B-181885, DEC 17, 1974, 54 COMP GEN 497

B-181885, DEC 17, 1974, 54 COMP GEN 497

CONTRACTS - MODIFICATION - MUTUAL MISTAKE - PRICE ADJUSTMENT WHERE COMPANY'S MISTAKEN PROPOSAL TO REPAIR ROOFS WAS BASED ON MISINFORMATION GIVEN IT BY GOVERNMENT'S AGENT AND ALSO ON ITS OWN NEGLIGENCE IN NOT STUDYING BLUEPRINTS AND SPECIFICATIONS THOROUGHLY ENOUGH, THE POSITION OF THE PARTIES IS THAT OF PERSONS WHO HAVE MADE A MUTUAL MISTAKE AS TO MATERIAL FACT AND CONTRACT MAY BE REFORMED TO ALLOW ADDITONAL COMPENSATION FOR REPAIRING CORRECT CONTRACT AREA.

IN THE MATTER OF MORGAN ROOFING COMPANY, DECEMBER 17, 1974:

BY LETTER OF JULY 18, 1974, THE SUPPLY SERVICE DIRECTOR OF THE VETERANS ADMINISTRATION'S (VA'S) DEPARTMENT OF MEDICINE AND SURGERY RECOMMENDED THAT WE GRANT RELIEF TO THE MORGAN ROOFING COMPANY (MORGAN) FOR A MISTAKE MADE IN ITS PROPOSAL ON A JOB TO REPAIR AND REPLACE ROOFS AND FLASHINGS OF SEVERAL BUILDINGS AT THE VA HOSPITAL IN LAKE CITY, FLORIDA. THE RELIEF SOUGHT IS AN INCREASE OF $5,000 IN THE CONTRACT PRICE.

MORGAN WAS AWARDED CONTRACT 594C-219 ON JANUARY 30, 1974, AT ITS PROPOSED PRICE OF $18,500. THE ONLY OTHER PROPOSAL WAS $45,498 AND THE GOVERNMENT ESTIMATE FOR THE JOB WAS $27,263. CONSEQUENTLY, MORGAN WAS REQUESTED TO REVIEW ITS OFFER AND TO SUBMIT A BREAKDOWN OF MATERIALS AND THEIR COSTS WHICH IT DID IN WRITING ON JANUARY 18, 1974.

MORGAN CLAIMS THAT PRIOR TO SUBMISSION OF ITS PROPOSAL, THE GOVERNMENT AGENT WHO SHOWED MORGAN'S REPRESENTATIVE THE JOB SITE INDICATED TO ITS REPRESENTATIVE THAT THE JOB MORGAN WAS SUBMITTING A PROPOSAL ON DID NOT INCLUDE ANY WORK ON CERTAIN ROOF AREAS KNOWN AS "PENTHOUSES". HOWEVER, ACCORDING TO THE BLUEPRINTS AND SPECIFICATIONS FOR THE JOB, WHICH THE COMPANY HAD IN ITS POSSESSION BUT APPARENTLY DID NOT STUDY THOROUGHLY ENOUGH, THE JOB DID INCLUDE WORK ON THE "PENTHOUSES".

IN SPITE OF MORGAN'S CONTRIBUTORY NEGLIGENCE, THE RULE APPLIED IN MATTER OF CRAWFORD PAINT COMPANY, B-182257, NOVEMBER 20, 1974, AND IN B 159064, MAY 11, 1966, TO RELIEVE THE CONTRACTORS INVOLVED IN THOSE CASES, APPLIES TO THE INSTANT CASE WITH LIKE EFFECT. A STATEMENT OF THE RULE APPEARS IN B-159064 AS FOLLOWS:

IT HAS BEEN HELD THAT WHERE, IN CONNECTION WITH A GOVERNMENT CONTRACT, THE GOVERNMENT APPARENTLY NEGLIGENTLY MISSTATED A MATERIAL FACT AND THEREBY MISLED THE PLAINTIFF TO ITS DAMAGE, AND WHERE THE PLAINTIFF WAS NEGLIGENT IN NOT DISCOVERING THE MISSTATEMENT AND ASCERTAINING FOR ITSELF WHAT THE FACTS WERE BEFORE SUBMITTING ITS BID, THE POSITION OF THE PARTIES IS THAT OF PERSONS WHO HAVE MADE A MUTUAL MISTAKE AS TO A MATERIAL FACT RELATING TO THE CONTRACT AND THE COURT SHOULD THEREFORE, IN EFFECT, REFORM THE CONTRACT BY PUTTING THEM IN THE POSITION THEY WOULD HAVE OCCUPIED BUT FOR THE MISTAKE. VIRGINIA ENGINEERING CO., INC. V. THE UNITED STATES, 101 CT. CL. 516. THE GENERAL RULE IS THAT A CONTRACT MADE THROUGH MUTUAL MISTAKE AS TO MATERIAL FACTS MAY EITHER BE RESCINDED OR REFORMED. SEE 12 AM. JUR., CONTRACTS, SEC. 126 AND 17 C.J.S., CONTRACTS, SEC. 144. FURTHER, IT IS AN ADDITIONAL RULE THAT MISTAKE ON ONE SIDE AND MISREPRESENTATION, WHETHER WILLFUL OR ACCIDENTAL, ON THE OTHER, CONSTITUTE A GROUND FOR REFORMATION WHERE THE PARTY MISLED HAS RELIED ON THE MISREPRESENTATION OF THE PARTY SEEKING TO BIND HIM. 76 C.J.S., REFORMATION OF INSTRUMENTS, SECTION 29. RESTITUTION IN THESE CIRCUMSTANCES MAY BE OBTAINED ON THE PREMISE THAT IT WOULD BE UNJUST TO ALLOW ONE WHO MADE THE MISREPRESENTATION, THOUGH INNOCENTLY, TO RETAIN THE FRUITS OF A BARGAIN WHICH WAS INDUCED, IN WHOLE OR IN PART, BY SUCH MISREPRESENTATION. SEE WILLISTON ON CONTRACTS, REV. ED., SECTIONS 1500 AND 1509 AND THE CASES THEREIN CITED. ***

AT THE PRESENT TIME MORGAN ROOFING HAS NEARLY COMPLETED THE CONTRACT. EVEN WITH THE ADDITION OF $5,000 TO THE CONTRACT PRICE MORGAN WILL BE RECEIVING AN AMOUNT OF MONEY FAR BELOW THAT OF THE ONLY OTHER PROPOSAL ON THE JOB, AND ALSO BELOW THE GOVERNMENT'S ESTIMATE. THEREFORE, AS ADMINISTRATIVELY RECOMMENDED, CONTRACT 594C-219 MAY BE REFORMED SO AS TO INCREASE THE PRICE TO BE PAID THE MORGAN ROOFING COMPANY BY $5,000.