B-134187, DECEMBER 18, 1957, 37 COMP. GEN. 412

B-134187: Dec 18, 1957

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IS NOTIFIED THAT THE SUPPLIES DID NOT CONFORM TO THE WARRANTIES IN THE PURCHASE ORDER MAY NOT BE REGARDED AS HAVING RECEIVED A NOTICE OF THE BREACH OF WARRANTY BY REASON OF HIS PRESENCE AT THE TIME OF REINSPECTION AND A NINE MONTHS' DELAY IN GIVING ACTUAL NOTICE IS SO CLEARLY UNREASONABLE UNDER THE UNIFORM SALES ACT. WHICH IS IN EFFECT IN THE STATE WHERE THE CONTRACT WAS EXECUTED AND PERFORMED. 1957: REFERENCE IS MADE TO A LETTER DATED OCTOBER 14. WHETHER OR NOT THE PRODUCTS TO BE DELIVERED HEREUNDER ARE SHIPPED IN INTERSTATE COMMERCE AND WHETHER OR NOT PROVIDED FOR IN SPECIFICATIONS. THE FACT THAT PRODUCTS HAVE BEEN INSPECTED AND PASSED OR ACCEPTED SHALL NOT ACT AS A WAIVER OF THIS REQUIREMENT.

B-134187, DECEMBER 18, 1957, 37 COMP. GEN. 412

CONTRACTS - WARRANTIES - NOTICE - DELAY - UNIFORM SALES ACT A CONTRACTOR WHO, NINE MONTHS AFTER DELIVERY, REINSPECTION AND PAYMENT IN FULL, IS NOTIFIED THAT THE SUPPLIES DID NOT CONFORM TO THE WARRANTIES IN THE PURCHASE ORDER MAY NOT BE REGARDED AS HAVING RECEIVED A NOTICE OF THE BREACH OF WARRANTY BY REASON OF HIS PRESENCE AT THE TIME OF REINSPECTION AND A NINE MONTHS' DELAY IN GIVING ACTUAL NOTICE IS SO CLEARLY UNREASONABLE UNDER THE UNIFORM SALES ACT, WHICH IS IN EFFECT IN THE STATE WHERE THE CONTRACT WAS EXECUTED AND PERFORMED, AS TO PRECLUDE THE GOVERNMENT FROM ASSERTING A CLAIM FOR DAMAGES FOR BREACH OF WARRANTY.

TO THE SECRETARY OF THE AIR FORCE, DECEMBER 18, 1957:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 14, 1957, FROM THE CHIEF, CLAIMS DIVISION, OFFICE OF THE JUDGE ADVOCATE GENERAL, DEPARTMENT OF THE AIR FORCE, TO THE CLAIMS DIVISION OF OUR OFFICE, WITH ENCLOSURES, REFERENCE AFCJA-13, REQUESTING OUR OPINION AS TO WHETHER THE UNITED STATES HAS A VALID CLAIM AGAINST R. S. ANDERSON AND COMPANY FOR BREACH OF WARRANTY AS TO SUPPLIES FURNISHED UNDER PURCHASE ORDER NO. FH 8904-55, DATED NOVEMBER 9, 1954.

THE PURCHASE ORDER, ISSUED BY HEADQUARTERS, QUARTERMASTER MARKET CENTER SYSTEM, U.S. ARMY, CHICAGO, ILLINOIS, TO R. S. ANDERSON AND COMPANY, CLINTON, MISSOURI, CALLED FOR THE FURNISHING AND DELIVERY OF 6,000 POUNDS OF READY-TO-COOK FROZEN WHOLE FRYER CHICKENS TO CHANUTE AIR FORCE BASE, ILLINOIS.

THE PURCHASE ORDER PROVIDED FOR U.S. DEPARTMENT OF AGRICULTURE INSPECTION OF THE CHICKENS DURING PROCESSING AND PACKING, INCLUDING INSPECTION FOR WHOLESOMENESS, AT THE CONTRACTOR'S PLANT IN CLINTON, MISSOURI, AND FOR FURTHER INSPECTION AT DESTINATION.

PARAGRAPH 5 (D) OF THE GENERAL PROVISIONS OF THE PURCHASE ORDER PROVIDED THAT FINAL INSPECTION AND ACCEPTANCE OF THE SUPPLIES WOULD BE CONCLUSIVE EXCEPT AS REGARDS LATENT DEFECTS, FRAUD, OR SUCH GROSS MISTAKES AS AMOUNT TO FRAUD. HOWEVER, PARAGRAPH 29 OF THE ADDITIONAL GENERAL PROVISIONS PROVIDED AS FOLLOWS:

29. FEDERAL FOOD, DRUG AND COSMETIC ACT

THE PROVISIONS OF THE FEDERAL FOOD, DRUG AND COSMETIC ACT AND REGULATIONS THEREUNDER, INCLUDING LABELING REQUIREMENTS, SHALL BE COMPLIED WITH, AND SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF THE PARTIES INSOFAR AS APPLICABLE, WHETHER OR NOT THE PRODUCTS TO BE DELIVERED HEREUNDER ARE SHIPPED IN INTERSTATE COMMERCE AND WHETHER OR NOT PROVIDED FOR IN SPECIFICATIONS. THE FACT THAT PRODUCTS HAVE BEEN INSPECTED AND PASSED OR ACCEPTED SHALL NOT ACT AS A WAIVER OF THIS REQUIREMENT.

THE LOT OF 6,068 POUNDS OF CHICKENS DELIVERED TO CHANUTE AIR FORCE BASE UNDER THE PURCHASE ORDER WAS INSPECTED AT THE CONTRACTOR'S PLANT BY A DEPARTMENT OF AGRICULTURE INSPECTOR DURING PROCESSING AND PACKING AND ACCEPTED FOR SHIPMENT AS MEETING CONTRACT REQUIREMENTS. THE INSPECTOR'S REPORT SHOWS THAT THE CHICKENS LEFT THE PLANT EN ROUTE TO DESTINATION IN THE CONTRACTOR'S TRUCK, PROPERLY PACKED AND ICED, ON NOVEMBER 23, 1954. AN INSPECTION AND RECEIVING REPORT DATED NOVEMBER 26, 1954, SIGNED ON BEHALF OF AN INSPECTOR FOR THE VETERINARY CORPS OF CHANUTE AIR FORCE BASE, SHOWS THAT THE CHICKENS ARRIVED AT THE BASE ON NOVEMBER 24. THIS REPORT CERTIFIES THAT THE CHICKENS WERE INSPECTED BY THE INSPECTOR INVOLVED, OR UNDER HIS SUPERVISION, AND THAT "THEY CONFORM TO CONTRACT AND HAVE BEEN ACCEPTED.'

THE RECORD INDICATES THAT 5,435 POUNDS OF THE CHICKENS WERE ISSUED TO THE FOOD SERVICE CUTTING PLANT OF THE BASE ON THE SAME DAY, NOVEMBER 24, IN ORDER THAT THEY MIGHT HAVE THE CUSTOMARY TIME FOR GRADUAL THAWING AND PROCESSING (CUTTING) WITH A VIEW TO SERVING THEM TO TROOPS ON NOVEMBER 29. THE REMAINDER OF THE CHICKENS, WHICH CONSISTED OF 11 BOXES, OR APPARENTLY 633 POUNDS, WAS HELD IN COLD STORAGE.

IN THE COURSE OF CUTTING AND PREPARING, THE CHICKENS WERE FOUND TO POSSESS A BAD ODOR; THE MASTER SERGEANT IN CHARGE NOTIFIED A REPRESENTATIVE OF THE BASE VETERINARY CORPS; AND AT THE LATTER'S RECOMMENDATION, THE CHICKENS WERE NOT ISSUED TO MESS HALLS BUT WERE HELD FOR INSPECTION BY THE BASE VETERINARIAN. ON NOVEMBER 30, THE BASE VETERINARIAN CONDUCTED AN INSPECTION AND FOUND THE PROCESSED CHICKENS TO BE SOUR AND DETERIORATED, WITH SOME SHOWING DEEP BRUISES. THE CONTRACTOR WAS ADVISED ORALLY ON DECEMBER 1 OF THE RESULTS OF THIS INSPECTION, AND ALL OF THE CHICKENS WHICH HAD NOT BEEN LEFT IN COLD STORAGE WERE DESTROYED ON DECEMBER 2. ON DECEMBER 3, SIX BOXES (347 POUNDS) OF THE CHICKENS REMAINING IN COLD STORAGE WERE THAWED AND REINSPECTED IN THE PRESENCE OF MR. R. S. ANDERSON REPRESENTING THE SELLER. AS QUOTED IN A LETTER DATED DECEMBER 16, 1954, FROM THE U.S. DEPARTMENT OF AGRICULTURE, AGRICULTURAL MARKETING SERVICE, POULTRY INSPECTION SERVICE, CHICAGO, ILLINOIS, TO THE QUARTERMASTER INSPECTION SERVICE COMMAND, HEADQUARTERS MARKET CENTER U.S. ARMY, CHICAGO, THE REPORT OF THE REINSPECTION LISTED THE FOLLOWING DEFECTS:

"CONTAMINATION FROM CROP CONTENT:

NO. 1--- CROP AREA AND NECK SKIN--- 72 BIRDS.

NO. 2--- GIZZARDS--- 147.

NO. 3--- BODY CAVITY--- 42 BIRDS.

CONTAMINATED BY FECAL MATTER--- 2 BIRDS.

CONTAMINATED BY FECAL MATTER--- 2 GIBLET WRAPPERS.

"THE FOLLOWING CONDITIONS WERE ALSO NOTED:

NO. 1--- FEATHERS ON NECK SKIN AT POINT WHERE HEAD WAS REMOVED---

24 BIRDS. ALSO LOOSE FEATHERS AND HAIR ON SEVERAL BIRDS

EXAMINED.

NO. 2--- LIVERS NOT PROPERLY TRIMMED AND BILE SAC NOT PROPERLY

REMOVED--- 13 BIRDS

NO. 3--- SEX GLANDS NOT PROPERLY REMOVED--- 18 BIRDS.

NO. 4--- TRACHEAS NOT REMOVED--- 8 BIRDS.

NO. 5--- GIZZARD LINING ONLY PARTLY REMOVED--- 1 BIRD.

NO. 6--- GREEN STRUCK SLIGHT IN AREA OF VENT--- 2 BIRDS.'

IN A LETTER DATED DECEMBER 11, 1954, ADDRESSED TO THE CONTRACTING OFFICER, MR. ANDERSON STATES THAT HE LEFT THE INSPECTION PROCEEDING BEFORE IT WAS OVER BECAUSE HE DID NOT BELIEVE IT WAS BEING HANDLED PROPERLY. WITH REFERENCE TO THE QUESTION OF WHETHER THE SHIPMENT OF CHICKENS WAS IN A SPOILED CONDITION WHEN THEY WERE DELIVERED TO THE BASE, HE STATES:

* * * UPON MY ARRIVAL HOME, I ASKED MY DRIVER MR. EMMET ADKINS WHO DELIVERED THAT ORDER, IF HE HAD NOTICED ANYTHING ABOUT THE WAY IT WAS HANDLED AND HE INFORMED ME HE HAD. HE SAID THE ENTIRE ORDER WAS TAKEN OFF THE TRUCK, WAS PUT ON SKIDS AND PUSHED INTO THIS VERY WARM, STEAMED KETTLE ROOM INSTEAD OF GOING INTO THE FREEZER. HE THOUGHT IT WAS STRANGE AT THE TIME THAT THE POULTRY WOULD BE PUT INTO THAT ROOM UNLESS THEY WERE GOING TO USE IT THE FOLLOWING DAY, WHICH WAS THANKSGIVING. IT APPEARS TO ME THAT IF THERE WAS A QUESTION OF SPOILAGE, THAT THE BURDEN IS ON THE CHANUTE BASE. UNLESS THE POULTRY WAS TO BE USED THE FOLLOWING DAY, WHICH WAS THANKSGIVING, IT SHOULD NEVER HAVE BEEN PUT INTO THIS HOT ROOM.

THE LETTER CONCLUDES WITH A DEMAND BY THE CONTRACTOR THAT PAYMENT BE MADE FOR THE CHICKENS AT THE FULL CONTRACT PRICE.

THE CONTRACTING OFFICER REFERRED THE MATTER TO THE CHIEF COUNSEL, HEADQUARTERS, QUARTERMASTER MARKET CENTER SYSTEM, FOR AN OPINION AS TO THE GOVERNMENT'S RIGHTS THEREIN AND WAS ADVISED THAT INASMUCH AS THE CHICKENS HAD BEEN FINALLY INSPECTED AND ACCEPTED BY THE GOVERNMENT ON NOVEMBER 24, 1954, NO LEGAL BASIS ON WHICH TO DENY PAYMENT THEREFOR EXISTED, IN VIEW OF THE PROVISIONS OF PARAGRAPH 5 (D) OF THE GENERAL PROVISIONS, UNLESS THE DEFECTS IN THE CHICKENS AS DISCLOSED BY THE REPORT OF INSPECTION MADE ON DECEMBER 3, 1954, COULD BE CONSIDERED LATENT DEFECTS, OR UNLESS FRAUD, OR SUCH GROSS MISTAKES AS AMOUNT TO FRAUD, WERE EXISTENT. ON THE BASIS OF THIS OPINION AND OF HIS CONCLUSION THAT NO FRAUD OR LATENT DEFECTS WERE INVOLVED, THE CONTRACTING OFFICER, ON OR ABOUT DECEMBER 16, 1954, CAUSED PAYMENT TO BE MADE TO THE CONTRACTOR FOR THE SHIPMENT OF CHICKENS AT THE CONTRACT PRICE.

IN AUGUST, 1955, THE FOOD AND DRUG ADMINISTRATION SAMPLED AND TESTED THE 5 BOXES (288 POUNDS) OF CHICKENS WHICH WAS ALL THAT REMAINED OF THE SHIPMENT AND WHICH HAD BEEN KEPT IN COLD STORAGE. BY LETTER OF SEPTEMBER 7, 1955, THAT AGENCY ADVISED THAT THE LOT SAMPLED DID NOT CONFORM TO THE REQUIREMENTS OF THE FOOD, DRUG AND COSMETIC ACT, 21 U.S.C. 301. THE CONTRACTOR WAS ADVISED OF THIS BY LETTER OF SEPTEMBER 14, 1955, AND REFUND OF THE AMOUNT OF $2,240.77, WHICH HAD BEEN PAID FOR THE SUPPLIES, WAS DEMANDED. THE CONTRACTOR HAS REFUSED TO MAKE THE REQUESTED PAYMENT, OR TO PAY ANY AMOUNT.

IN VIEW OF THE PROVISIONS OF PARAGRAPH 5 (D) OF THE GENERAL PROVISIONS AND THE ADMINISTRATIVE DETERMINATIONS WITH RESPECT TO THE NATURE OF THE DEFECTS IN THE CHICKENS AND THE ABSENCE OF FRAUD, WHICH APPEAR TO BE REASONABLY SUPPORTED BY THE RECORD, THE GOVERNMENT IS CLEARLY PRECLUDED FROM ASSERTING A CLAIM AGAINST THE CONTRACTOR ON ACCOUNT OF THE DEFECTIVE SUPPLIES UNLESS IT CAN BE ESTABLISHED UNDER PARAGRAPH 29 OF THE ADDITIONAL GENERAL PROVISIONS, SUPRA. SINCE THIS PARAGRAPH CONSTITUTED A WARRANTY ON THE PART OF THE CONTRACTOR THAT THE CHICKENS TO BE FURNISHED UNDER THE PURCHASE ORDER WOULD CONFORM TO THE PROVISIONS OF THE FEDERAL FOOD, DRUG AND COSMETIC ACT AND REGULATIONS THEREUNDER, ANY RIGHT TO DAMAGES WHICH MAY HAVE ACCRUED TO THE GOVERNMENT AS A RESULT OF THE FAILURE OF THE CHICKENS TO SO CONFORM IS GOVERNED BY THE GENERAL OR APPLICABLE STATUTORY LAW RELATING TO WARRANTIES.

IN THE INSTANT CASE, THE CONTRACT WAS ENTERED INTO AND PERFORMED IN THE STATE OF ILLINOIS AND THEREFORE THE LAWS OF THAT JURISDICTION--- INSOFAR AS THEY DO NOT CONFLICT WITH FEDERAL LAW OR STATUTE--- ARE FOR APPLICATION IN DETERMINING THE RIGHTS OF THE PARTIES. FIRE ASSOCIATION OF PHILADELPHIA V. ALLIS CHALMERS MFG. CO., 129 F.1SUPP. 335; UNITED STATES V. H. R. HENDERSON AND COMPANY, 126 F.1SUPP. 626; CUDAHY PACKING CO. V. NARZISENFELD, 3 F.2D 567; NORWOOD LUMBER CORP. V. MCKEAN, 153 F.2D 753. THE UNIFORM SALES ACT HAS LONG BEEN IN EFFECT IN ILLINOIS. SECTION OF THE ACT, AS SET FORTH IN SECTION 49, CH. 121 1/2, SMITH-HURD ILLINOIS ANNOTATED STATUTES, PROVIDES AS FOLLOWS:

ACCEPTANCE DOES NOT BAR ACTION FOR DAMAGES.

IN THE ABSENCE OF EXPRESS OR IMPLIED AGREEMENT OF THE PARTIES, ACCEPTANCE OF THE GOODS BY THE BUYER SHALL NOT DISCHARGE THE SELLER FROM LIABILITY IN DAMAGES OR OTHER LEGAL REMEDY FOR BREACH OF ANY PROMISE OR WARRANTY IN THE CONTRACT TO SELL OR THE SALE. BUT, IF, AFTER ACCEPTANCE OF THE GOODS, THE BUYER FAIL TO GIVE NOTICE TO THE SELLER OF THE BREACH OF ANY PROMISE OR WARRANTY WITHIN A REASONABLE TIME AFTER THE BUYER KNOWS, OR OUGHT TO KNOW OF SUCH BREACH, THE SELLER SHALL NOT BE LIABLE THEREFOR. ( ITALICS SUPPLIED.)

THE NECESSITY OF COMPLYING WITH THE NOTICE REQUIREMENT OF THE ABOVE SECTION IN ORDER TO PRESERVE THE GOVERNMENT'S RIGHT TO CLAIM DAMAGES FOR BREACH OF WARRANTY HAS BEEN RECOGNIZED BY THE FEDERAL COURTS. UNITED STATES V. AMERICAN RADIATOR AND STAND. SAN. CORP., 115 F.1SUPP. 422; UNITED STATES V. DEWART MILK PRODUCTS CO., 9 F.2D 705; CHAMPLIN V. UNITED STATES, 297 F. 503.

AS TO THE GOVERNMENT'S KNOWLEDGE OF THE BREACH, IT IS STATED IN 6TH ENDORSEMENT OF FEBRUARY 12, 1957, FROM HEADQUARTERS MILITARY SUBSISTENCE SUPPLY AGENCY TO THE QUARTERMASTER GENERAL, THAT THE ,DEFECTS FOUND ON 3 DECEMBER 1954 WERE IDENTICAL TO THOSE FOUND IN ANOTHER INSPECTION ON WHICH THE FOOD AND DRUG ADMINISTRATION DETERMINED THE SUPPLIES TO BE ADULTERATED.' THUS, WHEN THE GOVERNMENT MADE ITS FIRST DEMAND UPON THE CONTRACTOR UNDER THE WARRANTY, IT HAD BEEN IN POSSESSION OF THE BASIC FACTS ON WHICH IT RELIED TO ESTABLISH ITS CLAIM FOR A PERIOD OF MORE THAN 9 MONTHS.

IN A MEMORANDUM OPINION SUBMITTED IN THE MATTER BY THE STAFF JUDGE ADVOCATE, AIR MATERIAL COMMAND, DATED APRIL 22, 1947, THE JUDGE ADVOCATE REACHES THE CONCLUSION THAT MR. ANDERSON'S PRESENCE AT THE INSPECTION WHICH TOOK PLACE ON DECEMBER 3, 1954, WAS SUFFICIENT NOTICE TO THE CONTRACTOR. HOWEVER, AS INDICATED ABOVE, MR. ANDERSON WAS ONLY PRESENT DURING THE INSPECTION OF THE FIRST 25 OR 30 CHICKENS IN THE LOT TESTED, DURING WHICH TIME HE IS STATED TO HAVE REMARKED THAT HE COULD NOT SEE MUCH WRONG WITH THE CHICKENS. ON DECEMBER 1, MR. ANDERSON HAD RECEIVED TELEPHONIC ADVICE THAT THE 5,435 POUNDS OF CHICKENS PROCESSED FOR COOKING HAD BEEN FOUND TO BE IN A SPOILED CONDITION AFTER THAWING OUT. WHEN HE CAME TO CHANUTE AIR FORCE BASE ON DECEMBER 3, FOR THE SCHEDULED REINSPECTION, HE CAN ONLY HAVE BEEN UNDER THE IMPRESSION THAT THE QUESTION AT ISSUE WAS WHETHER OR NOT THE SHIPMENT OF CHICKENS WAS IN A SPOILED CONDITION WHEN RECEIVED AT DESTINATION. HIS LETTER OF DECEMBER 11, 1954, SHOWS THAT HE CONSIDERED THIS TO BE THE ONLY ISSUE OF ANY CONSEQUENCE WHICH HAD BEEN RAISED, FOR THE WHOLE LETTER IS DEVOTED TO REFUTING THE ALLEGATION THAT THE CHICKENS WERE SPOILED WHEN DELIVERED. SINCE THE CONTRACTING OFFICER DID NOT REPLY TO THE ALLEGATIONS OF FACT SET FORTH IN THE CONTRACTOR'S LETTER AND THE SHIPMENT OF CHICKENS WAS SUBSEQUENTLY PAID FOR IN FULL, THE CONTRACTOR HAD EVERY REASON TO BELIEVE THAT THE DISPUTE AS TO WHO WAS RESPONSIBLE FOR THE SPOILAGE IN THE CHICKENS HAD BEEN RESOLVED IN ITS FAVOR AND THAT THE CONTRACTING AGENCY HAD NO FURTHER COMPLAINT WITH RESPECT TO THE SUPPLIES. THE REPORT OF INSPECTION MADE ON DECEMBER 3, 1954, DOES NOT STATE THAT ANY OF THE CHICKENS WERE FOUND TO BE IN A SPOILED OR DETERIORATED CONDITION, WHICH SUGGESTS THAT THE CONTRACTOR MAY HAVE BEEN RIGHT IN CONTENDING THAT IT WAS IN NO WAY RESPONSIBLE FOR THE SPOILED CONDITION OF THE 5,435 POUNDS OF CHICKENS WHICH WERE PROCESSED FOR COOKING.

ON THE BASIS OF THE FACTS IN THE CASE, WE ARE OF THE OPINION THAT THE CONTRACTOR MAY NOT PROPERLY BE SAID TO HAVE RECEIVED NOTICE OF THE GOVERNMENT'S CLAIM PRIOR TO RECEIPT OF THE DEMAND LETTER OF SEPTEMBER 14, 1955. UNDER THE CIRCUMSTANCES, WE THINK THE DELAY INVOLVED WAS SO CLEARLY UNREASONABLE AS TO PRECLUDE THE GOVERNMENT FROM ASSERTING THE CLAIM IN QUESTION. SEE UNITED STATES V. DEWART MILK PRODUCTS CO., 300 F. 448, REVERSED ON OTHER GROUNDS, 9 F.2D 705; UNITED STATES V. AMERICAN RADIATOR AND STAND. SAN. CORP., 115 F.1SUPP. 422; 42ND STREET FOTOSHIP V. UNITED STATES, 137 F.1SUPP. 313; CUDAHY PACKING CO. V. UNITED STATES, 75 F.1SUPP. 239. ..END :