B-154280, JUN. 16, 1964

B-154280: Jun 16, 1964

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CAUTIONED BIDDERS THAT THE PROPERTY WAS OFFERED FOR SALE "AS IS" "WHERE IS. BIDDERS WERE INVITED. WAS ITEM NO. 160. WHICH YOU HAD INSPECTED BEFORE BIDDING AND WHICH WAS DESCRIBED IN THE SALES BROCHURE AS FOLLOWS: "TANK ASSY.'. YOU CONTENDED THAT SINCE YOUR BID PRICE WAS BASED IN PART ON THE VALUE OF THE HYDRAULIC FLUID AND THAT SINCE INSPECTION OF EACH TANK BEFORE BIDDING WAS IMPOSSIBLE. YOU WERE ENTITLED TO A PURCHASE PRICE ADJUSTMENT IN THE AMOUNT OF $82.50. THE DISALLOWANCE OF YOUR CLAIM UNDER THE DOCTRINE OF CAVEAT EMPTOR WAS BASED ON THE INCORPORATION IN THE SALES CONTRACT OF THE EXPRESS DISCLAIMER OF WARRANTY. YOUR PROTEST YOU CONTEND THAT BAD FAITH AND/OR MISREPRESENTATION IS INVOLVED.

B-154280, JUN. 16, 1964

TO WINOGRAD-S:

YOUR LETTER OF MAY 13, 1964, REQUESTS RECONSIDERATION OF OUR SETTLEMENT OF MAY 1, 1964, WHICH DISALLOWED YOUR CLAIM FOR ADJUSTMENT OF THE PURCHASE PRICE OF 270 TANK ASSEMBLIES SOLD TO YOU UNDER SPOT BID SALE INVITATION NO. 35-S-64-29, DATED DECEMBER 26, 1963, ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, PUEBLO, COLORADO.

THE INVITATION, WHICH SOLICITED BIDS ON 161 ITEMS OF SURPLUS GOVERNMENT PROPERTY, CAUTIONED BIDDERS THAT THE PROPERTY WAS OFFERED FOR SALE "AS IS" "WHERE IS," WITH NO WARRANTY EXPRESSED OR IMPLIED AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT, SIZE OR DESCRIPTION. IN ADDITION, BIDDERS WERE INVITED, URGED, AND CAUTIONED TO INSPECT THE PROPERTY, BEFORE SUBMITTING BIDS, DURING THE INSPECTION PERIOD, DECEMBER 26, 1963, TO JANUARY 16, 1964, MONDAY THROUGH FRIDAY, EXCLUDING HOLIDAYS.

AMONG THE ITEMS AWARDED TO YOU UNDER CONTRACT NO. DSA 35-S-1900, DATED JANUARY 16, 1964, WAS ITEM NO. 160, WHICH YOU HAD INSPECTED BEFORE BIDDING AND WHICH WAS DESCRIBED IN THE SALES BROCHURE AS FOLLOWS:

"TANK ASSY.' HYDRAULIC PRESSURE, 0 TO 2800 PSI, 7 INCHES DIAMETER BY 12 INCHES LONG. EA. TANK HAS 1 GALLON OF HYDRAULIC FLUID NO. 5606. ORD NO. 8001368. UNUSED, GOOD. PACKED IN 63 BOXES AND CTNS. EST SWT: 10,400 LBS. ACQ COST $62,991.00 (LOC: 2-B-6, OUTSIDE) (M 1420) QTY 270 EA"

AFTER YOU HAD ACCEPTED DELIVERY OF THE PROPERTY, YOU COMPLAINED THAT 165 OF THE TANKS, ONE OF WHICH YOU RETURNED TO THE SALES OFFICE, DID NOT CONTAIN HYDRAULIC FLUID. YOU CONTENDED THAT SINCE YOUR BID PRICE WAS BASED IN PART ON THE VALUE OF THE HYDRAULIC FLUID AND THAT SINCE INSPECTION OF EACH TANK BEFORE BIDDING WAS IMPOSSIBLE, YOU WERE ENTITLED TO A PURCHASE PRICE ADJUSTMENT IN THE AMOUNT OF $82.50, REPRESENTING A REFUND OF $0.50 EACH ON THE 165 EMPTY TANKS.

THE DISALLOWANCE OF YOUR CLAIM UNDER THE DOCTRINE OF CAVEAT EMPTOR WAS BASED ON THE INCORPORATION IN THE SALES CONTRACT OF THE EXPRESS DISCLAIMER OF WARRANTY, WHICH PRECLUDES RECOVERY IN THE ABSENCE OF EVIDENCE OF BAD FAITH, OR FRAUD OR MISREPRESENTATION ON THE PART OF THE GOVERNMENT. YOUR PROTEST YOU CONTEND THAT BAD FAITH AND/OR MISREPRESENTATION IS INVOLVED. YOU STATE THAT IT WAS NOT ONLY IMPOSSIBLE FOR A BIDDER TO INSPECT EACH PACKAGE BUT BIDDERS HAD NO REASON TO SUSPECT THAT ANY OF THE TANKS WOULD BE EMPTY IN VIEW OF THE STATEMENT IN THE DESCRIPTION THAT EACH TANK HAD ONE GALLON OF HYDRAULIC FLUID. SUCH CIRCUMSTANCES, YOU ALLEGE, INVALIDATE THE RULE OF CAVEAT EMPTOR.

AN INVESTIGATION BY THE SALES OFFICE DISCLOSES THAT THE TANKS WERE RECEIVED AT THE PROPERTY DISPOSAL OFFICE IN THEIR UNDISTURBED ORIGINAL PACKAGING. A PHYSICAL INSPECTION OF TWO OF THE CRATES, WHICH WERE OPENED AT THE PROPERTY DISPOSAL YARD, SHOWED THAT ALL OF THE TANKS IN SUCH CRATES CONTAINED FLUID, AND ACTUAL MEASUREMENT OF THE FLUID IN TWO OF THE TANKS WAS ONE GALLON EACH. THEREFORE, ON THE ASSUMPTION THAT EACH OF THE 270 TANKS CONTAINED ONE GALLON OF FLUID, THE PROPERTY DESCRIPTION SUBMITTED BY THE HOLDING ACTIVITY INCLUDED THE STATEMENT THAT EACH TANK CONTAINED ONE GALLON OF HYDRAULIC FLUID. THE SALES OFFICE IS PREPARING THE DESCRIPTION IN THE SALES CATALOG RELIED SOLELY ON SUCH INFORMATION.

WHILE ORDINARILY IN THE SALE OF PERSONAL PROPERTY BY DESCRIPTION THERE IS AN IMPLIED WARRANTY THAT THE PROPERTY WILL CORRESPOND TO THE DESCRIPTION, NO SUCH WARRANTY MAY BE IMPLIED WHERE, AS HERE, THE SALES CONTRACT CONTAINS AN EXPRESS DISCLAIMER OF WARRANTY. THE PURPOSE AND EFFECT OF THE DISCLAIMER OF WARRANTY PROVISIONS ARE TO IMPOSE ALL RISKS OF MISTAKE UPON THE PURCHASER. ALSO, SUCH PROVISIONS PRECLUDE A SUIT FOR DAMAGES ON THE THEORY OF MUTUAL MISTAKE. UNITED STATES V. HATHAWAY, 242 F.2D 897; AMERICAN SANITARY RAG CO. V. UNITED STATES, 142 CT.CL. 293.

FURTHERMORE, UNDER CONTRACTS SUCH AS THESE, THE BIDDER IS REQUIRED TO MAKE AN EFFECTUAL INSPECTION. THEREFORE, EVEN THOUGH ADEQUATE OR THOROUGH INSPECTION BY IMPRACTICABLE, OR EVEN IMPOSSIBLE, IN THE ABSENCE OF BAD FAITH OR FRAUD ON THE PART OF THE GOVERNMENT, A BIDDER, BY BIDDING, ASSUMES ANY LOSS WHICH MIGHT RESULT FROM A VARIANCE BETWEEN THE PROPERTY DESCRIBED IN THE INVITATION AND THE PROPERTY DELIVERED. PAXTON-MITCHELL COMPANY V. UNITED STATES, 172 F.SUPP. 463 (1959); ALLOYS CHEMICAL CORP. V. UNITED STATES, 324 F.2D 509.

SINCE THE SALES OFFICE BASED THE DESCRIPTION OF THE TANKS SOLELY ON THE ONLY AVAILABLE INFORMATION, WHICH WAS FURNISHED BY THE HOLDING ACTIVITY AND WHICH INDICATED THAT THE TANKS CONTAINED FLUID, IT IS CLEAR THAT THERE WAS NO BAD FAITH ON THE PART OF THE SALES ACTIVITY. NOR, IN VIEW OF THE FACT THAT ALL THE TANKS APPARENTLY WERE SIMILARLY PACKED, DO WE FEEL THAT THE ASSUMPTION THAT THEY ALL HELD FLUID, BASED ON THE RANDOM SAMPLING REFERRED TO, WAS SO UNREASONABLE AS TO JUSTIFY IMPUTING BAD FAITH TO THE HOLDING ACTIVITY PERSONNEL. IN THE CIRCUMSTANCES, THE BURDEN WAS ON YOU, IF IT WAS IMPORTANT THAT EACH TANK CONTAIN FLUID, TO MAKE SUCH AN INSPECTION BEFORE BIDDING AS WOULD HAVE ASSURED YOU OF THAT FACT, REGARDLESS OF INCONVENIENCE. BY FAILING TO MAKE SUCH AN INSPECTION, YOU ASSUMED THE RISK OF MISDESCRIPTION. ACCORDINGLY, THERE IS NO BASIS TO GRANT YOU RELIEF BECAUSE OF THE VARIATION BETWEEN THE DESCRIPTION IN THE INVITATION AND A PORTION OF THE PROPERTY ACTUALLY DELIVERED.