A-75498, DECEMBER 3, 1937, 17 COMP. GEN. 466

A-75498: Dec 3, 1937

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

IS NOT FOR CONSIDERATION. THE FACT THAT THERE WAS DELAY IN DELIVERY OF ONLY A SMALL PORTION OF MATERIAL UNDER A CONTRACT IS NOT A VALID REASON FOR REMISSION OF LIQUIDATED DAMAGES WHERE THE RATE AGREED UPON IS COMPUTED ONLY ON THE DELAYED PORTION AND BEAR A REASONABLE RELATION TO ANY PROBABLE DAMAGES WHICH MIGHT BE EXPECTED TO FOLLOW A BREACH OF THE CONTRACT. FLOOD CONDITIONS ARE A PART OF THE GENERAL HAZARDS ASSUMED BY THE CONTRACTOR. MAY NOT BE CLASSED AS "ACTS OF GOD" WHICH WILL RELIEVE FROM THE PERFORMANCE OF THE CONTRACT. EXTRAORDINARY OR UNUSUAL AND OF SUCH SEVERITY THAT THEY REASONABLY COULD NOT HAVE BEEN CONSIDERED AS FORESEEABLE SO AS TO BE PROVIDED AGAINST IN THE CONTRACT. THE FACT THAT PERFORMANCE OF A CONTRACT ENTAILED HARDSHIP RESULTING IN LOSS TO THE CONTRACTOR WILL NOT RELIEVE HIM FROM PERFORMANCE OF THE CONTRACT ACCORDING TO ITS TERMS IF THE HARDSHIP MIGHT HAVE BEEN GUARDED AGAINST BY A PROPER STIPULATION IN THE CONTRACT.

A-75498, DECEMBER 3, 1937, 17 COMP. GEN. 466

CONTRACTS - DAMAGES - LIQUIDATED - DELAYS - PROOF OF ACTUAL DAMAGES, SUBSTANTIAL PERFORMANCE, HARDSHIP, AND FORESEEABLE CAUSES OF DELAY UNDER A VALID AGREEMENT FOR LIQUIDATED DAMAGES ON ACCOUNT OF DELAYS IN PERFORMANCE OF A CONTRACT, THE QUESTION WHETHER THE GOVERNMENT SUFFERED ACTUAL DAMAGES, OR THE AMOUNT THEREOF, IS NOT FOR CONSIDERATION. THE FACT THAT THERE WAS DELAY IN DELIVERY OF ONLY A SMALL PORTION OF MATERIAL UNDER A CONTRACT IS NOT A VALID REASON FOR REMISSION OF LIQUIDATED DAMAGES WHERE THE RATE AGREED UPON IS COMPUTED ONLY ON THE DELAYED PORTION AND BEAR A REASONABLE RELATION TO ANY PROBABLE DAMAGES WHICH MIGHT BE EXPECTED TO FOLLOW A BREACH OF THE CONTRACT. WHERE CONTRACT CONTAINS NO PROVISION FOR EXCUSING DELAYS IN PERFORMANCE FOR ANY CAUSE, THE OCCURRENCE OF SNOW, ICE, SLEET, BLIZZARDS, HEAVY RAINS, AND FLOOD CONDITIONS ARE A PART OF THE GENERAL HAZARDS ASSUMED BY THE CONTRACTOR, AND MAY NOT BE CLASSED AS "ACTS OF GOD" WHICH WILL RELIEVE FROM THE PERFORMANCE OF THE CONTRACT, UNLESS SO ABNORMAL, EXTRAORDINARY OR UNUSUAL AND OF SUCH SEVERITY THAT THEY REASONABLY COULD NOT HAVE BEEN CONSIDERED AS FORESEEABLE SO AS TO BE PROVIDED AGAINST IN THE CONTRACT, AND THE FACT THAT PERFORMANCE OF A CONTRACT ENTAILED HARDSHIP RESULTING IN LOSS TO THE CONTRACTOR WILL NOT RELIEVE HIM FROM PERFORMANCE OF THE CONTRACT ACCORDING TO ITS TERMS IF THE HARDSHIP MIGHT HAVE BEEN GUARDED AGAINST BY A PROPER STIPULATION IN THE CONTRACT.

ACTING COMPTROLLER GENERAL ELLIOTT TO J. P. REIGHARD, RECEIVER, THE KULP LUMBER CO., DECEMBER 3, 1937:

YOUR LETTER OF JULY 31, 1937, REQUESTS REVIEW OF SETTLEMENT OF OCTOBER 30, 1936, BY WHICH THERE WAS DISALLOWED YOUR CLAIM IN THE AMOUNT OF $1,000.65 FOR REMISSION OF LIQUIDATED DAMAGES WITHHELD UNDER CONTRACT W- 978-ENG-ECW-1 DATED SEPTEMBER 27, 1935, FOR WHITE OAK TIES FURNISHED THE UNITED STATES ENGINEER CORPS.

BY INVITATION OF SEPTEMBER 12, 1935, THE OFFICE OF THE CHIEF OF ENGINEERS SOLICITED BIDS, TO BE OPENED SEPTEMBER 24, 1935, FOR THE FURNISHING OF THREE LOTS OF CREOSOTED RAILROAD TIES AND ONE LOT OF UNTREATED RAILROAD TIES FOR DELIVERY F.O.B. DESTINATIONS NAMED IN THE SCHEDULES FORMING A PART OF SAID INVITATION.

YOUR BID OF SEPTEMBER 20, 1935--- PROPOSING TO MAKE DELIVERY F.O.B. NEW CUMBERLAND, PA., OF LOT 3, ONLY--- WAS ACCEPTED SEPTEMBER 27, 1935, WITH CERTAIN CHANGES AS INDICATED IN PURCHASE ORDER OF SAME DATE. THE CONTRACT THUS ENTERED INTO PROVIDED FOR DELIVERY, WITHIN 45 DAYS AFTER RECEIPT OF THE CONTRACT, OF 4,281 TIES, TYPE I, AS SPECIFIED UNDER ITEM 1, AT 69 CENTS EACH, AMOUNTING TO $2,953.89, AND 638 TIES, TYPE II, AS SPECIFIED UNDER ITEM 2, AT $1.62 EACH, AMOUNTING TO $1,033.56, MAKING A TOTAL CONTRACT PRICE OF $3,987.45. PROVISION WAS MADE FOR PRELIMINARY INSPECTION AT YOUR PLANT, THOMPSONTOWN, PA., WITH FINAL INSPECTION AT DESTINATION, AND FOR DISCOUNT OF "2 PERCENT 10 DAYS; 1 1/2 PERCENT 20 DAYS; 1 PERCENT 30 DAYS.' THE CONTRACT FURTHER PROVIDED:

3. ESTIMATE OF DIFFICULTIES.--- NO ALLOWANCE WILL BE MADE FOR THE FAILURE OF A BIDDER OR OF THE CONTRACTOR TO ESTIMATE CORRECTLY THE DIFFICULTIES ATTENDING THE EXECUTION OF THE WORK.

4. DELIVERY.--- * * * IN THE EVENT OF THE TIME LIMIT EXPIRING ON SATURDAY, SUNDAY, OR HOLIDAY, DELIVERY WILL BE REQUIRED ON THE NEXT WORKING DAY. THE TIME OF COMPLETION OF THE CONTRACT WILL INCLUDE THE TIME REQUIRED FOR FACTORY INSPECTION BY THE GOVERNMENT * * *

7. LIQUIDATED DAMAGES.--- LIQUIDATED DAMAGES IN THE AMOUNT OF 5 CENTS PER TIE WILL BE ASSESSED FOR EACH CALENDAR DAY OF DELAY IN THE DELIVERY OF EACH TIE BEYOND THE SPECIFIED DELIVERY TIME AND WILL BE DEDUCTED FROM THE AMOUNT DUE THE CONTRACTOR UPON DELIVERY AND ACCEPTANCE OF THE TIES, PROVIDED THAT THE TOTAL AMOUNT OF THE LIQUIDATED DAMAGES DEDUCTED WILL NOT EXCEED 50 PERCENT OF THE TOTAL AMOUNT OF THE CONTRACT.

8. CLAIMS AND PROTESTS. IF THE CONTRACTOR CONSIDERS ANY WORK REQUIRED OF HIM TO BE OUTSIDE THE REQUIREMENTS OF THE CONTRACT, OR CONSIDERS ANY RECORD OR RULING OF THE INSPECTORS OR CONTRACTING OFFICER AS UNFAIR, HE SHALL ASK FOR WRITTEN INSTRUCTIONS OR DECISION IMMEDIATELY AND THEN FILE A WRITTEN PROTEST WITH THE CONTRACTING OFFICER AGAINST THE SAME WITHIN 10 DAYS THEREAFTER, OR BE CONSIDERED AS HAVING ACCEPTED THE RECORD OR RULING.

IN CASE OF DEFAULT OF THE CONTRACTOR, THE GOVERNMENT MAY PROCURE THE ARTICLES OR SERVICES FROM OTHER SOURCES AND HOLD THE CONTRACTOR RESPONSIBLE FOR ANY EXCESS COST OCCASIONED THEREBY: * * *

THE CONTRACT WAS RECEIVED BY YOU OCTOBER 10, 1935, THUS FIXING THE CONTRACT DUE DATE FOR DELIVERY AS NOVEMBER 25, 1935, NOVEMBER 24, 1935, BEING A SUNDAY. AT DATE OF EXPIRATION OF THE CONTRACT PERIOD, DELIVERIES HAD BEEN MADE OF 4,139 OF THE 4,919 TIES REQUIRED TO BE DELIVERED, LEAVING AN UNDELIVERED BALANCE OF 780 TIES. THE FOLLOWING STATEMENT SETS FORTH THE DATES ON WHICH THE DELAYED DELIVERIES WERE FINALLY MADE, THE DELAY INVOLVED ON EACH DELINQUENT DELIVERY, AND THE LIQUIDATED DAMAGES ACCRUING THEREON, COMPUTED AT THE STIPULATED CONTRACT RATE OF 5 CENTS PER TIE FOR EACH DAY OF DELAY INVOLVED:

CHART

DELIVERY DATE QUANTITY DAYS OF DELAY

LIQUIDATED

DAMAGES

11-26-35 ---------------------------- 80 1 $4.00

11-27-35 ---------------------------- 247 2 24.70

11-29-35 ---------------------------- 61 4 12.20

11-30-35 ---------------------------- 35 5 8.75

12-18-35 ---------------------------- 65 23 74.75

11-30-35 ---------------------------- 41 5 10.25

12-2-35 ----------------------------- 50 7 17.25

12-31-35 ---------------------------- 16 36 28.80

1-13-36 ----------------------------- 15 49 36.75

1-16-36 ----------------------------- 27 52 70.20

1-17-36 ----------------------------- 42 53 111.30

3-6-36 ------------------------------ 21 102 107.10

3-23-36 ----------------------------- 16 119 95.20

3-24-36 ----------------------------- 18120 108.00

3-30-36 ----------------------------- 43 126 270.90

4-8-36 ------------------------------ 3 135 20.25

TOTAL -------------------------- 780 839 1,000.65

YOUR CONTENTIONS IN SUPPORT OF YOUR CLAIM FOR REMISSION OF LIQUIDATED DAMAGES MAY BE SUMMARIZED AS FOLLOWS: (1) THAT THE MATERIAL WAS FURNISHED IN TIME FOR ACTUAL USE AND THAT NO DAMAGES WERE SUSTAINED BY THE GOVERNMENT; (2) THAT THE DELAYED PORTION CONSTITUTED ONLY A SMALL PORTION OF THE CONTRACT QUANTITY; (3) THAT EVERY POSSIBLE EFFORT WAS MADE TO EFFECT TIMELY PERFORMANCE AND THE ASSESSMENT OF DAMAGES CONSTITUTES A HARDSHIP; AND (4) THAT THE WEATHER CONDITIONS ENCOUNTERED WERE ABNORMAL AND EXTRAORDINARY IN CHARACTER.

WITH RESPECT TO THE FIRST CONTENTION--- THAT THE GOVERNMENT SUFFERED NO ACTUAL DAMAGES AS A RESULT OF THE DELAYED DELIVERIES--- IT IS WELL SETTLED THAT UNDER A VALID AGREEMENT FOR LIQUIDATED DAMAGES, THE MATTER OF WHETHER THERE WERE ACTUAL DAMAGES OR THE AMOUNT THEREOF IS NOT FOR CONSIDERATION. SUN PRINTING AND PUBLISHING ASSOCIATION V. MOORE, 183 U.S. 642; 10 COMP. DEC. 605; 13 ID. 853; 16 ID. 618; 19 ID. 278; 23 ID. 514; 2 COMP. GEN. 322; 5 ID. 363, 750; 16 ID. 918.

THE SECOND CONTENTION--- THAT ONLY A SMALL PORTION OF THE CONTRACT WAS DELAYED--- CAN FORM NO VALID REASON FOR REMISSION OF THE LIQUIDATED DAMAGES, SINCE THE EVIDENCE ESTABLISHES THAT THE RATE OF LIQUIDATED DAMAGES AS AGREED UPON--- 5 CENTS PER TIE FOR EACH DAY OF DELAY THEREOF--- IS COMPUTED ONLY ON THE PORTION WITH RESPECT TO WHICH THERE WAS DELAY AND BEARS A REASONABLE RELATION TO ANY PROBABLE DAMAGES WHICH MIGHT BE EXPECTED TO FOLLOW A BREACH. SUCH A PROVISION IS FOR ENFORCEMENT. WISE V. UNITED STATES, 249 U.S. 261; KOTHE V. R.C. TAYLOR TRUST, 280 U.S. 224; 16 COMP. GEN. 344.

THE THIRD REASON ASSIGNED FOR REMISSION OF DAMAGES--- HARDSHIP INVOLVED-- - IS OBVIOUSLY WITHOUT LEGAL WEIGHT. THE ANSWER TO THIS OBJECTION IS THAT THE HARDSHIP COULD HAVE BEEN GUARDED AGAINST BY A PROPER STIPULATION. JACKSONVILLE ETC. RAILWAY V. HOOPER, 160 U.S. 514, 528; 3 COMP. GEN. 344, 345. THE LAW REGARDS THE SANCTITY OF CONTRACTS. IT REQUIRES THE PARTIES THERETO TO DO WHAT THEY HAVE AGREED TO DO. IF UNEXPECTED IMPEDIMENTS BE IN THE WAY, AND A LOSS MUST ENSUE, IT LEAVES THE LOSS WHERE THE CONTRACT PLACES IT. IF THE PARTIES HAVE MADE NO PROVISION FOR A DISPENSATION, THE RULE OF LAW GIVES NONE. IT DOES NOT ALLOW A CONTRACT FAIRLY MADE TO BE ANNULLED, AND IT DOES NOT PERMIT TO BE INTERPOLATED WHAT THE PARTIES THEMSELVES HAVE NOT STIPULATED. DERMOTT V. JONES, 2 WALL. 8; 14 COMP. GEN. 431, 433.

THE FOURTH REASON ADVANCED IN SUPPORT OF YOUR CLAIM--- ABNORMAL AND EXTRAORDINARY WEATHER CONDITIONS--- INVOLVES THE QUESTION OF WHETHER A DELAY DUE TO SUCH WEATHER CONDITIONS IS AN EXCUSABLE DELAY UNDER THIS CONTRACT, THAT IS, AS TO WHETHER IT IS A DELAY FOR WHICH LIQUIDATED DAMAGES WOULD NOT ACCRUE UNDER THE CONTRACT. THE CONTRACT WAS FOR PERFORMANCE IN THE TUSCARORA MOUNTAINS OF PENNSYLVANIA. IT WAS AN ABSOLUTE UNDERTAKING, CONTAINING NO PROVISIONS FOR EXCUSING DELAYS IN PERFORMANCE FOR ANY CAUSE; THE ONLY LIMITATION STIPULATED WAS THAT THE LIQUIDATED DAMAGES DEDUCTED SHOULD NOT EXCEED 50 PERCENT OF THE TOTAL AMOUNT OF THE CONTRACT. THE EVIDENCE OF RECORD TENDS TO ESTABLISH THAT THE WEATHER CONDITIONS OF WHICH YOU HAVE COMPLAINED CONSISTED OF SNOW, ICE, AND SLEET IN THE EARLY WINTER SEASON, FOLLOWED BY A BLIZZARD JANUARY 18, 1936, AND FLOOD CONDITIONS DURING THE FIRST HALF OF THE MONTH OF MARCH. IT IS TO BE NOTED IN THIS CONNECTION THAT THE CONTRACT WAS FOR COMPLETION ON OR BEFORE NOVEMBER 25, 1935, AND THAT, THEREFORE, THE REPORTED BLIZZARD AND FLOOD CONDITIONS WERE LONG AFTER THE CONTRACT SHOULD HAVE BEEN COMPLETED. SINCE THE CONTRACT CONTAINED NO PROVISION FOR EXCUSING DELAYS DUE TO UNUSUALLY SEVERE WEATHER CONDITIONS, THE ONLY QUESTION LEFT FOR CONSIDERATION IS WHETHER THE WEATHER CONDITIONS CONSTITUTED SUCH AN ACT OF GOD AS WOULD RELEASE A CONTRACTOR FROM ITS CONTRACTUAL OBLIGATION.

GENERALLY, THE COURTS HAVE BEEN HESITANT IN PRESCRIBING AN EXACT DEFINITION OF THE PHRASE "AN ACT OF GOD" BECAUSE OF THE DIFFICULTY INVOLVED IN FRAMING ONE APPLICABLE ALIKE TO ALL CASES. HOWEVER, THE PHRASE HAS BEEN GENERALLY DEFINED AS "SOMETHING WHICH OCCURS EXCLUSIVELY BY THE VIOLENCE OF NATURE; AT LEAST AN ACT OF NATURE WHICH IMPLIES AN ENTIRE EXCLUSION OF ALL HUMAN AGENCIES.' UNITED STATES V. KANSAS CITY SOUTHERN RY.CO., 189 F. 471, 476. IN BULLOCK V. WHITE STAR STEAMSHIP CO., 30 WASH. 448, IT WAS HELD THAT "AN ACT OF GOD TO RELIEVE FROM THE PERFORMANCE OF A CONTRACT MUST BE SUCH AS A PERSON OF REASONABLE PRUDENCE AND FORESIGHT COULD NOT HAVE GUARDED AGAINST.'

OCCURRENCES WHICH REASONABLY MIGHT HAVE BEEN ANTICIPATED ARE NOT ACTS OF GOD IN THE LEGAL SENSE. SEE GLEASON V. VIRGINIA MIDLAND RAILROAD COMPANY, 140 U.S. 435. SNOWS, ICE, SLEET, BLIZZARDS, HEAVY RAINS, AND FLOOD CONDITIONS ARE A PART OF THE GENERAL HAZARDS ASSUMED BY A CONTRACTOR IN THE PERFORMANCE OF A CONTRACT IN LATE FALL AND WINTER MONTHS--- ESPECIALLY WHERE, AS IN THIS CASE, PARTIAL PERFORMANCE WAS DEPENDENT UPON A SUBCONTRACTOR AND THE TIMBER WAS LOCATED IN THE MOUNTAINOUS REGIONS OF PENNSYLVANIA--- AND UNLESS THE CONTRACT SPECIFICALLY SO PROVIDES THEY MAY NOT BE CLASSED AS "ACTS OF GOD" UNLESS SO ABNORMAL, EXTRAORDINARY OR UNUSUAL AND OF SUCH SEVERITY THAT THEY REASONABLY COULD NOT HAVE BEEN CONSIDERED AS FORESEEABLE SO AS TO BE PROVIDED AGAINST IN THE CONTRACT. NOTE PARTICULARLY THE CASE OF BERG V. ERICKSON, 234 F. 817, IN WHICH THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT HELD THAT AN UNPRECEDENTED DROUGHT DID NOT RELIEVE A CONTRACTOR FROM DAMAGES FOR FAILURE TO PERFORM. SEE ALSO PHOENIX BRIDGE CO. V. UNITED STATES, 38 CT.CLS. 492, IN WHICH IT WAS HELD THAT AN UNEXPECTED FRESHET OR ICE FLOW RENDERING WORK UNDER THE CONTRACT IMPOSSIBLE DID NOT RELIEVE THE CONTRACTOR.

ACCORDINGLY, THE DISALLOWANCE OF YOUR CLAIM FOR $1,000.65 DEDUCTED AS LIQUIDATED DAMAGES APPEARS CORRECT AND IS SUSTAINED.