAR TERMS, BUT NOT TO ALTER OR MODIFY PLAIN LANGUAGE WHICH THEY HAVE USED. BRAWLEY V. UNITED STATES, 96 U.S. 173; SEITZ V. BREWERS' REFRIGERATING CO., 147 U.S. 517. THE STIPULATION IN THE CONTRACT FOR THE MAINTENANCE OF THE EQUIPMENT FREE OF CHARGE INDEFINITELY WAS NOT THE PRINCIPAL SERVICE FOR WHICH THE CONSIDERATION WAS PAID BUT WAS INCIDENTAL THERETO AND IS TOO INDEFINITE FOR ENFORCEMENT. AN AGREEMENT WHICH CONTEMPLATES CONTINUING PERFORMANCE FOR AN INDEFINITE TIME HAS BEEN CONSTRUED AS STIPULATING ONLY FOR PERFORMANCE TERMINABLE AT THE WILL OF EITHER PARTY OR AT LEAST IT MUST BE CONSTRUED TO MEAN SOME PERIOD SHORT OF INFINITY. IN SUCH A CASE IT IS NECESSARY TO FIRST CONSTRUE THE AGREEMENT IN THE LIGHT OF SURROUNDING CIRCUMSTANCES AND WITH REFERENCE TO THE SUBJECT MATTER IN ORDER TO ASCERTAIN THE INTENTION OF THE PARTIES. IT MAY BE CONSTRUED THAT THE AGREEMENT MEANS THE PERFORMANCE IS TO CONTINUE FOR A REASONABLE TIME OR THAT THE PARTIES WOULD SUBSEQUENTLY SETTLE THAT TERM OF THE AGREEMENT. GENERALLY, AN AGREEMENT OF THIS CHARACTER WILL NOT PROPERLY BE CONSTRUED AS CALLING FOR PERPETUAL PERFORMANCE.

UNDER THE FACTS OF RECORD AND IN VIEW OF THE PRIOR CONTRACT PROVIDING FOR MAINTENANCE SERVICES FOR A PERIOD OF 1 YEAR AFTER COMPLETION OF THE ORIGINAL INSTALLATION, A REASONABLE CONSTRUCTION OF THE TERMS OF CONTRACT S-28FA17 WOULD APPEAR TO BE THAT THE CONTRACTOR IS NOT BOUND TO FURNISH MAINTENANCE OF THE EQUIPMENT FREE OF CHARGE FOR ANY PERIOD AFTER FEBRUARY 28, 1934. YOU ARE ADVISED ACCORDINGLY.