B-141337, DEC. 18, 1959

B-141337: Dec 18, 1959

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO A LETTER DATED NOVEMBER 25. WHICH BID WAS ACCEPTED. THE MAJOR ITEM IN THE LOT IS STATED AS BEING THAT LISTED AS 13. THE ACQUISITION COST OF THE ENTIRE LOT WAS ESTIMATED AS $17. 690 AND THE ACQUISITION COST OF THE COTTON DUCK ALONE WAS ESTIMATED AS $9. THE CONTRACTOR ASCERTAINED AFTER AWARD THAT ALL MATERIAL BUT THREE OF THE 15 ROLLS REPRESENTED AS BEING COTTON DUCK WAS IN FACT CHEESECLOTH. BECAUSE THE VALUE OF CHEESECLOTH IS ABOUT ONE-FIFTH OF THE VALUE OF COTTON DUCK. IT IS WILLING TO ACCEPT THE LOT AT A REDUCED PRICE. WHEN GOVERNMENT SURPLUS PROPERTY IS SOLD BY LOT. "AS IS" AND "WHERE IS. THERE IS NO IMPLIED WARRANTY THAT THE DESCRIPTION GIVEN IS CORRECT AND THE SUCCESSFUL BIDDER CANNOT ESCAPE LIABILITY UNDER A CONTRACT.

B-141337, DEC. 18, 1959

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 25, 1959, FROM THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS) REQUESTING A DECISION AS TO WHETHER K. K. TOKYO SANGYO MAY BE GIVEN AN ADJUSTMENT IN THE PRICE OF MATERIALS PURCHASED FROM THE NAVY DEPARTMENT UNDER CONTRACT NO. DA/S/92-557-FEC- 28509.

THE RECORDS IN THIS CASE SHOW THAT IN RESPONSE TO INVITATION NO. 92 557-S -59-1025 ISSUED ON FEBRUARY 11, 1959, FOR THE SALE OF VARIOUS LOTS OF SURPLUS PROPERTY, K. K. TOKYO SANGYO SUBMITTED A BID TO PURCHASE ONE LOT (ITEM NO. 5) OF MISCELLANEOUS UNUSED CLOTHING FOR Y2,180,000, WHICH BID WAS ACCEPTED. SEVEN OTHER BIDS ON THIS LOT RANGED IN AMOUNTS FROM Y315,000 TO Y1,101,800. THE LOT CONSISTS OF APPROXIMATELY 62 DIFFERENT UNSEGREGATED LINE ITEMS. THE MAJOR ITEM IN THE LOT IS STATED AS BEING THAT LISTED AS 13,000 YARDS OF COTTON DUCK. THE ACQUISITION COST OF THE ENTIRE LOT WAS ESTIMATED AS $17,690 AND THE ACQUISITION COST OF THE COTTON DUCK ALONE WAS ESTIMATED AS $9,490.

THE CONTRACT CONTAINS THE USUAL CLAUSES WITH REGARD TO DISCLAIMER OF WARRANTY AND INSPECTION OF THE PROPERTY. WHILE THE INFORMATION ON RECORD WITH THE DISPOSAL OFFICE SHOWS THAT ONE OF THE ITEMS OFFERED FOR SALE CONSISTED OF 13,000 YARDS OF COTTON DUCK, THE CONTRACTOR ASCERTAINED AFTER AWARD THAT ALL MATERIAL BUT THREE OF THE 15 ROLLS REPRESENTED AS BEING COTTON DUCK WAS IN FACT CHEESECLOTH. BECAUSE THE VALUE OF CHEESECLOTH IS ABOUT ONE-FIFTH OF THE VALUE OF COTTON DUCK, THE CONTRACTOR HAS STATED THAT IT DESIRES TO RESCIND THE CONTRACT OR IN THE ALTERNATIVE, IT IS WILLING TO ACCEPT THE LOT AT A REDUCED PRICE.

GENERALLY, WHEN GOVERNMENT SURPLUS PROPERTY IS SOLD BY LOT,"AS IS" AND "WHERE IS," WITH OPPORTUNITY TO INSPECT AND WITH NO WARRANTY OR GUARANTY, THERE IS NO IMPLIED WARRANTY THAT THE DESCRIPTION GIVEN IS CORRECT AND THE SUCCESSFUL BIDDER CANNOT ESCAPE LIABILITY UNDER A CONTRACT, NOR IS HE ENTITLED TO REFUND OF MONEY PAID FOR PROPERTY BECAUSE IT DOES NOT FULLY ANSWER THE DESCRIPTION GIVEN. LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90; MOTTRAM V. UNITED STATES, 271 U.S. 15; TRIAD CORPORATION V. UNITED STATES, 63 C.CLS. 151; AND YANKEE EXPORT AND TRADING CO. V. UNITED STATES, 72 C.CLS. 442. IN VARIOUS COURT DECISIONS INVOLVING SALES OF GOVERNMENT SURPLUS PROPERTY, AS IN THE TRIAD CORPORATION CASE, SUPRA, THE BUYER'S FAILURE TO INSPECT THE PROPERTY OFFERED FOR SALE HAS BEEN REGARDED AS AN ADDITIONAL REASON FOR DENYING RELIEF TO HIM BECAUSE THE PROPERTY DOES NOT MEET EXPECTATIONS. IN THIS CASE IT IS NOT CLEAR WHETHER THE BUYER WAS ALLOWED TO MAKE A COMPLETE INSPECTION OF THE PROPERTY.

IN THE ABSENCE OF BAD FAITH ON THE PART OF GOVERNMENT OFFICIALS IN SETTING OUT THE DESCRIPTION OF THE ARTICLES TO BE SOLD, THE PURCHASER OF SURPLUS PROPERTY UNDER A CONTRACT CONTAINING THE USUAL DISCLAIMER OF WARRANTY PROVISION IS BOUND BY THAT PROVISION UNLESS THE DISCREPANCY BETWEEN THE DETAILS OF THE INVITATION AS TO THE ARTICLES TO BE SOLD AND THE ARTICLES ACTUALLY TENDERED BY THE GOVERNMENT IS SO GREAT THAT IT AMOUNTS TO WHAT WAS STATED IN STANDARD MAGNESIUM CORPORATION V. UNITED STATES, 241 F.2D 677, AS A "CASE OF ORDERING APPLES AND GETTING ORANGES.' IN THIS CASE THE MAJOR PORTION OF THE LOT INSOFAR AS VALUE IS CONCERNED APPEARED TO BE THE 13,000 YARDS OF COTTON DUCK. PRACTICALLY ALL OF THE PROPERTY TENDERED BY THE GOVERNMENT AS BEING COTTON DUCK WAS NOT COTTON DUCK AND NEVER WAS COTTON DUCK. CHEESECLOTH MUST BE REGARDED AS AN ENTIRELY DIFFERENT PRODUCT THAN WHAT WAS OFFERED FOR SALE.

IN VIEW OF THE FOREGOING, AND SINCE NO PART OF THE LOT HAS BEEN ACCEPTED BY THE PURCHASER, THE CONTRACT MAY BE RESCINDED AND THE PROPERTY INVOLVED OFFERED FOR SALE IN A READVERTISEMENT AS RECOMMENDED IN THE REPORTS ACCOMPANYING YOUR LETTER.