B-145783, JUNE 13, 1961, 40 COMP. GEN. 691

B-145783: Jun 13, 1961

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WHICH WERE OBTAINED FROM A DEALER WHO HAD PURCHASED THE MATERIAL FROM THE GOVERNMENT UNDER A SALES AGREEMENT CONTAINING AN EXPRESS DISCLAIMER OF WARRANTY AS TO THE FITNESS OF THE BOMBS FOR ANY USE OR PURPOSE. EVEN THOUGH SOME OF THE BOMBS MAY HAVE CONTAINED SOME EXPLOSIVE MATERIAL OR MATERIAL NOT FULLY DEMILITARIZED. ARE STATUTORY REGULATIONS AND WOULD PRECLUDE ADMINISTRATIVE CONSIDERATION OF A CLAIM FOR DAMAGES ARISING FROM THE USE OF SURPLUS MATERIAL OBTAINED FROM A DEALER WHO HAD PURCHASED IT FROM THE GOVERNMENT UNDER A SALES AGREEMENT CONTAINING A DISCLAIMER OF WARRANTY CLAUSE. RECONSIDERATION WAS REQUESTED OF OUR SETTLEMENT CERTIFICATE OF APRIL 17. YOUR BID WAS ACCEPTED AND IT WAS DETERMINED.

B-145783, JUNE 13, 1961, 40 COMP. GEN. 691

SALES - DISCLAIMER OF WARRANTY - SUBSEQUENT PURCHASES - DANGEROUS MATERIAL DAMAGES SUSTAINED BY A VENDEE IN USING AS SCRAP IN ELECTRIC FURNACES FRAGMENTATION BOMBS, WHICH WERE OBTAINED FROM A DEALER WHO HAD PURCHASED THE MATERIAL FROM THE GOVERNMENT UNDER A SALES AGREEMENT CONTAINING AN EXPRESS DISCLAIMER OF WARRANTY AS TO THE FITNESS OF THE BOMBS FOR ANY USE OR PURPOSE, MAY NOT BE REGARDED AS A LIABILITY OF THE GOVERNMENT, EVEN THOUGH SOME OF THE BOMBS MAY HAVE CONTAINED SOME EXPLOSIVE MATERIAL OR MATERIAL NOT FULLY DEMILITARIZED, THERE BEING NO EXPRESS OR IMPLIED WARRANTY BY THE GOVERNMENT THAT THE BOMBS COULD BE USED AS SCRAP WITHOUT FURTHER INSPECTION OR REWORKING. REGULATIONS WHICH EXCLUDE FROM THE TYPE OF LOSS OR DAMAGE CLAIMS ADMINISTRATIVELY COGNIZABLE UNDER THE MILITARY CLAIMS ACT, 10 U.S.C. 2733, THOSE CLAIMS FOUNDED IN CONTRACT, EXPRESS OR IMPLIED, ARE STATUTORY REGULATIONS AND WOULD PRECLUDE ADMINISTRATIVE CONSIDERATION OF A CLAIM FOR DAMAGES ARISING FROM THE USE OF SURPLUS MATERIAL OBTAINED FROM A DEALER WHO HAD PURCHASED IT FROM THE GOVERNMENT UNDER A SALES AGREEMENT CONTAINING A DISCLAIMER OF WARRANTY CLAUSE.

TO THE PRUDY COMPANY, JUNE 13, 1961:

BY LETTER DATED APRIL 27, 1961, RECONSIDERATION WAS REQUESTED OF OUR SETTLEMENT CERTIFICATE OF APRIL 17, 1961, WHEREIN WE DISALLOWED YOUR CLAIM IN THE AMOUNT OF $7,955.77, REPRESENTING DAMAGES SUFFERED BY THE SOULE STEEL COMPANY AS A RESULT OF EXPLOSIONS OF FRAGMENTATION BOMBS PURCHASED BY YOUR FIRM AS SCRAP MATERIAL UNDER SALES CONTRACT NO. N665S 49440, SALE B-157-60-665, ITEM NO. 15.

IN RESPONSE TO INVITATION NO. B-157-60-665, ISSUED BY THE U.S. NAVAL SUPPLY DEPOT CLEAR FIELD, DISPOSAL DEPARTMENT, OGDEN, UTAH, ON JUNE 1, 1960, YOUR FIRM SUBMITTED THE HIGH BID OF $55,100 ON ITEM 15 DESCRIBED AS 2,000 GROSS TONS OF "1IRON AND STEEL PREPARED NO. 1 CONSISTING OF 20 LB. FRAGMENTATION BOMBS. REF. SCL 34 SCRAP WARRANTY APPLIES.' ON JUNE 22, 1960, YOUR BID WAS ACCEPTED AND IT WAS DETERMINED, PURSUANT TO PARAGRAPH 20 OF THE CONTRACT GENERAL TERMS AND CONDITIONS, THAT 2,192.26785 GROSS TONS WERE TENDERED AND ACCEPTED BY YOUR FIRM IN THE TOTAL AMOUNT OF $60,396.98. IN ACCORDANCE WITH YOUR INSTRUCTIONS, 2192.3 GROSS TONS WERE SHIPPED TO THE SOULE STEEL COMPANY IN AUGUST 1960.

YOU ADVISED THE DISPOSAL AGENCY ON SEPTEMBER 2, 1960, THAT SOULE HAD EXPERIENCED SEVERAL EXPLOSIONS IN THEIR ELECTRIC FURNACES WHICH CAUSED SEVERAL THOUSAND DOLLARS OF DAMAGE AND THAT ANY DAMAGES OR SUITS ASSERTED BY SOULE WOULD BE PASSED ON TO THE GOVERNMENT. ON OCTOBER 6, 1960, YOU FILED A CLAIM IN THE AMOUNT OF $7,955.77 REPRESENTING LOSSES SUSTAINED BY SOULE AS A RESULT OF FIVE EXPLOSIONS. THEREAFTER, THE CONTRACTING OFFICER REQUESTED THE INSPECTOR OF NAVAL MATERIAL (1LOS ANGELES) TO CONDUCT AN INVESTIGATION OF THE CLAIM. THE INSPECTOR IN REPORTING HIS FINDINGS ON OCTOBER 31, 1960, QUOTED A MR. BOWMAN, PLANT SUPERVISOR OF SOULE, AS SAYING "THE SCRAP LOADS DID NOT CONSIST ENTIRELY OF BOMBS, BUT CONTAINED OTHER BY-PRODUCTS AS WELL, AND THAT IT HAD BEEN THEIR EXPERIENCE THAT ON OCCASION THE USE OF AUTOMOTIVE AND MACHINERY SCRAP RESULTED IN HYDRAULIC CYLINDERS AND OTHER TYPE OF CLOSED CARTONS CONTAINING LIQUID, WOULD FIND THEIR WAY INTO THE FURNACES AND RESULT IN DETONATIONS.' THE INSPECTOR FURTHER REPORTED THAT NO DAMAGED FURNACES WERE AVAILABLE FOR INSPECTION SINCE REPAIRS HAD BEEN MADE AS THE DAMAGE OCCURRED IN ORDER TO HAVE THEM AVAILABLE FOR USE. YOU WERE THEN REQUESTED ON NOVEMBER 7, 1960, TO FURNISH ADDITIONAL INFORMATION CONCERNING THE CLAIMED DAMAGES. SUCH INFORMATION, IN AFFIDAVIT FORM, WAS FURNISHED BY SOULE ON DECEMBER 16, 1960, WHICH CONTAINED AN ITEMIZATION OF THE REPAIR COSTS TO THE FURNACES. WE NOTE THAT THE TOTAL DAMAGES LISTED BY SOULE ON THIS DATE WERE $6,411.20, WHEREAS IT LISTED DAMAGES IN THE AMOUNT OF $7,955.77 ON ITS INVOICE NO. 10054 OF SEPTEMBER 28, 1960.

ASIDE FROM THE FACT THAT THE EVIDENCE OF RECORD DOES NOT CONCLUSIVELY ESTABLISH THAT THE CLAIMED DAMAGES WERE CAUSED SOLELY BY THE SCRAP PURCHASED BY YOUR FIRM, WE FIND NO LEGAL BASIS TO ALLOW THE CLAIM.

PARAGRAPH 2 OF THE GENERAL SALE TERMS AND CONDITIONS OF YOUR CONTRACT PROVIDED:

CONDITION OF PROPERTY: ALL PROPERTY LISTED HEREIN IS OFFERED FOR THE SALE "AS IS" AND "WHERE IS" AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. IF IT IS PROVIDED THEREIN 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 OF 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.

PARAGRAPH 27 PROVIDED:

SCRAP WARRANTY: THIS PARAGRAPH APPLIES TO THE ITEMS INDICATING "1SCRAP WARRANTY APPLIES.' THE PURCHASER REPRESENTS AND WARRANTS TO THE UNITED STATES THAT THE MATERIAL COVERED BY THIS CONTRACT WAS OFFERED AS SCRAP, THAT IT IS PURCHASING OR RETAINING THE MATERIAL ONLY AS SCRAP AND THAT IT WILL SELL AND SHIP OR USE THE MATERIAL ONLY AS SCRAP EITHER IN ITS EXISTING CONDITION OR AFTER FURTHER PREPARATION. THE PURCHASER FURTHER REPRESENTS AND WARRANTS TO THE UNITED STATES THAT IT WILL REQUIRE A LIKE WARRANTY FROM ANY SUBSEQUENT PURCHASER WHO SHALL PURCHASE THIS SCRAP OR ANY PART THEREOF.

THERE IS NO INDICATION THAT THE PROPERTY WAS IN ANY WAY MISDESCRIBED OR THAT INTERESTED BIDDERS WERE UNAWARE OF THE CHARACTER OF THE PROPERTY OFFERED FOR SALE.

WHERE, AS HERE, THE PARTIES TO A SALE OF PERSONALTY HAVE BY EXPRESS TERMS NEGATIVED ALL IMPLIED WARRANTIES, THE VENDEE CANNOT CLAIM AN IMPLIED WARRANTY THAT OTHERWISE MIGHT HAVE BEEN AVAILABLE. SEE WILLISTON ON CONTRACTS, REV. USED., SECTION 993; FAIRBANKS, MORSE AND CO. V. CONSOLIDATED FISHERIES CO., 94 F.1SUPP. 311; MARYLAND CAS. CO. V. OWENS- ILLINOIS GLASS CO., 116 F.1SUPP. 122; 34 COMP. GEN. 300.

WHILE THE FRAGMENTATION BOMBS PURCHASED BY YOUR FIRM MAY HAVE CONTAINED SOME EXPLOSIVE MATERIAL OR MATERIAL NOT OTHERWISE FULLY DEMILITARIZED, THE GOVERNMENT'S DISCLAIMER OF WARRANTY AS TO "ITS FITNESS FOR ANY USE OR PURPOSE" CONTAINED IN THE CONTRACT PROVISION QUOTED ABOVE RELIEVED THE GOVERNMENT FROM LIABILITY FOR DAMAGES SUSTAINED BY YOUR VENDEE IN PROCESSING THE SCRAP. IN DECISION OF THIS OFFICE, B-54597, FEBRUARY 15, 1946, WE REACHED THE SAME RESULT IN A CASE INVOLVING FACTS NOT MATERIALLY DIFFERENT FROM THOSE PRESENT HERE. HOWEVER, PARTICULAR ATTENTION IS INVITED TO THE CASE OF CHARLES LACHMAN CO., INC. V. HERCULES POWDER CO., INC., 79 F1/SUPP. 206, IN WHICH THE COURT CONSIDERED THE EFFECT OF A DISCLAIMER OF WARRANTY CLAUSE IN A CONTRACT OF SALE OF AN INHERENTLY DANGEROUS CHEMICAL AND HELD THAT SUCH CLAUSE EFFECTIVELY RELIEVED THE SELLER OF ALL LIABILITY FOR DAMAGES RESULTING FROM THE COMBUSTIBLE CHARACTER OF THE CHEMICAL. WE FEEL THAT THE RATIONALE OF THAT CASE IS APPLICABLE TO YOUR CLAIM. SINCE THE GOVERNMENT DID NOT WARRANT, EXPRESSLY OR IMPLIEDLY, THAT THE BOMBS AS OFFERED FOR SALE COULD BE INDUSTRIALLY PROCESSED AS SCRAP WITHOUT FURTHER INSPECTION OR REWORKING, WE MUST CONCLUDE THAT THE GOVERNMENT UNDER THE CONTRACT OF SALE IS NOT LIABLE FOR THE CLAIMED DAMAGES.

IT WAS SUGGESTED BY YOUR WASHINGTON REPRESENTATIVE THAT OUR OFFICE GIVE CONSIDERATION TO RETURNING THE CLAIM TO THE DEPARTMENT OF THE NAVY FOR CONSIDERATION UNDER THE MILITARY CLAIMS ACT, 10 U.S.C. 2733. THAT ACT AUTHORIZES THE SETTLEMENT OF CLAIMS FOR DAMAGE OR LOSS OF PROPERTY CAUSED BY A CIVILIAN OFFICER OR EMPLOYEE OR MEMBER OF THE NAVY ACTING WITHIN THE SCOPE OF HIS EMPLOYMENT OR OTHERWISE INCIDENT TO NONCOMBAT ACTIVITIES OF THE DEPARTMENT OF THE NAVY UNDER SUCH REGULATIONS AS MAY BE PRESCRIBED BY THE SECRETARY. ADMINISTRATIVE REGULATIONS OF THE NAVY IMPLEMENTING THE ACT ARE CONTAINED IN 32 CFR 750.17-26. SECTION 750.19 (B) (9) EXPRESSLY EXCLUDES FROM THE PROVISIONS OF THE ACT: "1ANY CLAIM FOR DAMAGE TO OR LOSS OR DESTRUCTION OF PROPERTY FOUNDED IN CONTRACT, EXPRESS OR IMPLIED, * *

THAT REGULATION, HAVING BEEN PROMULGATED PURSUANT TO STATUTE, HAS THE FORCE AND EFFECT OF LAW (1UNITED STATES V. SHORT, 240 F.2D. 292, 298; UNITED STATES V. BARNARD, 255 F.2D 583, 589), AND EFFECTIVELY PRECLUDES, IN OUR OPINION, ADMINISTRATIVE CONSIDERATION OF THE INSTANT CLAIM UNDER THE MILITARY CLAIMS ACT.