A-71253, JULY 18, 1938, 18 COMP. GEN. 54

A-71253: Jul 18, 1938

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NOR IS THE POSTING OF THE BID DEPOSIT TO BE CONSTRUED AS AN AGREEMENT TO PAY LIQUIDATED DAMAGES IN THE FLAT AMOUNT OF THE BOND. THE DEFAULTING BIDDER-CONTRACTOR IS LIABLE FOR SUCH AMOUNT IN EXCESS OF THE BID SECURITY AS REPRESENTS THE DIFFERENCE BETWEEN THE AMOUNT OF HIS BID. UNDER THE OPENING THE LOWEST BID WAS SUBMITTED BY THE NICOLETTE CONSTRUCTION CO. WAS AWARDED UNDER DATE OF DECEMBER 21. WAS AMENDED UNDER DATE OF MAY 1. LETTER DATED MAY 22D WAS RECEIVED FROM MRS. NICOLETTE HAS BEEN SICK FOR OVER A YEAR AND HIS MENTAL CONDITION IS SUCH THAT HE IS UNABLE TO ATTEND TO ANY BUSINESS. A CONSTRUCTION ENGINEER WAS DETAINED TO INVESTIGATE THE FOREGOING STATEMENTS. ITS RIGHT TO PROCEED WAS TERMINATED ON JUNE 10.

A-71253, JULY 18, 1938, 18 COMP. GEN. 54

CONTRACTS - INCREASED COSTS - DEFAULTING CONTRACTOR - EXTENT OF LIABILITY UNDER BID SECURITY IN LIEU OF BID BOND WHERE BID GUARANTEES IN THE FORM OF CERTIFIED OR CASHIER'S CHECKS MIGHT BE POSTED AT THE OPTION OF THE BIDDER IN LIEU OF AND TO SERVE THE SAME PURPOSE AS A BID BOND, REQUIRED BY THE SPECIFICATIONS, WHICH COULD BE DISCHARGED UPON THE BIDDER'S FAILURE TO ENTER INTO A WRITTEN CONTRACT IN ACCORDANCE WITH THE BID AS ACCEPTED AND THE NONFURNISHING OF THE REQUIRED PERFORMANCE BOND ONLY BY PAYING THE GOVERNMENT THE DIFFERENCE BETWEEN THE AMOUNT OF THE ACCEPTED BID AND THE COST TO THE GOVERNMENT OF HAVING THE WORK DONE, THE BID DEPOSIT IN AMOUNT LESS THAN THE COST TO THE GOVERNMENT OF HAVING THE WORK DONE BY ANOTHER MAY NOT BE RETURNED TO THE BIDDER WHO HAS FAILED TO MEET THE REQUIRED CONDITIONS, NOR IS THE POSTING OF THE BID DEPOSIT TO BE CONSTRUED AS AN AGREEMENT TO PAY LIQUIDATED DAMAGES IN THE FLAT AMOUNT OF THE BOND, AND THE DEFAULTING BIDDER-CONTRACTOR IS LIABLE FOR SUCH AMOUNT IN EXCESS OF THE BID SECURITY AS REPRESENTS THE DIFFERENCE BETWEEN THE AMOUNT OF HIS BID, PLUS THE BID SECURITY, AND THE COST TO THE GOVERNMENT OF PROCURING THE WORK ELSEWHERE JUST AS HE WOULD BE ENTITLED TO A REFUND OF THE UNNEEDED PORTION OF THE BID DEPOSIT HAD THE DAMAGES RESULTING FROM HIS DEFAULT BEEN LESS THAN THE AMOUNT OF THE BID SECURITY.

DECISION BY ACTING COMPTROLLER GENERAL ELLIOTT, JULY 18, 1938:

SYLVESTER NICOLETTE, AS PRESIDENT AND APPARENTLY SOLE PROPRIETOR OF NICOLETTE CONSTRUCTION CO., HAS REQUESTED THE RETURN OF A DEPOSIT OF $1,020 SUBMITTED WITH THE BID OF THAT FIRM FOR THE CONSTRUCTION OF A POST OFFICE BUILDING AT CANTON, N.Y.

UNDER DATE OF JUNE 26, 1936, THE SECRETARY OF THE TREASURY MADE THE FOLLOWING REPORT TO THIS OFFICE CONCERNING THE MATTER:

THIS DEPARTMENT ADVERTISED FOR BIDS FOR CONSTRUCTION OF A NEW POST OFFICE BUILDING AT CANTON, N.Y., UNDER A SPECIFICATION DATED NOVEMBER 21, 1935.

UNDER THE OPENING THE LOWEST BID WAS SUBMITTED BY THE NICOLETTE CONSTRUCTION CO., POTSDAM, .Y., IN THE AMOUNT OF $48,975, TO WHOM A CONTRACT NO. TIPW-3786, WAS AWARDED UNDER DATE OF DECEMBER 21, 1935. THE CONTRACT, HOWEVER, WAS AMENDED UNDER DATE OF MAY 1, 1936, TO PROVIDE FOR PAYMENT, IN THE AMOUNT $51,000, IN ACCORDANCE WITH YOUR DECISION DATED APRIL 25, 1936 (A-71253), RELATING TO THE CONTRACTOR'S CLAIM OF ERROR.

THE DEPARTMENT WIRED THE CONTRACTOR UNDER DATES OF MAY 18TH AND 21ST FOR ADVICE AS TO WHEN THE FORMAL CONTRACT AND BOND WOULD BE EXECUTED. LETTER DATED MAY 22D WAS RECEIVED FROM MRS. NICOLETTE STATING THAT MR. NICOLETTE HAS BEEN SICK FOR OVER A YEAR AND HIS MENTAL CONDITION IS SUCH THAT HE IS UNABLE TO ATTEND TO ANY BUSINESS. A CONSTRUCTION ENGINEER WAS DETAINED TO INVESTIGATE THE FOREGOING STATEMENTS, AND IT APPEARS FROM HIS REPORT DATED JUNE 3D THAT MR. NICOLETTE HAS BEEN ILL THE PAST THREE YEARS BOTH PHYSICALLY AND MENTALLY; THAT DUE TO ILLNESS HE WOULD BE UNABLE TO CARRY ON OR COMPLETE ANY KIND OF BUSINESS; THAT THE FINANCIAL CONDITION OF THE CONTRACTOR WOULD RENDER IT UNFIT TO UNDERTAKE THE PROJECT AWARDED IT; AND THAT THE CONTRACTOR HAD BEEN UNABLE TO OBTAIN A BOND. A LETTER DATED JUNE 2D FROM THE CONTRACTOR REQUESTS THAT IT BE RELIEVED FROM THE CONTRACT AND THE RETURN OF THE GUARANTEE DEPOSITS.

IN VIEW OF THE CONTRACTOR'S FAILURE TO EXECUTE A FORMAL CONTRACT AND BOND AS REQUIRED, ITS RIGHT TO PROCEED WAS TERMINATED ON JUNE 10, 1936. THE PROCEEDS OF THE CONTRACTOR'S GUARANTEE DEPOSITS, IN THE AMOUNT OF $1,020, HAVE BEEN DEPOSITED IN THE DISBURSING OFFICER'S SPECIAL DEPOSIT ACCOUNT (SYMBOL 891-804). IT IS THE INTENTION OF THE DEPARTMENT TO READVERTISE THE PROJECT, AND AFTER A NEW CONTRACT HAS BEEN AWARDED YOU WILL BE FURNISHED WITH THE NECESSARY DATA WITH REFERENCE TO THE DIFFERENCE IN COST, IF ANY, OF PERFORMING THE WORK. NOTICE OF THE MATTER IS GIVEN YOU AT THIS TIME FOR PURPOSES OF RECORD.

THERE ARE ENCLOSED FOR YOUR INFORMATION THE FOLLOWING COPIES OF PERTINENT PAPERS:

SPECIFICATION DATED NOVEMBER 21, 1935; BID OF NICOLETTE CONSTRUCTION CO.; SCHEDULE OF BIDS; DEPARTMENT LETTER OF ACCEPTANCE DATED DECEMBER 21, 1935; LETTER AMENDING CONTRACT DATED MAY 1, 1936; CONSTRUCTION ENGINEER'S REPORT DATED JUNE 3, 1936; INCLOSING LETTER FROM CONTRACTOR DATED JUNE 2D; DEPARTMENT LETTER DATED JUNE 10, 1936, TERMINATING CONTRACTOR'S RIGHT TO PROCEED.

UNDER DATE OF FEBRUARY 19, 1938, A FURTHER REPORT WAS MADE TO THIS OFFICE IN PART AS FOLLOWS:

* * * THE PROJECT WAS READVERTISED AND UNDER DATE OF JULY 29, 1936, AWARD WAS MADE TO MR. LEON WEXLER, IN THE AMOUNT OF $77,000 CONTRACT NO. T1PB159, FOR PERFORMANCE OF THE WORK. THIS CONTRACT WAS SUBSTANTIALLY COMPLETED AND THE BUILDING OCCUPIED ON MAY 29, 1937.

IN VIEW OF THE CIRCUMSTANCES IN CONNECTION WITH THIS CONTRACT, AS SET FORTH IN DEPARTMENT LETTER OF FEBRUARY 11, 1938, IT IS BEING REFERRED TO YOUR OFFICE FOR DIRECT SETTLEMENT.

THE INVITATION FOR BIDS AND APPENDED BULLETIN AND SPECIFICATIONS, ON WHICH THE ACCEPTED BID OF THE NICOLETTE CONSTRUCTION CO. OF $48,975, LATER CORRECTED TO $51,000, FOR CONSTRUCTION OF THE POST OFFICE BUILDING WAS BASED, CONTAINED THE FOLLOWING PROVISIONS:

THE INVITATION FOR BIDS---

* * * ATTENTION IS DIRECTED TO THE SPECIAL CONDITIONS OF BIDDING SET FORTH IN THE SPECIFICATIONS AND BULLETIN NO. 51 (REVISED) OF THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS. * * *

GUARANTEE WILL BE REQUIRED WITH EACH BID AS FOLLOWS: (SEE PARAGRAPH 65 OF FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS BULLETIN NO. 51 (REVISED) AND PARAGRAPHS 9 AND 10 OF THE SPECIFICATION.)

NOTE.--- SEE GOVERNMENT FORM OF CONTRACT NO. P.W.A. 51 (REVISED), AND THE GOVERNMENT FORMS OF BID BOND * * *.

BULLETIN NO. 51---

SEC. 51. FORMS.--- (A) BIDS FOR CONTRACTS FOR CONSTRUCTION OR REPAIR WORK SHALL BE SUBMITTED ON COMBINED FORM NO. P.W.A. 50, TOGETHER WITH BID BOND ON STANDARD FORM NO. 24, OR OTHER APPROVED SECURITY, WHEN REQUIRED.

SEC. 65. GUARANTY.--- WHERE SECURITY IS REQUIRED TO INSURE THE EXECUTION OF CONTRACT AND BOND FOR PERFORMANCE OF THE SERVICE NO BID WILL BE CONSIDERED UNLESS IT IS SO GUARANTEED. THE BIDDER, AT HIS OPTION, MAY FURNISH A GUARANTY BOND, A CERTIFIED CHECK, OR DEPOSIT, IN ACCORDANCE WITH TREASURY DEPARTMENT REGULATIONS, UNITED STATES BONDS (AT PAR VALUE) AS SECURITY IN THE AMOUNT REQUIRED. * * *

IN CASE SECURITY IS IN THE FORM OF A CERTIFIED CHECK OR UNITED STATES BOND, THE GOVERNMENT MAY MAKE SUCH DISPOSITION OF THE SAME AS WILL ACCOMPLISH THE PURPOSE FOR WHICH SUBMITTED. * * *

THE SPECIFICATIONS---

9. BID GUARANTEE.--- EACH BID SHALL BE ACCOMPANIED BY A GUARANTEE IN AMOUNT NOT LESS THAN 2 PERCENT OF THE BID PRICE, AND MAY BE: BID BOND ON U.S. STANDARD FORM NO. 24; CERTIFIED CHECK OR CASHIER'S CHECK. IN LIEU OF SURETIES ON BID BONDS THERE MAY BE DEPOSITED * * * BONDS OR NOTES OF THE UNITED STATES. * * *

READING THESE PROVISIONS TOGETHER IT IS CLEAR THAT BID GUARANTEES IN THE FORM OF CERTIFIED OR CASHIER'S CHECKS MIGHT BE POSTED AT THE OPTION OF THE BIDDER IN LIEU OF AND TO SERVE THE SAME PURPOSE AS A BID BOND ON UNITED STATES STANDARD FORM NO. 24, AND, HENCE, WHEN SO POSTED, WERE SUBJECT TO THE SAME CONDITIONS AS SUCH BID BOND, IN THE ABSENCE OF ANY STIPULATIONS TO THE CONTRARY. A COPY OF THE SAID BID BOND STANDARD FORM NO. 24 ATTACHED TO THE SPECIFICATIONS, STATES THE CONDITIONS THEREOF AS FOLLOWS:

NOW, THEREFORE, IF THE PRINCIPAL SHALL NOT WITHDRAW SAID BID WITHIN THE PERIOD SPECIFIED THEREIN AFTER THE OPENING OF THE SAME, OR, IF NO PERIOD BE SPECIFIED, WITHIN SIXTY (60) DAYS AFTER SAID OPENING, AND SHALL WITHIN THE PERIOD SPECIFIED THEREFOR, OR, IF NO PERIOD BE SPECIFIED, WITHIN TEN (10) DAYS AFTER THE PRESCRIBED FORMS ARE PRESENTED TO HIM FOR SIGNATURE, ENTER INTO A WRITTEN CONTRACT WITH THE GOVERNMENT, IN ACCORDANCE WITH THE BID AS ACCEPTED, AND GIVE BOND WITH GOOD AND SUFFICIENT SURETY OR SURETIES, AS MAY BE REQUIRED, FOR THE FAITHFUL PERFORMANCE AND PROPER FULFILLMENT OF SUCH CONTRACT, OR IN THE EVENT OF THE WITHDRAWAL OF SAID BID WITHIN THE PERIOD SPECIFIED, OR THE FAILURE TO ENTER INTO SUCH CONTRACT AND GIVE SUCH BOND WITHIN THE TIME SPECIFIED, IF THE PRINCIPAL SHALL PAY THE GOVERNMENT THE DIFFERENCE BETWEEN THE AMOUNT SPECIFIED IN SAID BID AND THE AMOUNT FOR WHICH THE GOVERNMENT MAY PROCURE THE REQUIRED WORK AND/OR SUPPLIES, IF THE LATTER AMOUNT BE IN EXCESS OF THE FORMER, THEN THE ABOVE OBLIGATION SHALL BE VOID AND OF NO EFFECT, OTHERWISE TO REMAIN IN FULL FORCE AND VIRTUE.

THUS UPON FAILURE OF A SUCCESSFUL BIDDER TO ENTER INTO A WRITTEN CONTRACT WITH THE GOVERNMENT IN ACCORDANCE WITH THE BID AS ACCEPTED AND TO FURNISH A PERFORMANCE BOND WITH GOOD AND SUFFICIENT SURETY FOR THE FAITHFUL PERFORMANCE AND PROPER FULFILLMENT OF SUCH CONTRACT, THE BID BOND COULD BE DISCHARGED ONLY BY PAYING THE GOVERNMENT THE AMOUNT THEREOF OR BY PAYING THE GOVERNMENT THE DIFFERENCE BETWEEN THE AMOUNT OF THE ACCEPTED BID AND THE COST TO THE GOVERNMENT OF HAVING THE WORK DONE. IT FOLLOWS THAT THE RETURN OF THE AMOUNT OF A CERTIFIED OR CASHIER'S CHECK POSTED IN LIEU OF SUCH BID BOND AS BID SECURITY IS NOT AUTHORIZED EXCEPT ON LIKE CONDITIONS. IN THE PRESENT CASE THE EXCESS COST TO THE GOVERNMENT DUE TO THE DEFAULT OF THE NICOLETTE CONSTRUCTION CO. IN THIS RESPECT AFTER ITS BID WAS ACCEPTED APPEARS TO BE $26,000, AND AS NO PART OF SUCH DAMAGES HAVE BEEN PAID, THE RETURN OF THE BID SECURITY IN THE AMOUNT OF $1,020 IS NOT AUTHORIZED.

WITH RESPECT TO THE LIABILITY OF THE DEFAULTING CONTRACTOR HERE FOR THE GOVERNMENT'S DAMAGES IN EXCESS OF THE AMOUNT OF ITS BID SECURITY THERE ARE FOR APPLICATION THE PRINCIPLES STATED IN DECISION OF SEPTEMBER 30, 1937, A -73166, CONCERNING THE LIABILITY OF ANOTHER CONTRACTOR UNDER ALMOST IDENTICAL CONDITIONS. THAT DECISION IS IN PART AS FOLLOWS:

YOU CONTEND THAT YOUR LIABILITY IS LIMITED TO THE PENALTY SUM OF $3,000 NAMED IN YOUR BID BOND, AND OFFER TO SETTLE THE MATTER ON THAT BASIS. YOUR OFFER CAN NOT BE ACCEPTED BY THIS OFFICE. YOUR INDEBTEDNESS IS FOR DAMAGES SUFFERED BY THE UNITED STATES AS A RESULT OF THE BREACH OF YOUR CONTRACT WITH THE GOVERNMENT TO FURNISH A PERFORMANCE BOND AND TO DO THE WORK FOR $36,000 AND THE FACT THE GOVERNMENT TOOK SECURITY IN THE FORM OF A BID BOND FOR $3,000 THAT UPON ACCEPTANCE OF YOUR BID YOU WOULD FURNISH A PERFORMANCE BOND IN THE AMOUNT OF $30,000 DOES NOT LIMIT YOUR LIABILITY FOR BREACH OF THE CONTRACT BUT ONLY THE COLLATERAL LIABILITY OF YOUR SURETY FOR YOUR FAILURE TO FURNISH THE PERFORMANCE BOND.

IT IS SETTLED THAT IN CONTRACTING WITH THE GOVERNMENT A VALID AND ENFORCEABLE CONTRACT IS FORMED UPON THE ACCEPTANCE BY AN AUTHORIZED AGENT OF THE GOVERNMENT OF A BIDDER'S OFFER OR PROPOSAL, EVEN THOUGH THE PARTIES CONTEMPLATE, OR THE STATUTES REQUIRE, THAT A FORMAL WRITTEN CONTRACT BE THEREAFTER EXECUTED BY THE PARTIES, AND IRRESPECTIVE OF WHETHER SUCH FORMAL CONTRACT IS THEREAFTER EXECUTED. SEE GARFIELDEV. UNITED STATES, 93 U.S. 242; HARVEY V. UNITED STATES, 105 U.S. 671, 688; UNITED STATES V. NEW YORK AND PORTO RICO. S.S. CO., 239 U.S. 88; ACKERLIND V. UNITED STATES, 240 U.S. 531; UNITED STATES V. PURCELL ENVELOPE CO., 249 U.S. 313; AMERICAN SMELTING AND REFINING CO. V. UNITED STATES, 259 U.S. 75; ADAMS V. UNITED STATES, 1 CT.CLS. 192; GARFIELDE V. UNITED STATES, 11 CT.CLS. 592; MCCOLLUM V. UNITED STATES, 17 CT.CLS. 92; PROFFIT V. UNITED STATES, 42 CT.CLS. 248; WATERS V. UNITED STATES, 75 CT.CLS. 126.

IN ADAMS V. UNITED STATES, 1 CT.CLS, 192, THE COURT SAID:

"WE THINK THIS CONTRACT WAS COMPLETE ON THE 28TH JUNE 1862 WHEN THE CLAIMANT'S PROPOSALS WERE ACCEPTED BY THE NAVY DEPARTMENT. HE AND HIS SURETIES FROM THAT TIME WERE BOUND NOT ONLY TO FURNISH THE ARTICLES OF CLOTHING, BUT TO ENTER INTO THE FURTHER OBLIGATIONS AND STIPULATIONS PROVIDED FOR IN THE ADVERTISEMENT. IF HE HAD REFUSED TO EXECUTE THE CONTRACT AS PREPARED, OR TO FURNISH THE SECURITY, HE AND HIS GUARANTORS WERE LIABLE FOR THE DIFFERENCE IN COST TO WHICH THE GOVERNMENT WOULD HAVE BEEN SUBJECTED BY HIS FAILURE, IN THE SHAPE OF LIQUIDATED DAMAGES.'

IN WATERS V. UNITED STATES, 75 CT.CLS. 126, IT WAS HELD, QUOTING FROM THE SYLLABUS, THAT---

"WHERE A BIDDER ON A PROPOSAL TO FURNISH GOODS FOR THE NAVY DEPARTMENT AGREES IN HIS BID TO EXECUTE A STANDARD FORM OF GOVERNMENT CONTRACT, AND HIS BID IS FORMALLY ACCEPTED, BUT HE FAILS TO EXECUTE THE AGREED FORM, HE MAY NEVERTHELESS BE HELD TO RESPOND IN DAMAGES FOR BREACH OF AN OBLIGATION TO FURNISH THE GOODS.'

THE COURT SAID:

"THE FACT THAT THE FORMAL CONTRACT WAS NOT EXECUTED BY THE PLAINTIFF DOES NOT PREVENT THE UNITED STATES FROM RECOVERING THE DAMAGES SUSTAINED. UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP CO., 239 U.S. 88; ACKERLIND V. UNITED STATES, 240 U.S. 531; AMERICAN SMELTING AND REFINING CO. V. UNITED STATES, 259 U.S. 75.'

YOUR BRIEF FILED JUNE 2, 1937, RELATIVE TO THE MATTER, URGES THAT THE GOVERNMENT'S ACCEPTANCE OF NOVEMBER 27, 1935, DID NOT CREATE A CONTRACT BECAUSE IT WAS NOT UNCONDITIONAL, IN THAT IT WAS STATED TO BE "SUBJECT TO" THE FURNISHING OF A SATISFACTORY PERFORMANCE BOND BY YOU AND THE EXECUTION OF A FORMAL CONTRACT BETWEEN YOU AND THE GOVERNMENT. THESE PROVISIONS IN NO WAY VARY THE TERMS OF YOUR PROPOSAL BUT MERELY REITERATE WHAT YOU HAD AGREED BY YOUR PROPOSAL TO DO IF THE PROPOSAL WAS ACCEPTED AND WERE NOT CONDITIONS PRECEDENT TO THE CREATION OF A CONTRACT RELATION BETWEEN YOU AND THE GOVERNMENT, BUT ONLY CONDITIONS PRECEDENT TO YOUR RIGHT UNDER THE CONTRACT TO PROCEED WITH THE CONTRACT WORK. YOUR FAILURE TO MEET THOSE CONDITIONS, AS YOU HAD AGREED AND WERE BOUND TO DO BY THE TERMS OF YOUR ACCEPTED PROPOSAL, WAS A BREACH OF YOUR CONTRACT RELEASING THE GOVERNMENT FROM ANY OBLIGATION TO PERMIT YOU TO PROCEED WITH THE WORK, BUT NOT RELEASING YOU FROM FULL LEGAL LIABILITY FOR ALL DAMAGES TO THE GOVERNMENT RESULTING FROM SUCH BREACH. YOU WERE GIVEN EVERY OPPORTUNITY TO MEET THE CONDITIONS AGREED UPON AND IT WAS NOT UNTIL AFTER YOU HAD DEFINITELY INFORMED THE CONTRACTING OFFICER THAT YOU COULD NOT OBTAIN A PERFORMANCE BOND WAS THE CONTRACT RELET TO THE NEXT LOWEST BIDDER AT AN EXCESS COST OF $8,345. THE WORK HAD BEEN WIDELY ADVERTISED. SEVEN BIDS WERE RECEIVED RANGING FROM YOUR LOW BID OF $36,000 TO A HIGH BID OF $124,000. THE WORK HAD ALREADY BEEN DELAYED BY YOUR DEFAULT AND THERE APPEARS NO REASON FOR COMPLAINT THAT IN MITIGATION OF YOUR DAMAGES THE WORK MIGHT HAVE BEEN PROCURED AT A BETTER PRICE BY READVERTISING. RESPECTING YOUR CONTENTION THAT YOUR LIABILITY IS LIMITED TO THE AMOUNT OF YOUR BID BOND, THE SITUATION HERE PRESENTED IS CLEARLY DISTINGUISHABLE FROM THE SITUATIONS INVOLVED IN LAMPORT MFG. SUPPLY CO. V. UNITED STATES, 65 CT.CLS. 579; JOHN T. HICKEY V. UNITED STATES, 65 CT.CLS. 729, AND SIMILAR CASES, WHERE, IRRESPECTIVE OF THE ACTUAL DAMAGES, DEFAULTING BIDDERS FORFEITED THE AMOUNT OF THEIR CERTIFIED CHECKS DEPOSITED AS BID GUARANTEES, ON THE GROUND THAT SUCH DEPOSITS WERE INTENDED BY THE PARTIES AS LIQUIDATED DAMAGES TO BE PAID IN THE EVENT OF DEFAULT. IN THIS CASE THERE WAS NOT POSTED ANY SUM AS LIQUIDATED DAMAGES FOR A DEFAULT, BUT A BID BOND EXPRESSLY CONDITIONED, INTER ALIA, THAT IF THE BID WAS ACCEPTED THE PRINCIPAL WOULD ENTER INTO A WRITTEN CONTRACT IN ACCORDANCE WITH THE BID AS ACCEPTED, AND GIVE BOND WITH GOOD AND SUFFICIENT SURETY OR SURETIES, AS MIGHT BE REQUIRED, FOR THE FAITHFUL PERFORMANCE AND PROPER FULFILLMENT OF SUCH CONTRACT, OR IN THE EVENT OF "THE FAILURE TO ENTER INTO SUCH CONTRACT AND GIVE SUCH BOND" THAT THE PRINCIPAL "SHALL PAY TO THE GOVERNMENT ALL EXCESS COST AND LOSS IN PROCURING THE WORK AND/OR SUPPLIES.' CLEARLY, AS THE BOND BY THIS EXPRESS PROVISION MAY BE DISCHARGED BY PAYING THE GOVERNMENT ITS ACTUAL DAMAGES, IT MAY NOT BE CONSTRUED AS AN AGREEMENT TO PAY LIQUIDATED DAMAGES IN THE FLAT AMOUNT OF THE BOND. SUN PRINTING AND PUBLISHING ASSOCIATION V. MOORE, 183 U.S. 642; KOTHE V. R. C. TAYLOR TRUST, 280 U.S. 224. IT FOLLOWS THAT THE PRINCIPLES OF THE LAMPORT AND HICKEY CASES, SUPRA, HAVE NO APPLICATION TO THIS CASE, AND AS, UNDER THE PRINCIPLES OF THE NUMEROUS CASES CITED, SUPRA, YOU WERE CONTRACTUALLY BOUND BY THE ACCEPTANCE OF YOUR BID YOU ARE LEGALLY LIABLE AS A DEFAULTING CONTRACTOR FOR ALL DAMAGES RESULTING FROM YOUR DEFAULT, EVEN THOUGH THE LIABILITY OF THE SURETY ON THE BID BOND MAY BE LIMITED TO THE AMOUNT OF THE BOND. IF NO BID BOND HAD BEEN TAKEN THERE COULD BE NO QUESTION AS TO YOUR LEGAL LIABILITY FOR THE FULL AMOUNT OF DAMAGES RESULTING FROM YOUR BREACH OF THE CONTRACT TO FURNISH A PERFORMANCE BOND, AND, OBVIOUSLY, THE GOVERNMENT IS IN NO WORSE POSITION SO FAR AS YOU ARE CONCERNED BECAUSE IT TOOK SECURITY IN THE FORM OF A BID BOND TO COVER SUCH DAMAGES UP TO $3,000. * * *

WHILE IN THAT CASE THERE WAS A BID BOND EXPRESSLY CONDITIONED FOR DISCHARGE UPON PAYMENT OF THE GOVERNMENT'S ACTUAL DAMAGES, NEGATIVING ANY PRESUMPTION THAT THE AMOUNT THEREOF WAS INTENDED AS LIQUIDATED DAMAGES, AND THUS THE LIMIT OF THE DEFAULTING CONTRACTOR'S LIABILITY, IN THE PRESENT CASE THERE WAS NO SUCH BID BOND, BUT, AS ALREADY POINTED OUT, THE CERTIFIED CHECK WAS POSTED IN LIEU OF SUCH BID BOND AND FOR THE SAME PURPOSE, AND, THEREFORE, THERE APPEARS NO BASIS FOR HOLDING THAT SUCH CHECK WAS POSTED AS LIQUIDATED DAMAGES, OR THAT THE PARTIES SO UNDERSTOOD OR INTENDED. IF THE DAMAGES DUE TO THE CONTRACTOR'S DEFAULT HAD BEEN LESS THAN THE AMOUNT OF SUCH BID SECURITY, THE BALANCE UNDER SUCH CIRCUMSTANCES WOULD HAVE BEEN REFUNDABLE. IT MUST BE HELD, THEREFORE, THAT THE CHECK WAS NOT POSTED AS LIQUIDATED DAMAGES, BUT ONLY AS SECURITY TO THAT EXTENT FOR DAMAGES DUE TO THE CONTRACTOR'S FAILURE TO FURNISH A PERFORMANCE BOND AND TO GO FORWARD WITH THE WORK FOR THE ACCEPTED BID PRICE, AS CONTRACTUALLY OBLIGATED TO DO. THE FACT THAT THE GOVERNMENT DID NOT TAKE SECURITY FOR THE FULL AMOUNT OF SUCH DAMAGES DOES NOT RELIEVE THE DEFAULTING CONTRACTOR OF LEGAL LIABILITY FOR SUCH DAMAGES. SEE FRANK ET AL. ADMRS. V. UNITED STATES, 79 CT.CLS. 516.

THE RECORD INDICATES THAT THE DEFAULT OF THE CONTRACTOR IN THIS CASE WAS BECAUSE OF THE MENTAL AND FINANCIAL INABILITY OF SYLVESTER NICOLETTE TO CARRY OUT THE CONTRACT. THERE IS NO EVIDENCE, HOWEVER, NOR IT IS EVEN ALLEGED, THAT HIS MENTAL CONDITION WAS SUCH AS TO RENDER HIS CONTRACTS VOID OR VOIDABLE. IN HIS SWORN STATEMENT OF RESOURCES SUBMITTED WITH THE BID MR. NICOLETTE ALLEGED A NET WORTH OF $191,645.90, INCLUDING REAL ESTATE IN POTSDAM AND MOUNTAIN VIEW, N.Y., VALUED AT $270,000, SUBJECT TO MORTGAGES OF $99,184. IT APPEARS FROM THE REPORT OF THE TREASURY DEPARTMENT INVESTIGATOR, HOWEVER, THAT SUCH REAL ESTATE WAS BEING ADMINISTERED BY A CREDITORS' COMMITTEE PROTECTING THE INTERESTS OF A LOCAL BANK. HOWEVER THESE MATTERS MAY BE, THERE IS NOTHING IN SUCH CIRCUMSTANCES LEGALLY EXCUSING A BREACH OF CONTRACT OR RELEASING THE DEFAULTING CONTRACTOR FROM LEGAL LIABILITY FOR DAMAGES RESULTING FROM SUCH BREACH.

ACCORDINGLY, THE AMOUNT OF THE BID SECURITY WILL BE COVERED INTO THE TREASURY AS A MISCELLANEOUS RECEIPT AND A SETTLEMENT WILL BE STATED CHARGING SAID COMPANY AND SYLVESTER NICOLETTE JOINTLY AND SEVERALLY WITH THE AMOUNT OF THE DAMAGES RESULTING FROM THE DEFAULT AND APPLY THE AMOUNT OF THE BID SECURITY IN REDUCTION OF THE AMOUNT SO CHARGED.