B-162195, AUG. 18, 1967

B-162195: Aug 18, 1967

Additional Materials:

Contact:

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

 

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

DOLLAR LIMITATION WAS ESTABLISHED TO PROTECT THE GOVERNMENT RATHER THAN AFFORD PROTECTION TO LESSOR IN EVENT OF ADVERSE FLUCTUATION OF EXCHANGE RATE. ALL SUBSEQUENT PAYMENTS WILL BE PAID IN THE CURRENCY OF VIETNAM AT THE LEGAL RATE OF EXCHANGE AT THE TIME OF PAYMENT. THE ANNUAL RENTAL IS 840. IN NO EVENT WILL THE ANNUAL RENTAL EXCEED $11. WAS PAID IN OCTOBER 1966. THE EXCHANGE RATE ON THE DATE THE LEASE WAS SIGNED. WHILE THE PAYMENT CLAUSE STATES THAT "ALL SUBSEQUENT PAYMENTS WILL BE PAID IN THE CURRENCY OF VIETNAM AT THE LEGAL RATE OF EXCHANGE AT THE TIME OF PAYMENT. " IT DOES NOT APPEAR THAT THE WORDING "AT THE LEGAL RATE OF EXCHANGE AT THE TIME OF PAYMENT" WAS INTENDED TO DISTURB THE LEASE OBLIGATION OF THE GOVERNMENT TO PAY ANNUAL RENTAL AT THE MONTHLY RATE OF $962 EXPRESSED IN TERMS OF VIETNAMESE CURRENCY WITHOUT REGARD TO CURRENCY RATE FLUCTUATIONS.

B-162195, AUG. 18, 1967

LEASES - OVERSEAS - FOREIGN CURRENCY FLUCTUATION DECISION TO ARMY ACCOUNTABLE OFFICER RE SUPPLEMENTAL RENTAL PAYMENT FOR LEASED PREMISES IN VIET NAM. CLAIM FOR ADVANCE ANNUAL RENTAL AT CURRENT RATE OF EXCHANGE FOR VIETNAMESE CURRENCY UNDER LEASE WHICH PROVIDES FOR PAYMENTS IN THE CURRENCY OF VIETNAM AT THE LEGAL RATE OF EXCHANGE AT TIME OF PAYMENT AND STIPULATED A FIXED MONTHLY RENTAL RATE WITHOUT REGARD TO CURRENCY RATE FLUCTUATIONS MUST BE DISALLOWED SINCE LEASE FIXED OBLIGATION OF GOVT. AND DOLLAR LIMITATION WAS ESTABLISHED TO PROTECT THE GOVERNMENT RATHER THAN AFFORD PROTECTION TO LESSOR IN EVENT OF ADVERSE FLUCTUATION OF EXCHANGE RATE.

TO MAJOR BOYETTE:

BY LETTER DATED AUGUST 2, 1967, THE OFFICE OF THE CHIEF OF FINANCE AND ACCOUNTING FORWARDED YOUR LETTER OF FEBRUARY 28, 1967, WITH ENCLOSURES, REQUESTING AN ADVANCE DECISION AS TO THE LEGAL PROPRIETY OF MAKING PAYMENT ON A VOUCHER STATED IN FAVOR OF NGUYEN VAN SANG IN THE AMOUNT OF 83,521$VN, REPRESENTING SUPPLEMENTAL RENTAL PAYMENT ALLEGED TO BE DUE UNDER LEASE NO. USARV-E-313-66, DATED SEPTEMBER 15, 1965.

UNDER THE TERMS OF THE LEASE THE GOVERNMENT AGREED TO PAY TO THE LESSOR FOR THE USE OF THE PREMISES DESCRIBED THEREIN AS FOLLOWS:

"THE MONTHLY RENTAL SHALL BE 70,000$VN THE EQUIVALENT OF $962.00 AT THE CURRENT RATE OF EXCHANGE OF 72.765 PIASTRES PER US DOLLAR, TO BE PAID IN THE CURRENCY OF VIETNAM IN FULL, IN ADVANCE THROUGH 19 SEPTEMBER 1966. ALL SUBSEQUENT PAYMENTS WILL BE PAID IN THE CURRENCY OF VIETNAM AT THE LEGAL RATE OF EXCHANGE AT THE TIME OF PAYMENT. THE ANNUAL RENTAL IS 840,000$VN. IN NO EVENT WILL THE ANNUAL RENTAL EXCEED $11,544.01.'

IN YOUR LETTER OF FEBRUARY 28, 1967, YOU STATE THAT A CLAIM FOR ADVANCE ANNUAL RENTAL PAYMENT FOR THE PERIOD OCTOBER 7, 1966, THROUGH OCTOBER 6, 1967, WAS PAID IN OCTOBER 1966, IN THE AMOUNT OF 840,000$VN (UNITED STATES DOLLAR EQUIVALENT $10,500, EXCHANGE RATE 80$VN EQUALS $1). THE VOUCHER ENCLOSED WITH YOUR LETTER REPRESENTS A CLAIM FOR THE DIFFERENCE BETWEEN 72.765$VN TO $1, THE EXCHANGE RATE ON THE DATE THE LEASE WAS SIGNED, AND 80$VN TO $1, THE CURRENT RATE. YOU STATE THAT YOUR DOUBT AS TO THE VALIDITY OF THE PAYMENT OF THE ADDITIONAL AMOUNT CLAIMED ARISES BECAUSE OF THE EXPRESSION OF THE RENTAL RATES IN BOTH THE UNITED STATES AND VIETNAMESE CURRENCIES.

THE LEASE PROVIDES FOR THE PAYMENT OF AN ANNUAL RENTAL OF 840,000$VN. WHILE THE PAYMENT CLAUSE STATES THAT "ALL SUBSEQUENT PAYMENTS WILL BE PAID IN THE CURRENCY OF VIETNAM AT THE LEGAL RATE OF EXCHANGE AT THE TIME OF PAYMENT," IT DOES NOT APPEAR THAT THE WORDING "AT THE LEGAL RATE OF EXCHANGE AT THE TIME OF PAYMENT" WAS INTENDED TO DISTURB THE LEASE OBLIGATION OF THE GOVERNMENT TO PAY ANNUAL RENTAL AT THE MONTHLY RATE OF $962 EXPRESSED IN TERMS OF VIETNAMESE CURRENCY WITHOUT REGARD TO CURRENCY RATE FLUCTUATIONS. IT WOULD SEEM THAT THE EXPRESSION OF THE THEN CURRENT RATE OF EXCHANGE (72.765$VN) CONTEMPLATED THE CONVERSION OF THE EQUIVALENT OF $11,544.01 TO 840,000$VN AS THE ANNUAL RENTAL BUT IS NOT INDICATIVE OF AN INTENT TO APPLY IN SUBSEQUENT YEARS A DEPRECIATED CURRENT EXCHANGE RATE WHICH WOULD RESULT IN AN ANNUAL PAYMENT IN EXCESS OF THE FIXED DOLLAR LIMITATION. HENCE, THE OBLIGATION OF THE GOVERNMENT UNDER THE LEASE IS DISCHARGED BY AN ANNUAL PAYMENT OF RENTAL EXPRESSED IN $VN BUT NOT TO EXCEED THE DOLLAR EQUIVALENT OF $11,554.01. ALSO, IT APPEARS THAT THE MAXIMUM DOLLAR LIMITATION OF $11,544.01 WAS ESTABLISHED FOR THE PURPOSE OF PROTECTING THE GOVERNMENT RATHER THAN AFFORDING PROTECTION TO THE LESSOR IN THE EVENT OF ADVERSE FLUCTUATIONS IN THE EXCHANGE RATE.

ACCORDINGLY, PAYMENT IS NOT AUTHORIZED AND THE VOUCHER WITH ENCLOSURES WILL BE RETAINED HERE.