B-142344, APR. 19, 1960

B-142344: Apr 19, 1960

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TO UNIVERSAL-CYCLOPS STEEL CORPORATION: REFERENCE IS MADE TO A LETTER DATED MARCH 9. BIDS WERE SOLICITED ON 19 ITEMS OF SURPLUS GOVERNMENT PROPERTY. AWARD WAS MADE TO YOU AS THE HIGHEST BIDDER ON ITEMS NOS. 1 AND 2. 665 POUNDS WERE GROUP 8 MATERIAL (INCONNEL) AS ADVERTISED AND THAT 3. 565 POUNDS WERE GROUP 14 MATERIAL (NOT INCONNEL AND MUCH LESS VALUABLE THAN INCONNEL) AND YOU REQUESTED REFUND OF $3. THE PARTIES AGREE THAT THE APPELLANT IS ENTITLED TO AN ADJUSTMENT UNDER PROVISIONS OF CLAUSE EIGHT (8) OF SAID CONTRACT AND A REFUND. "3. THE PARTIES FURTHER AGREE AND STIPULATE AS A FACT THAT THE ADJUSTMENT TO WHICH THE APPELLANT IS ENTITLED BY REASON OF SAID VARIATION IN QUANTITY TOGETHER WITH SAID REFUND IS EQUAL TO TWO THOUSAND THREE HUNDRED THIRTY- SEVEN DOLLARS AND NINE CENTS ($2.

B-142344, APR. 19, 1960

TO UNIVERSAL-CYCLOPS STEEL CORPORATION:

REFERENCE IS MADE TO A LETTER DATED MARCH 9, 1960, WITH A MEMORANDUM OF LAW ENCLOSED, FROM YOUR ATTORNEY, REQUESTING REVIEW OF GENERAL ACCOUNTING OFFICE SETTLEMENT DATED FEBRUARY 13, 1959, WHICH DISALLOWED YOUR CLAIM IN THE AMOUNT OF $2,337.09 AS A PARTIAL REFUND OF AN AMOUNT PAID BY YOU FOR GOVERNMENT PROPERTY PURCHASED FROM LAUGHLIN AIR FORCE BASE, DEL RIO, TEXAS, UNDER CONTRACT NO. (41-646/S 56-5 DATED AUGUST 17, 1955.

BY INVITATION NO. 41-646-S-56-1 DATED JULY 18, 1955, BIDS WERE SOLICITED ON 19 ITEMS OF SURPLUS GOVERNMENT PROPERTY, THE PROPERTY INCLUDED IN ITEM NO. 2 BEING DESCRIBED AS FOLLOWS:

"2. FERRO-NICKLE-CHROME-ALLOY. INCONNEL. UNPREPARED GROUP 8, CONSISTING OF LINERS SIZE 2 FEET BY 5 1/2 INCHES BY 4/64. WEIGHT 5 1/2 NUMBER EACH. (SCRAP) "

IN RESPONSE TO THE INVITATION, YOU SUBMITTED A BID OF $10,868.80 ON ITEM NO. 2 ($0.985 PER POUND FOR 4 1/2 GROSS TONS) . ON AUGUST 17, 1955, AWARD WAS MADE TO YOU AS THE HIGHEST BIDDER ON ITEMS NOS. 1 AND 2. YOU ACCEPTED DELIVERY OF THE MATERIAL COVERED BY ITEMS NOS. 1 AND 2 AND COMPLETED PAYMENT OF THE AMOUNT OF YOUR BID ON THOSE ITEMS.

IN YOUR LETTER OF DECEMBER 22, 1955, TO LAUGHLIN AIR FORCE BASE, YOU STATED THAT TESTS MADE BY YOU ON EACH PIECE OF MATERIAL RECEIVED UNDER ITEM NO. 2 SHOWED THAT ONLY 6,665 POUNDS WERE GROUP 8 MATERIAL (INCONNEL) AS ADVERTISED AND THAT 3,565 POUNDS WERE GROUP 14 MATERIAL (NOT INCONNEL AND MUCH LESS VALUABLE THAN INCONNEL) AND YOU REQUESTED REFUND OF $3,680.15, REPRESENTING THE DIFFERENCE IN VALUE OF THE MATERIAL RECEIVED AND THAT DESCRIBED IN THE INVITATION. IN HIS DECISION DATED SEPTEMBER 5, 1956, THE CONTRACTING OFFICER DISALLOWED YOUR CLAIM. ON APPEAL, THE AIR FORCE CONTRACT APPEALS PANEL OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS APPROVED YOUR CLAIM IN THE AMOUNT OF $2,337.09 (ASBCA NO. 3834), THE PANEL ACCEPTING THE STIPULATION FILED BY THE ATTORNEYS FOR THE CLAIMANT AND THE AIR FORCE QUOTED AS FOLLOWS IN THE BOARD'S DECISION:

" "NOW COME THE PARTIES BY THEIR RESPECTIVE ATTORNEYS AND JOINTLY SUBMIT THIS

STIPULATION OF FACT

"1. THE GOVERNMENT ADMITS THE QUANTITIES OF MATERIALS DELIVERED TO THE APPELLANT IN PERFORMANCE OF CONTRACT NO. AF (41-646/S-56-5 VARIED MATERIALLY FROM THE QUANTITIES CALLED FOR BY SAID CONTRACT.

"2. THE PARTIES AGREE THAT THE APPELLANT IS ENTITLED TO AN ADJUSTMENT UNDER PROVISIONS OF CLAUSE EIGHT (8) OF SAID CONTRACT AND A REFUND.

"3. THE PARTIES FURTHER AGREE AND STIPULATE AS A FACT THAT THE ADJUSTMENT TO WHICH THE APPELLANT IS ENTITLED BY REASON OF SAID VARIATION IN QUANTITY TOGETHER WITH SAID REFUND IS EQUAL TO TWO THOUSAND THREE HUNDRED THIRTY- SEVEN DOLLARS AND NINE CENTS ($2,337.09).

"4. THE PARTIES AGREE THAT UPON SUCH PAYMENT OF $2,337.09 THE CONTRACT SHALL BE DEEMED COMPLETED WITHOUT FURTHER SHIPMENT OF MATERIAL.'

THE QUOTED STIPULATION IS STATED BY HEADQUARTERS, AIR MATERIEL COMMAND, WRIGHT-PATTERSON AIR FORCE BASE, OHIO, TO HAVE BEEN BASED ON THE BOARD'S DECISIONS IN TWO PRIOR SIMILAR CASES (STATE METALS AND STEEL COMPANY, ASBCA 3494, AND LURIA STEEL AND TRADING CORP., ASBCA 4260). THE DECISION OF THE PANEL WAS ACCEPTED BY THE BOARD WITHOUT REVIEW. THE DECISION OF THE BOARD IN THE MATTER OF STATE METALS AND STEEL COMPANY WAS NOT ACCEPTED AS CONCLUSIVE BY OUR OFFICE, SINCE THE QUESTION INVOLVED WAS HELD TO BE ONE OF LAW AND NOT OF FACT, AND THE CLAIM WAS SUBSEQUENTLY DISALLOWED HERE.

YOUR CLAIM FOR PAYMENT OF THE AMOUNT AWARDED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS WAS TRANSMITTED BY LAUGHLIN AIR FORCE BASE, ADMINISTRATIVELY DISAPPROVED, TO THE GENERAL ACCOUNTING OFFICE FOR DISPOSITION AND BY GENERAL ACCOUNTING OFFICE SETTLEMENT DATED FEBRUARY 13, 1959, THE CLAIM WAS DISALLOWED FOR REASONS SET OUT THEREIN, NOTWITHSTANDING THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS. YOU REQUEST REVIEW OF THE SETTLEMENT WITH RESPECT TO THE CONCLUSIVENESS OF THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS; AND IF THE DETERMINATION OF THAT QUESTION IS CONTRARY TO YOUR CONTENTION YOU REQUEST REVIEW OF THE LEGAL INTERPRETATION OF THE CONTRACT.

IN DETERMINING THE RIGHTS AND LIABILITIES OF THE PARTIES UNDER A PARTICULAR CONTRACT, DUE EFFECT MUST BE GIVEN TO THE CONTRACT AS A WHOLE. SEE NORTHROP AIRCRAFT, INC. V. UNITED STATES, 130 C.CLS. 626, 633. SUCH RIGHTS AND LIABILITIES ARE, OF COURSE, LIMITED BY THE TERMS OF THE CONTRACT, WHICH ARE TO BE INTERPRETED ACCORDING TO THE GENERAL RULES OF CONSTRUCTION. SEE 3 COMP. GEN. 54.

THE COURTS HAVE HELD CONSISTENTLY THAT A "DISPUTES" PROVISION INA GOVERNMENT CONTRACT OF THE TYPE INCLUDED AS NO. 15 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE INSTANT CONTRACT, STIPULATING THAT THE DECISION OF THE CONTRACTING OFFICER OR IN THE EVENT OF AN APPEAL TO THE SECRETARY OR HIS DULY AUTHORIZED REPRESENTATIVE THE DECISION OF THAT OFFICER SHALL BE FINAL AND CONCLUSIVE AS TO ANY DISPUTED QUESTION ARISING UNDER THE CONTRACT, IS LIMITED TO QUESTIONS OF FACT, AND THAT QUESTIONS INVOLVING INTERPRETATION OF THE CONTRACT ARE NOT "QUESTIONS OF FACT" WITHIN THE MEANING OF THAT EXPRESSION AS IT IS WRITTEN INTO THE DISPUTES CLAUSE, BUT ARE QUESTIONS OF LAW. SEE S. J. GROVES AND SONS COMPANY V. WARREN, 135 F.2D 264, CERTIORARI DENIED, 319 U.S. 766; MCWILLIAMS DREDGING CO. V. UNITED STATES, 118 C.CLS. 1, 16; B-W CONSTRUCTION CO. V. UNITED STATES, 97 C.CLS. 92, 118; DAVIS ET AL., TRUSTEES V. UNITED STATES, 82 C.CLS. 334. FURTHERMORE, SECTION 2 OF PUBLIC LAW 356, APPROVED MAY 11, 1954, 68 STAT. 81, 41 U.S.C. 322, PROVIDES:

"NO GOVERNMENT CONTRACT SHALL CONTAIN A PROVISION MAKING FINAL ON A QUESTION OF LAW THE DECISION OF ANY ADMINISTRATIVE OFFICIAL, REPRESENTATIVE OR BOARD.'

SINCE THE SETTLEMENT OF YOUR CLAIM INVOLVES THE CONSTRUCTION OF THE CONTRACT, THE MATTER IN DISPUTE IS ONE OF LAW, AND NOT OF FACT, AND THE DETERMINATION OF THE BOARD IS NOT FINAL AND CONCLUSIVE ON OUR OFFICE.

THE SALE INVOLVED IN THE INSTANT MATTER--- AS IN THE MATTER OF STATE METALS AND STEEL COMPANY ABOVE REFERRED TO--- WAS IN REALITY A SALE BY LOT AND NOT A SALE BY QUANTITY. UNDER THE CONTRACT, YOU PURCHASED A SEGREGATED QUANTITY OF MATERIAL UNDER ITEM NO. 2 AT A UNIT BID PRICE OF $0.985 PER POUND. THE QUANTITY WAS ESTIMATED AS 4 1/2 GROSS TONS (10,080 POUNDS). IN YOUR LETTER OF DECEMBER 22, 1955, YOU STATED THAT YOU HAD RECEIVED A TOTAL OF 10,230 POUNDS AND YOU BASE YOUR CLAIM FOR PARTIAL REFUND ON THE ALLEGED VARIANCE BETWEEN THE KIND, CHARACTER OR QUALITY OF A PORTION OF THE MATERIAL RECEIVED AND THE ADVERTISED DESCRIPTION OF THE MATERIAL TO BE SOLD. THEREFORE, THERE IS NO PROPER BASIS FOR "ADJUSTMENT FOR VARIATION IN QUANTITY OR WEIGHT" SUCH AS PROVIDED FOR BY PARAGRAPH 8 OF THE GENERAL SALE TERMS AND CONDITIONS MADE A PART OF THE CONTRACT. LIKEWISE, HAVING REGARD FOR THE PERTINENT PROVISIONS OF THE CONTRACT, THERE APPEARS NO PROPER BASIS FOR THE ADMISSIONS AND AGREEMENTS INCLUDED IN THE REFERRED-TO STIPULATION. ASSUMING THE EXISTENCE OF A MUTUAL MISTAKE OF FACT WITH RESPECT TO THE DESCRIPTION OR KIND OF PROPERTY, SUCH MISTAKE WOULD NOT ENTITLE YOU TO RELIEF UNDER THE TERMS OF THE CONTRACT. SEE AMERICAN SANITARY RAG CO. V. UNITED STATES, 161 F.SUPP. 414; TRIAD CORPORATION V. UNITED STATES, 63 C.CLS. 151.

PARAGRAPHS 1 AND 2 OF GENERAL SALE TERMS AND CONDITIONS INCLUDED IN THE INVITATION PROVIDED:

"1. INSPECTION.--- BIDDERS ARE INVITED AND URGED TO INSPECT THE PROPERTY TO BE SOLD PRIOR TO SUBMITTING BIDS. PROPERTY WILL BE AVAILABLE FOR INSPECTION AT THE PLACES AND TIMES SPECIFIED IN THE INVITATION. THE GOVERNMENT WILL NOT BE OBLIGED TO FURNISH ANY LABOR FOR SUCH PURPOSE. NO CASE WILL FAILURE TO INSPECT CONSTITUTE GROUNDS FOR A CLAIM OR FOR THE WITHDRAWAL OF A BID AFTER OPENING.

"2. CONDITION OF PROPERTY.--- ALL PROPERTY LISTED HEREIN IS OFFERED FOR SALE "AS IS" AND ,WHERE IS" " AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. IF IT IS PROVIDED HEREIN THAT THE GOVERNMENT SHALL LOAD, THEN "WHERE IS" MEANS F.O.B. CONVEYANCE AT THE POINT SPECIFIED IN THE INVITATION. THE DESCRIPTION IS BASED ON THE BEST AVAILABLE INFORMATION, BUT THE GOVERNMENT MAKES NO GUARANTY, WARRANTY, OR REPRESENTATION, EXPRESSED OR IMPLIED, AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT, SIZE, OR DESCRIPTION OF ANY OF THE PROPERTY, OR ITS FITNESS FOR ANY USE OR PURPOSE, AND NO CLAIM WILL BE CONSIDERED FOR ALLOWANCE OR ADJUSTMENT OR FOR RESCISSION OF THE SALE BASED UPON FAILURE OF THE PROPERTY TO CORRESPOND WITH THE STANDARD EXPECTED; THIS IS NOT A SALE BY SAMPLE.'

IT IS DIFFICULT TO PERCEIVE HOW CLEARER OR MORE EXPLICIT LANGUAGE COULD HAVE BEEN USED TO APPRISE ALL PROSPECTIVE BIDDERS THAT THEY WERE CONTRACTING FOR THE PURCHASE OF LISTED MATERIALS AT THEIR OWN RISK. THE COURTS HAVE HELD REPEATEDLY THAT SUCH PROVISIONS CONSTITUTE AN EXPRESS DISCLAIMER OF WARRANTY. MAGUIRE AND COMPANY V. UNITED STATES, 273 U.S. 67; LUMBRAZO V. WOODRUFF, 175 N.E. 525; W. E. HEDGER COMPANY V. UNITED STATES, 52 F.2D 31, CERTIORARI DENIED, 284, U.S. 676. SEE, ALSO, LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90, WHEREIN AN AGENT FOR THE GOVERNMENT LISTED FOR SALE CERTAIN ITEMS OF JUNK LOCATED AT SEVERAL FORTS, SETTING FORTH THE WEIGHTS AND KINDS OF EACH ITEM. ALTHOUGH THE QUANTITIES ACTUALLY WERE ONLY APPROXIMATELY ONE-HALF OF THOSE SHOWN IN THE ADVERTISEMENT, THE PLAINTIFFS WERE HELD NOT TO HAVE ANY CAUSE OF ACTION SINCE, AS STATED BY THE SUPREME COURT, THE MENTIONING OF THE QUANTITIES "CANNOT BE REGARDED AS IN THE NATURE OF A WARRANTY, BUT MERELY AN ESTIMATE OF THE PROBABLE AMOUNTS IN REFERENCE TO WHICH GOOD FAITH ONLY COULD BE REQUIRED OF THE PARTY MAKING IT.'

THOSE CASES AND OTHERS TOO NUMEROUS TO MENTION CONCLUDE THAT, UNDER SUCH CIRCUMSTANCES, BUYERS HAVE NO RIGHT TO EXPECT, HAVE NOTICE NOT TO EXPECT, AND CONTRACT NOT TO EXPECT ANY WARRANTIES WHATEVER. IN DISPOSING OF SURPLUS MATERIALS, THE GOVERNMENT IS NOT ENGAGED IN NORMAL TRADE AND FREQUENTLY IS NOT AWARE OF THE CONDITION OR THE QUANTITY OF THE GOODS IT SELLS. THAT FACT IS MADE KNOWN TO ALL BIDDERS BY THE TERMS OF THE CONTRACT WHEREBY THE PARTIES AGREE THAT THE RISK AS TO THE CONDITION AND THE QUANTITY OF THE MATERIAL SOLD IS ASSUMED BY THE PURCHASER AS ONE OF THE ELEMENTS OF THE BARGAIN. SEE 36 COMP. GEN. 612.

THERE ARE MANY COURT CASES INVOLVING CLAIMS BASED ON INFERIOR QUALITY OR KIND OF MATERIAL DELIVERED UNDER CONTRACTS CONTAINING PROVISIONS SIMILAR TO THAT INCLUDED IN YOUR CONTRACT WITH THE GOVERNMENT. IN SUCH CASES, ALSO, THE COURTS HAVE HELD UNIFORMLY THAT PURCHASERS HAVE NO RIGHT TO EXPECT, HAVE NOTICE NOT TO EXPECT AND CONTRACT NOT TO EXPECT ANY WARRANTIES WHATEVER. SEE AMERICAN ELASTICS INC. V. UNITED STATES, 84 F.SUPP. 198, AFFIRMED 187 F.2D 109, CERTIORARI DENIED, 342 U.S. 829; SNYDER CORP. V. UNITED STATES, 68 C.CLS. 667; SAMUEL AND SONS V. UNITED STATES, 61 C.CLS. 373; PAXTON MITCHELL COMPANY V. UNITED STATES, 172 F.SUPP. 463; AMERICAN SANITARY RAG CO. V. UNITED STATES, 161 F.SUPP. 414.

NO LEGAL RESPONSIBILITY WOULD ATTACH TO THE GOVERNMENT IN THE ABSENCE OF A SHOWING OF BAD FAITH ON THE PART OF THE DISBURSING OFFICER OR HIS AGENTS. LIPSHITZ AND COHEN V. UNITED STATES, SUPRA. THERE IS NOTHING IN THE RECORD TO ESTABLISH THAT THE CONTRACTING OFFICER OR HIS AGENTS ACTED OTHER THAN IN GOOD FAITH THROUGHOUT THE TRANSACTION AND NO ALLEGATION OF BAD FAITH HAS BEEN MADE. IN THIS CONNECTION, IT IS REPORTED THAT A SPOT TEST MADE OF THE MATERIAL DESCRIBED IN ITEM NO. 2 BY THE BASE SHOPS, LAUGHLIN AIR FORCE BASE, INDICATED THAT THE MATERIAL WAS INCONNEL AS DESCRIBED IN THE INVITATION; ALSO, THAT TESTS MADE BY SEVEN BIDDERS SHOWED SIMILAR RESULTS. IT IS STATED IN THE MEMORANDUM SUBMITTED BY YOUR ATTORNEY THAT YOU MADE NO INSPECTION PRIOR TO SUBMITTING YOUR BID.

IN PAXTON-MITCHELL COMPANY V. UNITED STATES, SUPRA, THE COURT OF CLAIMS HELD (QUOTING YLLABUS):

"UNDER A CONTRACT BY THE GOVERNMENT FOR THE SALE OF "STEEL, SCRAP, CAST STEEL" AND PROVING THAT THE MATERIAL WAS SOLD ON AN "AS IS" AND "WHERE IS" BASIS AND THAT THE GOVERNMENT MADE NO GUARANTY OR REPRESENTATION AS TO THE QUALITY OR FITNESS OF THE MATERIAL SOLD, PURCHASER WAS NOT ENTITLED TO RECOVER THE DIFFERENCE BETWEEN WHAT IT PAID FOR THE MALLEABLE IRON AND THE MARKET VALUE THEREOF BECAUSE 49.7 PERCENT OF THE MATERIAL SOLD WAS MALLEABLE IRON WHICH WAS MUCH CHEAPER THAN STEEL.'

THAT CASE INVOLVED CONTRACT PROVISIONS SIMILAR TO OR IDENTICAL WITH THOSE INCLUDED IN YOUR CONTRACT RELATIVE TO CONDITION OF THE PROPERTY AND INSPECTION OF THE PROPERTY. IN THE DECISION THE COURT STATES:

"NOTE THAT THE CONTRACT EXPRESSLY SAYS THAT DEFENDANT DOES NOT GUARANTEE, WARRANT, OR REPRESENT THAT THE MATERIAL IS OF THE "KIND" OR "CHARACTER" OR "DESCRIPTION" AS ADVERTISED. IT SAID IT WAS SCRAP STEEL, BUT IT DOES NOT WARRANT THAT IT IS; THIS IS NOT GUARANTEED. "IT IS AGREED BY COUNSEL THAT STEEL AND MALLEABLE IRON ARE NOT DISTINGUISHABLE BY THE NAKED EYE. THEY CAN BE DIFFERENTIATED ONLY BY MICROSCOPIC EXAMINATION OR BY CHEMICAL ANALYSIS. THE FINDINGS OF FACT OF THE DISPOSAL OFFICER, FILED AS AN EXHIBIT TO DEFENDANT'S MOTION, SHOW THAT ,RANDOM SAMPLES" WERE TAKEN FROM THE PILE OFFERED FOR SALE AND WERE TESTED BY SPARKING AND CUTTING. THESE TESTS SHOWED THAT THE MATERIAL WAS STEEL. THE REST OF THE PILE LOOKED LIKE THAT TESTED, AND SO IT WAS SOLD AS SCRAP STEEL; BUT WITH THE EXPRESS UNDERSTANDING THAT THE DEFENDANT DID NOT GUARANTEE NOR WARRANT IT TO BE AS ADVERTISED.

"THE REASON FOR SELLING IT "AS IS" AND "WHERE IS" AND FOR DEFENDANT'S REFUSAL TO GUARANTEE OR WARRANT IT, HAS BEEN EXPLAINED MANY TIMES. SEE THE CASES CITED HEREINAFTER.

"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 DO SO LEAVES IT NO ROOM TO COMPLAIN.'

FOR THE REASONS ABOVE SET OUT, THE SETTLEMENT OF FEBRUARY 13, 1959, DISALLOWING YOUR CLAIM, APPEARS CORRECT AND HEREBY IS SUSTAINED.