B-182062, APR 25, 1975

B-182062, APR 25, 1975

WHERE CONTRACTOR ASKS FOR RECONSIDERATION OF THE PART OF SETTLEMENT BY TRANSPORTATION AND CLAIMS DIVISION WHICH DISALLOWED CLAIM FOR REIMBURSEMENT OF $7,224 IN FET AND $1,172 IN INTEREST ON TWO CONTRACTS WHERE PERFORMANCE AND PAYMENT ARE COMPLETE ON GROUND OF MUTUAL MISTAKE, THAT SETTLEMENT IS UPHELD. THEORY OF MUTUAL MISTAKE REQUIRES CLEAR SHOWING OF MISTAKE BY BOTH PARTIES WITH BURDEN ON PARTY SEEKING REFORMATION TO OVERCOME PRESUMPTION THAT WRITTEN CONTRACT IS CORRECT. HEREIN, CONTRACTOR FAILED TO MEET BURDEN OF DEMONSTRATING MUTUAL MISTAKE.

TELEDYNE CONTINENTAL MOTORS:

TELEDYNE CONTINENTAL MOTORS (TELEDYNE) REQUESTED RECONSIDERATION OF THAT PART OF A SETTLEMENT BY OUR TRANSPORTATION AND CLAIMS DIVISION, DATED APRIL 10, 1974, WHICH DISALLOWED ITS CLAIMS FOR REIMBURSEMENT OF $7,224.71 IN FEDERAL EXCISE TAX (FET), AND $1,172.56 IN INTEREST RETROACTIVELY IMPOSED ON TELEDYNE BY THE INTERNAL REVENUE SERVICE FOR CALENDAR YEAR 1969. THE CLAIMS ARE CONCERNED WITH TWO SEPARATE CONTRACTS BUT THE ISSUES PRESENTED IN EACH ARE SIMILAR.

IN RESPONSE TO THE GOVERNMENT'S REQUEST FOR QUOTATION (RFQ) NO. R 4161, ISSUED BY THE DEFENSE SUPPLY AGENCY (DSA), DEFENSE CONSTRUCTION SUPPLY CENTER, COLUMBUS, OHIO, TELEDYNE SUBMITTED A QUOTATION WHICH SPECIFICALLY STATED THAT FET WAS NOT INCLUDED IN THE QUOTED PRICE.

CONTRACT NO. DSA 700-69-C-9069, AWARDED TO TELEDYNE AS A RESULT OF ITS QUOTATION, INCORPORATED ADDITIONAL GENERAL PROVISIONS AND ALTERATIONS TO GENERAL PROVISIONS, STANDARD FORM 32, JUNE 1964 EDITION (SUPPLY CONTRACT), DSA FORM 222, NOVEMBER 1964. CLAUSE NO. 23 THEREOF, "FEDERAL, STATE AND LOCAL TAXES (AUGUST 1961)", PROVIDES IN PERTINENT PART:

"(A) EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE, AND LOCAL TAXES AND DUTIES."

AFTER PERFORMANCE WAS COMPLETED AND FINAL PAYMENT HAD BEEN MADE BY THE DSA, THE INTERNAL REVENUE SERVICE QUESTIONED THE NONPAYMENT OF FET FOR VARIOUS CONTRACTS INCLUDING CONTRACT NO. DSA 700-69-C-9069 AND REQUIREMENTS CONTRACT NO. DSA 700-67-D-0107 (DISCUSSED BELOW) AND DETERMINED THAT FET WAS APPLICABLE, WAS NOT INCLUDED IN THE UNIT PRICE, AND THAT PAYMENT WAS DUE THE GOVERNMENT.

TELEDYNE PAID THE IRS $4,385.52 FET AND $725.64 INTEREST FOR CONTRACT NO. DSA 700-69-C-9069 AND $2,839.19 FET AND $461.03 INTEREST FOR CONTRACT NO. DSA 700-67-D-0107; IT SUBSEQUENTLY UNSUCCESSFULLY SOUGHT REIMBURSEMENT OF THIS AMOUNT FROM DSA. BY LETTER TO DSA DATED MARCH 19, 1973, TELEDYNE REQUESTED THAT OUR OFFICE CONSIDER ITS REQUEST FOR REIMBURSEMENT FOR FET AND INTEREST PAID BY IT ON THE CONTRACTS.

TELEDYNE BASES ITS CLAIM FOR REIMBURSEMENT ON THE THEORY OF MUTUAL MISTAKE, STATING:

"THERE CERTAINLY IS EVIDENCE OF LACK OF MUTUALITY OF INTENT AND MISTAKE WHICH COULD HAVE BEEN CORRECTED UNDER THE CONTRACT HAD THE CONTRACTING OFFICER HAD AUTHORITY TO REFORM THE CONTRACTS AT THE TIME THE INEQUITY TRANSPIRED. YOUR ATTENTION IS INVITED TO THE DEFENSE SUPPLY AGENCY CONTRACTING OFFICER'S LETTER RECEIVED BY TELEDYNE CONTINENTAL MOTORS ON NOVEMBER 30, 1972 WHEREIN THE CONTRACTING OFFICER STATED, AMONG OTHER THINGS, THAT 'THIS ARGUMENT WOULD PROVIDE A BASIS FOR REFORMATION OF THE SUBJECT CONTRACTS ON GROUND OF MUTUAL MISTAKE, EXCEPT FOR THE FACT OF FINAL PAYMENT, AS STATED IN OUR LETTER OF 16 AUGUST 1972.'"

WE DISALLOWED PAYMENT ON CONTRACT NO. DSA 700-69-C-9069 AND ALLOWED PARTIAL PAYMENT OF $61.60 ON CONTRACT NO. DSA 700-67-D-0107. WE FOUND THAT CONTRACT NO. DSA 700-69-C-9069 INCORPORATED BY REFERENCE THE STANDARD TAX CLAUSE QUOTED ABOVE, AND SINCE THIS AGREEMENT WAS COMPLETE AND UNAMBIGUOUS ON ITS FACE, IT WAS THE FINAL MEMORIAL OF THE CONTRACT, TELEDYNE'S QUOTATION EXCLUDING FET NOTWITHSTANDING. ADDITIONALLY, SINCE THE CONTRACT CLEARLY INCLUDED THE STANDARD TAX CLAUSE, THE GOVERNMENT HAD NO CONTRACTUAL OBLIGATION TO PAY RETROACTIVELY IMPOSED FET.

DESPITE THE CONTRACTING OFFICER'S STATEMENT TO TELEDYNE TO THE EFFECT THAT A BASIS FOR REFORMATION OF THE CONTRACT BASED ON MUTUAL MISTAKE WOULD EXIST IF NOT FOR FINAL PAYMENT (QUOTED, SUPRA), WE DO NOT AGREE THAT THE RECORD BEFORE US REFLECTS A MUTUAL MISTAKE.

AS THE TERM IMPLIES, MUTUAL MISTAKE REQUIRES A MISTAKE ON THE PART OF BOTH PARTIES. IN THE INSTANT CASE THE REPORT AND RECOMMENDATIONS OF THE CONTRACTING OFFICER SHOW THAT INCLUSION OF THE STANDARD TAX CLAUSE BY REFERENCE IN THE SUBJECT CONTRACT WAS DELIBERATE ON THE PART OF DSA AND THAT IT WAS TELEDYNE'S ASSUMPTION AND NOT THE GOVERNMENT'S, THAT FET WAS INAPPLICABLE TO THE CONTRACT.

IN OUR DECISION B-177859, APRIL 20, 1973, WE STATED:

"*** THERE IS A STRONG PRESUMPTION OF LAW THAT A WRITTEN INSTRUMENT WAS CAREFULLY PREPARED AND EXECUTED, THAT THE PARTIES KNEW AND UNDERSTOOD ITS CONTENTS, AND THAT IT SETS FORTH FULLY AND CORRECTLY, THEIR FINAL AGREEMENT. THUS, THE BURDEN IS ON THE PARTY SEEKING REFORMATION TO PRODUCE EVIDENCE SUFFICIENT TO OVERCOME SUCH A PRESUMPTION. ***

"IN ORDER TO ESTABLISH A MUTUAL MISTAKE, THE EVIDENCE MUST BE OF THE CLEAREST AND MOST SATISFACTORY CHARACTER - PROOF THAT IS CONVINCING BEYOND REASONABLE CONTROVERSY. THE EVIDENCE MUST SHOW CONCLUSIVELY THAT A MISTAKE WAS MADE, WHAT IT CONSISTED OF AND HOW IT OCCURRED SO AS TO LEAVE NO ROOM FOR DOUBT THAT THERE WAS IN FACT A BONA FIDE MUTUAL MISTAKE. ***"

AS IN THAT DECISION, WE DO NOT BELIEVE THAT TELEDYNE HAS SUFFICIENTLY REBUTTED THAT PRESUMPTION; THE RECORD DOES NOT SUPPORT TELEDYNE'S ASSERTION OF MUTUAL MISTAKE.

AS NOTED ABOVE, TELEDYNE'S CLAIM FOR REIMBURSEMENT FOR FET ALSO INCLUDED REQUIREMENTS CONTRACT NO. DSA 700-67-D-0107 AND SEVEN DELIVERY ORDERS THEREUNDER. THE CONTRACT WAS FOR THE SUPPLY OF REPLACEMENT PARTS AND/OR COMPONENTS FOR EQUIPMENT SPECIALLY DESIGNED AND MANUFACTURED BY OR FOR (TELEDYNE) CONTINENTAL MOTORS CORPORATION. IT ALSO INCORPORATED THE STANDARD TAX CLAUSE 23, QUOTED ABOVE. AMONG THE PROVISIONS OF THE CONTRACT WERE THE FOLLOWING:

"ARTICLE II

"UNLISTED PARTS

"A. DURING THE EFFECTIVE PERIOD OF THIS CONTRACT, THE GOVERNMENT WILL DEVELOP REQUIREMENTS FOR MANY ITEMS OF REPLACEMENT PARTS INCLUDING ENGINES WHICH ARE NOT LISTED IN THE AFORESAID PRICE LISTS. *** REQUIREMENTS WITHIN THE PURVIEW OF THIS ARTICLE WILL BE NEGOTIATED UNDER 10 U.S.C. 2304 /A/ /10/ UNLESS OTHERWISE INDICATED IN THE ORDER AND WILL BE PROCURED IN ACCORDANCE WITH THE PROCEDURE SET FORTH BELOW.

"B. NEGOTIATION: THE PARTIES WILL NEGOTIATE FOR SUCH ITEMS THE PRICES, COST OF PRESERVATION, PACKAGING, PACKING AND MARKING, AND THE TIME OF DELIVERY, EITHER BY TELEPHONE OR BY WRITTEN COMMUNICATION. IN ALL CASES, THE CONTRACTOR WILL FURNISH THE GOVERNMENT A WRITTEN OFFER /TWX OR LETTER/ WHICH WILL BE OPEN FOR ACCEPTANCE FOR A PERIOD OF 60 DAYS AFTER RECEIPT BY THE GOVERNMENT, UNLESS OTHERWISE SPECIFIED BY THE CONTRACTOR. ***

"D. IF DELIVERY ORDERS ISSUED BY THE GOVERNMENT FOR SUPPLIES PURSUANT TO THE PROVISIONS OF THIS CLAUSE DO NOT PROPERLY REFLECT THE NEGOTIATIONS OF THE PARTIES OR ARE OTHERWISE INCONSISTENT WITH THE TERMS OF THE CONTRACT, THE CONTRACTOR MUST REJECT THE DELIVERY ORDER WITHIN FORTY-FIVE /45/ DAYS AFTER RECEIPT THEREOF STATING REASONS FOR REJECTION, OTHERWISE, THE SUPPLIES OR SERVICES AS SET FORTH IN THE ORDER WILL BE FURNISHED AS STATED THEREIN."

ALTHOUGH IN ALL OF ITS QUOTATIONS UNDER ARTICLE II, TELEDYNE CLEARLY STATED THAT FET WAS NOT INCLUDED IN ITS PRICE, ALL BUT ONE OF THE GOVERNMENT'S DELIVERY ORDERS DID NOT MENTION FET.

WE DISALLOWED ALL BUT $61.60 OF TELEDYNE'S CLAIM OF $3,238.62, FINDING THAT ONLY DELIVERY ORDER NO. DSA 700-67-D-0107-0237 MADE ANY PROVISION FOR A CONTINGENT EXCISE TAX. (THIS DELIVERY ORDER STATES IN BLOCK 19: "FET NOT INCLUDED".) IN DENYING THE REST OF TELEDYNE'S CLAIM WE NOTED THAT UNDER THE SPECIAL TERMS AND CONDITIONS OF THE CONTRACT, TELEDYNE HAD 45 DAYS AFTER RECEIPT OF A DELIVERY ORDER TO REJECT THE ORDER IF IT DID NOT PROPERLY REFLECT THE NEGOTIATIONS OF THE PARTIES. BY FAILING TO REJECT RELEVANT DELIVERY ORDERS WITHIN THIS PERIOD, TELEDYNE WAS OBLIGATED TO PERFORM IN ACCORDANCE WITH THE CONTRACT TERMS.

EACH OF THE DELIVERY ORDERS IN QUESTION WAS ENTERED INTO PURSUANT TO CONTRACT NO. DSA 700-67-D-0107 AND EACH CLEARLY REFERENCED THE ABOVE CONTRACT NUMBER IN THE UPPER LEFT CORNER OF THE DOCUMENT. AS NOTED ABOVE, THIS CONTRACT INCLUDED THE STANDARD TAX CLAUSE WHICH STATED THAT ALL APPLICABLE FEDERAL, STATE, AND LOCAL TAXES WERE INCLUDED IN THE CONTRACT PRICE. IT IS THIS WRITTEN CONTRACT WHICH REPRESENTS THE FINAL MEMORIAL OF THE AGREEMENT. PRELIMINARY NEGOTIATIONS OR QUOTATIONS ARE MERGED THEREIN.

MOREOVER, TELEDYNE TOOK NO ACTION UNDER ARTICLE II D OF THE SPECIAL TERM AND CONDITIONS OF THE CONTRACT, WHICH GAVE TELEDYNE 45 DAYS FROM RECEIPT OF A DELIVERY ORDER TO REJECT IT IF IT DID NOT PROPERLY REFLECT NEGOTIATIONS. UNDER THESE CIRCUMSTANCES WE REMAIN OF THE OPINION THAT TELEDYNE WAS OBLIGATED TO PERFORM IN ACCORDANCE WITH PROVISIONS OF THE CONTRACT, INCLUDING THE PROVISION THAT INCLUDED FET IN THE CONTRACT PRICE. WE DO NOT FEEL THAT THE RECORD REFLECTS A MUTUAL MISTAKE WITH REGARD TO THE SUBJECT CONTRACT.

WITH REGARD TO TELEDYNE'S CLAIM FOR INTEREST, "IT IS WELL SETTLED THAT SUCH PAYMENT MAY NOT BE MADE EXCEPT WHEN INTEREST IS PROVIDED FOR IN LEGAL AND PROPER CONTRACTS OR WHEN ALLOWANCE OF INTEREST IS SPECIFICALLY DIRECTED BY STATUTE." 53 COMP. GEN. 824, 829 (1974) AND CASES CITED THEREIN. THE INSTANT CONTRACT DID NOT PROVIDE FOR INTEREST AND WE CAN FIND NO STATUTE WHICH SPECIFICALLY DIRECTS THE PAYMENT OF INTEREST.

ACCORDINGLY, THE PRIOR DISALLOWANCE OF TELEDYNE'S CLAIM IS SUSTAINED.