B-150729, JUNE 19, 1963, 42 COMP. GEN. 708

B-150729, JUNE 19, 1963, 42 COMP. GEN. 708

BAILMENTS - LIABILITY - ENLARGEMENT AUTHORITY. CONTRACTS - DAMAGES - GOVERNMENT LIABILITY - DEFINITENESS REQUIREMENT. APPROPRIATIONS - EXPENSES INCIDENT TO SPECIFIC PURPOSES - NECESSARY EXPENSES. APPROPRIATIONS - OBLIGATIONS - DEFINITE COMMITMENT. APPROPRIATIONS - LIMITATIONS - AIRCRAFT PURCHASES THE INCLUSION OF A CLAUSE IN FEDERAL AVIATION AGENCY CONTRACTS FOR THE LEASE OF FLIGHT TRAINING AIRCRAFT ON A FLYING-HOUR RENTAL BASIS WHICH WILL INCREASE THE LIABILITY OF THE AGENCY BEYOND ITS LEGAL RESPONSIBILITY AS A BAILEE BY REQUIRING THE RETURN OF THE AIRCRAFT IN AS GOOD CONDITION AS WHEN RECEIVED, REASONABLE WEAR AND TEAR EXCEPTED, AND THE ASSUMPTION OF THE RISK OF LOSS RESULTING FROM THE LESSOR'S NEGLIGENCE OR FROM ACTS OF GOD, IS WITHIN THE AUTHORITY OF THE AGENCY IN THE SAME MANNER THAT AN INDIVIDUAL BAILEE CAN INCREASE HIS RESPONSIBILITY FOR GOODS IN HIS CARE FOR BAILMENT CONSIDERATION; THEREFORE, IN VIEW OF THE ADVANTAGE TO THE GOVERNMENT BY INCLUSION OF SUCH A LIABILITY CLAUSE IN REDUCTION OF THE RENTAL CHARGE AND THE FACT THAT THERE WILL BE LITTLE LIKELIHOOD THAT THE GOVERNMENT WILL HAVE TO PAY MORE THAN SMALL AMOUNTS UNDER THE CLAUSE, NO OBJECTION TO ITS INCLUSION IN FLYING-RENTAL CONTRACTS WILL BE MADE. A LIABILITY CLAUSE IN FEDERAL AVIATION AGENCY FLYING-RENTAL AGREEMENTS WHICH WOULD OBLIGATE THE GOVERNMENT IN THE EVENT THE AIRCRAFT IS DESTROYED OR DAMAGED BEYOND REPAIR TO PAY THE CONTRACTOR THE FAIR MARKET VALUE OF THE AIRCRAFT AT THE TIME, LESS SALVAGE VALUE, IF ANY, IS A CLAUSE WHICH FIXES THE MAXIMUM LIABILITY MEASURABLE BY THE FAIR MARKET VALUE OF THE AIRCRAFT AND, THEREFORE, IS NOT OBJECTIONABLE ON THE BASIS OF CREATING AN INDEFINITE OR UNCERTAIN LIABILITY ON THE AGENCY. THE OBLIGATION OF THE FEDERAL AVIATION AGENCY WHICH MIGHT ARISE UNDER AN AIRCRAFT RENTAL CONTRACT FOR DAMAGES OR DESTRUCTION OF THE CONTRACTOR'S AIRCRAFT IS A NECESSARY EXPENSE INCIDENT TO THE HIRING OF AIRCRAFT FOR WHICH THE AGENCY'S 1963 APPROPRIATION IS EXPRESSLY AVAILABLE AND, THEREFORE, THAT APPROPRIATION IS AVAILABLE FOR ANY PAYMENTS UNDER THE LIABILITY CLAUSE OF THE CONTRACT. WHILE UNDER A LIABILITY CLAUSE IN A FEDERAL AVIATION AGENCY AIRCRAFT RENTAL CONTRACT WHICH OBLIGATES THE AGENCY TO PAY FOR DAMAGE OR DESTRUCTION OF THE AIRCRAFT THERE IS ALWAYS THE POSSIBILITY OF PAYMENT BEING REQUIRED, SUCH POSSIBILITY ALONE IS NOT SUFFICIENT TO REQUIRE THE ESTABLISHMENT OF A RESERVE OF FUNDS FOR THE CONTINGENT LIABILITY AND UNTIL IT IS APPARENT THAT A DEMAND UNDER THE CLAUSE MAY BE MADE, FUNDS CANNOT BE CURRENTLY OBLIGATED. ALTHOUGH PAYMENT FOR THE DESTRUCTION OF AIRCRAFT UNDER A FEDERAL AVIATION AGENCY RENTAL CONTRACT OBLIGATING THE AGENCY TO PAY FOR THE DESTRUCTION OF AIRCRAFT WOULD NOT CONSTITUTE THE "PURCHASE" OF AIRCRAFT WITHIN THE APPROPRIATION LIMITATION ON THE SPECIFIC NUMBER OF AIRCRAFT THAT CAN BE PURCHASED, IF THE AGENCY ACQUIRES THE REMAINS OF AN AIRCRAFT AND MAKES IT A USABLE AIRCRAFT SUCH ACTION CONSTITUTES A "PURCHASE" WITHIN THE LIMITATION.

TO THE ADMINISTRATOR, FEDERAL AVIATION AGENCY, JUNE 19, 1963:

BY LETTER OF JANUARY 28, 1963, YOU REQUESTED OUR DECISION ON SEVERAL QUESTIONS ARISING IN THE PROCUREMENT OF THE USE OF AIRCRAFT FOR TRAINING FEDERAL AVIATION AGENCY PERSONNEL BY MEANS OF TERM RENTAL AGREEMENTS AND FLYING-HOUR RENTAL AGREEMENTS.

YOUR LETTER STATES THAT THE FAA HAS FOUND IT ESSENTIAL, IN TRAINING ITS PERSONNEL TO CARRY OUT THEIR VITAL FUNCTIONS OF INSPECTING COMMERCIAL AIR CARRIER OPERATIONS AND EXAMINING THEIR PILOTS AND CREWS FOR PROFICIENCY, TO PROCURE THE USE OF PRIVATELY OWNED AIRCRAFT OF VARIOUS TYPES, PARTICULARLY HEAVY JET AIRCRAFT USED IN COMMERCIAL AIRLINE OPERATIONS. YOU INDICATE THAT THE USE OF SUCH VARIED TYPES OF AIRCRAFT IN ADDITION TO THOSE WHICH THE FAA DEEMS ECONOMICAL TO PURCHASE, IS NECESSARY TO ENABLE YOUR INSPECTORS TO BECOME PROFICIENT IN OR FAMILIAR WITH THE TYPES OF AIRCRAFT TO WHICH THEIR SPECIALIZED INSPECTION DUTIES RELATE.

IT IS STATED IN THE LETTER THAT USE OF SUCH AIRCRAFT HAS BEEN PROCURED PRINCIPALLY BY TWO METHODS. WHERE FEASIBLE AND ADVANTAGEOUS TO THE FAA, EXCLUSIVE USE RENTAL CONTRACTS (HEREIN REFERRED TO AS "TERM RENTAL AGREEMENTS") HAVE BEEN ENTERED INTO, WHEREBY THE AIRCRAFT ARE LEASED FOR THE SOLE USE OF THE FAA DURING THE TERM OF THE LEASE. SUCH TERM RENTAL AGREEMENTS GENERALLY PROVIDE FOR PAYMENT OF THE AGREED RENTAL ON AN ANNUAL OR MONTHLY BASIS. AIRCRAFT LEASED UNDER SUCH AGREEMENTS ARE OPERATED, MAINTAINED AND CONTROLLED BY THE FAA IN THE SAME MANNER AS IF THEY WERE OWNED BY THE FAA. IN OTHER CASES, EITHER BECAUSE OF UNAVAILABILITY OF THE AIRCRAFT ON TERM RENTAL BASIS OR BECAUSE FAA REQUIREMENTS DO NOT JUSTIFY FULL-TIME RENTAL, YOU SEEK TO PROCURE THE USE OF THE AIRCRAFT ON AN HOURLY BASIS (HEREIN REFERRED TO AS "FLYING-HOUR RENTAL") UNDER WHICH THE FAA AGREES TO USE FLYING TIME IN SPECIFIED INTERMITTENT HOURLY AMOUNTS, PAYMENTS TO BE MADE AT AGREED HOURLY RATES FOR THE TIME THE AIRCRAFT IS IN USE FOR FAA PURPOSES. FLYING-HOUR RENTALS FREQUENTLY ARE INCLUDED AS PART OF OR RELATED TO TRAINING CONTRACTS IN WHICH THE LESSOR-CARRIER AGREES TO FURNISH INSTRUCTION TO YOUR PERSONNEL INVOLVING THE USE OF THE AIRCRAFT. AIRCRAFT PROCURED UNDER THE FLYING-HOUR RENTAL AGREEMENTS ARE NOT FOR THE EXCLUSIVE USE OR UNDER THE CONTROL OF THE FAA. NORMALLY, THE LESSOR REMAINS IN CONTROL OF THE AIRCRAFT AND IS RESPONSIBLE FOR ALL OPERATING EXPENSES AND FOR MAINTENANCE. ALSO, THE AIRCRAFT, WHEN IN USE, IS UNDER THE COMMAND AND CONTROL OF THE LESSOR'S PILOT EXCEPT WHEN ACTUALLY BEING TAXIED OR PILOTED BY THE FAA TRAINEE, UNDER THE DIRECTION AND COMMAND OF THE LESSOR'S INSTRUCTOR PILOT.

YOUR LETTER INDICATES THAT AIRCRAFT OWNERS GENERALLY CARRY HULL INSURANCE, COVERING DAMAGE TO OR DESTRUCTION OF THE AIRCRAFT EITHER ON THE GROUND OR IN FLIGHT, USUALLY WRITTEN AT HOURLY RATES FOR GROUND TIME AND FOR FLYING TIME. THE COST OF SUCH INSURANCE NATURALLY IS PASSED ON TO THE LESSEE OF THE AIRCRAFT IN THE FEE CHARGED FOR USE THEREOF. SUCH COST IS STATED TO BE RELATIVELY HIGH, ACCOUNTING FOR FROM 15 TO 40 PERCENT OR MORE OF THE HOURLY RATES CHARGED FOR USE OR RENTAL OF THE AIRCRAFT. SINCE THE INCLUSION OF THE HULL INSURANCE CHARGE IN THE FEE FOR USE OR RENTAL OF THE AIRCRAFT CONSUMES SUCH A LARGE PORTION OF THE FUNDS AVAILABLE TO THE FAA FOR TRAINING PURPOSES, PORTION OF THE FUNDS AVAILABLE TO THE FAA FOR TRAINING PURPOSES, YOUR AGENCY HAS SOUGHT MEANS OF OBTAINING USE OF THE REQUIRED AIRCRAFT WITHOUT ASSUMING THE COST OF HULL INSURANCE.

YOU STATE THAT YOU HAVE ACCOMPLISHED THIS RESULT IN THE CASE OF AIRCRAFT OBTAINED UNDER TERM RENTAL AGREEMENTS BY INDUCING THE LESSOR TO FOREGO, OR OMIT RENTAL CHARGES FOR, HULL INSURANCE DURING THE TERM OF THE RENTAL AGREEMENT, IN RELIANCE UPON A CONTRACT CLAUSE PROVIDING THAT UPON COMPLETION OF THE CONTRACT, THE GOVERNMENT SHALL RETURN THE AIRCRAFT IN AS GOOD CONDITION AS IT WAS WHEN RECEIVED, REASONABLE WEAR AND TEAR EXCEPTED, OR IN LIEU THEREOF, AT THE GOVERNMENT'S OPTION, PAY TO THE CONTRACTOR THE REASONABLE VALUE OF THE REPAIRS NECESSARY TO PLACE THE AIRCRAFT IN SUCH CONDITION; OR, IN THE EVENT THE AIRCRAFT IS DESTROYED OR DAMAGED BEYOND REPAIR, PAY THE CONTRACTOR THE FAIR MARKET VALUE OF THE AIRCRAFT AT THE TIME, LESS SALVAGE VALUE, IF ANY.

YOU FURTHER STATE THAT PRIOR TO USING THIS TYPE OF CONTRACT CLAUSE IN TERM RENTAL AGREEMENTS, YOU OUTLINED THE SITUATION TO THE BUREAU OF THE BUDGET AND THE INTERESTED COMMITTEES OF CONGRESS. IN ADDITION, YOU INDICATE THAT, AFTER DISCUSSION OF THE MATTER WITH PERSONNEL OF OUR GENERAL COUNSEL'S OFFICE, IT WAS CONCLUDED THAT THE USE OF SUCH A PROVISION IN TERM RENTAL AGREEMENTS WAS WITHIN THE AUTHORITY OF THE ADMINISTRATOR OF THE FAA; THAT THE MAXIMUM CONTINGENT LIABILITY INVOLVED IS DETERMINABLE AT THE OUTSET OF THE CONTRACT, BEING THE FAIR MARKET VALUE OF THE AIRCRAFT, AND HENCE IS NOT AN INDETERMINATE LIABILITY OF THE TYPE PROHIBITED BY 7 COMP. GEN. 507 AND 16 COMP. GEN. 803; THAT THE REQUIREMENTS OF THE ANTI-DEFICIENCY ACT (31 U.S.C. 665, 41 U.S.C. 11) ARE MET BECAUSE THE "NO-YEAR" FACILITIES AND EQUIPMENT APPROPRIATIONS OF THE FAA WILL REMAIN AVAILABLE, WITH REPROGRAMMING IF NECESSARY, TO MEET ANY POTENTIAL LIABILITY ARISING DURING A GIVEN FISCAL YEAR; THAT NO RESERVE NEED BE OBLIGATED TO COVER THE REMOTE CONTINGENT LIABILITY IMPOSED BY THE CONTRACT CLAUSE; AND THAT SUCH CONTINGENT LIABILITY PRIOR TO OCCURRENCE OF THE CONTINGENCY, PROBABLY COULD NOT PROPERLY BE RECORDED AS "AN OBLIGATION OF THE GOVERNMENT OF THE UNITED STATES" UNDER THE PROVISIONS OF 31 U.S.C. 200.

THE LETTER OF JANUARY 28, 1963, STATES THAT YOU NOW DESIRE TO USE A LIABILITY CLAUSE OF SIMILAR EFFECT IN CONTRACTS FOR FLYING-HOUR RENTALS. YOU INDICATE THAT, WHILE YOU ARE OF THE OPINION THAT THERE IS NO LEGAL OBSTACLE TO SUCH ACTION, SOME PROSPECTIVE LESSORS OF AIRCRAFT ARE RELUCTANT TO ACCEPT CONTRACTS WITH SUCH A LIABILITY CLAUSE, IN LIEU OF HULL INSURANCE, IN THE ABSENCE OF AN AUTHORITATIVE OPINION THAT THE INCLUSION OF SUCH A CLAUSE IS WITHIN THE AUTHORITY OF THE FAA, THAT FUNDS WILL BE LEGALLY AVAILABLE TO MEET ANY FAA LIABILITY UNDER SUCH CLAUSE TO REPAIR OR PAY FOR THE DAMAGE TO OR DESTRUCTION OF THE AIRCRAFT, AND THAT SUCH LIABILITY WOULD NOT BE AFFECTED BY AN ALLEGATION OF NEGLIGENCE ON THE LESSOR'S PART AS A DEFENSE TO FAA LIABILITY. IN VIEW THEREOF, YOU REQUEST OUR DECISION ON THE FOLLOWING FOUR QUESTIONS:

1. WOULD THE COMPTROLLER GENERAL TAKE EXCEPTION TO AN FAA FLIGHT TRAINING CONTRACT IN WHICH THE AGENCY ASSUMES LIABILITY FOR ANY DAMAGE OR DESTRUCTION TO THE CONTRACTOR'S AIRCRAFT, EXCEPT DAMAGE OR DESTRUCTION RESULTING FROM NORMAL WEAR AND TEAR, DURING THE TIME THE AIRCRAFT IS ACTUALLY USED FOR THE CONTRACTED TRAINING? IN SUCH CASES, THE MAXIMUM AMOUNT OF LIABILITY THUS ASSUMED WOULD BE FIXED AT THE FAIR MARKET VALUE OF THE AIRCRAFT LESS SALVAGE VALUE, IF ANY, AT THE TIME SUCH AIRCRAFT IS DAMAGED OR DESTROYED.

2. WOULD THE FAA ("NO-YEAR") APPROPRIATION FOR FACILITIES AND EQUIPMENT, INCLUDED ANNUALLY IN THE INDEPENDENT OFFICES APPROPRIATION ACT, BE DEEMED LEGALLY AVAILABLE (IF THE UNOBLIGATED BALANCE IS OTHERWISE SUFFICIENT OR CAN BE MADE SUFFICIENT BY REPROGRAMMING) TO PAY FOR LIABILITY WHICH MIGHT ARISE FROM THE OBLIGATION ASSUMED IN SUCH A CONTRACT?

3. MUST A RESERVE BE ESTABLISHED OR FUNDS CURRENTLY OBLIGATED TO PROVIDE FOR A CONTINGENT LIABILITY OF THE TYPE REFERRED TO HEREIN?

4. WOULD PAYMENT FOR DESTRUCTION OF AN AIRCRAFT PURSUANT TO SUCH ASSUMED LIABILITY CONSTITUTE THE "PURCHASE" OF AN AIRCRAFT WITHIN THE MEANING OF A PROVISION, SUCH AS THAT INCORPORATED IN THE FAA FACILITIES AND EQUIPMENT APPROPRIATION FOR FISCAL 1963, LIMITING THE PURCHASE OF AIRCRAFT TO A SPECIFIED NUMBER?

THE INDEPENDENT OFFICES APPROPRIATION ACT, 1963, APPROVED OCTOBER 3, 1962, PUBLIC LAW 87-741, 76 STAT. 716, SPECIFICALLY PROVIDES THAT THE APPROPRIATIONS MADE THEREIN TO THE FAA SHALL BE AVAILABLE FOR "HIRE OF PASSENGER MOTOR VEHICLES AND AIRCRAFT" (76 STAT. 721). HENCE, THERE IS NO QUESTION AS TO YOUR AUTHORITY TO RENT OR LEASE AIRCRAFT. THE RENTAL OR LEASE OF PERSONAL PROPERTY SUCH AS AN AIRCRAFT CREATES A BAILOR-BAILEE RELATIONSHIP BETWEEN THE OWNER OF THE AIRCRAFT AND THE GOVERNMENT. BAILEE UNDER A BAILMENT FOR MUTUAL BENEFIT, SUCH AS IS HERE INVOLVED, IS OBLIGED TO EXERCISE ONLY ORDINARY CARE AND PRUDENCE IN THE HANDLING AND OPERATION OF THE BAILED PROPERTY AND IS LIABLE ONLY FOR DAMAGES THERETO CAUSED BY HIS FAILURE TO EXERCISE SUCH ORDINARY CARE AND PRUDENCE, IN THE ABSENCE OF A CONTRACTUAL PROVISION ENLARGING HIS RESPONSIBILITY.

YOUR LETTER STATES, IN REFERENCE TO THE FLYING-HOUR RENTAL AGREEMENTS, THAT THE PROPOSED LIABILITY CLAUSE IS INTENDED TO FIX AN ABSOLUTE LIABILITY ON THE FAA TO RETURN THE AIRCRAFT IN AS GOOD CONDITION AS WHEN RECEIVED, REASONABLE WEAR AND TEAR EXCEPTED, AND REQUIRE THE FAA TO ASSUME THE RISK OF LOSS RESULTING FROM THE LESSOR'S NEGLIGENCE OR FROM ACTS OF GOD (IN ADDITION TO THE ORDINARY LEGAL RESPONSIBILITY OF A BAILEE) AND TO PREVENT THE ASSERTION OF SUCH DEFENSES AGAINST A CLAIM FOR LIABILITY. WHILE THE LETTER DOES NOT EXPRESSLY SO STATE, IT APPEARS THAT THE SAME INTENTION IS PRESENT IN THE TERM RENTAL AGREEMENTS.

THE ASSUMPTION OF SUCH EXTENSIVE LIABILITY GOES BEYOND THE ORDINARY LEGAL RESPONSIBILITY OF A BAILEE. HOWEVER, IT IS WELL SETTLED THAT A BAILEE MAY ENLARGE HIS LEGAL RESPONSIBILITY BY CONTRACT, EXPRESS OR IMPLIED. STURM V. BOKER, 150 U.S. 312; SUN PRINTING AND PUBLISHING ASSOCIATION V. MOORE, 183 U.S. 642, 654; MULVANY, ET AL. V. KING PAINT MFG. CO., 256 F. 612. STURM V. BOKER, SUPRA, THE COURT, ON PAGE 330, STATED:

THE COMPLAINANT'S COMMON LAW RESPONSIBILITY AS BAILEE EXEMPTED HIM FROM LIABILITY FOR LOSS OF THE CONSIGNED GOODS ARISING FROM INEVITABLE ACCIDENT. A BAILEE MAY, HOWEVER, ENLARGE HIS LEGAL RESPONSIBILITY BY CONTRACT, EXPRESS OR FAIRLY IMPLIED, AND RENDER HIMSELF LIABLE FOR THE LOSS OR DESTRUCTION OF THE GOODS COMMITTED TO HIS CARE--- THE BAILMENT OR COMPENSATION TO BE RECEIVED THEREFOR BEING A SUFFICIENT CONSIDERATION FOR SUCH AN UNDERTAKING.

WHILE THE CITED CASES DID NOT INVOLVE PUBLIC CONTRACTS, THE HOLDING THEREIN WITH RESPECT TO THE INCREASED RESPONSIBILITY OF THE BAILEE APPEARS EQUALLY FOR APPLICATION HERE, SINCE IT LONG HAS BEEN ESTABLISHED THAT WHEN THE UNITED STATES ENTERS INTO CONTRACTS WITH ITS CITIZENS, IT IS CONTROLLED BY THE ORDINARY RULES OF LAW WHICH GOVERN THOSE CITIZENS. UNITED STATES V. BOSTWICK, 94 U.S. 53, 66; LYNCH V. UNITED STATES, 292 U.S. 571, 579; BRAND, ET AL. V. CHICAGO HOUSING AUTHORITY, 120 F.2D 786.

ALSO, IT IS APPARENT FROM YOUR LETTER THAT YOU BELIEVE THE ASSUMPTION OF THE RISK ENTAILED BY THE LIABILITY CLAUSE WILL BE TO THE ADVANTAGE OF THE GOVERNMENT, SINCE ITS INCLUSION IN THE LEASE RESULTS IN A VERY MUCH REDUCED RENTAL CHARGE AND THE LIKELIHOOD OF THE GOVERNMENT'S BEING REQUIRED TO PAY MORE THAN RELATIVELY SMALL AMOUNTS THEREUNDER HAS ADMINISTRATIVELY BEEN DETERMINED TO BE REMOTE. IN ADDITION, WE CONCUR WITH YOUR VIEW THAT THE CLAUSE IN QUESTION DOES NOT CREATE AN INDETERMINATE LIABILITY OF THE TYPE CONSIDERED IN 7 COMP. GEN. 507 AND 16 COMP. GEN. 803, BECAUSE THE MAXIMUM LIABILITY IS MEASURABLE BY THE FAIR MARKET VALUE OF THE AIRCRAFT.

FOR THE REASONS STATED, YOUR FIRST QUESTION IS ANSWERED IN THE NEGATIVE.

LIABILITY UNDER THE CLAUSE IN QUESTION WOULD APPEAR TO BE AN EXPENSE INCIDENT TO THE HIRING OF AIRCRAFT. IT HAS BEEN HELD THAT AN APPROPRIATION IS PROPERLY CHARGEABLE WITH ALL EXPENSES NECESSARY TO ACCOMPLISH THE OBJECT FOR WHICH MADE, UNLESS PARTICULAR ITEMS OF EXPENSE ARE SPECIFICALLY PROVIDED FOR BY SOME OTHER APPROPRIATION OR SPECIFICALLY PROHIBITED BY LAW. SINCE THE APPROPRIATION FOR FACILITIES AND EQUIPMENT IS EXPRESSLY MADE AVAILABLE IN 1963 FOR THE HIRING OF AIRCRAFT, THAT APPROPRIATION ALSO IS AVAILABLE FOR THE PAYMENT OF ANY DAMAGES FOR WHICH THE GOVERNMENT MAY BECOME LIABLE UNDER THIS LIABILITY CLAUSE. YOUR SECOND QUESTION IS ANSWERED IN THE AFFIRMATIVE.

THE CONTINGENT LIABILITY ESTABLISHED BY THE CLAUSE IN QUESTION DOES NOT MEET THE REQUIREMENTS OF SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, APPROVED AUGUST 26, 1954, 68 STAT. 830, AS AMENDED, 31 U.S.C. 200, FOR A VALID OBLIGATION AND HENCE FUNDS CANNOT BE CURRENTLY OBLIGATED THEREFOR. WHERE A CLAUSE OF THIS NATURE IS INCLUDED IN A CONTRACT, THERE IS ALWAYS THE POSSIBILITY OF PAYMENT THEREUNDER BEING REQUIRED. THIS BARE POSSIBILITY ALONE IS NOT SUFFICIENT TO REQUIRE RECOGNITION THEREOF BY ESTABLISHMENT OF A RESERVE, UNLESS AND UNTIL SOME CIRCUMSTANCE ARISES FROM WHICH IT IS APPARENT THAT A DEMAND UNDER THE CLAUSE MAY BE MADE. CF. 37 COMP. GEN. 691. YOUR THIRD QUESTION IS ANSWERED ACCORDINGLY.

WITH RESPECT TO YOUR FOURTH QUESTION, PAYMENT FOR THE DESTRUCTION OF AN AIRCRAFT PURSUANT TO THE LIABILITY CLAUSE IN QUESTION WOULD NOT CONSTITUTE THE "PURCHASE" OF AN AIRCRAFT WITHIN THE MEANING OF YOUR APPROPRIATION LIMITATION, PROVIDED THAT THE AIRCRAFT WAS IN FACT DESTROYED OR DAMAGED BEYOND REPAIR. SHOULD YOUR ADMINISTRATION ACQUIRE THE REMAINS OF SUCH A "DESTROYED" AIRCRAFT AND PRODUCE A USABLE AIRCRAFT THEREFROM, SUCH ACTION WOULD CONSTITUTE "PURCHASE" OF AN AIRCRAFT WITHIN THE MEANING OF SAID LIMITATION.