[Question of Whether a Damage Claim Can Be Set Off Against Moneys Due Rail Carrier]

B-206161: Jul 20, 1982

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The Department of the Army requested advice under the Federal Claims Collection Standards on the question of whether the Army can set off a damage claim, arising as a result of a train derailment, against moneys currently due the rail carrier. The carrier's position, that the claim was time-barred, was based on the terms and conditions of the commercial bill of lading. The bill of lading provides that no carrier shall be liable for damage where suit is not instituted within 2 years and 1 day from the date when notice in writing is given by the carrier that the claim is denied. The shipment was transported on a government bill of lading (GBL). GAO has held that certain provisions of the GBL constitute a waiver of the limitation periods in the commercial bill of lading, and that the latter present no impediment to the exercise of the government's common law right of setoff. Therefore, GAO concluded that the Army may legally recover on its damage claim by exercising the government's common law right of setoff against moneys currently due the rail carrier, although GAO expressed no opinion concerning the merits of the claim.