B-175388, MAY 8, 1972

B-175388: May 8, 1972

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WHICH IS OPERATED BY THE UNIVERSITY OF CALIFORNIA UNDER CONTRACT WITH THE ATOMIC ENERGY COMMISSION. A CONTRACTOR IS BOUND TO THE TERMS OF THE WRITTEN AGREEMENT. TO PACIFIC ELECTRIC MOTOR CO.: THIS IS IN REPLY TO YOUR LETTER OF MARCH 1. WHICH IS OPERATED BY THE UNIVERSITY OF CALIFORNIA UNDER CONTRACT WITH THE ATOMIC ENERGY COMMISSION (AEC). THIS PROCLAMATION WAS ISSUED AFTER THE DATE OF THE SUBJECT AGREEMENT. YOU APPARENTLY INCURRED ADDITIONAL AND UNCONTEMPLATED DUTIES ON THE COPPER CONDUCTOR WHICH WAS TO BE INTEGRATED IN THE COIL PORTION OF THE MAGNETS IN THE AMOUNT OF $1. IT IS AEC'S POSITION THAT ARTICLE VII PRECLUDES PAYMENT OF YOUR CLAIM. YOUR LETTER TO THIS OFFICE STATES THAT THE CONTRACT PRICE WAS BASED UPON DUTIES AND TAXES AS THEY EXISTED AT THE TIME OF YOUR OFFER AND THAT YOU INTENDED TO INCLUDE ONLY THOSE DUTIES AND TAXES.

B-175388, MAY 8, 1972

CONTRACTS - INCREASED SUPPLEMENTAL DUTY - REQUEST FOR REIMBURSEMENT DECISION DENYING A REQUEST OF PACIFIC ELECTRIC MOTOR CO., FOR REIMBURSEMENT OF AN IMPORT SURCHARGE INCURRED IN CONNECTION WITH A CONTRACT FOR QUADRUPOLE MAGNETS AND SPARE COILS FOR THE LOS ALAMOS SCIENTIFIC LABORATORY, WHICH IS OPERATED BY THE UNIVERSITY OF CALIFORNIA UNDER CONTRACT WITH THE ATOMIC ENERGY COMMISSION. IN THE ABSENCE OF PRIOR AGREEMENT CONCERNING THE RISK OF UNANTICIPATED INCREASED DUTY, A CONTRACTOR IS BOUND TO THE TERMS OF THE WRITTEN AGREEMENT, NOTWITHSTANDING A CHANGE IN LAW BY WHICH HE INCURS ADDITIONAL EXPENSE. ACCORDINGLY, THERE EXISTS NO BASIS FOR PERMITTING PERFORMANCE AT OTHER THAN THE AGREED CONTRACT PRICE.

TO PACIFIC ELECTRIC MOTOR CO.:

THIS IS IN REPLY TO YOUR LETTER OF MARCH 1, 1972, AND ENCLOSURES, REQUESTING REIMBURSEMENT OF THE SUPPLEMENTAL DUTY (IMPORT SURCHARGE) INCURRED IN CONNECTION WITH YOUR CONTRACT FOR QUADRUPOLE MAGNETS AND SPARE COILS FOR THE LOS ALAMOS SCIENTIFIC LABORATORY (LASL), WHICH IS OPERATED BY THE UNIVERSITY OF CALIFORNIA UNDER CONTRACT WITH THE ATOMIC ENERGY COMMISSION (AEC).

FOLLOWING AUTHORIZATION BY AEC, THE UNIVERSITY PLACED AN ORDER (LTI 52141 -2) ON JUNE 30, 1971, WHICH YOU ACCEPTED ON JULY 6, 1971, FOR THE MAGNETS AND SPARE COILS.

WITH RESPECT TO DUTIABLE ARTICLES IMPORTED AFTER 12:01 A.M., AUGUST 16, 1971, PRESIDENTIAL PROCLAMATION 4074 IMPOSED A TEN PERCENT IMPORT SURCHARGE AS A PART OF THE ADMINISTRATION'S ECONOMIC STABILIZATION PROGRAM. THIS PROCLAMATION WAS ISSUED AFTER THE DATE OF THE SUBJECT AGREEMENT. AS A RESULT OF THIS SURCHARGE, YOU APPARENTLY INCURRED ADDITIONAL AND UNCONTEMPLATED DUTIES ON THE COPPER CONDUCTOR WHICH WAS TO BE INTEGRATED IN THE COIL PORTION OF THE MAGNETS IN THE AMOUNT OF $1,890.30.

AEC HAS REFUSED TO ALLOW PAYMENTS OF THE INCREASED DUTY INCURRED ON THIS ORDER, SINCE REVISED ARTICLE VII OF THE CONTRACT STATES THAT "EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE AND LOCAL TAXES AND DUTIES." SINCE THE CONTRACT CONTAINS NO EXCEPTION APPLICABLE TO IMPORT DUTIES, IT IS AEC'S POSITION THAT ARTICLE VII PRECLUDES PAYMENT OF YOUR CLAIM.

YOUR LETTER TO THIS OFFICE STATES THAT THE CONTRACT PRICE WAS BASED UPON DUTIES AND TAXES AS THEY EXISTED AT THE TIME OF YOUR OFFER AND THAT YOU INTENDED TO INCLUDE ONLY THOSE DUTIES AND TAXES. IT IS YOUR POSITION THAT ANY INCREASE IN DUTIES AFTER THE DATE OF THE QUOTATION SHOULD BE BORNE BY THE CONSUMER SINCE A SELLER CANNOT ASSUME THE RISK OF INCREASED DUTIES OR TAXES CUSTOMARILY PASSED ON TO THE PURCHASER. YOU CONTEND THAT YOU HAVE BEEN UNJUSTLY AGGRIEVED BY AEC'S POSITION WHICH YOU HAVE CHARACTERIZED AS UNWARRANTED AND ILLOGICAL.

WE HAVE REVIEWED THE PERTINENT CONTRACT DOCUMENTS AND HAVE FOUND NO EXPRESS AGREEMENT OR COMMITMENT WHATEVER ON THE PART OF EITHER CONTRACTING PARTY WITH RESPECT TO WHO WAS TO ASSUME THE RISK OF ANY UNANTICIPATED INCREASED DUTY. IN SUCH CIRCUMSTANCE WE ARE REQUIRED TO APPLY THE GENERAL FUNDAMENTAL RULE OF CONTRACT LAW THAT A CONTRACTOR IS NOT ABSOLVED FROM PERFORMANCE WHERE CIRCUMSTANCES, SUCH AS A CHANGE IN THE LAW, OCCUR AFTER THE MAKING OF A BARGAIN AND RENDER PERFORMANCE MORE EXPENSIVE THAN ANTICIPATED. SEE RESTATEMENT, CONTRACTS, SEC 467, AND PARTICULARLY THE FOURTH ILLUSTRATION WHICH INVOLVES AN INCREASED TARIFF SITUATION. ALSO, SEE 23 COMP. GEN. 957, 959 (1944). MOREOVER, CONTRACTS CANNOT BE ALTERED, BY THE COURTS OR BY THIS OFFICE, MERELY BECAUSE THEY WORK A HARDSHIP ON ONE OF THE PARTIES. 17 AM. JUR. 2D, CONTRACTS, SEC 402.

IN VIEW OF THE ABOVE, WE MUST ADVISE THAT WE FIND NO LEGITIMATE BASIS FOR RELINQUISHING THE GOVERNMENT'S RIGHT, THROUGH THE UNIVERSITY, TO OBTAIN PERFORMANCE AT THE AGREED CONTRACT PRICE.

WITH RESPECT TO YOUR CLAIM FOR REIMBURSEMENT OF THE SURCHARGE INCURRED ON PURCHASE ORDER LT 2-60971-1, WHEREIN IT APPEARS THAT THE PRICE WAS SPECIFIED AS "SUBJECT" TO THE SURCHARGE, THE REPORT FROM AEC STATES THAT YOU HAVE BEEN ADVISED SUBSEQUENT TO YOUR LETTER TO THIS OFFICE THAT PAYMENT WILL BE MADE FOR SUCH COSTS.