B-126242, FEBRUARY 16, 1956, 35 COMP. GEN. 460

B-126242: Feb 16, 1956

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CONTRACTS - DEFAULT - PROVISIONS EXCUSING PERFORMANCE - STRIKES CONTRACT CASUALTY PROVISION WHICH WOULD RELIEVE CONTRACTOR OF LIABILITY FOR DEFAULT DUE TO A STRIKE IS NOT INOPERATIVE BECAUSE A STRIKE WAS IN EFFECT WHEN THE CONTRACT WAS EXECUTED. HE IS NOT ESTOPPED FROM OBTAINING RELIEF UNDER THE CASUALTY PROVISION BECAUSE OF ORAL STATEMENTS MADE PRIOR TO EXECUTION THAT THE STRIKE WOULD BE OF SUCH SHORT DURATION AS NOT TO INTERFERE WITH SCHEDULED DELIVERIES. 1956: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 27. THE COOLERS IN QUESTION WERE TO BE DELIVERED AS FOLLOWS: 520 UNITS ON DECEMBER 15. THE INVITATION PURSUANT TO WHICH THE CONTRACT WAS AWARDED PROVIDED THAT BIDS SHOULD BE SUBMITTED NOT LATER THAN OCTOBER 17.

B-126242, FEBRUARY 16, 1956, 35 COMP. GEN. 460

CONTRACTS - DEFAULT - PROVISIONS EXCUSING PERFORMANCE - STRIKES CONTRACT CASUALTY PROVISION WHICH WOULD RELIEVE CONTRACTOR OF LIABILITY FOR DEFAULT DUE TO A STRIKE IS NOT INOPERATIVE BECAUSE A STRIKE WAS IN EFFECT WHEN THE CONTRACT WAS EXECUTED, AND WHERE, AS HERE, THE CONTRACTOR DID NOT ASSUME THE RISK AS TO THE DURATION OF THE STRIKE, HE IS NOT ESTOPPED FROM OBTAINING RELIEF UNDER THE CASUALTY PROVISION BECAUSE OF ORAL STATEMENTS MADE PRIOR TO EXECUTION THAT THE STRIKE WOULD BE OF SUCH SHORT DURATION AS NOT TO INTERFERE WITH SCHEDULED DELIVERIES.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, FEBRUARY 16, 1956:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 27, 1956, REQUESTING AN OPINION AS TO THE LIABILITY OF WESTINGHOUSE ELECTRIC CORPORATION FOR EXCESS COSTS OCCASIONED BY ITS FAILURE TO PERFORM CONTRACT NO. CS-05S 5243, PROVIDING FOR THE SALE OF 1,010 ELECTRIC WATER COOLERS TO YOUR ADMINISTRATION FOR $107,482.87. THE COOLERS IN QUESTION WERE TO BE DELIVERED AS FOLLOWS: 520 UNITS ON DECEMBER 15, 1955; 175 UNITS BY JANUARY 15, 1956, AND 315 UNITS BY FEBRUARY 1, 1956.

THE INVITATION PURSUANT TO WHICH THE CONTRACT WAS AWARDED PROVIDED THAT BIDS SHOULD BE SUBMITTED NOT LATER THAN OCTOBER 17, 1955. ON THAT DATE THE BID OF WESTINGHOUSE WAS RECEIVED AND DURING THE DAY YOUR CHICAGO REGIONAL OFFICE WAS ADVISED BY WESTINGHOUSE REPRESENTATIVES IN WASHINGTON THAT A STRIKE AGAINST THE COMPANY HAD BEEN DECLARED AND WAS IN EFFECT. NOTWITHSTANDING THIS INFORMATION THE CONTRACT WAS AWARDED TO WESTINGHOUSE ON OCTOBER 18, 1955, AND CONTAINED THE PROVISION SPECIFICALLY RELIEVING THE CONTRACTOR FROM LIABILITY FOR EXCESS COSTS ARISING OUT OF FAILURE TO PERFORM FOR VARIOUS REASONS INCLUDING STRIKES, QUOTED IN YOUR LETTER. PARAGRAPH 11 (B) OF STANDARD FORM 32, NOVEMBER 1949 USED., GENERAL PROVISIONS, SUPPLY CONTRACT.)

BECAUSE OF THE STRIKE IT BECAME EVIDENT THAT THE WESTINGHOUSE COMPANY WOULD BE UNABLE TO MAKE THE DECEMBER 15TH DELIVERY AND ITS RIGHT TO DO SO WAS TERMINATED BY YOUR ADMINISTRATION ON NOVEMBER 29, 1955. THE COOLERS IN QUESTION WERE REPURCHASED AT AN INCREASED COST TO THE GOVERNMENT OF $8,567.78 AND COMPARABLE LOSSES WILL BE INCURRED IN ACQUIRING THE 490 COOLERS THAT WERE TO BE DELIVERED ON JANUARY 15 AND FEBRUARY 1, 1956.

IT IS DOUBTLESS TRUE THAT REPRESENTATIVES OF THE WESTINGHOUSE COMPANY EXPRESSED THE BELIEF THAT THE STRIKE WOULD BE OF SHORT DURATION AND THAT AWARD OF THE CONTRACT WAS INFLUENCED BY SUCH EXPRESSIONS.

YOUR LETTER INDICATES UNCERTAINTY WHETHER THOSE EXPRESSIONS WERE POSITIVE REPRESENTATIONS OR MERELY EXPRESSIONS OF HOPE AND EXPECTATION; AND IT ALSO STATES YOUR UNDERSTANDING THAT THE CONTRACTING OFFICER WAS NOT ENTIRELY INFLUENCED BY THE STATEMENTS, BEING PROMPTED IN PART BY THE FACT THAT THE OFFER WAS LOW BY ABOUT $14,000. THE FACT REMAINS THAT THE CONTRACT CONTAINING THE PROVISION REFERRED TO WAS EXECUTED AND BECAME A VALID AND BINDING AGREEMENT. EVEN IF THE STATEMENTS OF THE WESTINGHOUSE OFFICIALS HAD AMOUNTED TO POSITIVE REPRESENTATIONS THAT THE STRIKE WOULD BE OF SUCH SHORT DURATION THAT THE DELIVERIES COULD BE MADE AS SCHEDULED, SUCH REPRESENTATIONS WERE NOT INCORPORATED IN THE CONTRACT AND NO EFFORT TO LIMIT THE PLAIN AND UNAMBIGUOUS LANGUAGE OF PARAGRAPH 11 (B) WAS MADE. UNDER THE PAROLE EVIDENCE RULE STATEMENTS AND REPRESENTATIONS OF THE PARTIES LEADING UP TO THE MAKING OF A WRITTEN CONTRACT MAY NOT BE USED TO VARY OR CONTRADICT THE PLAIN AND UNAMBIGUOUS LANGUAGE OF SUCH AGREEMENT AFTER IT HAS BEEN EXECUTED.

PERTINENT TO THIS MATTER IS WILLISTON ON CONTRACTS, REVISED EDITION, VOLUME 6, SEC. 1968, AS FOLLOWS:

SECTION 1968. CLAUSES RELIEVING FROM IMPOSSIBLE PERFORMANCE.

IT HAS BECOME COMMON FOR MANUFACTURERS AND OTHERS TO INSERT IN THEIR CONTRACTS CLAUSES RELIEVING THEM FROM LIABILITY IN CASE OF STRIKES AND OTHER UNFORESEEN CASUALTIES. * * * IN GENERAL, THESE CLAUSES PROVIDE AGAINST LIABILITY FOR NONPERFORMANCE CAUSED, FOR EXAMPLE, BY WAR, FIRE, RIOTS, STRIKES, CAR SHORTAGE, CROP FAILURE, EXHAUSTION OF COAL, OIL, GAS, OR OTHER NATURAL RESOURCE IN PAYING QUANTITIES, OR CONTINGENCIES BEYOND THE PROMISOR-S, OR SOMETIMES EITHER PARTY-S, CONTROL. IF SUCH A CLAUSE BECOMES OPERATIVE AND EXCUSES THE PROMISOR FROM PERFORMANCE, THE EXCUSE HAS BEEN HELD NOT MERELY TEMPORARY, OPERATIVE ONLY WHILE THE CASUALTY CONTINUES, BUT A PERMANENT EXCUSE FOR NON-PERFORMANCE, UNLESS THE CONTRACT PROVIDES THAT DELAY ONLY SHALL BE EXCUSED.

DANT AND RUSSELL, INC. V. GRAYS HARBOR EXPORTATION CO., 106 F.2D 911 (WHICH IS CITED IN 22 COMP. GEN. 1087), INVOLVED CONTRACTS FOR THE DELIVERY OF LOGS DURING CERTAIN SPECIFIED MONTHS WHICH CONTAINED A PROVISION RELIEVING THE CONTRACTOR FROM LIABILITY IN THE EVENT OF STRIKES, ETC. SUBSEQUENTLY, A LONGSHOREMAN'S STRIKE BROKE OUT AND PREVENTED DELIVERIES DURING THE SPECIFIED PERIODS. THE QUESTION INVOLVED WAS WHETHER OR NOT THE CONTRACTOR WAS BOUND TO MAKE DELIVERIES OF THE INTERRUPTED SHIPMENTS AFTER THE STRIKE WAS ENDED. THE COURT IN PASSING ON THIS QUESTION SAID:

APPELLEE'S POSITION IS THAT THE CLAUSE PERMANENTLY EXCUSED NONDELIVERY FOR THE PERIOD OF THE STRIKE, AND THAT AFTERWARDS THERE WAS NO DUTY ON ITS PART TO MAKE THE DELIVERIES WHICH THE STRIKE HAD PREVENTED IT FROM MAKING.

WITH THE LATTER CONTENTION WE AGREE. THE CLAUSE, IN SO MANY WORDS, EXEMPTS THE SELLER FROM LIABILITY, NOT ONLY FOR DELAY IN PERFORMANCE BUT FOR NONSHIPMENT AND NONDELIVERY, IF OCCASIONED BY A LABOR DISTURBANCE OF THE KIND WHICH TOOK PLACE. THIS CONSTRUCTION IS FORTIFIED BY THE CONCLUDING SENTENCE OF THE CLAUSE, RELATING TO THE OPTIONAL RIGHT OF THE SELLER TO REQUIRE THE BUYER'S ACCEPTANCE OF DELAYED SHIPMENTS OR DELIVERIES OCCASIONED BY THE CAUSES MENTIONED, WHERE THE DELAY DOES NOT EXCEED 30 DAYS. A CONSIDERATION OF THE MANY FACTORS ENTERING INTO THE MAKING OF CONTRACTS OF THIS CHARACTER FURTHER REINFORCES THE VIEW ENTERTAINED.

THE CASE IS GOVERNED BY THE LAW OF WASHINGTON, BUT COUNSEL HAVE CITED NO HELPFUL AUTHORITY FROM THAT STATE. THE FOLLOWING CASES SUPPORT THE CONCLUSION HERE REACHED: NORMANDIE SHIRT CO. V. J. H. AND C. K. EAGLE, 238 N.Y. 218, 144 N.E. 507, 35 A.L.R. 714; EDWARD MAURER CO. V. TUBELESS TIRE CO., 6 CIR., 285 F. 713; INDIANA FLOORING CO. V. GRAND RAPIDS TRUST CO., 6 CIR., 20 F.2D 63, 66; KUNGLIGJARNVAGSSTYRELSEN V. NATIONAL CITY BANK, 2 CIR., 20 F.2D 307; BLACK AND YATES, INC. V. NEGROS-1PHILIPPINE LUMBER CO., 32 WYO. 248, 231 P. 398, 37 A.L.R. 1487. SEE, ALSO, WILLISTON ON CONTRACTS, SECTION 1968.

UNITED STATES V. RUSSIAN VOLUNTEER FLEET, 22 F.2D 187, IS SOMEWHAT SIMILAR IN ITS FACTS TO THE INSTANT MATTER AND LIKEWISE BEARS ON THE QUESTION OF POSSIBLE ESTOPPEL SUGGESTED IN YOUR LETTER. THE SYLLABUS OF THIS CASE READS IN PERTINENT PART AS FOLLOWS:

UNDER CONTRACT OF AFFREIGHTMENT EXCEPTING DELAYS CAUSED BY STRIKES FROM CLAIMS FOR DEMURRAGE, CHARACTER DID NOT BECOME LIABLE FOR DEMURRAGE CHARGES ARISING FROM DELAY IN LOADING, CAUSED BY STRIKE AT PORT DESIGNATED BY CHARTERER AS LOADING PORT, WITH NO OBJECTION FROM OWNER, THOUGH BOTH PARTIES WERE AWARE THAT A STRIKE EXISTED AT SUCH PORT, SINCE CHARTERER HAD RIGHT TO RELY ON AGREEMENT EXCEPTING IT FROM LIABILITY IN SUCH CASE.

THE KNOWLEDGE ON THE PART OF THE GOVERNMENT REPRESENTATIVES THAT A STRIKE WAS IN EFFECT WHEN THE CONTRACT WAS EXECUTED APPEARS TO RENDER THE CHANCES FOR ESTABLISHING AN ESTOPPEL AGAINST THE WESTINGHOUSE COMPANY REMOTE. SINCE THE DURATION OF THE STRIKE WAS NOT A MATTER THAT COULD BE DETERMINED UNILATERALLY BY THE COMPANY, THE REPRESENTATIONS OF ITS OFFICIALS ON THAT SCORE WOULD OF NECESSITY REPRESENT NO MORE THAN OPTIMISTIC OR WISHFUL THINKING AND SHOULD HAVE BEEN RECOGNIZED AS SUCH.

THE REAL QUESTION APPEARS TO BE WHETHER THE CASUALTY CLAUSE OF THE CONTRACT SHOULD BE INTERPRETED TO INCLUDE A FAILURE TO PERFORM THE CAUSE OF WHICH, TO THE KNOWLEDGE OF BOTH PARTIES, EXISTED WHEN THE CONTRACT WAS EXECUTED. THE LANGUAGE OF PARAGRAPH 11 (B), STANDARD FORM 32, MAKES NO DISTINCTION BETWEEN EXISTING AND SUPERVENING CAUSES OF DELAY THAT ARISE OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR. IT IS NOT LIMITED TO UNFORESEEABLE" CAUSES, AS WAS THE CASE WITH THE PROVISION CONSIDERED IN UNITED STATES V. BROOKS-1CALLAWAY CO., 318 U.S. 120. NOR WERE THE CIRCUMSTANCES A MATTER OF KNOWLEDGE TO ONLY ONE PARTY, AS WAS THE CASE IN REFINING ASSOCIATES, INC. V. UNITED STATES, 124 C.1CLS. 115, IN WHICH THE PLAINTIFF WAS NOT PERMITTED TO WITHDRAW HIS BID BECAUSE OF ALLEGED INABILITY TO PERFORM DUE TO STRIKES IN EXISTENCE WHEN HIS BID WAS SUBMITTED, THE COURT HAVING FOUND NO EVIDENCE THAT THE STRIKES AFFECTED PLAINTIFF'S ABILITY TO PERFORM.

NO DOUBT PARTIES TO A CONTRACT ARE PRESUMED TO TAKE INTO ACCOUNT EXISTING DIFFICULTIES KNOWN AT THE TIME THE CONTRACT IS EXECUTED AND TO ASSUME THE RISK INVOLVED IN PERFORMING THEIR RESPECTIVE OBLIGATIONS IF THE CONTRACT IS SILENT ON THAT POINT. THERE IS NO REASON, HOWEVER, WHY PROVISION MAY NOT BE MADE FOR EXEMPTION FROM LIABILITY FOR EXISTING AS WELL AS SUPERVENING MATTERS WHERE THE PARTIES TURN THEIR ATTENTION TO THE QUESTION AND INCLUDE IN THE CONTRACT A CLEARLY APPLICABLE PROVISION. CF., UNITED STATES V. RUSSIAN VOLUNTEER FLEET, SUPRA. IN THIS RESPECT, IT HAS BEEN SAID ( WILLISTON ON CONTRACTS, REVISED EDITION, VOL. 6, SEC. 1933) THAT:

* * * IT MAY ALSO HAPPEN THAT PARTIES KNOW ALL THE FACTS, BUT ERRONEOUSLY BELIEVE KNOWN DIFFICULTIES CAN BE REMOVED. SUCH AN AGREEMENT WILL GENERALLY BE MADE ON THE ASSUMPTION THAT THE DIFFICULTIES ARE NOT INSUPERABLE AND IF THEY PROVE TO BE SO (NOT MERELY BECAUSE OF A PROMISOR'S SUBJECTIVE INCAPACITY), THERE WILL BE NO LIABILITY * * *.

IT APPEARS, THEREFORE, THAT THE PARTIES TO THE CONTRACT KNEW OF THE STRIKE WHEN THE CONTRACT WAS MADE; THAT THEY DISCUSSED IT ORALLY AND EXPECTED IT WOULD BE OF SUCH SHORT DURATION AS NOT TO INTERFERE WITH SCHEDULED DELIVERIES; AND THAT THEY THEREAFTER ENTERED INTO A CONTRACT WITH A PROVISION RELIEVING THE CONTRACTOR OF LIABILITY FOR DEFAULT ARISING FROM CAUSES (INCLUDING STRIKES) BEYOND HIS CONTROL AND WITHOUT HIS FAULT OR NEGLIGENCE, WITHOUT LIMITING THE PROVISION TO SUPERVENING CAUSES. ASSUMING, AS YOU HAVE, THAT THE STRIKE WAS BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, THE CONCLUSION IS WARRANTED THAT THE CASUALTY CLAUSE EXEMPTS HIM FROM LIABILITY IF THE EXPECTED DURATION OF THE STRIKE SHOULD PROVE WRONG.

UNDER THE CIRCUMSTANCES AS YOU HAVE RELATED THEM, IT IS OUR OPINION THAT WESTINGHOUSE ELECTRIC CORPORATION IS NOT LIABLE FOR THE EXCESS COSTS THAT HAVE BEEN OR MAY BE OCCASIONED BY REASON OF ITS DEFAULT UNDER CONTRACT NO. GS-05S-5243.