B-82333, JANUARY 25, 1949, 28 COMP. GEN. 435

B-82333, JANUARY 25, 1949, 28 COMP. GEN. 435

CONTRACTS - DAMAGES - LIQUIDATED - REMISSION WHERE, UNDER A CONTRACT CONTAINING A LIQUIDATED DAMAGE PROVISION FOR DELAY IN DELIVERY, CONTRACTOR DEFAULTED IN MEETING THE SHIPPING SCHEDULE, THEREBY RESULTING IN THE ACCRUAL OF LIQUIDATED DAMAGES IN AN AMOUNT IN EXCESS OF THE CONTRACT PRICE, THERE IS NO LEGAL BASIS FOR REMITTING ANY PART OF THE LIQUIDATED DAMAGES THAT ACCRUED TO THE GOVERNMENT IN ACCORDANCE WITH THE LIQUIDATED DAMAGE PROVISION, WHICH WAS MADE PART OF THE CONTRACT TO SERVE AS THE ONLY PRACTICAL MEASURE OF COMPENSATION TO THE GOVERNMENT FOR DAMAGE INCIDENT TO DELAY IN DELIVERY.

COMPTROLLER GENERAL WARREN TO THE PUBLIC PRINTER, JANUARY 25, 1949:

I HAVE YOUR LETTER OF DECEMBER 15, 1948, WITH ENCLOSURES, REQUESTING A DECISION AS TO THE AMOUNT OF LIQUIDATED DAMAGES, IF ANY, CHARGEABLE TO SPEED SORT SYSTEMS ON ACCOUNT OF DELAY IN PERFORMANCE OF CONTRACT NO. 11348, DATED APRIL 23, 1948. AMONG THE ENCLOSURES WITH YOUR LETTER IS A VOUCHER IN THE AMOUNT OF $212.60, REPRESENTING $195.03 FOR 9,850 IMMUNOLOGY STUDIES PLUS $17.57 PARCEL POST CHARGES.

UNDER THE TERMS OF THE CONTRACT SPEED SORT SYSTEMS AGREED TO FURNISH 10,000 IMMUNOLOGY STUDIES IN STRICT ACCORDANCE WITH QUOTATION NO. 65326, DATED APRIL 19, 1948, AND GOVERNMENT PRINTING OFFICE SPECIFICATIONS. WITH RESPECT TO DELIVERIES THE SPECIFICATIONS ATTACHED TO THE CONTRACT PROVIDED THAT SHIPMENT WOULD BE MADE ON OR ABOUT MAY 20, 1948, AND THAT LIQUIDATED DAMAGES OF $5 PER DAY WOULD BE ASSESSED AGAINST THE CONTRACTOR IF IN DEFAULT OF THE SHIPPING SCHEDULE. ALSO, THE SPECIFICATIONS PROVIDE:

PENALTIES AND/OR DAMAGES SHALL NOT BE APPLIED AGAINST THE CONTRACTOR FOR DELAYS IN DELIVERY OCCASIONED BY ACTS OF GOD, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, AND FREIGHT EMBARGOES:PROVIDED, THAT THE CONTRACTOR SHALL, WITHIN 10 DAYS FROM THE BEGINNING OF SUCH DELAY, NOTIFY THE PUBLIC PRINTER IN WRITING OF THE CAUSE OF THE DELAY, WHO SHALL ASCERTAIN THE FACTS AND THE EXTENT OF THE DELAY, AND HIS FINDINGS OF FACTS THEREON SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO.

IN YOUR LETTER IT IS STATED THAT ALTHOUGH DELIVERY OF THIS JOB WAS REQUESTED FOR MAY 20, 1948, THE DELIVERY DATE WAS EXTENDED BY CHANGE ORDER TO MAY 25, 1948, TO COMPENSATE FOR DELAY OF THE GOVERNMENT PRINTING OFFICE IN SENDING A COPY OF THE ORDER TO THE CONTRACTOR. IT IS STATED FURTHER THAT COMPLETE DELIVERY WAS NOT MADE UNTIL AUGUST 1, 1948 (APPARENTLY SHOULD BE AUGUST 12, 1948), A DELAY OF 79 DAYS, AND THAT LIQUIDATED DAMAGES ACCRUED IN THE AMOUNT OF $395, OR $197 MORE THAN THE CONTRACT PRICE. ALSO, IT IS STATED THAT THE FORMS COVERED BY THE CONTRACT HAVE BEEN RECEIVED AND ARE NOW IN USE AND THAT THERE IS NO SHOWING THAT THE GOVERNMENT SUSTAINED ANY ACTUAL DAMAGES AS A RESULT OF THE DELAY IN DELIVERY OF THE FORMS.

THE LIQUIDATED DAMAGE PROVISION, QUOTED ABOVE, SETS FORTH THE CIRCUMSTANCES UNDER WHICH DELAY IN DELIVERY WOULD BE EXCUSED, AND IT IS APPARENT THEREFROM THAT IN ORDER FOR ANY DELAY IN PERFORMANCE TO BE EXCUSABLE THE CAUSE OF THE DELAY MUST BE FOUND BY THE PUBLIC PRINTER TO HAVE BEEN DUE TO ONE OR MORE OF THE CAUSES SPECIFIED. THE DELAY IN PERFORMANCE IS NOT SHOWN TO HAVE BEEN DUE TO ANY OF THE CAUSES IN THE CONTRACT AS A BASIS FOR AN EXTENSION OF THE PERFORMANCE TIME. HENCE, THE SOLE QUESTION IS WHETHER UNDER THE FACTS AND CIRCUMSTANCES NOW OF RECORD IN THE MATTER THERE IS ANY LEGAL BASIS FOR GIVING LESS THAN FULL FORCE AND EFFECT TO THE LIQUIDATED DAMAGE PROVISION IN THE CONTRACT.

WHERE, AT THE TIME A CONTRACT IS EXECUTED, IT IS DIFFICULT OR IMPRACTICABLE TO CALCULATE THE DAMAGE WHICH MIGHT RESULT FROM A DELAY IN PERFORMANCE BEYOND THE DATE AGREED UPON, REASONABLE AGREEMENTS FOR LIQUIDATED DAMAGES UNIFORMLY ARE UPHELD. KOTHE V. R.C. TAYLOR TRUST, 280 U.S. 224; ROBINSON V. UNITED STATES, 261 U.S. 486; WISE V. UNITED STATES, 249 U.S. 361; UNITED STATES V. BETHLEHEM STEEL CO., 205 U.S. 105; SUN PRINTING AND PUBLISHING ASSN. V. MOORE, 183 U.S. 642; CONSOLIDATED FLOUR MILLS CO. V. FILE BROS. W. CO., 110 F.2D 926; BANKERS' SURETY CO. V. ELKHORN RIVER DRAINAGE DISTRICT., 214 F. 342. THAT IS, ONCE THE PARTIES HAVE AGREED BETWEEN THEMSELVES WITH RESPECT TO THE AMOUNT PAYABLE IN THE EVENT OF DELAY, THE COURTS ARE STRONGLY INCLINED TO ENFORCE THE AGREEMENT AS IT IS WRITTEN. SEE, IN ADDITION TO THE CASES CITED IMMEDIATELY ABOVE, 25 COLUMBIA LAW REVIEW 277 AND AUTHORITIES CITED THEREIN. NOR IS IT MATERIAL TO THE LEGALITY OF SUCH A PROVISION THAT IN A PARTICULAR CASE NO ACTUAL DAMAGE CAN BE SHOWN TO HAVE RESULTED FROM THE BREACH. SOUTHERN PAC. CO. V. GLOBE INDEMNITY CO., 20 F.2D 288; UNITED STATES V. KANTER, 137 F.2D 828; FRICK CO. V. RUBEL CORPORATION, 62 F.2D 765.

THERE IS, HOWEVER, A LINE OF CASES WHEREIN THE PROVISION FOR LIQUIDATED DAMAGES HAS BEEN HELD TO BE UNENFORCEABLE AS CONSTITUTING A PENALTY RATHER THAN COMPENSATION FOR DAMAGE. IN ORDER FOR A CASE TO FALL IN THIS CATEGORY IT MUST APPEAR THAT THE FIXED SUM STIPULATED IS PLAINLY WITHOUT REASONABLE RELATION TO ANY PROBABLE DAMAGE WHICH COULD FOLLOW FROM A DELAY IN PERFORMANCE. KOTHE V. R.C. TAYLOR TRUST, SUPRA. ALSO, SEE 16 COMP. GEN. 344, AND CASES CITED THEREIN.

THE RECORD IN THE PRESENT CASE DOES NOT INDICATE HOW URGENTLY THE PRINTED MATTER COVERED BY THE ORDER WAS NEEDED BY THE ADMINISTRATIVE OFFICE INVOLVED; NOR IS THERE EVIDENCE BEARING UPON THE EXTENT OR NATURE OF THE DAMAGE WHICH MIGHT HAVE BEEN ANTICIPATED. HOWEVER, THE FACE OF THE CONTRACT, VIEWED AS OF THE DATE IT WAS CONSUMMATED, WOULD NOT STAMP THE LIQUIDATED DAMAGE PROVISION EITHER AS UNCONSCIONABLE OR UNREASONABLE. SEE " LIQUIDATED DAMAGES," 17 VIRGINIA LAW REVIEW 103, 113, AND CASES CITED THEREIN. ALSO, IN MATTERS OF THIS KIND, THERE IS A PRESUMPTION, ARISING FROM THE VERY EXISTENCE OF A PROVISION IN A CONTRACT, THAT ITS ADOPTION WAS PREMISED UPON DUE CONSIDERATION FOR ALL ATTENDANT CIRCUMSTANCES. STATED MORE PARTICULARLY, IT MUST BE ASSUMED, IN THE ABSENCE OF COMPELLING EVIDENCE TO THE CONTRARY, THAT THIS LIQUIDATED DAMAGE PROVISION WITH ALL ITS COMPONENT TERMS, INCLUDING THE RATE STIPULATED, WAS CONSCIOUSLY AND DELIBERATELY MADE PART OF THE CONTRACT TO SERVE AS THE ONLY PRACTICAL MEASURE OF COMPENSATION TO THE GOVERNMENT FOR DAMAGE INCIDENT TO DELAY IN DELIVERY. SOMEWHAT THE SAME PRINCIPLE WAS FOLLOWED BY THE COURT IN DETROIT EDISON CO. V. WYATT COAL CO., 1 F.2D 788, 789, WHEREIN IT WAS STATED:

* * * THE CONTRACT IS IMPRESSED WITH A STRONG PRESUMPTION THAT THE OFFICERS AND COUNSEL OF THESE LARGE CORPORATIONS KNEW THE MEANING OF THE LANGUAGE THEY USED AND INTENDED WHAT THEY SAID. * * * THE COURTS WILL DISREGARD THE EXPRESSED INTENTION OF THE PARTIES TO PROVIDE FOR SUCH LIQUIDATED DAMAGES ONLY WHEN THE PRINCIPLE OF COMPENSATION IS EVIDENTLY DISREGARDED.

ACCORDINGLY, I HAVE TO ADVISE THAT IN THE CASE YOU PRESENT AND ON THE RECORD NOW BEFORE ME THERE IS NO AUTHORITY TO REMIT ANY PART OF THE LIQUIDATED DAMAGES ACCRUED TO THE GOVERNMENT ON ACCOUNT OF THE DELAY IN DELIVERY.