B-131980, JUL. 1, 1957

B-131980, JUL. 1, 1957

TO EASTERN ENGINEERING COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF MAY 9, 1957, REQUESTING REVIEW OF SETTLEMENT DATED APRIL 19, 1957, WHICH DISALLOWED YOUR CLAIM FOR REFUND OF $6,600, REPRESENTING THE BID DEPOSIT THAT ACCOMPANIED YOUR OFFER OF SEPTEMBER 5, 1956, SUBMITTED IN RESPONSE TO INVITATION NO. B 35-57. YOU STATE THAT YOU REFUSED TO COMPLY WITH THE TERMS OF YOUR ACCEPTED BID, ASSIGNED CONTRACT NO. N189S-22731A (S), FOR THE REASON THAT "THE CONDITION OF THE MATERIAL WAS GROSSLY MISREPRESENTED, WHETHER THROUGH FRAUD, BAD FAITH OR IGNORANCE IS IMMATERIAL AND THE FACT THAT THE MATERIAL SOLD WAS GROSSLY MISREPRESENTED IS AMPLE GROUND FOR VOIDING THE CONTRACT.'

THE RECORD DISCLOSES THAT ITEMS 2582 AND 2583 OF THE INVITATION ON WHICH YOU QUOTED PRICES OF $17,500 AND $15,000, RESPECTIVELY, WERE IDENTIFIED AS ENGINES MODEL 12-567, MANUFACTURED BY ELECTRO-MOTIVE DIVISION GENERAL MOTORS CORPORATION,"USED, REPAIRS REQUIRED, FAIR CONDITION.' IN PREVIOUS CORRESPONDENCE YOU HAVE CONTENDED THAT A MORE ACCURATE DESIGNATION AS TO THE CONDITION OF THE ENGINE UNDER LOT 2582 WOULD BE "POOR TO BAD," AND THAT BECAUSE OF THE EXTENSIVE REPAIRS REQUIRED TO RECONDITION ITEM 2583 IT SHOULD HAVE BEEN DESCRIBED AS SCRAP.

THERE IS NOTHING IN THE FILE TO JUSTIFY THE CONCLUSION THAT THE DISPOSAL OFFICER OR ANY OTHER GOVERNMENT EMPLOYEE CONNECTED WITH THE TRANSACTION COMMITTED ANY ACT CONSTITUTING FRAUD OR BAD FAITH, AND NO EVIDENCE HAS BEEN SUBMITTED BY YOU TENDING TO SHOW THAT THE CONDITION OF THE EQUIPMENT WAS INTENTIONALLY MISREPRESENTED. FURTHERMORE, IN LETTER OF DECEMBER 1, 1956, YOU STATED THAT PRIOR TO THE PREPARATION OF YOUR OFFER, YOUR REPRESENTATIVE EXAMINED THE ENGINES AND NOTED THEIR CONDITION TO BE FAIR, BUT THAT FOR SEVERAL REASONS HE WAS UNABLE TO MAKE A THOROUGH INSPECTION WHICH WOULD HAVE DISCLOSED ALL OF THEIR MECHANICAL DEFECTS. UNDER THOSE CIRCUMSTANCES, IT WOULD APPEAR THAT YOUR ELECTION TO SUBMIT AN OFFICER TO PURCHASE THE EQUIPMENT WAS INDUCED BY THE OPINION GIVEN BY YOUR REPRESENTATIVE AS TO THE CONDITION OF THE ENGINES, EVEN THOUGH IT KNOWINGLY WAS BASED UPON AN INCOMPLETE INSPECTION.

CONCEDING THAT THE DESCRIPTION WAS NOT ACCURATE, AND THAT A THOROUGH AND COMPLETE INSPECTION WAS NOT PRACTICAL BEFORE BIDDING, THE TERMS OF THE INVITATION WHICH WERE EMBODIED IN THE CONTRACT PROVIDED THAT THE MATERIAL WAS FOR SALE "AS IS" WITHOUT ANY WARRANTY AS TO ITS CONDITION. DISPOSING OF SURPLUS MATERIAL, THE GOVERNMENT IS NOT ALWAYS AWARE OF THE QUALITY OR CONDITION OF THE GOODS IT SELLS, AND THEREFORE PROSPECTIVE BIDDERS USUALLY ARE APPRISED BY THE TERMS OF THE INVITATION, SIMILAR TO THOSE HERE INVOLVED, THAT ANY RISK AS TO THE ACCURACY OF THE DESCRIPTION IS IMPOSED UPON THE PURCHASER. THE COURTS HAVE HELD REPEATEDLY THAT SUCH STIPULATIONS CONSTITUTE AN EXPRESS DISCLAIMER OF WARRANTY. SEE LUMBRAZO V. WOODRUFF, 175 N.E. 525; W. E. HEDGER COMPANY V. UNITED STATES, 52 F.2D 31, CERTIORARI DENIED, 284 U.S. 676. THOSE CASES, ALSO INVOLVING THE MATTER OF A VARIANCE IN THE CONDITION OF THE PROPERTY FROM THAT OF THE DESCRIPTION IN THE INVITATION, CONCLUDE THAT UNDER SUCH CIRCUMSTANCES BUYERS NOT ONLY HAVE NO RIGHT TO EXPECT, BUT HAVE NOTICE AND AGREE UNDER THE TERMS OF THE CONTRACT NOT TO EXPECT ANY WARRANTIES WHATSOEVER.

THE ACCEPTANCE OF YOUR BID WAS IN GOOD FAITH CREATING A VALID AND BINDING CONTRACT PURSUANT TO WHICH THE CONTRACTING OFFICER WAS AUTHORIZED AND REQUIRED UNDER ARTICLE FOUR OF THE GENERAL SALE TERMS AND CONDITIONS MADE A PART OF THE CONTRACT TO WITHHOLD YOUR BID DEPOSIT FOR APPLICATION AGAINST ANY LOSS, COST, OR EXPENSE OCCASIONED BY YOUR DEFAULT, INCLUDING THE LOSS INCURRED UPON RESALE OF THE EQUIPMENT.