B-147080, SEP. 29, 1961

B-147080: Sep 29, 1961

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TO THE POSTMASTER GENERAL: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 29. THE FOLLOWING PROVISION FOR LIQUIDATED DAMAGES WAS INCLUDED IN THE CONTRACT: "DELAYS. - LIQUIDATED DAMAGES: AFTER AWARD IS MADE TO BIDDER. THERE WILL BE DEDUCTED FROM PAYMENT TO HIM. THE AMOUNT OF $25.00 PER CALENDAR DAY UNTIL COMPLETE DELIVERY IS ACCOMPLISHED.'. DELIVERY WAS NOT COMPLETED BY NOVEMBER 15. WITHOUT WAITING FOR A DETERMINATION BY THE CONTRACTING OFFICER WHETHER THE DELAY WAS EXCUSABLE. THE CONTRACTING OFFICER FOUND THAT MANUFACTURE OF THE FIXTURES WAS COMPLETED ON NOVEMBER 1. IT IS ELEMENTARY CONTRACT LAW THAT IN ORDER FOR A PARTY TO A CONTRACT TO ENFORCE PAYMENT OF LIQUIDATED DAMAGES. WHEN ONE PARTY HAS PREVENTED THE OTHER FROM PERFORMING THE PROVISIONS OF THE ORIGINAL CONTRACT CANNOT BE INSISTED UPON AND LIQUIDATED DAMAGES MEASURED THEREBY ARE WAIVED.

B-147080, SEP. 29, 1961

TO THE POSTMASTER GENERAL:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 29, 1961, REQUESTING OUR DECISION REGARDING ASSESSMENT OF LIQUIDATED DAMAGES UNDER CONTRACT NO. 6-1 -9739, AWARDED ON JUNE 20, 1960, TO H.M.S., INC., MARIETTA, GEORGIA.

THE CONTRACT FOR 10,000 INCANDESCENT LIGHTING FIXTURES CALLED FOR DELIVERY TO BE COMPLETED BY NOVEMBER 15, 1960. THE FOLLOWING PROVISION FOR LIQUIDATED DAMAGES WAS INCLUDED IN THE CONTRACT:

"DELAYS--- LIQUIDATED DAMAGES: AFTER AWARD IS MADE TO BIDDER, IF HE FAILS TO MAKE COMPLETE DELIVERY WITHIN TIME SPECIFIED, THERE WILL BE DEDUCTED FROM PAYMENT TO HIM, AS A LIQUIDATED DAMAGE, THE AMOUNT OF $25.00 PER CALENDAR DAY UNTIL COMPLETE DELIVERY IS ACCOMPLISHED.'

DELIVERY WAS NOT COMPLETED BY NOVEMBER 15, 1960. WITHOUT WAITING FOR A DETERMINATION BY THE CONTRACTING OFFICER WHETHER THE DELAY WAS EXCUSABLE, THE CERTIFYING OFFICER MADE DEDUCTIONS FOR LIQUIDATED DAMAGES FROM AMOUNTS PAID TO THE CONTRACTOR. IN RESPONSE TO A PROTEST BY THE CONTRACTOR, ON MAY 29, 1961, THE CONTRACTING OFFICER FOUND THAT MANUFACTURE OF THE FIXTURES WAS COMPLETED ON NOVEMBER 1, 1960, AND THE GOVERNMENT'S DELAY IN FURNISHING GOVERNMENT BILLS OF LADING AND SHIPPING INSTRUCTIONS, PLUS ADDITIONAL DELAY IN CORRECTING ERRORS THEREIN, CONSTITUTED THE SOLE CAUSE OF THE CONTRACTOR'S FAILURE TO MAKE COMPLETE DELIVERY BY NOVEMBER 15, 1960.

ALTHOUGH THE LIQUIDATED DAMAGE CLAUSE DID NOT SET FORTH ANY CONDITIONS WHICH WOULD EXCUSE THE CONTRACTOR FOR DELAY IN PERFORMANCE, IT IS ELEMENTARY CONTRACT LAW THAT IN ORDER FOR A PARTY TO A CONTRACT TO ENFORCE PAYMENT OF LIQUIDATED DAMAGES, THE PARTY MUST NOT PREVENT THE OTHER PARTY FROM PERFORMING WITHIN THE STIPULATED TIME. WHEN ONE PARTY HAS PREVENTED THE OTHER FROM PERFORMING THE PROVISIONS OF THE ORIGINAL CONTRACT CANNOT BE INSISTED UPON AND LIQUIDATED DAMAGES MEASURED THEREBY ARE WAIVED. UNITED STATES V. UNITED ENGINEERING AND CONTRACTING COMPANY (1914) 234 U.S. 236, 242. IN VIEW OF THE CONTRACTING OFFICER'S DETERMINATION AND THE APPLICABLE RULE OF LAW, WE MUST CONCLUDE THAT THERE WAS NO LEGAL BASIS FOR THE CERTIFYING OFFICER'S ASSESSMENT OF LIQUIDATED DAMAGES IN THIS CASE.

SINCE THE CONTRACTOR IS NOT LEGALLY LIABLE FOR LIQUIDATED DAMAGES, THERE IS NO NECESSITY TO INVOKE THE PROCEDURES SET FORTH FOR REMISSION OF SUCH DAMAGES IN 41 U.S.C. 256A. SECTION 256A PROVIDES A MEANS OF GRANTING EQUITABLE RELIEF AND WE AGREE WITH YOUR CONCLUSION THAT IT WAS NOT INTENDED TO APPLY TO A SITUATION SUCH AS THIS, IN WHICH NO LEGAL LIABILITY EXISTS ON THE PART OF THE CONTRACTOR TO PAY LIQUIDATED DAMAGES.

ACCORDINGLY, THE AMOUNT WITHHELD AS LIQUIDATED DAMAGES MAY BE PAID, AS RECOMMENDED. A REFERENCE TO THIS DECISION SHOULD BE INCLUDED IN THE VOUCHER COVERING SUCH PAYMENT. THE ORIGINAL CONTRACT IS RETURNED IN ACCORDANCE WITH YOUR REQUEST.