SEPTEMBER 13, 1923, 3 COMP. GEN. 140

SEPTEMBER 13, 1923, 3 COMP. GEN. 140

RENTAL OF EMPTY CONTAINERS - INDEFINITE CONTRACTS AN AGREEMENT TO PAY A RENTAL OF 50 CENTS PER MONTH FOR STEEL OIL DRUMS NOT RETURNED WITHIN 30 DAYS, WITHOUT ANY LIMIT ON THE TOTAL AMOUNT SO PAYABLE OR ON THE LENGTH OF TIME SUCH CHARGE WOULD RUN, IS UNENFORCEABLE AS CONSTITUTING AN INDEFINITE AGREEMENT WHICH NO OFFICER OR EMPLOYEE OF THE GOVERNMENT IS AUTHORIZED TO MAKE; BUT WHERE THE UNITED STATES HAS HAD THE BENEFIT OF SUCH DRUMS BEYOND THE 30-DAY LIMIT, PAYMENT OF A REASONABLE RENTAL THEREFOR IS AUTHORIZED BASED ON THE ESTIMATED DEPRECIATION DURING THE TIME SO RETAINED BY THE GOVERNMENT AS COMPARED WITH THE ESTIMATED LIFE OF THE DRUMS.

DECISION BY COMPTROLLER GENERAL MCCARL, SEPTEMBER 13, 1923:

THE SINCLAIR REFINING CO., BY LETTER DATED JULY 9, 1923, REQUESTED A RECONSIDERATION OF DECISION OF JUNE 6, 1922, SUSTAINING SETTLEMENT NO. W- 757554, DATED MARCH 24, 1922, DISALLOWING ITS CLAIM FOR $1,985 AS RENTAL OF 289 STEEL DRUMS AT 50 CENTS PER MONTH EACH DELIVERED WITH OIL THEREIN TO THE UNITED STATES AT FORT SILL, OKLA., UNDER A PURCHASE ORDER DATED SEPTEMBER 28, 1919, AND NOT RETURNED TO THE VENDOR WITHIN 30 DAYS FROM THE DATE OF DELIVERY. THE CHARGE COVERED PERIODS OF FROM 11 TO 17 MONTHS AND WAS BASED ON A PROVISION OF THE PURCHASE ORDER TO THE EFFECT THAT STEEL BARRELS WOULD BE RETURNED TO THE CONTRACTOR IN 30 DAYS OR SERVICE CHARGE OF 50 CENTS EACH PER MONTH OR FRACTION THEREOF WOULD BE PAID AFTER THE ORIGINAL 30 DAYS HAD EXPIRED.

IN SAID DECISION IT WAS STATED:

IN SO FAR AS THIS STIPULATION OF THE ORDER WAS CONCERNED, THERE WAS NO CONTRACT PROPERLY ENTERED INTO. THERE COULD NOT BE IMPOSED AN OBLIGATION INDEFINITE AS TO THE TIME FOR WHICH IT MIGHT RUN AS APPEARS IN THIS CASE.

THE VALUE OF THE STEEL BARRELS IS SAID TO HAVE BEEN $8 EACH AND THEY ARE UNDERSTOOD TO HAVE AN AVERAGE LIFE OF AT LEAST 10 YEARS. IT IS OBVIOUS THAT THE CHARGE OF 50 CENTS A MONTH, OR $6 A YEAR, EACH FOR THE PERIOD RETAINED IN EXCESS OF THIRTY DAYS BEARS NO RELATION TO THE AMOUNT OF THE INVESTMENT IN EACH BARREL AND CAN NOT BE PROPERLY CALLED A RENTAL. THE WHOLE 289 BARRELS COULD APPARENTLY HAVE BEEN PURCHASED FOR $2,312. THEY HAVE BEEN RETURNED IN AS GOOD CONDITION AS WHEN RECEIVED, REASONABLE WEAR AND TEAR EXCEPTED, AND IT IS INSISTED THAT THE UNITED STATES SHALL PAY $1,985, OR ONLY $327 LESS THAN IF PURCHASED. THE CHARGE CAN BE VIEWED ONLY AS A PENALTY AND UNENFORCEABLE AGAINST THE UNITED STATES.

DECEMBER 28, 1922, IN DENYING RECONSIDERATION OF SAID DECISION IT WAS STATED:

THE CHARGE CAN BE VIEWED ONLY AS A PENALTY TO SECURE THE RETURN OR PURCHASE OF THE DRUMS AND AS SUCH IS UNENFORCEABLE. * * * IN ALL CASES OF CONTRACTS FOR THE PERFORMANCE OF ANY SERVICE, OR THE DELIVERY OF ARTICLES OF ANY DESCRIPTION, FOR THE USE OF THE UNITED STATES, PAYMENT THEREFOR MAY NOT EXCEED THE VALUE OF THE SERVICE RENDERED, OR OF THE ARTICLES DELIVERED PREVIOUSLY TO SUCH PAYMENT.

IN THE REQUEST FOR RECONSIDERATION REFERENCE IS MADE TO THE COMPANY'S "CLAIM FOR ALLOWANCE ON RENTAL ON STEEL DRUMS UNDER THEIR CONTRACT NO. 1437 OF OCTOBER 1, 1919, FOR DELIVERY OF OIL TO FORT SILL," AND TO COPY OF LETTER OF NOVEMBER 14, 1919, TRANSMITTING BY AUTHORITY OF THE QUARTERMASTER GENERAL, COPIES OF SAID CONTRACT FOR EXECUTION AND STATING:

2. YOUR ATTENTION IS CALLED TO SCHEDULE A, QTRM. GENERAL, WHEREIN PARAGRAPH THREE (3) RELATING TO DRUMS HAS BEEN CORRECTED TO READ:

"DRUMS TO BE RETURNED WITHIN (30) DAYS. SERVICE CHARGE AT FIFTY CENTS PER DRUM PER MONTH OR FRACTION AFTER THIRTY DAYS, CHARGE EIGHT DOLLARS EACH FOR DRUMS RETAINED.'

AND IT IS ARGUED ON BEHALF OF CLAIMANT:

(3) AS TO THE REASONABLENESS OF THE PROVISION, I CALL YOUR ATTENTION TO THE FACT THAT AN OIL COMPANY MUST KEEP ITS STOCK OF DRUMS TO STANDARD REQUIREMENTS. IF A PURCHASER OF OIL BUYS THE DRUM SUCH DRUM CAN BE FORTHWITH REPLACED. IF THE PURCHASER OF OIL USES THE DRUM FOR STORAGE PURPOSES AND AT A LATER DATE MAKES A RETURN THERE MUST BE A NECESSARY AD INTERIM REPLACEMENT IN GOING STOCK OF DRUMS BY THE OIL MERCHANT, AND, THEREFORE, A RENTAL OR SERVICE CHARGE AGAINST THE OIL PURCHASER FOR USE OF THE DRUM FOR STORAGE IS A NECESSARY PART OF THE UPKEEP OF DRUM INVENTORY BY THE OIL MERCHANT. THE CHARGE IS IN NO SENSE A PENALTY TO COMPEL RETURN, BUT IS A FAIR RENTAL CHARGE FOR PROPERTY USED. TO TREAT THIS CHARGE AS A PENALTY IS TO OVERLOOK THE FACT OF BENEFIT TO THE USER, COUPLED WITH THE CORRESPONDING PRIVATION TO THE OWNER. THE RENTAL CHARGE IS NOT TO BE CONSIDERED EXCESSIVE, IN VIEW OF THE TROUBLE TO WHICH THE OWNER IS PUT IN CASE OF DETENTION OVER A PERIOD OF TIME BY THE USER AND EXPENSE NECESSARILY INCURRED BY THE WITHHOLDING OF THE DRUMS FROM THE OWNER.

IT IS RESPECTFULLY SUBMITTED, HOWEVER, THAT IN THIS CASE THE RENTAL CHARGE HAVING BEEN STATED CONTRACTUALLY AS ONE OF THE TERMS OF THE CONTRACT, AND PARTICULARLY IN THE LIGHT OF THE FACT THAT THIS PROVISION WAS WRITTEN BY THE GOVERNMENT OFFICERS, MAKES THIS QUESTION UNIMPORTANT.

IT IS NOTED THAT CONTRACT NO. 1437, REFERRED TO, WAS FOR 15,000 GALLONS OF OIL FOR DELIVERY DURING OCTOBER, NOVEMBER, AND DECEMBER, 1919, AS CALLED FOR BY THE CAMP SUPPLY OFFICER, CAMP PIKE, ARK., WHEREAS THE PURCHASE ORDER DATED SEPTEMBER 28, 1919, UNDER WHICH THE CLAIM IN QUESTION WAS MADE, WAS FOR 19,500 GALLONS OF OIL TO BE SHIPPED TO CAMP SUPPLY OFFICER, FORT SILL, OKLA.

THE PROVISION, IN THE PURCHASE ORDER OF SEPTEMBER 28, 1919, WITH RESPECT TO THE SERVICE CHARGE OF 50 CENTS EACH PER MONTH FOR THE STEEL BARRELS IS INDEFINITE, NO LIMIT BEING PLACED ON THE LENGTH OF PERIOD DURING WHICH THE CHARGE WOULD BE PAYABLE, AND SUCH A PROVISION NO CONTRACTING OFFICER ON THE PART OF THE GOVERNMENT HAS THE AUTHORITY TO MAKE. IT THEREFORE FOLLOWS THAT THE UNITED STATES WAS NOT LEGALLY OBLIGATED THEREBY.

HOWEVER, THE GOVERNMENT DERIVED THE BENEFIT FROM THE USE OF THE DRUMS AND IT MUST BE ASSUMED THAT THERE WAS RECEIVED FROM CLAIMANT THE CONSIDERATION OF SUCH USE BY THE GOVERNMENT. IT IS UNDERSTOOD THAT THE AVERAGE LIFE OF SUCH DRUMS IS 10 YEARS OR 120 MONTHS; AND IN THE ABSENCE OF EVIDENCE SHOWING ANY OTHER ACTUAL DAMAGES SUSTAINED BY CLAIMANT IT MAY BE ASSUMED THAT THE DAMAGE SUSTAINED FOR EACH MONTH OF DELAY WAS ONE ONE-HUNDRED-AND- TWENTIETH OF $8, THE ALLEGED VALUE OF EACH DRUM, OR 6 2/3 CENTS PER DRUM PER MONTH. ACCORDINGLY, UPON A REVIEW OF THE MATTER A DIFFERENCE OF $264.66 IS CERTIFIED DUE CLAIMANT IN FULL AND FINAL SETTLEMENT OF ALL CLAIMS ARISING OUT OF THE DELAY IN RETURNING THE 289 DRUMS. OF THE AMOUNT THUS ALLOWED THE SUM OF $123.13 IS CHARGEABLE TO THE APPROPRIATION "GENERAL APPROPRIATIONS, QUARTERMASTER CORPS, 1920," AND $141.53 TO THE APPROPRIATION "GENERAL APPROPRIATIONS, QUARTERMASTER CORPS, 1921.'