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B-145611, JUN. 16, 1961

B-145611 Jun 16, 1961
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THERE WAS FORWARDED TO OUR OFFICE YOUR LETTER OF DECEMBER 9. BIDS WERE REQUESTED ON FIVE ITEMS OF NONFERROUS SCRAP CONSISTING OF BRASS CARTRIDGE CASES. J. ZIMBLE AND COMPANY WAS HIGH BIDDER ON ITEMS 1 THROUGH 4. STEPS WERE IMMEDIATELY TAKEN TO INSURE SHIPMENT OF CLEAN BRASS ONLY AND ZIMBLE AND COMPANY WAS SO ADVISED. HE REQUESTED A NOTARIZED STATEMENT OF THE COSTS ALLEGED TO HAVE BEEN INCURRED AS A RESULT OF THE CONTAMINATION AND STATED THAT IF THESE COSTS WERE REASONABLE AND PROPER. 205.55 THIS CLAIM WAS DENIED BY YOUR DECISION OF NOVEMBER 2. - BIDDERS ARE INVITED AND URGED TO INSPECT THE PROPERTY TO BE SOLD PRIOR TO SUBMITTING BIDS. PROPERTY WILL BE AVAILABLE FOR INSPECTION AT THE PLACES AND TIMES SPECIFIED IN THE INVITATION.

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B-145611, JUN. 16, 1961

TO LIEUTENANT C. H. KING, (SC) USN:

BY SECOND ENDORSEMENT DATED APRIL 6, 1961, FROM THE OFFICER IN CHARGE, NAVY REGIONAL ACCOUNTS OFFICE, WASHINGTON, D.C., THERE WAS FORWARDED TO OUR OFFICE YOUR LETTER OF DECEMBER 9, 1960, WITH ENCLOSURES, REQUESTING A DECISION AS TO THE PROPRIETY OF MAKING PAYMENT OF THE CLAIM OF J. ZIMBLE AND COMPANY, NORWOOD, MASSACHUSETTS, IN THE AMOUNT OF $15,205.55, REPRESENTING ALLEGED DAMAGES DUE TO CONTAMINATION OF SCRAP BRASS PURCHASED FROM THE NAVAL AMMUNITION DEPOT, MCALESTER, OKLAHOMA, UNDER CONTRACT NO. N60162S-5826, DATED MAY 6, 1960.

BIDS WERE REQUESTED ON FIVE ITEMS OF NONFERROUS SCRAP CONSISTING OF BRASS CARTRIDGE CASES. J. ZIMBLE AND COMPANY WAS HIGH BIDDER ON ITEMS 1 THROUGH 4, HAVING A TOTAL WEIGHT OF 4,180,000 POUNDS AND RECEIVED THE AWARD AT $0.21469 PER POUND OR A TOTAL OF $897,404.20. ZIMBLE ALLEGES THAT IT SOLD PRACTICALLY THE ENTIRE QUANTITY OF SCRAP TO CHASE BRASS AND COPPER COMPANY, CLEVELAND, OHIO.

BY TELEPHONE CALL OF JUNE 3, 1960, CONFIRMED BY LETTER OF JUNE 6, 1960, ZIMBLE ADVISED THAT SOME OF THE CASINGS RECEIVED BY CHASE CONTAINED STEEL STRAPPING AND PIECES OF GALVANIZED STEEL IN SUFFICIENT QUANTITIES TO SPOIL SIX FURNACE HEATS DUE TO HIGH IRON CONTENT, AND REQUESTED THAT FUTURE SHIPMENTS BE FREE OF CONTAMINATION. STEPS WERE IMMEDIATELY TAKEN TO INSURE SHIPMENT OF CLEAN BRASS ONLY AND ZIMBLE AND COMPANY WAS SO ADVISED. ON JUNE 21, 1960, MR. DALE H. ADAMS, SALES CONTRACTING OFFICER, VISITED THE CHASE PLANT IN CLEVELAND AND VERIFIED THE PRESENCE OF SOME FERROUS METAL IN EARLY SHIPMENTS. MR. ADAMS ADVISED ZIMBLE AND COMPANY THAT, SUBJECT TO APPROVAL OF HIGHER AUTHORITY, THE MATTER WOULD BE ADJUSTED, AND BY LETTER DATED OCTOBER 11, 1960, HE REQUESTED A NOTARIZED STATEMENT OF THE COSTS ALLEGED TO HAVE BEEN INCURRED AS A RESULT OF THE CONTAMINATION AND STATED THAT IF THESE COSTS WERE REASONABLE AND PROPER, AN ADJUSTMENT OF THE CONTRACT WOULD BE MADE.

ZIMBLE THEREUPON FILED CLAIM FOR $15,205.55, WHICH REPRESENTED A LIKE CLAIM FILED AGAINST ZIMBLE BY CHASE, AS FOLLOWS:

CHART COST TO REMELT 338,551 LBS. AT $0.024 PER LB. $8,125.22 EXTRA HANDLING

AND SORTING 411,298 LBS. AT $0.0151 PER LB. 6,210.60 COST TO MAGNETIZE

WHILE UNLOADING 107,820 LBS. AT $3.00 PER TON 161.73 ACTUAL FREE STEEL,

RUBBISH, ETC. 1,770 LBS. AT $0.21469 PER LB. 380.00 CARS HELD ON DEMURRAGE -

COULD NOT BE UNLOADED

BECAUSE OF CONTAMINATION 328.00

$15,205.55

THIS CLAIM WAS DENIED BY YOUR DECISION OF NOVEMBER 2, 1960, IN VIEW OF PARAGRAPHS 1 AND 2 OF THE GENERAL SALE TERMS AND CONDITIONS, MADE A PART OF THE CONTRACT, WHICH PROVIDE:

"1. INSPECTION.--- BIDDERS ARE INVITED AND URGED TO INSPECT THE PROPERTY TO BE SOLD PRIOR TO SUBMITTING BIDS. PROPERTY WILL BE AVAILABLE FOR INSPECTION AT THE PLACES AND TIMES SPECIFIED IN THE INVITATION. THE GOVERNMENT WILL NOT BE OBLIGED TO FURNISH ANY LABOR FOR SUCH PURPOSE. NO CASE WILL FAILURE TO INSPECT CONSTITUTE GROUNDS FOR A CLAIM OR FOR THE WITHDRAWAL OF A BID AFTER OPENING.

"2. CONDITION OF PROPERTY.--- ALL PROPERTY LISTED HEREIN IS OFFERED FOR SALE "AS IS" AND ,WHERE IS," AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. IF IT IS PROVIDED HEREIN THAT THE GOVERNMENT SHALL LOAD, THEN "WHERE IS" MEANS F.O.B. CONVEYANCE AT THE POINT SPECIFIED IN THE INVITATION. THE DESCRIPTION IS BASED ON THE BEST AVAILABLE INFORMATION, BUT THE GOVERNMENT MAKES NO GUARANTY, WARRANTY, OR REPRESENTATION, EXPRESSED OR IMPLIED, AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT, SIZE, OR DESCRIPTION OF ANY OF THE PROPERTY, OR ITS FITNESS FOR ANY USE OR PURPOSE, AND NO CLAIM WILL BE CONSIDERED FOR ALLOWANCE OR ADJUSTMENT OR FOR RESCISSION OF THE SALE BASED UPON FAILURE OF THE PROPERTY TO CORRESPOND WITH THE STANDARD EXPECTED; THIS IS NOT A SALE BY SAMPLE.'

ZIMBLE CONTENDS THAT INSPECTION OF THE MATERIAL WAS NOT CONTEMPLATED BY THE PARTIES, THAT IT RELIED ON PRACTICES OF THE TRADE TO INSURE THAT THE ITEMS OFFERED WERE THE TOP GRADE OF BRASS SCRAP, AND THAT THE DESCRIPTION OF THE MATERIAL AS NONFERROUS WAS AN ABSOLUTE REPRESENTATION THAT IT WOULD BE SUCH. IT IS CONTENDED FURTHER THAT SINCE THE AMOUNTS CLAIMED HAVE NOT BEEN SHOWN TO BE OTHER THAN REASONABLE AND PROPER, THE ABOVE LETTER OF OCTOBER 11, 1960, CONSTITUTED A FINAL DECISION BY THE CONTRACTING OFFICER UNDER THE "DISPUTES" CLAUSE OF THE CONTRACT THAT AN ADJUSTMENT OF $15,205.55 WOULD BE MADE.

THE ABOVE-QUOTED PROVISIONS RELATIVE TO INSPECTION AND CONDITION OF PROPERTY ARE PLAIN AND UNEQUIVOCAL IN WARNING PROSPECTIVE PURCHASERS OF THE RISKS INVOLVED. THE VALIDITY OF THESE PROVISIONS AND THEIR EFFECT AS AN EXPRESS DISCLAIMER OF WARRANTY HAVE BEEN FULLY ESTABLISHED BY NUMEROUS DECISIONS OF THE COURTS. MAGUIRE AND COMPANY. V. UNITED STATES, 273 U.S. 67; LUMBRAZO V. WOODRUFF, 175 N.E. 525; W. E. HEDGER CO., INC., V. UNITED STATES, 52 F.2D 31, CERTIORARI DENIED, 284 U.S. 676. IN DISPOSING OF SURPLUS PROPERTY THE GOVERNMENT IS NOT ENGAGED IN NORMAL TRADE AND FREQUENTLY IS UNAWARE OF THE QUALITY OR CONDITION OF THE MATERIALS IT SELLS, AND BUYERS HAVE NO RIGHT TO EXPECT, HAVE NOTICE NOT TO EXPECT, AND CONTRACT NOT TO EXPECT ANY WARRANTIES WHATSOEVER. AMERICAN ELASTICS, INC. V. UNITED STATES, 2 CIR., 187 F.2D 109, 112.

IN A PURCHASE OF OVER 4,000,000 POUNDS OF SCRAP METAL THE PRESENCE OF SOME EXTRANEOUS MATTER COULD BE ANTICIPATED AND ANY EXTRA HANDLING OR OTHER COSTS OCCASIONED BY SAME WOULD BE FOR THE ACCOUNT OF THE PURCHASER, WHOSE RESPONSIBILITY IT WAS TO MAKE WHATEVER INSPECTION WAS NECESSARY TO INSURE THAT THERE WOULD BE NO FERROUS MATERIAL WITH THE CASES. AS WAS STATED BY THE COURT IN PAXTON-MITCHELL COMPANY V. UNITED STATES, 172 F.SUPP. 463: "A BIDDER FAILS TO INSPECT AT HIS PERIL. HAD PLAINTIFF MADE AN INSPECTION BEFORE MAKING ITS BID, AS IT DID AFTERWARDS, IT COULD HAVE DISCOVERED THAT MUCH OF THE MATERIAL WAS MALLEABLE IRON. VISUAL INSPECTION WAS INEFFECTUAL, BUT MICROSCOPIC INSPECTION WAS EFFECTUAL, AS WAS ALSO CHEMICAL ANALYSIS. PLAINTIFF WAS REQUIRED TO MAKE THE SORT OF INSPECTION THAT WAS EFFECTUAL. IT MADE NONE, NOT EVEN A VISUAL INSPECTION. ITS FAILURE TO DO SO LEAVES IT NO ROOM TO COMPLAIN.'

AS TO THE CONTENTION THAT THE CONTRACTING OFFICER MADE A FINAL DECISION THAT THE ADJUSTMENT WOULD BE MADE, IT SHOULD BE POINTED OUT THAT HE HAD NO AUTHORITY TO MAKE SUCH A FINAL DECISION, SINCE THE MATTER INVOLVED A QUESTION OF LAW. UNDER THE "DISPUTES" CLAUSE OF THE CONTRACT, THE CONTRACTING OFFICER IS AUTHORIZED, SUBJECT TO CERTAIN STATED LIMITATIONS, TO MAKE FINAL DECISIONS ON QUESTIONS OF FACT. BUT HE IS PRECLUDED FROM MAKING A "FINAL" DECISION ON A QUESTION OF LAW. SEE SECTION 2 OF PUBLIC LAW 356, APPROVED MAY 11, 1954, 68 STAT. 81, 41 U.S.C. 322, WHICH PROVIDES THAT: "NO GOVERNMENT CONTRACT SHALL CONTAIN A PROVISION MAKING FINAL ON A QUESTION OF LAW THE DECISION OF ANY ADMINISTRATIVE OFFICIAL, REPRESENTATIVE, OR BOARD.' ACCORDINGLY, WHILE THE CONTRACTING OFFICER HAD THE AUTHORITY TO DETERMINE THE FACT THAT THE BRASS POSSESSED SOME CONTAMINATION OF STEEL, HE WAS NOT AUTHORIZED TO MAKE A FINAL DECISION AS TO WHETHER THE CONTAMINATION CONSTITUTED A BREACH OF THE CONTRACT OR TO SURRENDER THE RIGHT OF THE GOVERNMENT TO RETAIN THE FULL CONTRACT PRICE.

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