B-35053, JUNE 25, 1943, 22 COMP. GEN. 1127

B-35053, JUNE 25, 1943, 22 COMP. GEN. 1127

CONTRACTS - DEFAULTING CONTRACTORS - EXCESS COST LIABILITY FOR PURCHASES ELSEWHERE THE MERE FACT THAT, UNDER A CONTRACT FOR THE FURNISHING OF MEAT SUPPLIES, THE SPECIFIED MEAT ITEMS COULD NOT BE OBTAINED IN THE OPEN MARKET FOR DELIVERY ON THE REQUIRED DATE DOES NOT PER SE CONSTITUTE AN "UNFORESEEABLE" CAUSE FOR FAILURE TO DELIVER SO AS TO EXCUSE CONTRACT PERFORMANCE, AND, IN THE ABSENCE OF A SHOWING THAT CONDITIONS WERE SO ABNORMAL, EXTRAORDINARY, OR UNUSUAL THAT THEY COULD NOT HAVE BEEN ANTICIPATED OR FORESEEN AT THE TIME THE CONTRACT WAS FORMULATED, THE CONTRACTOR IS CHARGEABLE WITH THE EXCESS COST OF OBTAINING ACCEPTABLE SUBSTITUTE SUPPLIES ELSEWHERE. WHERE A CONTRACTOR IS LIABLE IN DAMAGES TO THE GOVERNMENT FOR FAILURE TO DELIVER SPECIFIED MEAT SUPPLIES WHICH COULD NOT BE OBTAINED ON THE MARKET FOR DELIVERY ON THE REQUIRED DATE, THE CONTRACTOR'S LIABILITY IS MEASURED BY THE DIFFERENCE BETWEEN THE ACTUAL COST OF ACCEPTABLE SUBSTITUTE SUPPLIES OF A DIFFERENT KIND--- WHICH THE CONTRACTOR WAS NOT PREPARED TO FURNISH--- PURCHASED IN THE OPEN MARKET AND THE COST WHICH WOULD HAVE BEEN INCURRED HAD THE CONTRACTOR FURNISHED THE SAME QUANTITY OF SUPPLIES CALLED FOR BY THE CONTRACT.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, JUNE 25, 1943:

I HAVE YOUR LETTER OF JUNE 10, 1943, WITH REFERENCE TO THE PARTIAL DEFAULT OF THE MCKINLEY MEAT AND POULTRY CORPORATION, UNDER ITS UNNUMBERED CONTRACT, DATED OCTOBER 27, 1942, PROVIDING FOR DELIVERY OF CERTAIN ITEMS OF MEAT TO THE VETERANS' ADMINISTRATION FACILITY, BRONX, NEW YORK, DURING THE MONTH OF NOVEMBER, 1942, IN ACCORDANCE WITH QUANTITIES AND DELIVERY DATES TO BE SPECIFIED IN SUBSEQUENT PURCHASE ORDERS.

IT APPEARS FROM YOUR LETTER AND THE FILE SUBMITTED THEREWITH THAT DELIVERY OF 850 POUNDS OF FRESH, CHILLED, CHOICE GRADE, LAMB SHOULDERS, AT $0.29 PER POUND, LESS ONE-HALF OF ONE PERCENT DISCOUNT FOR PAYMENT WITHIN 10 DAYS, WAS NOT ACCOMPLISHED ON NOVEMBER 20, 1942, AS REQUIRED BY A PURCHASE ORDER DULY ISSUED UNDER THE CONTRACT, FOR THE REASON THAT, AS ALLEGED BY THE NTRACTOR,"THE ITEM WAS UNOBTAINABLE ON THE MARKET; " AND THAT, CONSEQUENTLY, AN EMERGENCY PURCHASE OF 827 POUNDS OF PORK LOINS AT $0.31 1/4 PER POUND WAS MADE FROM ARMOUR AND COMPANY. IT APPEARS FURTHER THAT, IN RESPONSE TO AN INQUIRY AS TO THE AVAILABILITY OF LAMB SHOULDERS ON NOVEMBER 20, 1942, THE UNITED STATES DEPARTMENT OF AGRICULTURE, BY LETTER DATED APRIL 5, 1943, ADVISED YOUR ADMINISTRATION AS FOLLOWS:

ACCORDING TO OUR MARKET REPORTS OF THIS DATE, THE SUPPLY OF WESTERN DRESSED LAMB WAS CLEANED UP AN EARLY HOUR WITH MOST ORDERS ONLY PARTIALLY FILLED. LOCAL SLAUGHTER WAS OF LIBERAL PROPORTIONS ON NOVEMBER 19TH, WITH SUPPLIES FROM THIS DAY'S KILL AVAILABLE ON NOVEMBER 20.

HOWEVER, THE SUPPLY OF KOSHER FORESADDLES APPEARED TO BE INSUFFICIENT FOR DEMAND; THEREFORE, THE SUPPLY OF SHOULDERS (WHICH ARE PRODUCED FROM FORESADDLES), AVAILABLE TO THE GENERAL TRADE, APPEARED TO BE SCANT.

THIS OFFICE CARRIES NO PRICE QUOTATIONS FOR LAMB SHOULDERS ON OUR MEAT TRADE REPORTS. ON NOVEMBER 20, 1942 THERE WAS NO UNIFORM MARKET ON LAMB SHOULDERS IN THE NEW YORK MARKET. WE ARE UNABLE, THEREFORE, TO FURNISH YOU THE MARKET PRICE OF THIS CUT. ALSO, IT APPEARS FROM THE " SUPPLY OFFICER-S" MEMORANDUM DATED APRIL 23, 1943, THAT FIVE DEALERS WHO WERE CONTACTED IMMEDIATELY UPON THE DEFAULT OF THE CONTRACTOR WERE UNABLE TO SUBMIT BIDS ON LAMB SHOULDERS DUE TO THE FACT THAT THERE WERE NONE AVAILABLE AT THAT TIME.

IN VIEW OF THE FACTS THUS SET FORTH AND THE PROVISIONS OF PARAGRAPH 4 OF THE CONDITIONS FORMING A PART OF THE CONTRACT, YOUR LETTER REQUESTS A DECISION AS TO WHETHER THE INCREASED COST INCURRED BY THE UNITED STATES AS A RESULT OF THE DEFAULT SHOULD BE CHARGED AGAINST THE CONTRACTOR'S ACCOUNT, AND, IF SO, ON WHAT BASIS THE SAID INCREASED COST SHOULD BE COMPUTED.

PARAGRAPH 4 OF THE CONTRACT CONDITIONS PROVIDES IN PERTINENT PART FOR THE PURCHASE OF ANY OR ALL OF THE ITEMS OF MEAT COVERED BY THE CONTRACT FROM ANOTHER SOURCE UPON THE CONTRACTOR'S REFUSAL OR FAILURE TO FURNISH THE SAME WITHIN THE TIME SPECIFIED, AND FOR CHARGING THE CONTRACTOR WITH THE RESULTING EXCESS COST UNLESS THE FAILURE TO DELIVER IN A PARTICULAR INSTANCE SHOULD BE FOUND TO BE DUE TO:

* * * UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, UNUSUALLY SEVERE WEATHER * * *.

THE MERE FACT THAT GOODS CANNOT BE OBTAINED IN THE OPEN MARKET AT THE TIME AND PLACE OF DELIVERY DOES NOT PER SE CONSTITUTE AN UNFORESEEABLE CAUSE FOR FAILURE TO DELIVER WITHIN THE MEANING OF THE ABOVE-QUOTED PROVISION OF THE CONTRACT. ON THE CONTRARY, IT IS A FAMILIAR RULE THAT WHEN A PARTY ENTERS INTO A CONTRACT FOR THE SALE OF GOODS IT IS INCUMBENT UPON HIM TO HAVE ON HAND THE GOODS NECESSARY TO PERFORMANCE, OR PROPER COMMITMENTS WHICH WILL ENABLE HIM TO FURNISH THE GOODS WHEN AND WHERE REQUIRED. THIS BEING TRUE, THE CONTRACTOR'S INABILITY TO PROCURE THE LAMB SHOULDERS FOR DELIVERY ON NOVEMBER 20, 1942, COULD NOT BE SAID TO BE UNFORESEEABLE, UNLESS SHOWN BY APPROPRIATE EVIDENCE TO HAVE BEEN CAUSED BY CONDITIONS SO ABNORMAL, EXTRAORDINARY, OR UNUSUAL THAT THEY REASONABLY COULD NOT HAVE BEEN ANTICIPATED OR FORESEEN AT THE TIME THE CONTRACT WAS FORMULATED. NO SUCH EVIDENCE HAS BEEN MADE A PART OF THE PRESENT RECORD.

FURTHERMORE, UNDER THE SPECIAL CIRCUMSTANCES INVOLVED IN THIS PARTICULAR CASE THE FACT THAT REPLACEMENT MAY HAVE BEEN MADE BY THE PURCHASE OF A DIFFERENT ITEM OF MEAT THAN THAT CALLED FOR BUT NOT DELIVERED UNDER THE CONTRACT DOES NOT NECESSARILY DEPRIVE THE GOVERNMENT OF ITS RIGHT TO RECOVER ITS ACTUAL DAMAGES WHICH ARE DIRECTLY ATTRIBUTABLE TO THE DEFAULT. FROM THE VERY CHARACTER OF PARAGRAPH 4 OF THE CONTRACT CONDITIONS THE CONTRACTOR MANIFESTLY HAD NOTICE THAT DAMAGES SUCH AS THOSE IN QUESTION WOULD BE REGARDED AS THE PROXIMATE AND NATURAL CONSEQUENCE OF ITS INABILITY TO PERFORM ANY PART OF THE CONTRACT. MOREOVER, WHILE IT IS WELL ESTABLISHED THAT IN AN ACTION FOR BREACH OF CONTRACT FOR THE SALE OF GOODS THE MEASURE OF DAMAGES FOR NONDELIVERY IS THE DIFFERENCE BETWEEN THE MARKET PRICE AND THE CONTRACT PRICE OF THE GOODS, IT IS EQUALLY AS WELL ESTABLISHED THAT WHERE THERE IS NO MARKET PRICE FOR THE GOODS OR THE SAME ARE OUT OF THE MARKET AND UNOBTAINABLE, THE INCREASED EXPENSE ARISING BY REASON OF THE PURCHASER BEING COMPELLED TO SECURE THE BEST AVAILABLE SUBSTITUTE OF A DIFFERENT KIND OR QUALITY MAY BE ACCEPTED AS THE PROPER MEASURE OF DAMAGES. TRI-BULLION SMELTING AND DEVELOPMENT CO. V. JACOBSEN, 233 FED. 646; HARDWOOD LUMBER CO. V. ADAM, 134 GA. 821, 32 L.R.A. ( NS) 192; ALSO, SEE 55 C.J. 1175, AND 2 WILLISTON ON SALES 1478 (SECTION 599). IT APPEARS FROM THE RECORD THAT THIS CONTRACTOR WAS NOT PREPARED TO FURNISH PORK LOINS OR ANY OTHER SUBSTITUTE ACCEPTABLE TO THE DIETARY DEPARTMENT OF THE HOSPITAL.

ACCORDINGLY, APPROPRIATE STEPS SHOULD BE TAKEN TO COLLECT FROM THE CONTRACTOR AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE ACTUAL COST OF THE 827 POUNDS OF PORK LOINS PURCHASED IN THE OPEN MARKET AND THE COST WHICH WOULD HAVE BEEN INCURRED BY THE GOVERNMENT HAD THE SAME NUMBER OF POUNDS OF LAMB SHOULDERS BEEN SUPPLIED UNDER THE CONTRACT AND PAYMENT AT THE AGREED PRICE HAD BEEN MADE THEREFOR WITHIN THE 10-DAY DISCOUNT PERIOD OFFERED.