B-80960, NOVEMBER 15, 1948, 28 COMP. GEN. 306

B-80960: Nov 15, 1948

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SALES - SURPLUS PROPERTY - DISCLAIMER OF WARRANTY - ADJUSTMENTS AND REFUNDS WHERE SURPLUS PROPERTY LOCATED IN FOREIGN AREAS IS SOLD UNDER SALES CONTRACTS CONTAINING "AS IS" AND "WHERE IS" CLAUSES. THERE IS NO AUTHORITY FOR ADMINISTRATIVE OFFICERS TO MAKE ADJUSTMENTS OR REFUNDS TO PURCHASERS ON THE BASIS THAT THE SALES PRICE OF SUCH PROPERTY WAS BASED ON MISTAKE AS TO CONDITION OF THE PROPERTY EVEN THOUGH THE GOVERNMENT'S DESCRIPTION OF THE PROPERTY WAS INCOMPLETE OR INACCURATE AND. THE PROPERTY WAS OVERVALUED. AS IS" AND "WHERE IS" CLAUSE. WAS RECEIVED IN BADLY DAMAGED CONDITION ALTHOUGH A MAJORITY OF THE ITEMS SOLD WERE DESCRIBED AS BEING IN "GOOD" CONDITION. REFUND OF A PORTION OF THE PURCHASE PRICE IS NOT AUTHORIZED ON THE BASIS OF A UNILATERAL.

B-80960, NOVEMBER 15, 1948, 28 COMP. GEN. 306

SALES - SURPLUS PROPERTY - DISCLAIMER OF WARRANTY - ADJUSTMENTS AND REFUNDS WHERE SURPLUS PROPERTY LOCATED IN FOREIGN AREAS IS SOLD UNDER SALES CONTRACTS CONTAINING "AS IS" AND "WHERE IS" CLAUSES, WITHOUT WARRANTY OF ANY KIND, THERE IS NO AUTHORITY FOR ADMINISTRATIVE OFFICERS TO MAKE ADJUSTMENTS OR REFUNDS TO PURCHASERS ON THE BASIS THAT THE SALES PRICE OF SUCH PROPERTY WAS BASED ON MISTAKE AS TO CONDITION OF THE PROPERTY EVEN THOUGH THE GOVERNMENT'S DESCRIPTION OF THE PROPERTY WAS INCOMPLETE OR INACCURATE AND, THEREFORE, THE PROPERTY WAS OVERVALUED. WHERE SURPLUS PROPERTY LOCATED IN FOREIGN AREAS DELIVERED UNDER A SALES CONTRACT CONTAINING AN ,AS IS" AND "WHERE IS" CLAUSE, WITHOUT WARRANTY OF ANY KIND, WAS RECEIVED IN BADLY DAMAGED CONDITION ALTHOUGH A MAJORITY OF THE ITEMS SOLD WERE DESCRIBED AS BEING IN "GOOD" CONDITION, REFUND OF A PORTION OF THE PURCHASE PRICE IS NOT AUTHORIZED ON THE BASIS OF A UNILATERAL, NOT MUTUAL, MISTAKE BY THE PURCHASER IN ITS STATEMENT OF PRICE. SINCE THE OFFICE OF FOREIGN LIQUIDATION COMMISSIONER, STATE DEPARTMENT, PURSUANT TO SECTION 15 (A) OF THE SURPLUS PROPERTY ACT OF 1944, IS AUTHORIZED TO ENTER INTO CONTRACTS OF SALE UPON SUCH TERMS AND CONDITIONS AS THE AGENCY DEEMS PROPER, THE RESPONSIBILITY FOR ESTABLISHING ANY POLICY WITH RESPECT TO THE MANNER AND METHOD OF DISPOSITION OF THE PROPERTY PRIMARILY IS A MATTER FOR DETERMINATION BY THAT AGENCY; HOWEVER, IN ORDER TO MAKE APPROPRIATE REFUNDS AND ADJUSTMENTS AS PROVIDED FOR UNDER SECTION 30 (C) OF THE ACT, AN EQUITABLE ADJUSTMENT CLAUSE SHOULD BE INCLUDED IN THE CONTRACTS OF SALE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF STATE, NOVEMBER 15, 1948:

REFERENCE IS MADE TO LETTER OF OCTOBER 21, 1948, FROM THE ASSISTANT SECRETARY OF STATE, REQUESTING A DECISION AS TO THE AUTHORITY OF THE FOREIGN LIQUIDATION COMMISSIONER TO MAKE REFUNDS AND ADJUSTMENTS TO PURCHASERS TO CORRECT MISTAKES AS TO THE CONDITION OF PROPERTY SOLD UNDER CONTRACTS CONTAINING AN "AS IS" AND "WHERE IS" CLAUSE.

IN THE AFORESAID LETTER THERE ARE SET FORTH IN CONSIDERABLE DETAIL THE CONDITIONS AND PROBLEMS ENCOUNTERED BY TH OFFICE OF THE FOREIGN LIQUIDATION COMMISSIONER IN THE DISPOSITION OF SURPLUS PROPERTY LOCATED IN FOREIGN AREAS PURSUANT TO PUBLIC LAW 584, 60 STAT. 754, WHICH AMENDED THE SURPLUS PROPERTY ACT OF 1944, 58 STAT. 765. IT IS STATED IN SUBSTANCE THAT IN ORDER TO ACCOMPLISH THE ORDERLY DISPOSITION OF PROPERTY IT WAS DEEMED NECESSARY TO MAKE REFUNDS AND ADJUSTMENTS CORRECTING ERRORS IN SALES PRICE. FOR EXAMPLE, IT IS STATED THAT WHERE A SALES PROGRAM WITH A FOREIGN GOVERNMENT INVOLVED A SERIES OF CONTRACTS, REFUSAL ON THE PART OF OFLC TO RECOGNIZE AN INEQUITY IN AN EARLIER CONTRACT AND TO MAKE AN ON-THE -SPOT ADJUSTMENT WOULD HAVE RESULTED IN SHIPMENTS UNDER LATER CONTRACTS BEING REFUSED AT DESTINATION PENDING FORMAL RENEGOTIATION OF THE EARLIER CONTRACT, WITH THE END RESULT OF INTERIM TRANSPORTATION AND DEMURRAGE CHARGES BEING LEVIED AGAINST THE UNITED STATES. IN REVIEWING THE BACKGROUND OF THE QUESTION OF REFUNDS AND ADJUSTMENTS IT IS POINTED OUT THAT THERE WAS DEVISED A SIMPLIFIED METHOD OF CODING TO DESCRIBE THE CONDITION OF THE PROPERTY AT THE TIME THE OWNING AGENCY DECLARED IT SURPLUS BUT THAT IN THE FINAL ANALYSIS THE APPLICATION OF CONDITION CODING TO A PARTICULAR ITEM OF PROPERTY WAS NECESSARILY A MATTER OF INDIVIDUAL JUDGMENT. RECOGNIZING THAT CONDITION IS A MATTER OF OPINION, IT APPEARS THAT THE FIELD COMMISSIONERS HAVE REFUSED IN MOST INSTANCES TO ADJUST THE SALES PRICE WHERE THE PURCHASER HAS ASSERTED THAT THE PROPERTY DELIVERED WAS NOT IN THE CONDITION REPRESENTED, RELYING ON THE "AS IS" PROVISION OF THE CONTRACT. IT IS UNDERSTOOD FROM THE ASSISTANT SECRETARY'S LETTER, HOWEVER, THERE HAVE BEEN CASES WHERE THE VARIANCE BETWEEN REPORTED CONDITIONS AND ACTUAL CONDITION OF THE PROPERTY HAS BEEN CONSIDERED SO GREAT AS TO PRECLUDE A MERE DIFFERENCE OF OPINION BETWEEN THE BUYER AND SELLER AND BRING THE SITUATION INTO THE REALM OF MISREPRESENTATION, AND, IN SUCH INSTANCES, THE FIELD COMMISSIONERS HAVE RECOGNIZED THAT THE BUYER WAS ENTITLED TO RELIEF AND HAVE ADJUSTED THE SALES PRICE ON AN EQUITABLE BASIS.

ONE SUCH CASE IS SAID TO HAVE INVOLVED THE SALE OF A LARGE QUANTITY OF TEXTILES DESCRIBED AS IN ,FAIR" CONDITION AND PRICED ACCORDINGLY, WHEREAS ON DELIVERY TO THE PURCHASER THE MAJORITY OF THE ITEMS WERE FOUND TO BE SO MILDEWED AND ROTTED THAT THEY FELL APART ON REMOVAL FROM THE PACKING CASES. IN ANOTHER CASE, ACCORDING TO THE ASSISTANT SECRETARY'S LETTER, CANVAS WATER BUCKETS WERE SOLD TO A SOVEREIGN GOVERNMENT, AN INSPECTION BY THE ARMY REVEALED THE FEW BUCKETS INSPECTED TO BE INTACT, THE PROPERTY WAS DECLARED TO BE IN "GOOD" CONDITION, AND PRICED ACCORDINGLY; HOWEVER, WHEN THE BUCKETS WERE ISSUED BY THE FOREIGN GOVERNMENT FOR USE, IT WAS DISCOVERED THAT TIME AND MOISTURE HAD WEAKENED THE CANVAS FIBERS OF THE BUCKETS SO THAT WHEN FILLED WITH WATER THE CANVAS PULLED AWAY FROM THE METAL HOOPS AND BAILS AND THE BUCKETS WERE WORTHLESS. IN BOTH OF THESE CASES IT IS STATED THAT IT WAS IMPRACTICABLE FOR THE ARMY TO/MAKE OTHER THAN A CURSORY INSPECTION OF THE PROPERTY DUE TO THE LIMITED PERSONNEL AND THE STORAGE OF THE PROPERTY IN INACCESSIBLE PARTS OF A WAREHOUSE.

ALSO, REFERENCE IS MADE TO A CASE WHICH ILLUSTRATES THE SITUATION WHERE THERE IS NO MISTAKE BY THE PARTIES AS TO IDENTITY OF THE PROPERTY SOLD BUT A MISTAKE EXISTS AS TO THE VALUE OF THAT PROPERTY, SUCH CASE INVOLVING THE MATTER OF REFUNDS IN THE SALE TRANSACTION UNDER CONTRACT NO. W-ANL (MET-I/ -215 WITH THE MIDDLE EAST UNION OF SEVENTH DAY ADVENTUROUS, HELIOPOLIS, EGYPT. THE FACTS ARE AS FOLLOWS: ON MARCH 4, 1946, THE SAID CONTRACT WAS ENTERED INTO FOR THE SALE OF CERTAIN POWER AND HEATING UNITS, PLUMBING FIXTURES, AND HARDWARE WITH A TOTAL LANDED COST VALUE OF $17,351.55 FOR A SALES PRICE OF $11,104.99. THE PROPERTY WAS DECLARED IN "GOOD" CONDITION WITH THE EXCEPTION OF TWO POWER UNITS COSTING $5,040 WHICH WERE DECLARED TO BE IN "POOR" CONDITION. ARTICLE OF THE CONTRACT READS AS FOLLOWS:

WARRANTIES--- THE SELLER AGREES TO DO AND DOES HEREBY SELL TO THE BUYER "AS IS" AND WITHOUT WARRANTY EXCEPT AS TO TITLE, AND SUBJECT TO THE CONDITIONS HEREINAFTER SET FORTH, AND BUYER AGREES TO DO AND DOES HEREBY PURCHASE FROM THE SELLER, CERTAIN MOVABLE PROPERTY AND AT THE PRICES SET FORTH IN EXHIBIT "A" ATTACHED HERETO AND MADE PART HEREOF, LOCATED AT CAMP RUSSELL B. HUCKSTEP AND CAMP ATTAKA, EGYPT.

IN APRIL, 1946, AFTER DELIVERY HAD BEEN TAKEN OF THE PROPERTY, THE PURCHASER SOUGHT AN ADJUSTMENT ON THE GROUND THAT THE PLUMBING FIXTURES LOCATED AT CAMP ATTAKA HAD BEEN REPRESENTED AS BEING IN "GOOD" CONDITION WHEN THE PROPERTY HAD IN FACT BEEN LYING IN THE OPEN FOR MANY MONTHS AND, BEING EXPOSED TO SAND, WIND, AND SALT AIR, MANY ITEMS HAD BECOME RESTED, BROKEN, AND WEATHER-BEATEN. AFTER INVESTIGATION BY A REPRESENTATIVE FROM THE CAIRO OFFICE AND NEGOTIATION AS TO A POSSIBLE ADJUSTMENT FIGURE, THE PURCHASER PRESENTED AN ITEMIZED CLAIM FOR ADJUSTMENT TO THE CENTRAL FIELD COMMISSIONER AT CAIRO REQUESTING A REFUND OF $3,319.10 FROM THE TOTAL SALES PRICE OF $6,239.10 PAID FOR THESE ITEMS. THE ADJUSTMENT FIGURE INCLUDED A SHORTAGE OF TWO ITEMS WITH A SALES PRICE OF $75.30. THE CLAIM WAS REVIEWED BY THE CONTRACT REVIEW BOARD IN THE OFLC CAIRO OFFICE, AND, ON THE BASIS OF A FINDING THAT NO INSPECTION OF THE PROPERTY HAD BEEN MADE BY THE ARMY AT THE TIME THE PROPERTY WAS DECLARED SURPLUS AND THAT NO OFLC REPRESENTATIVE HAD INSPECTED THE PROPERTY PRIOR TO SALE, THE REFUND REQUESTED BY THE PURCHASER WAS APPROVED. A SUPPLEMENTARY AGREEMENT TO THE CONTRACT WAS EXECUTED ON SEPTEMBER 13, 1946, WHEREIN THE GOVERNMENT AGREED TO REDUCE THE PRICE OF THE PROPERTY AND REFUND $3,319.10 TO THE PURCHASER.

THE FOLLOWING PROVISIONS OF THE SURPLUS PROPERTY ACT OF 1944, 58 STAT. 768, 772, 782, ARE CITED IN THE ASSISTANT SECRETARY'S LETTER AS THE AUTHORITY TO MAKE AN ADJUSTMENT AND TO REFUND MONEY TO A PURCHASER:

SEC. 4. SURPLUS PROPERTY SHALL BE DISPOSED OF TO SUCH EXTENT, AT SUCH TIMES, IN SUCH AREAS, BY SUCH AGENCIES, AT SUCH PRICES, UPON SUCH TERMS AND CONDITIONS, AND IN SUCH MANNER, AS MAY BE PRESCRIBED IN OR PURSUANT TO THIS ACT.

SEC. 15 (A). NOTWITHSTANDING THE PROVISIONS OF ANY OTHER LAW BUT SUBJECT TO THE PROVISIONS OF THIS ACT, WHENEVER ANY GOVERNMENT AGENCY IS AUTHORIZED TO DISPOSE OF PROPERTY UNDER THIS ACT, THEN THE AGENCY MAY DISPOSE OF SUCH PROPERTY BY SALE, EXCHANGE, LEASE, OR TRANSFER, FOR CASH, CREDIT, OR OTHER PROPERTY, WITH OR WITHOUT WARRANTY, AND UPON SUCH OTHER TERMS AND CONDITIONS, AS THE AGENCY DEEMS PROPER.

SEC. 30 (C). TO THE EXTENT AUTHORIZED BY THE BOARD, ANY GOVERNMENT AGENCY DISPOSING OF PROPERTY UNDER THIS ACT (1) MAY DEPOSIT IN A SPECIAL ACCOUNT WITH THE TREASURER OF THE UNITED STATES, SUCH AMOUNT OF THE PROCEEDS OF SUCH DISPOSITIONS AS IT DEEMS NECESSARY TO PERMIT APPROPRIATE REFUNDS TO PURCHASERS WHEN ANY DISPOSITION IS RESCINDED OR DOES NOT BECOME FINAL, OR PAYMENTS FOR BREACH OF ANY WARRANTY, * * *.

THE ABOVE-QUOTED AUTHORITY IS SAID TO BE CONSIDERED BY THE OFLC AS SIMILAR TO THE AUTHORITY VESTED IN THE SECRETARY OF WAR AFTER THE LAST WAR UNDER THE ACTS OF MAY 10, 1918, 40 STAT. 548, AND JULY 9, 1918, 40 STAT. 845, 850, AND THE ACT OF JULY 11, 1919, 41 STAT. 104, 105, AND THERE IS CITED THE CASE OF UNITED STATES V. KOPLIN, 24 F.2D 840, WHEREIN THE COURT UPHELD AN ADJUSTMENT IN THE SALES PRICE OF UNASCERTAINED SURPLUS GOODS SOLD UNDER AN "AS IS" CONTRACT BECAUSE THE GOOD DELIVERED WERE NOT IN THE CONDITION ADVERTISED. ATTENTION IS ALSO INVITED TO THE CASES OF JACOB LEVY AND BROTHERS V. UNITED STATES, 63 C.1CLS. 126, 132; AMERICAN STORES CO. V. UNITED STATES, 68 C.1CLS. 128, 1038; BLUE RIBBON PRODUCTS V. UNITED STATES, 71 C.1CLS. 393, 404; GEORGIA WHOLESALE COMPANY V. UNITED STATES, 84 C.1CLS. 150, 191. IT IS CONTENDED THAT THE ABOVE-CITED DECISIONS PERMIT GOVERNMENT REPRESENTATIVES TO MAKE ADJUSTMENTS AND REFUNDS AT THEIR DISCRETION IN CONSUMMATING SURPLUS SALES TRANSACTIONS.

IN THE LIGHT OF THE ABOVE DISCUSSION, DECISION IS REQUESTED ON THE FOLLOWING QUESTIONS:

1. DID THE FOREIGN LIQUIDATION COMMISSIONER AND THE FIELD COMMISSIONERS TO WHOM HE DELEGATED HIS DISPOSAL AUTHORITY HAVE AUTHORITY WITHIN THEIR DISCRETION TO MAKE ADJUSTMENTS OR REFUNDS TO PURCHASERS OF SURPLUS PROPERTY WHERE THE SALES PRICE OF SUCH PROPERTY WAS BASED ON MISTAKE AS TO CONDITION OF THE PROPERTY, NOTWITHSTANDING THE "AS IS" CLAUSE OF THE SALES CONTRACT?

2. WAS THE REFUND MADE BY THE FIELD COMMISSIONER IN THE OFFICE OF THE FOREIGN LIQUIDATION COMMISSIONER, CAIRO, EGYPT, UNDER CONTRACT W ANL/1MET- I/-215. THE FACTS OF WHICH ARE SET FORTH ABOVE, WITHIN HIS AUTHORITY UNDER THE SURPLUS PROPERTY ACT OF 10944 AND FLC REGULATION 8, AS AMENDED?

3. IN THE EVENT YOU ARE NOT IN COMPLETE ACCORD WITH THE POLICY ADOPTED BY OFLC IN MAKING REFUNDS AND ADJUSTMENTS UNDER THE CIRCUMSTANCES OUTLINED ABOVE, WE WOULD APPRECIATE YOUR RECOMMENDATIONS AS TO THE COURSE OF ACTION TO BE TAKEN BY OFLC WHEN SUCH CASES COME TO THE ATTENTION OF ITS FIELD AUDITORS.

FROM THE FACTS PRESENTED, IT APPEARS THAT, PURSUANT TO THE ABOVE QUOTED PROVISIONS OF THE SURPLUS PROPERTY ACT OF 1944, THE OFLC GENERALLY EMPLOYED THE METHOD OF DISPOSING OF PROPERTY UNDER SALES CONTRACTS EXPRESSLY STIPULATING THAT THE PROPERTY WAS SOLD "AS IS" WITHOUT ANY WARRANTY AS TO THE QUALITY, CHARACTER, DESCRIPTION, CONDITION, OR FITNESS FOR USE.

INSOFAR AS CONCERNS THE CONDITION OF SURPLUS GOODS OFFERED FOR SALE BY THE GOVERNMENT ON AN "AS IS" BASIS WITHOUT WARRANTY OR GUARANTY OF ANY KIND, THE LAW IS CLEAR THAT A BIDDER WHO FAILS TO TAKE ADVANTAGE OF AN OPPORTUNITY TO INSPECT CANNOT SUBSEQUENTLY RECOVER ON THE GROUNDS THAT THE GOODS ARE OF AN INFERIOR QUALITY. SEE M. SAMUEL AND SONS V. UNITED STATES, 60 C.1CLS. 373; TRIAD CORPORATION V. UNITED STATES, 63 C.1CLS. 151; S. BRODY V. UNITED STATES, 64 C.1CLS. 538; SILBERSTEIN AND SON V. UNITED STATES, 69 C.1CLS. 412; SACHS MERCANTILE CO. V. UNITED STATES, 78 C.1CLS. 801; LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90; MOTTRAM V. UNITED STATES, 271 U.S. 15; MAGUIRE AND CO. V. UNITED STATES, 273 U.S. 67. MOREOVER, IT HAS BEEN HELD THAT ANY WORDS OR CONDUCT SUFFICIENT TO SHOW THAT THE SALE WAS MADE WITH THE UNDERSTANDING THAT THE PURCHASER SHOULD TAKE THE GOODS AS THEY ARE WILL PREVENT A WARRANTY FROM BEING IMPLIED. SEE WILLISTON ON SALES (2D ED.), SECTION 239. TO THE SAME EFFECT, THE COURTS IN MANY CASES DEALING WITH SALES OF SECOND-HAND GOODS HAVE HELD OR RECOGNIZED THAT IRRESPECTIVE OF INSPECTION OR OPPORTUNITY OF INSPECTION BY THE BUYER THERE IS NO IMPLIED WARRANTY OF QUALITY, CONDITION, OR FITNESS IN THE SALE OF SUCH GOODS, AND THAT THE DOCTRINE OF CAVEAT EMPTOR IS ESPECIALLY APPLICABLE SINCE, FROM THE VERY FACT THAT THE ARTICLES PURCHASED ARE NOT NEW, THE BUYER IS PLACED ON THE ALERT FOR DEFECTS THAT MIGHT AFFECT THE QUALITY, CONDITION, OR FITNESS THEREOF. ANNOTATION 151 A.L.R. 446, AND NUMEROUS CASES THERE CITED. IF THIS IS TRUE IN AN ORDINARY TRANSACTION INVOLVING THE SALE OF SECOND-HAND GOODS, A FORTIORI, IT IS TRUE WHERE SUCH A TRANSACTION IS COVERED BY A CONTRACT CONTAINING A DISCLAIMER OF WARRANTY OR AN "AS IS" PROVISION.

THE DECISIONS OF THE COURTS REFERRED TO IN THE ASSISTANT SECRETARY'S LETTER AS AUTHORITY FOR THE GOVERNMENT REPRESENTATIVES TO MAKE ADJUSTMENTS AND REFUNDS WITHIN THEIR DISCRETION DO NOT APPEAR TO BE PROPER FOR APPLICATION HERE. IN THE CASE OF UNITED STATES V. KOPLIN, SUPRA, IT WAS HELD THAT WHERE SURPLUS PROPERTY WAS ADVERTISED FOR SALE BY AUCTION "AS IS" AND "WHERE IS" BUT THE GOODS WERE IN FACT AUCTIONED OFF IN FRACTIONS OF LARGE LOTS, NO SPECIFIC GOODS BEING IDENTIFIED BEFOREHAND TO SELLER AND PURCHASER AS THOSE SOLD, THE SALE WAS ONE BY DESCRIPTION OF UNASCERTAINED GOODS, AND THAT WHERE THERE WAS A DISPUTE BEFORE THE PERFORMANCE OF THE CONTRACT OF SALE AS TO WHETHER THE GOODS TENDERED CORRESPONDED TO THE DESCRIPTION, THE SECRETARY OF WAR, THROUGH THE LOCAL BOARD OF SALES CONTROL, WAS AUTHORIZED TO SETTLE THE DISPUTE BY CANCELLATION OF THE CONTRACT AND EXECUTION OF A NEW CONTRACT AT A LOWER PRICE FOR THE GOODS WHICH WERE AVAILABLE FOR DELIVERY. IT IS TO BE NOTED, HOWEVER, THAT THE COURT FIRST FOUND THAT THE SALE WAS ONE BY DESCRIPTION OF UNASCERTAINED GOODS AND THAT THE ADVERTISED TERMS OF THE SALE,"AS IS" AND "WHERE IS," DID NOT APPLY, AND DID NOT GO TO THE EXTENT OF HOLDING THAT THERE WAS AUTHORITY TO CANCEL A SALES CONTRACT FOR DISCREPANCY BETWEEN THE CATALOGUE DESCRIPTION AND THE GOODS DELIVERED, IRRESPECTIVE OF THE TERMS OF THE SALE. IN THE LEVY CASE, SUPRA, A CERTAIN LOT OF WIRE ROPE ADVERTISED FOR SALE BY THE WAR DEPARTMENT WAS DESCRIBED IN THE CATALOGUE OF SALE AS "7/16 INCHES CLASS "A" " BUT THE ROPE DELIVERED TO THE PURCHASER WAS 3/8 INCHES AND NOT 7/16 INCHES AS ADVERTISED. WAR DEPARTMENT OFFICIALS ADVISED THE PURCHASER THAT IF THE ROPE WAS RETURNED THE GOVERNMENT WOULD RETURN THE PURCHASE PRICE. THE ROPE WAS RETURNED AND RESOLD BY THE GOVERNMENT. THE COURT DECIDED THAT, ALTHOUGH THE CONDITIONS OF THE SALE WERE SUCH THAT THE PURCHASER COULD NOT HAVE RECOVERED THE PURCHASE PRICE STRICTLY ON THE BASIS OF THE CATALOGUE DESCRIPTION, THE SECRETARY OF WAR HAVING CANCELED THE SALE "ON ACCOUNT OF DISCREPANCY IN IDENTITY OF GOODS" AND RECEIVED BACK THE GOODS, THE UNITED STATES WAS BOUND TO RETURN THE PURCHASE PRICE.

LIKEWISE, THE OTHER CASES CITED MAY BE SAID TO DIFFER ESSENTIALLY FROM THE PRINCIPLE INVOLVED IN CASES OF SALES OF PROPERTY "AS IS" AND "WHERE IS," WITHOUT WARRANTY OR GUARANTY AS TO QUALITY, CHARACTER, CONDITIONS, ETC., THE QUESTIONS GOING TO THE IDENTITY OF THE PROPERTY SOLD AND THE INABILITY OF THE GOVERNMENT TO PERFORM ITS PART OF THE CONTRACT.

HOWEVER, IN THE CASE OF UNITED STATES V. AMERICAN SALES CORPORATION, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574, THE COURT FOUND NO DIFFICULTY IN OVERCOMING THE PRESUMPTION OF REGULARITY OF THE ACTS OF SURPLUS PROPERTY OFFICERS OR IN DETERMINING THAT THE AUTHORITY CONTAINED IN THE ACTS CITED, SUPRA, AUTHORIZING THE SECRETARY OF WAR TO SELL SURPLUS WAR PROPERTY, HAD BEEN EXCEEDED BY AN ATTEMPTED REDUCTION IN THE CONTRACT PRICE TO A PURCHASER OF SUCH PROPERTY. THE COURT PLACED ITS DECISION ON THE GROUND OF LACK OF AUTHORITY IN THE AGENTS WHO ATTEMPTED TO ACT FOR THE UNITED STATES TO MODIFY OR RESCIND THE SALES CONTRACTS IN DEROGATION OF THE VESTED RIGHTS OF THE GOVERNMENT THEREUNDER. THE COURT, WITH REFERENCE TO SUCH AUTHORITY, SAID IN PART:

HERE IS A CASE IN WHICH CONGRESS HAVING BY STATUTE EMPOWERED THE SECRETARY OF WAR IS TO SELL ANY SURPLUS SUPPLIES UPON SUCH TERMS AS MAY BE DEEMED BEST, AND SUCH AUTHORITY HAVING BEEN EXERCISED, IT WAS SOUGHT BY THE AGENT THUS EMPOWERED TO EXERCISE FURTHER AUTHORITY NOT GRANTED TO HIM, TO RESCIND IN PART, RELEASE IN PART, MODIFY IN PART, THE SALE EFFECTED. THAT THIS CANNOT BE DONE THE AUTHORITIES ARE AGREED.

AFTER QUOTING DIFFERENT AUTHORITIES, THE COURT CONTINUED:

APPLYING THESE PRINCIPLES WHICH GOVERN ORDINARY BUSINESS DEALINGS TO THE FACTS OF THIS CASE, I FIND NO ESCAPE FROM THE CONCLUSION THAT, WHEN THE OFFICERS OF THE GOVERNMENT HAD MADE A VALID CONTRACT OF SALE, SO FAR EXECUTED ON DEFENDANT'S PART AS THAT IT HAD PAID $100,000 TO THE GOVERNMENT, THEY COULD NOT THROUGH ANY FORM MAKE EFFECTIVE A REDUCTION IN THE PURCHASE PRICE CALLED FOR IN THESE CONTRACTS. THEY HAVING ENDEAVORED TO DO SO, THEIR ACT IS A NULLITY BECAUSE WHOLLY BEYOND THEIR POWERS, OF THE EXTENT AND THE LIMITATION UPON WHICH POWERS THE LAW CHARGES ALL PERSONS DEALING WITH THEM. WHITESIDE V. UNITED STATES, 93 U.S. 248.

ACCORDINGLY, WITH REFERENCE TO QUESTION 1, IN VIEW OF THE FACTS OF RECORD AND THE LAW APPLICABLE THERETO, IT MUST BE CONCLUDED THAT THE FIELD COMMISSIONERS WERE UNAUTHORIZED TO MAKE ADJUSTMENTS OR REFUNDS TO PURCHASERS OF SURPLUS PROPERTY ON THE BASIS THAT THE SALES PRICE OF SUCH PROPERTY WAS BASED ON MISTAKE AS TO CONDITION OF THE PROPERTY. IN THIS CONNECTION IT SEEMS CLEAR THAT THERE WAS NO MISTAKE AS TO THE SUBJECT MATTER OF THE SALE. THE PROPERTY WAS SOLD "AS IS" AND THE CONTRACTS APPARENTLY SO STATED. WHILE IT MAY BE THAT THE GOVERNMENT'S DESCRIPTION OF THE PROPERTY WAS INCOMPLETE OR INACCURATE AND, CONSEQUENTLY, THE PROPERTY WAS OVERVALUED, THERE WAS AN EXPRESS DISCLAIMER OF ANY WARRANTY THAT THE PROPERTY WAS AS DESCRIBED. HENCE, THERE IS NO LEGAL BASIS UPON WHICH CLAIM FOR REFUND OF ANY PART OF THE PURCHASE PRICE COULD BE ALLOWED. SEE BARNARD V. KELLOGG, 10 WALL. 383. OF COURSE, WHERE THE PROPERTY IS STOLEN OR PILFERAGE HAS OCCURRED PRIOR TO DELIVERY AND PASSAGE OF TITLE, THE PURCHASER OF THE PROPERTY HAS JUSTIFIABLE GROUNDS FOR CLAIMING AN APPROPRIATE ADJUSTMENT.

WITH REFERENCE TO QUESTION 2, IT IS NOTED THAT WHILE THE MAJORITY OF THE ITEMS WERE DECLARED TO BE IN "GOOD" CONDITION, TWO OF THE ITEMS WERE DECLARED IN "POOR" CONDITION, THUS INDICATING THAT THE ARMY HAD SOME BASIS FOR THE DESCRIPTION OF THE PROPERTY EVEN THOUGH AN INSPECTION MAY NOT HAVE BEEN MADE AT THE TIME THE PROPERTY WAS DECLARED SURPLUS. IN VIEW THEREOF, IT APPEARS THAT, WITH THE EXCEPTION OF THE SUM OF $75.30 REPRESENTING A SHORTAGE OF TWO ITEMS, THE REFUND WAS UNAUTHORIZED.

SUCH A CONCLUSION IS IN ACCORDANCE WITH ESTABLISHED PRINCIPLES OF LAW APPLICABLE TO SIMILAR SITUATIONS. THUS, IN THE CASE OF LYNCH V. CURFMAN, 65 MINN. 170, 68 N.W. 5,7, THE COURT STATED THE PRINCIPLE AS FOLLOWS:

* * * WARRANTIES ARE CONTRACTS, AND THE RULES FOR INTERPRETING THEM OR DETERMINING WHETHER THEY WERE MADE DO NOT DIFFER FROM THE RULES APPLIED IN THE CASE OF ANY OTHER CONTRACTS. AT LEAST, IN THE ABSENCE OF FRAUD OR DECEIT, WHERE A VENDOR MAKES STATEMENTS AS TO THE QUALITY OF THE ARTICLE SOLD, ACCOMPANIED, HOWEVER, BY A POSITIVE AND EXPRESS REFUSAL TO COVENANT IT, OR A LIKE STATEMENT AND NOTICE TO THE VENDEE THAT HE DOES NOT AND WILL NOT WARRANT IT, HIS STATEMENTS AS TO THE QUALITY OF THE ARTICLE MUST BE DEEMED MERE EXPRESSIONS OF OPINION AND NOT A CONTRACT OF WARRANTY. * * *

IN WILLISTON ON SALES (2D ED.), SECTION 213, THE RULE IS STATED AS FOLLOWS:

THE PARTIES MAY BY AGREEMENT LIMIT THE EFFECT OF LANGUAGE WHICH WOULD OTHERWISE BE CONSTRUED AS AMOUNTING TO AN EXPRESS WARRANTY. THE MOST COMMON ILLUSTRATION OF THIS IS WHERE THE SELLER MAKES STATEMENTS IN REGARD TO THE GOODS, BUT REFUSES TO WARRANT THE TRUTH OF THE STATEMENTS. THOUGH THE STATEMENTS BY THEMSELVES MIGHT BE SUFFICIENT TO CONSTITUTE A WARRANTY, THE REFUSAL NOT ONLY INDICATES AN UNWILLINGNESS TO CONTRACT FOR THE TRUTH OF THE STATEMENTS, BUT ALSO SHOULD PUT THE BUYER SO ON HIS GUARD THAT HE WOULD NOT BE JUSTIFIED IN BUYING IN RELIANCE UPON THEM. * * *

FURTHERMORE, WHILE IT IS STATED THAT THERE WAS A MISTAKE AS TO THE VALUE OF THE PROPERTY SOLD, THE PURCHASER MAY NOT SAY THAT AT THE TIME THE AGREEMENT OF SALE WAS CONSUMMATED IT WAS ITS INTENTION TO PAY ANY SPECIFIC PRICE OTHER THAN THE PRICE STIPULATED IN THE AGREEMENT. IT IS WELL SETTLED THAT A CONTRACT MAY BE REFORMED ONLY ON THE GROUND OF MUTUAL, NOT UNILATERAL, MISTAKE. THE CLEAR WEIGHT OF AUTHORITY IS THAT A MISTAKE BY ONE PARTY IN THE STATEMENT OF A PRICE, IF NOT KNOWN TO THE OTHER PARTY, DOES NOT AFFECT THE VALIDITY OF THE CONTRACT AS MADE. TATUM V. COAST LUMBER ., 16 IDAHO 471, 101 P. 957; STEINMEYER V. SCHROEPPEL, 226 ILL. 9, 80 N.E. 564; BOECKELER LUMBER CO. V. CHEROKEE REALTY CO., 135 MD. APP. 708, 116 S.W. 452; HARRAN V. FOLEY, 62 WIS. 584, 22 N.W. 837.

WITH RESPECT TO THE REQUEST FOR ADVICE AS TO THE COURSE OF ACTION TO BE TAKEN BY THE OFLC IN FUTURE TRANSACTIONS, INASMUCH AS THE PROVISIONS OF THE SURPLUS PROPERTY ACT OF 1944, SUPRA, SPECIFICALLY AUTHORIZE THE DISPOSAL AGENCY TO ENTER INTO CONTRACTS OF SALE UPON SUCH TERMS AND CONDITIONS AS THE AGENCY DEEMS PROPER, THE RESPONSIBILITY FOR ESTABLISHING ANY POLICY WITH RESPECT TO THE MANNER AND METHOD OF DISPOSITION OF THE PROPERTY IS A MATTER FOR DETERMINATION BY YOUR DEPARTMENT IN THE FIRST INSTANCE. HOWEVER, IN ORDER TO AVOID SIMILAR SITUATIONS, THERE IS SUGGESTED THE FEASIBILITY OF INCLUDING IN THE CONTRACTS OF SALE AN EQUITABLE ADJUSTMENT CLAUSE SUCH AS REFERRED TO IN B-53313, OCTOBER 29, 1945, CITED IN THE ASSISTANT SECRETARY'S LETTER. WITH REFERENCE TO ANY CLAIMS PRESENTLY PENDING UNDER CONTRACTS CONTAINING AN EXPRESS DISCLAIMER OF WARRANTY, IT APPEARS THAT SUCH CLAIMS SHOULD BE TRANSMITTED TO THE CLAIMS DIVISION OF THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE BUDGET AND ACCOUNTING ACT OF JUNE 10, 1921, 42 STAT. 24.