B-63355, JUNE 5, 1947, 26 COMP. GEN. 899

B-63355: Jun 5, 1947

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CONTRACTS - REFORMATION - MUTUAL MISTAKE IN THE ABSENCE OF A STATEMENT FROM THE CONTRACTING OFFICER WHO SIGNED A CONSTRUCTION CONTRACT THAT HIS INTENTION WAS OTHER THAN THAT EXPRESSED IN THE CONTRACT AS WRITTEN. THE CONTRACT MAY NOT BE REFORMED TO INSERT A PRICE ADJUSTMENT CLAUSE ON THE BASIS THAT IN REDUCING THE AGREEMENT TO WRITING SUCH CLAUSE WAS OMITTED BY MUTUAL MISTAKE AND. WHO CONDUCTED THE PRELIMINARY NEGOTIATIONS BUT WERE NOT PARTIES TO THE CONTRACT. 1947: REFERENCE IS MADE TO YOUR LETTER OF APRIL 4. WHEREIN YOU WERE ADVISED THAT. REFORMATION OF THE CONTRACT WAS NOT AUTHORIZED. THERE IS QUOTED A PARAGRAPH FROM THE INVITATION FOR BIDS AS FOLLOWS: IF AN ITEM OF MATERIAL. IS SUBJECT TO SUCH CONTROL BY GOVERNMENT AGENCIES AS TO RENDER IT LIABLE TO FLUCTUATIONS IN PRICE OR AVAILABILITY.

B-63355, JUNE 5, 1947, 26 COMP. GEN. 899

CONTRACTS - REFORMATION - MUTUAL MISTAKE IN THE ABSENCE OF A STATEMENT FROM THE CONTRACTING OFFICER WHO SIGNED A CONSTRUCTION CONTRACT THAT HIS INTENTION WAS OTHER THAN THAT EXPRESSED IN THE CONTRACT AS WRITTEN, THE CONTRACT MAY NOT BE REFORMED TO INSERT A PRICE ADJUSTMENT CLAUSE ON THE BASIS THAT IN REDUCING THE AGREEMENT TO WRITING SUCH CLAUSE WAS OMITTED BY MUTUAL MISTAKE AND, THEREFORE, THE CONTRACT DID NOT EXPRESS THE ACTUAL AGREEMENT OF THE PARTIES; AND STATEMENTS BY OFFICERS IN CHARGE OF CONSTRUCTION, WHO CONDUCTED THE PRELIMINARY NEGOTIATIONS BUT WERE NOT PARTIES TO THE CONTRACT, MAY NOT BE ACCEPTED IN LIEU OF SUCH STATEMENT.

ACTING COMPTROLLER GENERAL YATES TO THE SECRETARY OF THE NAVY, JUNE 5, 1947:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 4, 1947, REQUESTING RECONSIDERATION OF DECISION DATED MARCH 26, 1947, B-63355, WHEREIN YOU WERE ADVISED THAT, SINCE THE RECORD THEN BEFORE THIS OFFICE CONTAINED NO STATEMENT BY THE CONTRACTOR OR BY THE CONTRACTING OFFICER THAT CONTRACT NO. NOY-6185, DATED JULY 22, 1943, WITH HARWOOD-NEBEL CONSTRUCTION COMPANY, DID NOT EXPRESS THE ENTIRE INTENTION AND UNDERSTANDING OF THE PARTIES THERETO, REFORMATION OF THE CONTRACT WAS NOT AUTHORIZED.

IN THE LETTER OF APRIL 4, 1947, THERE IS QUOTED A PARAGRAPH FROM THE INVITATION FOR BIDS AS FOLLOWS:

IF AN ITEM OF MATERIAL, WHICH CONSTITUTES AN IMPORTANT ITEM OF COST IN THE CONTRACT, IS SUBJECT TO SUCH CONTROL BY GOVERNMENT AGENCIES AS TO RENDER IT LIABLE TO FLUCTUATIONS IN PRICE OR AVAILABILITY, YOU SHALL FURNISH TO THE PUBLIC WORKS OFFICER, MARINE BARRACKS, QUANTICO, VA., DETAILED FIGURES UPON WHICH YOUR ESTIMATE IS BASED, TOGETHER WITH THE TYPE OF MATERIAL IN QUESTION. IN THIS EVENT A PROVISION WILL BE INSERTED IN THE CONTRACT TO PERMIT ADJUSTMENT OF PRICES WHICH MAY BE NECESSARY.

ALSO, IN SAID LETTER IT IS STATED THAT, IN A LETTER DATED JULY 8, 1943, THE CONTRACTOR POINTED OUT AN ERROR IN ITS BID AND IN SUBSTANTIATION OF ITS CONTENTIONS WITH RESPECT THERETO FORWARDED ITS ESTIMATE AND CARPENTRY SHEETS, WHICH--- ALTHOUGH APPARENTLY SUBMITTED FOR OTHER PURPOSES--- WERE SUFFICIENT IN FORM TO COMPLY WITH THE PARAGRAPH IN THE INVITATION FOR BIDS, QUOTED ABOVE, AND ENTITLED THE CONTRACTOR TO HAVE INCLUDED IN THE CONTRACT HERE INVOLVED A PROVISION FOR THE ADJUSTMENT OF THE PRICES STIPULATED THEREIN IN THE EVENT OF AN INCREASE IN THE COST OF LUMBER AS A RESULT OF CHANGES IN CEILING PRICES ESTABLISHED BY THE OFFICE OF PRICE ADMINISTRATION; THAT, IN FORWARDING TO THE BUREAU OF YARDS AND DOCKS INFORMATION AS TO THE BIDS RECEIVED AND RECOMMENDING ACCEPTANCE OF THE CONTRACTOR'S BID, THE OFFICER-IN CHARGE OF CONSTRUCTION FAILED TO FORWARD A COPY OF THE INVITATION TO BID OR TO CALL ATTENTION TO THE FACT THAT IT CONTAINED THE PROVISION QUOTED ABOVE; THAT THE BUREAU OF YARDS AND DOCKS PREPARED THE CONTRACT IN THE ABSENCE OF INFORMATION THAT THE INVITATION TO BID CONTAINED SAID PARAGRAPH AND, AS A RESULT THEREOF, THERE WAS OMITTED FROM THE CONTRACT AN " OPA LUMBER PRICE ADJUSTMENT CLAUSE; " THAT THE CONTRACT WAS SIGNED BY REAR ADMIRAL MARSHALL IN THE FORM IN WHICH IT WAS PREPARED, WHEREAS, IF THE BUREAU OF YARDS AND DOCKS HAD BEEN IN POSSESSION OF THE NECESSARY INFORMATION, A PRICE ADJUSTMENT CLAUSE WOULD HAVE BEEN INSERTED IN THE CONTRACT AND THE CONTRACT WOULD HAVE BEEN EXECUTED WITH SUCH PROVISION THEREIN; AND THAT BY REASON OF A MUTUAL MISTAKE "IN REDUCING TO WRITING THE TERMS OF THE AGREEMENT ACTUALLY NEGOTIATED" THE PROVISION REFERRED TO WAS OMITTED THEREFROM AND, AS A CONSEQUENCE THEREOF, IT IS BELIEVED THAT THE CONTRACTOR IS ENTITLED TO HAVE THE CONTRACT REFORMED SO AS TO INCLUDE SUCH PROVISION.

IN A LETTER DATED JANUARY 17, 1946, TO THE BUREAU OF YARDS AND DOCKS, THE CONTRACTOR STATED THAT, DURING PRELIMINARY NEGOTIATIONS AND BEFORE THE RECEIPT OF THE LETTER OF INTENT, THE CONTRACTOR WAS INFORMED BY THE INVITATION TO BID AND BY THE OFFICER-IN-CHARGE THAT ANY INCREASE IN THE COST OF LUMBER AUTHORIZED BY THE OFFICE OF PRICE ADMINISTRATION, AFTER THE EXECUTION OF THE CONTRACT, WOULD BE REIMBURSED TO THE CONTRACTOR BY CHANGE ORDER; THAT IT WAS UNDERSTOOD THAT THE CONTRACT WOULD CONTAIN A PROVISION FOR THE REIMBURSEMENT OF SUCH INCREASED COST; AND THAT, AT THE TIME THE CONTRACT WAS EXECUTED, THE CONTRACTOR BELIEVED THAT IT CONTAINED SUCH PROVISION AND WOULD NOT HAVE SIGNED THE CONTRACT IF IT HAD NOTICED THAT SUCH PROVISION HAD BEEN OMITTED THEREFROM.

IN LETTERS DATED OCTOBER 4, AND OCTOBER 7, 1946, THE OFFICER-IN CHARGE OF CONSTRUCTION AND THE RESIDENT OFFICER-IN-CHARGE OF CONSTRUCTION, RESPECTIVELY, SET FORTH THEIR RECOLLECTIONS WITH RESPECT TO CONVERSATIONS BETWEEN THEM AND THE CONTRACTOR, DURING PRELIMINARY NEGOTIATIONS IN 1943, RELATIVE TO THE REIMBURSEMENT OT THE CONTRACTOR FOR COSTS INCURRED BY IT IN THE EVENT OF AN INCREASE IN THE PRICE OF LUMBER, AND EACH OF THE OFFICERS CONCERNED STATES, IN SUBSTANCE, THAT THE CONTRACTOR WAS INFORMED THAT IT WOULD BE REIMBURSED FOR SUCH COSTS AND THAT REIMBURSEMENT WOULD BE AFFECTED BY CHANGE ORDER OR BY CLAIM.

IT IS STATED THAT REAR ADMIRAL MARSHALL, WHO EXECUTED THE CONTRACT ON BEHALF OF THE GOVERNMENT, NOW IS ON DUTY IN GUAM; THAT, WHILE ATTACHED TO THE BUREAU OF YARDS AND DOCKS, HE SIGNED HUNDREDS OF CONTRACTS, AND IT IS UNLIKELY THAT HE HAS AN INDEPENDENT RECOLLECTION AS TO HIS EXECUTION OF THE CONTRACT HERE INVOLVED; THAT, AT MOST, IT WOULD APPEAR POSSIBLE FOR HIM TO CONCLUDE FROM THE RECORD THAT HE INTENDED TO GIVE EFFECT AND EXPRESSION TO THE TERMS NEGOTIATED BY THE OFFICER-IN-CHARGE OF CONSTRUCTION; AND THAT, IF HE HAD KNOWN THAT THE INVITATION TO BID CONTAINED THE PARAGRAPH QUOTED ABOVE, HE WOULD NOT HAVE SIGNED THE CONTRACT WHICH ACTUALLY WAS EXECUTED, BUT WOULD HAVE SIGNED ANOTHER CONTRACT CONTAINING A PRICE ADJUSTMENT CLAUSE.

UPON THE BASIS OF THE FOREGOING, THE OPINION IS EXPRESSED IN THE LETTER OF APRIL 4, 1947, THAT THE CONTRACT SHOULD BE REFORMED SO AS TO INCLUDE THE PROVISION REFERRED TO, AND, IN THE EVENT REFORMATION IS APPROVED, IT IS PROPOSED TO ISSUE A CHANGE ORDER PROVIDING FOR THE PAYMENT OF THE LUMBER USED IN THE PERFORMANCE OF THE CONTRACT.

WHERE, BY REASON OF A MUTUAL MISTAKE IN OMITTING FROM A CONTRACT A CONTRACTOR'S CLAIM FOR $5,173.59, ON ACCOUNT OF THE INCREASE IN COST OF MATERIAL PROVISION ON WHICH THE PARTIES PREVIOUSLY HAD AGREED, THE CONTRACT, AS REDUCED TO WRITING, DOES NOT REFLECT THE ACTUAL AGREEMENT OF THE PARTIES, SUCH MISTAKE IS GROUND FOR REFORMING THE WRITTEN INSTRUMENT IF IT CAN BE ESTABLISHED WHAT THE CONTRACT ACTUALLY WAS OR WOULD HAVE BEEN BUT FOR THE MISTAKE. 20 COMP. GEN. 533, AND CASES THERE CITED. HOWEVER, THERE IS A PRESUMPTION OF LAW THAT A WRITTEN INSTRUMENT WAS CAREFULLY PREPARED AND EXECUTED, THAT THE PARTIES KNEW ITS CONTENTS AND THAT IT SETS FORTH FULLY AND CORRECTLY THEIR FINAL AGREEMENT. 45 AM.JUR. 649; 53 C.J. 1025, 1026; FIRST NAT. BANK V. OCEAN ACCIDENT AND GUARANTEE CORPORATION, 294 F. 91. HENCE, THE BURDEN IS ON THE PARTY SEEKING REFORMATION TO PRODUCE EVIDENCE SUFFICIENT TO OVERCOME SUCH PRESUMPTIONS. MARYLAND CASUALTY CO. V. STATE OF ARKANSAS ( C.C.A.), 40 F.2D 395; ROGERS V. JONES, ET AL. ( C.C.A.), 40 F.2D 333; GAUNT V. VANCE LUMBER CO. ( C.C.A.), 31 F.2D 503. BUT A MERE PREPONDERANCE OF THE EVIDENCE IS NOT SUFFICIENT. RELIEF BY WAY OF REFORMATION WILL NOT BE GRANTED UNLESS THE PROOF OF MUTUAL MISTAKE BE OF THE CLEAREST AND MOST SATISFACTORY CHARACTER--- PROOF THAT IS CONVINCING BEYOND REASONABLE CONTROVERSY. PHILIPPINE SUGAR ESTATES DEVELOPMENT CO. V. GOVERNMENT OF THE PHILIPPINE ISLANDS, 247 U.S. 385; SNELL V. INSURANCE CO., 98 U.S. 85; FIREMEN'S INS. CO. V. LASKER ( C.C.A.), 18 F.2D 375; SOUTHERN SURETY CO. V. UNITED STATES CAST IRON PIPE AND BOUNDARY CO., 13 F.2D 833.

THE RECORD CONTAINS NO STATEMENT FROM REAR ADMIRAL MARSHALL THAT, AT THE TIME OF SIGNING THE CONTRACT, AS THE REPRESENTATIVE OF THE GOVERNMENT, HIS INTENTION WAS OTHER THAN THAT EXPRESSED THEREIN. WHILE YOU STATE THAT HE PRESENTLY IS ON DUTY IN GUAM AND THAT, IN ANY EVENT, IT IS IMPROBABLE THAT HE HAS ANY RECOLLECTION WITH RESPECT TS EXECUTION OF THE CONTRACT, THERE IS NOTHING IN THE RECORD TO SHOW THAT ANY ATTEMPT HAS BEEN MADE TO OBTAIN FROM HIM A STATEMENT RELATIVE TO THE MATTER. OBVIOUSLY, NO ONE ELSE CAN KNOW WHAT WAS IN HIS MIND WHEN HE EXECUTED THE CONTRACT AND, IN THE ABSENCE OF A STATEMENT BY HIM THAT HIS UNDERSTANDING OF THE PROVISIONS OF THE CONTRACT AS TO THE PRICES WHICH THE CONTRACTOR WAS TO BE PAID FOR LUMBER WAS DIFFERENT FROM THOSE PROVIDED FOR IN THE CONTRACT, NO MUTUAL ERROR--- WHICH IS ESSENTIAL TO A REFORMATION--- IS ESTABLISHED. THE STATEMENTS OF THE OFFICER-IN CHARGE OF CONSTRUCTION AND THE RESIDENT OFFICER-IN-CHARGE OF CONSTRUCTION--- NEITHER OF WHOM WAS A PARTY TO THE CONTRACT--- ARE NOT EQUIVALENT TO, AND CANNOT BE ACCEPTED IN LIEU OF, THE STATEMENT OF THE PERSON WHO SIGNED THE CONTRACT, AND WHOSE INTENTION AND UNDERSTANDING IN THE MATTER ARE PRESUMED TO BE AS EXPRESSED THEREIN. SEE DECISION OF JULY 13, 1944, B-42772, TO YOU.