B-7069, DECEMBER 6, 1939, 19 COMP. GEN. 560

B-7069, DECEMBER 6, 1939, 19 COMP. GEN. 560

CONTRACTS - PERFORMANCE - WAR CONDITIONS AS EXCUSE FOR NONPERFORMANCE BY PRIVATE CONTRACTOR IN FOREIGN COUNTRY PERFORMANCE OF A CONTRACT, MADE IN IRELAND, FOR SUPPLYING COAL TO THE AMERICAN LEGATION AT DUBLIN, MAY NOT BE EXCUSED MERELY BECAUSE IT WOULD BE TO THE CONTRACTOR'S FINANCIAL DISADVANTAGE TO MAKE DELIVERIES AT THE CONTRACT PRICE DUE TO AN ADVANCE IN PRICES BROUGHT ABOUT BY "WAR CONDITIONS AND THE DIFFICULTY OF IMPORTING COAL FROM ENGLAND," IN THE ABSENCE OF A SHOWING THAT THE LAW OF IRELAND EXCUSES PERFORMANCE UNDER THE CIRCUMSTANCES, EVEN THOUGH THE CONTRACTOR'S LETTERHEAD, CONTAINING ITS OFFER, BEARS THE PRINTED NOTATION THAT "ALL OFFERS AND SALES ARE SUBJECT TO THE USUAL WAR AND STRIKE CLAUSES.'

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF STATE, DECEMBER 6, 1939:

I HAVE YOUR LETTER OF NOVEMBER 8, 1939, AS FOLLOWS:

UNDER CONTRACT NO. S76FA-16 ENTERED INTO ON AUGUST 3, 1939, BY THE AMERICAN LEGATION AT DUBLIN, IRELAND, MESSRS. P. DONNELLY AND SONS, LTD., UNDERTOOK TO SUPPLY FUEL TO THE AMERICAN LEGATION AND THE AMERICAN CONSULATE GENERAL AT DUBLIN FOR THE 1939-40 SEASON. THE ORIGINAL CONTRACT PAPERS WERE FURNISHED THE GENERAL ACCOUNTING OFFICE WITH THE DEPARTMENT'S LETTER DATED SEPTEMBER 1, 1939.

IN DISPATCH NO. 2304 OF OCTOBER 13, 1939, THE AMERICAN CONSUL GENERAL AT DUBLIN HAS REPORTED THAT HE HAS BEEN NOTIFIED BY THE CONTRACTORS THAT THEY ARE UNABLE TO FURNISH COAL AT THE PRICES AGREED UPON BECAUSE OF THE WAR CONDITIONS AND THE DIFFICULTY OF IMPORTING COAL FROM ENGLAND. THE CONSUL GENERAL STATES THAT THERE ARE LIKELY TO BE SHORTAGES, QUOTAS, AND RESTRICTIONS WHICH MAKE IT DESIRABLE FOR THE CONSUL GENERAL TO BE FREE TO PURCHASE FUEL SUPPLIES WHEN AVAILABLE AND FROM WHATEVER FIRM MAY HAVE SUPPLIES ON HAND, AND HE PROPOSES, WHEN PURCHASING COAL, TO MAKE THE BEST TERMS POSSIBLE WITH ANY COAL DEALER WHO MAY BE ABLE TO FURNISH THE FUEL SUPPLIES REQUIRED.

IN VIEW OF THE CIRCUMSTANCES AFFECTING SUPPLIES AND PRICES OF COAL WHICH HAVE DEVELOPED SINCE THE TIME THE CONTRACT WAS MADE IN AUGUST 1939 AND WHICH HAVE MADE IT IMPOSSIBLE FOR THE CONTRACTOR TO FULFILL THE TERMS OF HIS AGREEMENT, IT IS NECESSARY OF COURSE THAT THE AMERICAN CONSULATE GENERAL AND THE AMERICAN LEGATION AT DUBLIN TAKE SUCH STEPS AS MAY BE POSSIBLE TO OBTAIN SUPPLIES OF FUEL NECESSARY TO THEIR NEEDS. IF YOU PERCEIVE NO OBJECTION TO THE METHOD OF OBTAINING FUEL SUPPLIES PROPOSED BY THE CONSUL GENERAL, AUTHORIZATION WILL BE GRANTED HIM TO PROCEED ON THAT BASIS.

IT IS UNDERSTOOD FROM YOUR LETTER THAT THE REASON THE CONTRACTOR, P. DONNELLY AND SONS, LTD., HAS INDICATED UNWILLINGNESS TO FURNISH COAL IN ACCORDANCE WITH THE TERMS OF ITS CONTRACT IS NOT BECAUSE IT IS IMPOSSIBLE TO SUPPLY IT BUT BECAUSE IT WOULD BE FINANCIALLY TO ITS DISADVANTAGE TO DO SO, DUE TO AN ADVANCE IN PRICES BROUGHT ABOUT BY "WAR CONDITIONS AND THE DIFFICULTY OF IMPORTING COAL FROM ENGLAND.'

IT HAS MANY TIMES BEEN HELD BY COURTS OF THIS COUNTRY THAT "WHERE ONE AGREES TO DO, FOR A FIXED SUM, A THING POSSIBLE TO BE PERFORMED, HE WILL NOT BE EXCUSED OR BECOME ENTITLED TO ADDITIONAL COMPENSATION, BECAUSE UNFORESEEN DIFFICULTIES ARE ENCOUNTERED.' UNITED STATES V. SPEARIN, 248 U.S. 132, 136; COLUMBUS RAILWAY AND POWER COMPANY V. COLUMBUS, 249 U.S. 399, 412; DAY V. UNITED STATES, 245 U.S. 159, 161. STABILITY OF PRICE IS ONE OF THE ELEMENTS WHICH A CONTRACTOR IS PRESUMED TO TAKE INTO ACCOUNT IN COMPUTING HIS OFFER "AND HE CANNOT EXPECT THE OTHER PARTY TO GUARANTEE HIM AGAINST UNFAVORABLE CHANGES IN THOSE PRICES.' CHOUTEAU V. UNITED STATES, 95 U.S. 61, 68.

THE CONTRACT HERE IN QUESTION CONSISTS OF AN OFFER DATED JULY 24, 1939, AND A LETTER OF ACCEPTANCE DATED AUGUST 3, 1939. AT THE TOP OF THE LETTERHEAD OF THE CONTRACTOR, UPON WHICH ITS OFFER WAS SUBMITTED, THERE APPEARS THE PRINTED NOTATION THAT "ALL OFFERS AND SALES ARE SUBJECT TO THE USUAL WAR AND STRIKE CLAUSES.' IT DOES NOT APPEAR, HOWEVER, THAT EXISTENCE OF WAR IN ENGLAND WOULD ALTER THE OBLIGATION OF THE CONTRACTOR UNDER THE FACTS OF THE PRESENT CASE--- BOTH THE UNITED STATES AND IRELAND BEING NEUTRALS. EVEN AS BETWEEN BELLIGERENTS "THE WHOLE TENDENCY OF MODERN LAW AND PRACTICE IS TO * * * RECOGNIZE, INCREASINGLY, THAT THE NORMAL INTERRELATIONS OF THE CITIZENS OF THE RESPECTIVE BELLIGERENTS ARE NOT TO BE INTERFERED WITH WHEN SUCH INTERFERENCE IS UNNECESSARY TO THE SUCCESSFUL PROSECUTION OF THE WAR. PRIVATE RIGHTS AND DUTIES ARE AFFECTED BY WAR ONLY SO FAR AS THEY ARE INCOMPATIBLE WITH THE RIGHTS OF WAR.' SUTHERLAND V. MAYER, 271 U.S. 272, 287-288.

THE LAW OF ENGLAND IS TO THE SAME EFFECT, IT HAVING BEEN HELD UPON A NUMBER OF OCCASIONS BY ENGLISH COURTS THAT "WAR CLAUSES" IN CONTRACTS DO NOT OPERATE TO EXCUSE PERFORMANCE WHERE THE CONTRACT IS POSSIBLE OF PERFORMANCE, ALTHOUGH AT A GREATLY INCREASED COST TO THE CONTRACTOR. THUS IT WAS HELD IN THE ENGLISH CASE OF IN STONE AND COMPANY V. SPEEDING, MARSHALL AND COMPANY (1915), 32 TIMES L.R. 202, THAT A PROVISION IN A CONTRACT FOR SALE OF COAL THAT "IN CASE OF WAR, FORCE MAJEURE, STRIKES * * * OR OTHER HINDRANCES INTERVENING OR INTERFERING OR AFFECTING DELIVERY" THE SELLERS MIGHT SUSPEND DELIVERIES AT THEIR OPTION, DID NOT ENTITLE THE SELLERS TO SUSPEND DELIVERY WHERE WAR OCCASIONED A RISE IN THE PRICE OF COAL BUT DID NOT MAKE IT COMPLETELY UNAVAILABLE.

AGAIN, IN THE CASE OF WILSON AND CO., LTD. V. TENNANTS ( LANCASHIRE) LTD., 1 K.B. 208 (1917), THERE WAS BEFORE THE COURT THE QUESTION OF WHETHER DELIVERIES COULD LAWFULLY BE SUSPENDED AS A RESULT OF A RISE IN PRICES CAUSED BY WAR, WHERE THE CONTRACT PROVIDED: "DELIVERIES MAY BE SUSPENDED PENDING ANY CONTINGENCIES BEYOND THE CONTROL OF THE SELLERS OR BUYERS (SUCH AS FIRE, ACCIDENT, WAR, STRIKES, LOCKOUTS, OR THE LIKE) CAUSING A SHORT SUPPLY OF LABOR, FUEL, RAW MATERIALS OR MANUFACTURED PRODUCE, OR OTHERWISE PREVENTING OR HINDERING THE MANUFACTURE OR DELIVERY OF THE ARTICLE.' IN THE OPINION IN THAT CASE, PICKFORD, L.J., STATES IN PART:

I THINK I AM CORRECT IN SAYING THAT A RISE IN PRICE, EVEN IF VERY LARGE HAS NEVER BEEN HELD TO COME WITHIN SUCH WORDS AS "PREVENTING DELIVERY," AND I AGREE * * * THAT PREVENTION IN A CLAUSE OF THIS SORT IS A PHYSICAL OR LEGAL PREVENTION AND NOT AN ECONOMIC UNPROFITABLENESS. I ALSO THINK IN THIS CLAUSE "HINDERING" MUST REFER TO AN INTERFERENCE WITH MANUFACTURE OR DELIVERY FROM THE SAME CAUSES AS "PREVENTION," BUT INTERFERENCE OF A LESS DEGREE, AND THUS ECONOMIC UNPROFITABLENESS DOES NOT HINDER EITHER MANUFACTURE OR DELIVERY WITHIN THE MEANING OF THIS CONDITION. THAT DECISION WAS AFFIRMED ON THIS POINT BY THE HOUSE OF LORDS (1918), 116 LAW TIMES REPORTS 780, THE LORD CHANCELLOR ( LORD FINLAY) STATING:

I THINK THAT PICKFORD, L.J., WAS RIGHT WHEN HE POINTED OUT THAT A RISE IN PRICE, EVEN IF VERY GREAT, WOULD NOT AMOUNT TO A PREVENTION OF DELIVERY ON THE TRUE READING OF THE CONDITION * * * AND THAT "HINDERING" MUST REFER TO AN INTERFERENCE WITH THE MANUFACTURE OR DELIVERY FROM THE SAME CAUSE AS "PREVENTING," BUT INTERFERENCE OF A LESS DEGREE. THAT CASE HAS BEEN CITED WITH APPROVAL IN SEVERAL SUBSEQUENT CASES, INCLUDING PRODUCE BROKERS LTD. V. WEISS AND COMPANY (1918), 118 LAW TIMES REPORTS 111; AND DIXON AND SONS LTD. V. HENDERSON, CRAIG AND CO. (1918), 117 LAW TIMES REPORTS 636. SEE, ALSO, BLACKBURN ROBBIN COMPANY LTD. V. T. W. ALLEN AND SONS LTD. (1918), 2 K.B. 467, 3 A.L.R. 11.

THE ABOVE ARE NOT STATUTORY RULES OF LAW BUT APPEAR TO REPRESENT GENERAL PRINCIPLES DERIVED FROM THE COMMON LAW, AND WHILE IT IS RECOGNIZED THAT SINCE THE CONTRACT HERE IN QUESTION WAS MADE AND IS TO BE PERFORMED IN IRELAND THE LAWS OF THAT JURISDICTION CONTROL AS TO "ITS VALIDITY, CONSTRUCTION, DISCHARGE, AND ENFORCEMENT" ( VAN HOFFMAN V. CITY OF QUINCY, 4 WALL. 535, 550; WALKER V. WHITEHEAD, 16 WALL. 314, 317; FARMERS AND MERCHANTS BANK V. FEDERAL RESERVE BANK, 262 U.S. 649, 660), IT IS NOT UNDERSTOOD THAT THE LAWS OF IRELAND ARE DIFFERENT FROM THOSE OF THE UNITED STATES AND ENGLAND ON THIS POINT.

ON THE BASIS OF THE PRESENT RECORD, THEREFORE, AND IN THE ABSENCE OF A SHOWING THAT THE LAW OF IRELAND IS SUCH AS TO EXCUSE PERFORMANCE UNDER THE CIRCUMSTANCES OF THE PRESENT CASE, THE CONTRACTOR SHOULD BE ADVISED THAT IT MUST FURNISH THE COAL IN ACCORDANCE WITH THE TERMS OF ITS AGREEMENT AND THAT IF IT FAILS TO DO SO PURCHASE WILL BE MADE ELSEWHERE AND ANY EXCESS COST INCURRED WILL BE CHARGED AGAINST IT. IN THIS CONNECTION ATTENTION IS INVITED TO THE FACT THAT THE ENGLISH SALE OF GOODS ACT, 1893, WHICH APPEARS TO BE IN FORCE IN IRELAND (SEE VOL. II, MARTINDALE-1HUBBELL'S LAW DIRECTORY FOR 1939, IRISH LAW DIGEST), PROVIDES THAT---

51.--- (1) WHERE THE SELLER WRONGFULLY NEGLECTS OR REFUSES TO DELIVER THE GOODS TO THE BUYER, THE BUYER MAY MAINTAIN AN ACTION AGAINST THE SELLER FOR DAMAGES FOR NONDELIVERY.

(2) THE MEASURE OF DAMAGES IS THE ESTIMATED LOSS DIRECTLY AND NATURALLY RESULTING, IN THE ORDINARY COURSE OF EVENTS, FROM THE SELLER'S BREACH OF CONTRACT.

(3) WHERE THERE IS AN AVAILABLE MARKET FOR THE GOODS IN QUESTION THE MEASURE OF DAMAGES IS PRIMA FACIE TO BE ASCERTAINED BY THE DIFFERENCE BETWEEN THE CONTRACT PRICE AND THE MARKET OR CURRENT PRICE OF THE GOODS AT THE TIME OR TIMES WHEN THEY OUGHT TO HAVE BEEN DELIVERED, OR, IF NO TIME WAS FIXED, THEN AT THE TIME OF THE REFUSAL TO DELIVER. ( UNIFORM LAWS ANNOTATED, SALES, PP. 475-76.)

SHOULD THE CONTRACTOR, UPON BEING NOTIFIED THAT IT MUST PERFORM ITS CONTRACT, STILL REFUSE TO DO SO, PURCHASE FROM ANOTHER SOURCE SHOULD BE MADE, AFTER ADVERTISING IN ACCORDANCE WITH LAW, AND AWARD MADE TO THE LOWEST RESPONSIBLE BIDDER OFFERING COAL WHICH MEETS THE NEEDS OF THE LEGATION, AND STEPS THEN BE TAKEN TO COLLECT THE EXCESS COST, IF ANY, FROM THE DEFAULTING CONTRACTOR IN THE USUAL MANNER.