B-137471, AUG. 26, 1959

B-137471, AUG. 26, 1959

TO WHEELER AND WHEELER:

YOUR LETTER DATED JULY 28, 1959, REQUESTS RECONSIDERATION OF OUR DECISION OF JULY 8, 1959, B-137471, DENYING THE CLAIM OF COASTAL CARGO, INC., FOR DAMAGES ALLEGEDLY RESULTING FROM THE ACTION OF THE DEPARTMENT OF THE AIR FORCE IN CANCELLING CONTRACT NO. AF 11/626/75, WHICH WAS AWARDED TO THE CLAIMANT UNDER ITEM 7 OF IFB 11-626-59-3 CAB.

STATED BRIEFLY, YOUR REQUEST FOR RECONSIDERATION IS BASED UPON CONTENTIONS THAT THE CONTRACTING OFFICER DID HAVE AUTHORITY TO AWARD A CONTRACT TO COASTAL; THAT THE CONTRACTING OFFICER COMPLIED WITH APPLICABLE REGULATIONS IN EXECUTING A CERTIFICATE OF URGENCY AND IN REJECTING A LOWER BID WITHOUT REQUESTING A CERTIFICATE OF COMPETENCY FROM THE SMALL BUSINESS ADMINISTRATION; AND THAT HAVING THUS PROCEEDED PROPERLY AND WITHIN HIS AUTHORITY, THE AWARD TO COASTAL CREATED A VALID CONTRACT. ADDITIONALLY, YOU CONTEND THAT, EVEN IF IT IS ASSUMED THAT THE CONTRACTING OFFICER ACTED OUTSIDE THE SCOPE OF HIS AUTHORITY AND THE AWARD TO COASTAL THEREFORE DID NOT RESULT IN AN ENFORCEABLE CONTRACT UPON WHICH DAMAGES FOR BREACH CAN BE RECOVERED, THE MEASURE OF RECOVERY IN QUANTUM MERUIT IS NOT LIMITED TO THE UNIT PRICE SET OUT IN COASTAL'S BID BUT, ACCORDING TO THE WEIGHT OF AUTHORITY, MAY EXCEED SUCH PRICE IF THE REASONABLE VALUE OF THE SERVICES FURNISHED IS IN EXCESS OF THE CONTRACT PRICE.

CONCERNING YOUR CONTENTION THAT THE CONTRACTING OFFICER WAS ACTING WITHIN THE SCOPE OF HIS AUTHORITY IN MAKING A CONTRACT AWARD TO COASTAL AND THAT SUCH AWARD RESULTED IN A VALID AND ENFORCEABLE CONTRACT, YOUR ATTENTION IS INVITED TO OUR DECISIONS OF OCTOBER 24, 1958, B-137471, AND DECEMBER 9, 1958, B-137471, B-137482, TO THE SECRETARY OF THE AIR FORCE, COPIES ENCLOSED, SETTING FORTH THE FACTS AND CIRCUMSTANCES SURROUNDING THE AWARD TO COASTAL, INCLUDING REFERENCE TO AN AFFIDAVIT EXECUTED BY THE CONTRACTING OFFICER TO THE EFFECT THAT THE CERTIFICATE OF URGENCY, WHICH WAS PREREQUISITE TO A VALID AWARD TO COASTAL UNDER APPLICABLE REGULATIONS, WAS NOT EXECUTED UNTIL TEN DAYS AFTER SUCH AWARD AND THAT THE CERTIFICATE WAS THEN BACK DATED IN A BELATED EFFORT TO COMPLY WITH THE REGULATIONS. THESE DECISIONS, TOGETHER WITH OUR DISALLOWANCE OF COASTAL'S CLAIM UNDER THE DATE OF JULY 8, 1959, SET OUT IN DETAIL BOTH OUR REASONING AND THE LEGAL PRINCIPLES AND AUTHORITIES UPON WHICH WE BASED OUR CONCLUSION THAT A VALID AND ENFORCEABLE CONTRACT DID NOT RESULT FROM THE AWARD TO COASTAL. WHILE YOUR PRESENT LETTER STATES AN OPINION THAT THE CONTRACTING OFFICER DID COMPLY WITH APPLICABLE REGULATIONS AND THAT THE AWARD TO COASTAL THEREFORE DID CREATE A VALID AND BINDING CONTRACT, YOU HAVE NEITHER PRESENTED EVIDENCE WHICH WAS NOT PREVIOUSLY CONSIDERED BY US NOR DIRECTED OUR ATTENTION TO ANY LEGAL PRINCIPLE OR PRECEDENT WHICH WOULD SUPPORT A CONCLUSION THAT THE ACTION OF THE CONTRACTING OFFICER IN THIS CASE WAS WITHIN THE SCOPE OF HIS AUTHORITY. UNDER THE CIRCUMSTANCES, THAT PORTION OF OUR DISALLOWANCE OF JULY 8, 1958, WHICH CONCLUDES THAT THE CONTRACT AWARDED WAS UNENFORCEABLE AND THEREFORE DENIES LIABILITY FOR DAMAGES BASED UPON BREACH OF CONTRACT MUST BE REAFFIRMED.

CONCERNING THAT PORTION OF OUR DISALLOWANCE ON JULY 8 WHICH STATES THAT THE ABSENCE OF AN ENFORCEABLE CONTRACT WOULD REQUIRE THE GOVERNMENT'S LIABILITY TO BE DETERMINED ON THE BASIS OF QUANTUM MERUIT, AND THAT THE REASONABLE VALUE OF THE SERVICES FURNISHED BY COASTAL THEREFORE COULD NOT EXCEED THE CONTRACT UNIT PRICE, YOUR REQUEST FOR RECONSIDERATION CONTENDS THAT EVEN IF IT IS ASSUMED THAT THE AWARD WAS INVALID, THE AUTHORITIES CITED IN OUR DISALLOWANCE ARE CONTRARY TO THE WEIGHT OF AUTHORITY AND COASTAL'S RECOVERY IN QUANTUM MERUIT IS THEREFORE NOT LIMITED TO THE UNIT CONTRACT PRICE. IN SUPPORT OF THIS CONCLUSION, YOU CALL OUR ATTENTION TO SECTIONS 347 AND 348 OF THE RESTATEMENT OF CONTRACTS AND TO SECTION 536 OF WILLISTON ON CONTRACTS, WHICH DEAL WITH THE SUBJECT OF RESTITUTION IN A QUANTUM MERUIT ACTION AND INDICATE THAT THE OBJECT OF GRANTING RESTITUTION IN SUCH ACTION IS TO RESTORE THE INJURED PARTY TO AS GOOD A POSITION AS THAT OCCUPIED BY HIM BEFORE THE CONTRACT WAS MADE. ADDITIONALLY, YOU CALL ATTENTION TO A SERIES OF COURT CASES; TO SECTION 1459 OF WILLISTON ON CONTRACTS; AND TO SECTION 166 OF MCCORMICK ON DAMAGES, WHICH STATE THE PRINCIPLES THAT THE PLAINTIFF WHOSE CONTRACT HAS BEEN BREACHED MAY BRING AN ACTION IN QUANTUM MERUIT RATHER THAN AN ACTION FOR DAMAGES, IN WHICH CASE THE CONTRACT UNIT PRICE DOES NOT LIMIT RECOVERY AND THE PLAINTIFF IS ENTITLED TO RECOVER THE REASONABLE VALUE OF HIS SERVICES, AS MEASURED BY THEIR REASONABLE COST, EVEN THOUGH SUCH RECOVERY MAY BE IN EXCESS OF THE CONTRACT PRICE.

WITH RESPECT TO SECTIONS 347 AND 348 OF THE RESTATEMENT OF CONTRACTS, WHICH YOU HAVE CITED AS AUTHORITY FOR APPLICATION OF THE DOCTRINE OF RESTITUTION IN A QUANTUM MERUIT ACTION ARISING OUT OF AN UNENFORCEABLE CONTRACT, WE INVITE YOUR INTENTION TO THE FACT THAT BOTH OF THESE SECTIONS APPEAR UNDER "TOPIC 3. RESTITUTION" IN THE RESTATEMENT, AND THE INTRODUCTORY NOTE UNDER TOPIC 3 SPECIFICALLY STATES THAT THIS TOPIC DOES NOT DEAL WITH RESTITUTION AS A REMEDY WHERE AN AGREEMENT IS VOID OR VOIDABLE. ADDITIONALLY, IT SHOULD BE NOTED THAT, EVEN THOUGH A CONTRACT IS ENFORCEABLE, SECTION 351 OF THE RESTATEMENT RULES OUT APPLICATION OF SECTION 347, WHERE, AS IN THE CASE OF THE CONTRACT AWARD TO COASTAL, THE CONTRACT APPORTIONED THE CONSIDERATION FOR PART PERFORMANCE AND THE APPORTIONED PART HAS ALREADY BEEN PAID.

IN VIEW THEREOF, WE ARE UNABLE TO AGREE THAT SECTIONS 347 AND 348 OF THE RESTATEMENT ARE AUTHORITATIVE ON THE SUBJECT OF RIGHT OF RECOVERY UNDER AN UNENFORCEABLE CONTRACT AWARD SUCH AS WAS MADE TO COASTAL.

CONCERNING THE VARIOUS COURT CASES YOU HAVE CITED IN SUPPORT OF YOUR CONTENTION THAT COASTAL'S RECOVERY IN QUANTUM MERUIT IS NOT LIMITED BY THE CONTRACT UNIT PRICE, WE NOTE THAT ALL OF THESE CASES ARE BASED UPON CONTRACTS WHICH WERE LEGALLY ENFORCEABLE, AND ON WHICH THE PLAINTIFF ELECTED TO ABANDON HIS RIGHT TO SUE FOR DAMAGES ARISING OUT OF THE DEFENDANT'S BREACH AND TO SUE FOR A GREATER AMOUNT IN QUANTUM MERUIT. SINCE THESE CASES INVOLVE LEGALLY ENFORCEABLE CONTRACTS, WE ARE UNABLE TO AGREE WITH YOUR CONCLUSION THAT THEY SET OUT THE MODERN RULE OF LAW ON THE EXTENT OF LIABILITY AND RECOVERY IN QUANTUM MERUIT UNDER A GOVERNMENT CONTRACT AWARDED BY A CONTRACTING OFFICER ACTING OUTSIDE THE SCOPE OF HIS AUTHORITY.

AS INDICATED IN OUR DISALLOWANCE OF JULY 8, IT IS OUR OPINION THAT THE LEGAL LIABILITY OF THE GOVERNMENT FOR THE SERVICES RENDERED BY COASTAL UNDER ITS UNENFORCEABLE CONTRACT AWARD IS THE REASONABLE VALUE OF SUCH SERVICES TO THE GOVERNMENT, AND THAT SUCH REASONABLE VALUE MAY WELL BE REPRESENTED BY THE LOWER UNIT PRICE AT WHICH LOS ANGELES AIR SERVICE WAS READY, WILLING, AND ABLE TO RENDER SUCH SERVICES. IT IS OUR FURTHER OPINION THAT THE REASONABLE VALUE OF SUCH SERVICES CANNOT BE COMPUTED TO REFLECT COASTAL'S COST OF PERFORMING THE SERVICES WHERE SUCH COMPUTATION RESULTS IN A UNIT PRICE IN EXCESS OF THE PRICE BID.

SINCE YOUR REQUEST FOR RECONSIDERATION OF OUR DISALLOWANCE DOES NOT, IN OUR OPINION, PRESENT ANY CONVINCING EVIDENCE THAT THE GOVERNMENT IS LEGALLY LIABLE FOR PAYMENT OF ANY AMOUNT IN ADDITION TO THE SUMS ALREADY PAID AT COASTAL'S UNIT BID PRICE, OUR PRIOR DISALLOWANCE OF THE CLAIM MUST BE AFFIRMED.