B-140264, AUG. 3, 1959

B-140264: Aug 3, 1959

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

THE FACTS ARE NOT IN DISPUTE. BRIEFLY STATED FEDERAL METALS COMPANY WAS HIGH BIDDER ON ITEM 31. WHICH WAS IDENTIFIED IN THE INVITATION FOR SALE ON AN "AS IS. WHERE IS" BASIS AS "TOOL STEEL. CARBON STEEL WAS DELIVERED AND YOUR CLAIM OF $992 REPRESENTS THE DIFFERENCE IN VALUE. YOU CONCLUDE THAT THE DISPOSAL OFFICER SHOULD HAVE KNOWN THAT ITEM 31 WAS BEING MISDESCRIBED. YOU POINT OUT THAT INSPECTION WOULD NOT HAVE REVEALED THE MISDESCRIPTION. IT DOES NOT FOLLOW IN LOGIC OR LAW THAT HE KNEW ITEM 31 WAS MISDESCRIBED. RATHER THAN GENERAL KNOWLEDGE THAT TWO ITEMS ARE DIFFERENT IN NATURE. IS NECESSARY TO SHIFT THE BURDEN OF RISK FROM THE BUYER. YOUR FINAL POINT REGARDING INSPECTION IS. THE CONTRACT OF SALE WAS FOR STEEL ON AN "AS IS.

B-140264, AUG. 3, 1959

TO MR. ABRAHAM BELILOVE:

IN A LETTER DATED JULY 7, 1959, YOU REQUEST RECONSIDERATION OF THE SETTLEMENT OF JUNE 8, 1959, WHICH DISALLOWED THE CLAIM OF FEDERAL METALS COMPANY WITH RESPECT TO ITEM NO. 31 UNDER INVITATION NO. B-44 59-128 ISSUED BY THE NAVAL SUPPLY DEPOT, GREAT LAKES, ILLINOIS. YOU ALSO REFER IN THE LETTER OF JULY 7, 1959, TO ANOTHER LETTER FROM YOU DATED JUNE 16, 1959.

THE FACTS ARE NOT IN DISPUTE. BRIEFLY STATED FEDERAL METALS COMPANY WAS HIGH BIDDER ON ITEM 31, WHICH WAS IDENTIFIED IN THE INVITATION FOR SALE ON AN "AS IS, WHERE IS" BASIS AS "TOOL STEEL, ALLOY, TUNGSTEN MOLYBDENUM, * * *.' HOWEVER, CARBON STEEL WAS DELIVERED AND YOUR CLAIM OF $992 REPRESENTS THE DIFFERENCE IN VALUE. IN DISALLOWING THE CLAIM BY SETTLEMENT OF JUNE 8, 1959, WE STATED THAT THE CONTRACT TERMS IMPOSED UPON THE PURCHASER THE RISK IF THE PROPERTY FAILED TO CORRESPOND WITH THE DESCRIPTION. SUCH RISK CAN BE AVOIDED ONLY IF IT CAN BE SHOWN THAT THE DISPOSAL OFFICER ACTED IN BAD FAITH OR HAD KNOWLEDGE OF ANY MISDESCRIPTION. NO SUCH SHOWING HAS BEEN MADE HERE.

IN THE RECENT LETTERS YOU STATE THAT THE ORIGINAL CLAIM COULD NOT AND DID NOT ALLEGE BAD FAITH. ON THE BASIS THAT ANOTHER ITEM (NO. 22) OF THE INVITATION PERTAINS TO CARBON STEEL, YOU CONCLUDE THAT THE DISPOSAL OFFICER SHOULD HAVE KNOWN THAT ITEM 31 WAS BEING MISDESCRIBED. MOREOVER, YOU POINT OUT THAT INSPECTION WOULD NOT HAVE REVEALED THE MISDESCRIPTION.

WHILE IT MAY BE THAT THE DISPOSAL OFFICER KNEW THE DIFFERENCE GENERALLY, BETWEEN ALLOY AND CARBON STEEL, IT DOES NOT FOLLOW IN LOGIC OR LAW THAT HE KNEW ITEM 31 WAS MISDESCRIBED. ACTUAL KNOWLEDGE OF THE MISDESCRIPTION OF A PARTICULAR ITEM, RATHER THAN GENERAL KNOWLEDGE THAT TWO ITEMS ARE DIFFERENT IN NATURE, IS NECESSARY TO SHIFT THE BURDEN OF RISK FROM THE BUYER.

YOUR FINAL POINT REGARDING INSPECTION IS, WE BELIEVE, COMPLETELY DISPOSED OF BY A RECENT DECISION OF THE COURT OF CLAIMS. IN THE CASE OF PAXTON- MITCHELL COMPANY V. THE UNITED STATES, C.CLS. NO. 109-58, DECIDED APRIL 8, 1959, THE CONTRACT OF SALE WAS FOR STEEL ON AN "AS IS, WHERE IS" BASIS. HOWEVER, THE STEEL SCRAPS WERE 49.7 PERCENT MALLEABLE IRON. STEEL AND MALLEABLE IRON ARE NOT DISTINGUISHABLE, ACCORDING TO THE AGREEMENT OF COUNSEL IN THAT CASE, BY THE NAKED EYE. AFTER QUOTING ARTICLES 1 AND 2 OF THE GENERAL SALE TERMS AND CONDITIONS (BOTH IDENTICAL TO ARTICLES 1 AND 2 OF THE FEDERAL METALS COMPANY CONTRACT AND SUMMARIZED IN OUR SETTLEMENT OF JUNE 8, 1959) THE COURT SAID:

"A BIDDER FAILS TO INSPECT AT HIS PERIL. HAD PLAINTIFF MADE AN INSPECTION BEFORE MAKING ITS BID, AS IT DID AFTERWARDS, IT COULD HAVE DISCOVERED THAT MUCH OF THE MATERIAL WAS MALLEABLE IRON. VISUAL INSPECTION WAS INEFFECTUAL, BUT MICROSCOPIC INSPECTION WAS EFFECTUAL, AS WAS ALSO CHEMICAL ANALYSIS. PLAINTIFF WAS REQUIRED TO MAKE THE SORT OF INSPECTION THAT WAS EFFECTUAL. IT MADE NONE, NOT EVEN A VISUAL INSPECTION. ITS FAILURE TO SO DO LEAVES IT NO ROOM TO COMPLAIN.'

THE PLAINTIFF'S PETITION IN THAT CASE WAS DISMISSED.

IN VIEW OF THE CIRCUMSTANCES OUR SETTLEMENT OF JUNE 8, 1959, IS CORRECT AND MUST BE SUSTAINED.