B-130389, FEBRUARY 6, 1957, 36 COMP. GEN. 582

B-130389, FEBRUARY 6, 1957, 36 COMP. GEN. 582

CONTRACTS - MISTAKES - PRICE ADJUSTMENT THE SIGNING OF A NOTICE OF ACCEPTANCE OF A GOVERNMENT PURCHASE ORDER AND THE DELIVERY OF THE MATERIAL BY A CONTRACTOR WHO, UPON RECEIPT OF THE PURCHASE ORDER, PROMPTLY ALLEGED THAT AN ERROR IN PRICE HAD BEEN MADE IN THE QUOTATION REQUESTED BY THE GOVERNMENT, DO NOT CONSTITUTE A BAR TO THE FAVORABLE CONSIDERATION OF THE CONTRACTOR'S CLAIM FOR A PRICE INCREASE.

TO THE SECRETARY OF THE ARMY, FEBRUARY 6, 1957:

REFERENCE IS MADE TO LETTER DATED JANUARY 16, 1957, FROM THE ASSISTANT SECRETARY ( LOGISTICS), REQUESTING A DECISION AS TO WHETHER RELIEF MAY BE GRANTED TO FLOURNOY AND GIBBS, TOLEDO, OHIO, UNDER PURCHASE ORDER NO. O.I. 2300-G-56, DATED APRIL 20, 1956, ON ACCOUNT OF AN ERROR ALLEGED TO HAVE BEEN MADE IN THE BID UPON WHICH THE PURCHASE ORDER IS BASED.

IT APPEARS THAT THE ASSISTANT U.S. ARMY SAFETY DIRECTOR, DEPUTY CHIEF OF STAFF FOR PERSONNEL, WAS DESIROUS OF CONDUCTING A SAFETY CAMPAIGN ON ARMY POSTS AND IN CONNECTION THEREWITH REQUESTED THE NATIONAL CONFERENCE OF STATE SAFETY COORDINATORS ( FLOURNOY AND GIBBS, PUBLIC RELATIONS) FOR A SPECIAL PRICE TO THE GOVERNMENT ON A LARGE NUMBER OF " SLOW DOWN AND LIVE" POSTERS. BY LETTER DATED MARCH 13, 1956, THE ASSISTANT SAFETY DIRECTOR WAS ADVISED THAT 20,000 OF SUCH POSTERS, SIZE 17 INCH X 22 INCH, COULD BE FURNISHED AT A PRICE OF $102.90 PER THOUSAND. THE QUARTERMASTER GENERAL TRANSMITTED A REQUISITION TO THE PHILADELPHIA QUARTERMASTER DEPOT TO PURCHASE 20,250 OF THE POSTERS. IT WAS STATED IN THE REQUISITION THAT FLOURNOY AND GIBBS, TOLEDO, OHIO, WAS THE SOLE SOURCE OF SUPPLY AND THE ESTIMATED COST WAS STATED AS $2,083.75, WHICH WAS BASED ON THE PRICE OF $102.90 PER THOUSAND QUOTED BY FLOURNOY AND GIBBS.

ON APRIL 5, 1956, THE PHILADELPHIA QUARTERMASTER DEPOT SENT A REQUEST FOR QUOTATION ( FORM DD 747) TO FLOURNOY AND GIBBS FOR 20,250 OF THE POSTERS TO BE DELIVERED TO VARIOUS DESTINATIONS. IN REPLY DATED APRIL 9, 1956, FLOURNOY AND GIBBS SUBMITTED A QUOTATION OF $88 PER THOUSAND, WHICH WOULD PRODUCE A PRICE OF $1,762 FOR THE QUANTITY SPECIFIED. ON APRIL 20, 1956, PURCHASE ORDER NO. O.I. 2300-G-56 ( FORM DD 738-2) WAS ISSUED TO FLOURNOY AND GIBBS FOR 20,800 POSTERS AT $88 PER THOUSAND. THERE WAS TRANSMITTED WITH THE PURCHASE ORDER PQMD FORM 6673 ENTITLED " CONTRACTOR'S NOTICE OF ACCEPTANCE OF PURCHASE ORDER" WHICH PROVIDED "THE UNDERSIGNED CONTRACTOR HEREBY ACCEPTS THE SUBJECT PURCHASE ORDER AND AGREES TO PERFORM THE SAME," AND ON THE FACE OF THE ORDER THERE APPEARED THE STATEMENT: " THE GOVERNMENT MAY, AT ITS OPTION, CANCEL THIS PURCHASE ORDER, UNLESS THE ATTACHED ACCEPTANCE, EXECUTED IN DUPLICATE, IS RECEIVED BY THIS DEPOT NOT LATER THAN 27 APRIL 1956.'

ON APRIL 30, 1956, AN UNDATED LETTER WAS RECEIVED FROM THE NATIONAL CONFERENCE OF SAFETY COORDINATORS, PROMOTIONAL OFFICE ( FLOURNOY AND GIBBS), ACKNOWLEDGING RECEIPT OF THE PURCHASE ORDER AND ADVISING THAT AN ERROR HAD BEEN MADE IN THE QUOTATION OF $88 PER THOUSAND FURNISHED ON APRIL 9, 1956. IT WAS STATED THAT THE $88 PER THOUSAND REPRESENTED ONLY THE COST OF PRINTING AND THAT THE PRICE SHOULD HAVE BEEN $102.90 AS QUOTED IN THE LETTER OF MARCH 13, 1956, TO THE ASSISTANT U.S. ARMY SAFETY DIRECTOR, DEPUTY CHIEF OF STAFF FOR PERSONNEL, WASHINGTON, D.C.

ON MAY 1, 1956, A PURCHASING AGENT OF THE PHILADELPHIA QUARTERMASTER DEPOT CALLED THE BIDDER BY TELEPHONE AND DISCUSSED THE MATTER CONCERNING THE ALLEGED ERROR. A TRANSCRIPT OF THE CALL SHOWS THAT THE BIDDER WAS ADVISED THAT NO ONE AT THAT LEVEL HAD THE AUTHORITY TO MODIFY AN AWARD BECAUSE OF A MISTAKE MADE BY THE BIDDER IN A WRITTEN QUOTATION AND THAT A PROCEDURE MUST BE FOLLOWED WHEREBY ALL EVIDENCE SURROUNDING THE SITUATION, WAS REQUIRED TO BE SUBMITTED TO THE OFFICE OF THE QUARTERMASTER GENERAL OR THE COMPTROLLER GENERAL. IN RESPONSE TO THE BIDDER'S DIRECT QUESTION AS TO WHAT HE SHOULD DO WITH THE CERTIFICATE OF ACCEPTANCE HE WAS ADVISED TO SIGN IT AND RETURN IT TO THE DEPOT. THE BIDDER STATED THAT HE WOULD DO SO, BUT WOULD ATTACH A STATEMENT THAT IT WAS BEING SIGNED UNDER PROTEST. THE BIDDER WAS THEN ADVISED THAT UPON RECEIPT OF THE DOCUMENTS ACTION WOULD BE INITIATED TO PROCESS THE REQUEST FOR A CORRECTED AWARD AND THAT, IN THE MEANTIME, HE SHOULD START PERFORMANCE UNDER THE CONTRACT.

THE NOTICE OF ACCEPTANCE WAS SIGNED BY FLOURNOY AND GIBBS UNDER PROTEST AND THE POSTERS WERE FURNISHED. THE CONTRACTOR SUBMITTED CERTAIN EVIDENCE IN SUPPORT OF THE ALLEGED ERROR WHICH, TOGETHER WITH THE CIRCUMSTANCES INVOLVED, APPEARS TO LEAVE NO ROOM FOR DOUBT THAT AN ERROR WAS MADE IN THE QUOTATION OF APRIL 9, 1956, AS ALLEGED.

IN THE LETTER OF JANUARY 16, 1957, THE ASSISTANT SECRETARY ( LOGISTICS) STATES THAT " DD FORM 747" REQUEST FOR QUOTATION," AS USED IN THE INSTANT PROCUREMENT, WAS NOT DESIGNED AS A MEDIUM TO SOLICIT OFFERS FROM VENDORS FOR THE PURPOSE OF ISSUING A PURCHASE ORDER AS AN ACCEPTANCE AND THE ARMY PROCUREMENT PROCEDURE IS BEING REVISED ACCORDINGLY.' WE ARE IN AGREEMENT, SINCE THE FORM 747 FAILS TO INCORPORATE EVEN BY REFERENCE THE TERMS AND CONDITIONS CONTAINED IN THE PURCHASE ORDER, WHICH THEREFORE CANNOT BE CONSTRUED TO CONSTITUTE AN UNQUALIFIED ACCEPTANCE OF THE QUOTATION. ADDITION, IN THE ORDER UNDER CONSIDERATION THE QUANTITY WAS CHANGED FROM 20,250 TO 20,800.

A MEMORANDUM DATED NOVEMBER 16, 1956, BY THE QUARTERMASTER GENERAL CONCERNING THE MATTER IS, IN PART, AS FOLLOWS:

6. THERE APPEARS TO BE SOME QUESTION AS TO WHETHER OR NOT THE QUOTATION OF THE CONTRACTOR CONSTITUTED AN OFFER, WHICH WAS ACCEPTED BY THE ISSUANCE OF THE PURCHASE ORDER, THEREBY CREATING A CONTRACT. THE COURTS HAVE FREQUENTLY HELD THAT PRICE QUOTATIONS BY A SUPPLIER EVEN WHERE COMMUNICATED TO ONLY ONE PERSON DO NOT CONSTITUTE AN OFFER, ALTHOUGH THE GENERAL RULE APPEARS TO BE THAT WHERE THE PROPERTY TO BE SOLD IS ACCURATELY DEFINED AND AN AMOUNT IS STATED AS THE PRICE IN A COMMUNICATION MADE TO ONE PERSON INDIVIDUALLY, THERE IS AN OFFER TO SELL THE PROPERTY DESCRIBED AT THE PRICE STATED. (1 WILLISTON ON CONTRACTS 27). IN THE PRESENT CASE TWO FACTS ARGUE AGAINST THE SUBMISSION OF THE QUOTATION AND THE ISSUANCE OF THE PURCHASE ORDER AS CONSTITUTING A CONTRACT; FIRST, THE PURCHASE ORDER WAS NOT IN THE EXACT TERMS OF THE QUOTATION IN THAT THE QUOTATION WAS FOR 20,250 AND THE ORDER FOR 20,800; SECOND, THE USE OF THE NOTICE OF ACCEPTANCE, WHEREBY THE VENDOR "ACCEPTS THE SUBJECT PURCHASE ORDER AND AGREES TO PERFORM THE AME" APPEARS TO INDICATE THAT THE GOVERNMENT REGARDED THE QUOTATION AS PRELIMINARY NEGOTIATION AND THE PURCHASE ORDER AS TO AN OFFER TO BUY RATHER THAN AN ACCEPTANCE OF THE VENDOR'S OFFER TO SELL. UNDER SUCH A CONSTRUCTION HAD THE VENDOR REFUSED TO ACCEPT THE PURCHASE ORDER OR TO FURNISH THE SUPPLIES, NO CONTRACT WOULD HAVE RESULTED. EVEN IF THE QUOTATION IS REGARDED AS AN OFFER AND THE ISSUANCE OF THE PURCHASE ORDER AS AN ACCEPTANCE, THE VENDOR, HAD HE REFUSED TO PERFORM, MIGHT HAVE BEEN ABLE TO SECURE A RESCISSION OF THE CONTRACT ( MOFFETT V. ROCHESTER, 178 U.S. 373). HOWEVER, HE ELECTED TO FURNISH THE SUPPLIES AND THE FACT THAT HE EXECUTED THE NOTICE OF ACCEPTANCE SUBJECT TO AN ALLEGATION OF MISTAKE WOULD NOT APPEAR TO ENTITLE HIM TO BE PAID ANY AMOUNT IN ADDITION TO THE BID PRICE. ( BOARD OF TRUSTEES OF NATIONAL TRAINING SCHOOL FOR BOYS V. O. D. WILSON CO., 133 FED. (2) 399; 25 CG 536). FURTHER, IT DOES NOT APPEAR THAT THE ACTION BY THE GOVERNMENT'S REPRESENTATIVES IN INSISTING THAT THE NOTICE BE RETURNED AND THAT DELIVERIES BE MADE WAS SUFFICIENT TO CONSTITUTE A REPRESENTATION BY THE GOVERNMENT THAT THE MISTAKE WOULD BE CORRECTED (CF. RAPPOLI V. U.S., 98 CT CLAIMS 499).

WE AGREE THAT UNDER THE CIRCUMSTANCES HERE INVOLVED THERE WOULD BE NO CONTRACT IF THE CONTRACTOR HAD REFUSED TO SIGN THE " CONTRACTOR'S NOTICE OF ACCEPTANCE OF THE PURCHASE ORDER" OR TO DELIVER THE ARTICLES ORDERED. HOWEVER, WE DO NOT AGREE THAT THE CONTRACTOR, IN THIS CASE, BY SIGNING THE NOTICE OF ACCEPTANCE AND PERFORMING FORFEITED ALL RIGHTS THAT HE HAD PRIOR THERETO.

IN THE NATIONAL TRAINING SCHOOL CASE, SUPRA, THE CONTRACTOR REQUESTED PERMISSION TO WITHDRAW HIS BID PRIOR TO AWARD ON ACCOUNT OF AN ERROR ALLEGED TO HAVE BEEN MADE IN THE BID. THE REQUEST WAS CONSIDERED AND DENIED AND THE BID WAS ACCEPTED AND THE CONTRACTOR WAS ADVISED THAT HIS BID BOND WOULD BE FORFEITED IF HE FAILED TO PERFORM. AT THAT POINT IT WAS UP TO THE CONTRACTOR TO ELECT EITHER TO PERFORM OR TO STAND UPON HIS LEGAL RIGHTS. HE CHOSE TO PERFORM AND IT WAS HELD THAT HE COULD NOT THEN REPUDIATE THE CONTRACT AND RECOVER AS IF THERE HAD BEEN NONE. IN THE CASE REPORTED IN 25 COMP. GEN. 536, REFERRED TO IN THE ABOVE QUOTED MEMORANDUM, THE BIDS WERE SUBMITTED AND ACCEPTED AND THEREAFTER THE BIDDER ALLEGED ERROR. THE BIDDER WAS ADVISED BY THE CONTRACTING OFFICE THAT SINCE THE BIDS HAD BEEN ACCEPTED THE REQUESTED PRICE REVISION COULD NOT BE CONSIDERED BY THAT OFFICE; THAT THE CONTRACTS SHOULD BE SIGNED AND THAT IF FURTHER CONSIDERATION OF THE ERROR WAS REQUESTED IT WOULD HAVE TO BE TAKEN UP WITH HIGHER AUTHORITY. THE BIDDER EXECUTED THE CONTRACTS AND INDICATED THEREON THAT THEY HAD BEEN EXECUTED SUBJECT TO APPEAL TO THE COMPTROLLER GENERAL OF THE UNITED STATES. THE HOLDING IN THAT CASE DENYING THE CLAIM WAS NOT BASED ON THE BIDDER'S HAVING EXECUTED THE CONTRACTS, BUT RATHER ON THE BASIS THAT THE ACCEPTANCE OF THE BIDS IN GOOD FAITH, WITHOUT NOTICE OF THE PROBABILITY OF ERROR, HAD CONSUMMATED VALID AND BINDING CONTRACTS.

IN THE CIRCUMSTANCES OF THE INSTANT CASE, WHERE ERROR WAS ALLEGED AND ESTABLISHED PROMPTLY UPON RECEIPT OF THE PURCHASE ORDER AND PRIOR TO THE CONSUMMATION OF A VALID AND BINDING CONTRACT, WE DO NOT FEEL THAT THE SIGNING OF THE NOTICE OF ACCEPTANCE AND PERFORMANCE, AFTER BEING ADVISED THAT THE ERROR WOULD BE CONSIDERED, SHOULD CONSTITUTE A BAR TO THE CONSIDERATION OF THE CLAIM. ACCORDINGLY, PAYMENT MAY BE MADE TO FLOURNOY AND GIBBS ON THE BASIS OF $102.90 PER THOUSAND FOR THE POSTERS FINISHED.

ONE SET OF THE PAPERS FORWARDED WITH THE LETTER OF JANUARY 16, 1957, IS RETURNED. THE OTHER SET IS BEING RETAINED HERE.