B-151323, MAY 20, 1963

B-151323, MAY 20, 1963

TO UNITED ROAD MACHINERY COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 30, 1963, CONCERNING YOUR CLAIM FOR REFUND OF $28,500 UNDER INVITATION NO. 11-S-63-22 (CONTRACT NO. DSA-11 -S-497), REPRESENTING A PORTION OF $71,400 PAID FOR ITEMS NUMBERED 52, 99, 103, 104, 105, 247, 248, 249, 251, 252 AND 365, PURCHASED FROM THE DEFENSE SURPLUS SALES OFFICE (HEREAFTER REFERRED TO AS DSSO), PHILADELPHIA NAVAL SHIPYARD, PHILADELPHIA, PENNSYLVANIA, UNDER SITDOWN AUCTION SALE CONDUCTED ON SEPTEMBER 14, 1962, AT THE SHERATON HOTEL IN PHILADELPHIA.

SUBSEQUENT TO REMOVAL OF ITEMS NUMBERED 52, 99, 103, 104, 105 AND 365, CONSISTING OF FIVE LOCOMOTIVE CRANES AND ONE BUCKET-TYPE LOADER, YOU ENCOUNTERED DIFFICULTY IN REMOVING ITEMS 247, 248, 249, 251 AND 252, CONSISTING OF FIVE DIESEL ELECTRIC LOCOMOTIVES LOCATED AT THE UNITED STATES NAVAL AMMUNITION DEPOT, EARLE, RED BANK, NEW JERSEY. BECAUSE OF THIS DIFFICULTY OF REMOVAL YOU CONTEND THAT YOU ARE ENTITLED TO RESCISSION OF THAT PORTION OF THE CONTRACT COVERING THE DIESEL ELECTRIC LOCOMOTIVES AND REFUND OF $28,500 WHICH REPRESENTS THE PURCHASE PRICE OF THE LOCOMOTIVES.

THE RECORD INDICATES THAT FOLLOWING NOTICE OF AWARD, BY LETTER OF SEPTEMBER 22, 1962, YOU REQUESTED A 60-DAY EXTENSION OF TIME FOR REMOVAL OF ALL ITEMS PURCHASED BY YOU. (THE ORIGINAL FINAL REMOVAL DATE WAS SCHEDULED AS OCTOBER 15, 1962.) THIS REQUEST WAS GRANTED AS TO THE FIVE ITEMS HERE UNDER CONSIDERATION SO THAT THE FINAL REMOVAL DATE WAS EXTENDED TO DECEMBER 14, 1962. (LESSER TIME EXTENSIONS WERE GRANTED ON THE OTHER ITEMS AND THEY ARE NOT IN QUESTION HERE.) ON DECEMBER 11, 1962, YOU REQUESTED THAT THE FINAL REMOVAL DATE ON THE FIVE ITEMS IN QUESTION BE EXTENDED AN ADDITIONAL 90 DAYS AND STATED THE FOLLOWING REASONS FOR THIS REQUEST:

"/1) LOCOMOTIVES ARE "SOLD" TO A FOREIGN CLIENT, SUBJECT TO THEIR RECEIPT OF PERMISSION TO EXCEED THEIR ALLOWABLE PER-AXLE RESTRICTION OF 21-TONS. THEY ADVISE THAT MATTER IS BEING EXPEDITED THROUGH CHANNELS, AND THAT A REPLY WILL BE FORTHCOMING "SHORTLY.' THE COST OF TRANSPORTATION FROM EARLE TO MEMPHIS, THENCE TO A PORT, IS ABOUT EQUAL TO PRICE PAID FOR THESE LOCOMOTIVES.

"/2) READYING FOR OVER-TRACK SHIPMENT MUST BE PERFORMED OUTDOORS, AND PRESENT WEATHER IS MOST RESTRICTIVE.'

YOU CONCLUDED WITH THE STATEMENT THAT UNDER NO CIRCUMSTANCES WOULD ADDITIONAL EXTENSION BE REQUESTED AND COMPLETE REMOVAL OF ALL PROPERTY WOULD BE MADE ON OR BEFORE MARCH 15, 1963.

BY LETTER OF DECEMBER 26, 1962, YOU REITERATED YOUR REQUEST OF DECEMBER 11, 1962, FOR AN EXTENSION OF REMOVAL TIME AND GAVE AN ADDITIONAL REASON FOR SUCH REQUEST. YOU STATED THAT INSPECTION OF THE FIVE UNITS WAS MADE SHORTLY AFTER PURCHASE AND IT WAS BELIEVED THEN THAT THE LOCOMOTIVES COULD BE SWITCHED TO THE TRACKS OF THE PENNSYLVANIA RAILROAD WITHOUT THE NECESSITY OF ANY REPAIRS. HOWEVER, UPON DISCUSSION OF THE MATTER WITH OFFICIALS OF THE RAILROAD AND BASE, IT WAS LEARNED THAT AN EXAMINATION OF THESE UNITS HAD BEEN MADE BY RAILROAD AGENTS AND THAT THE BRAKES WERE IN SUCH CONDITION THAT SWITCHING WOULD NOT BE PERMITTED. YOU STATED THAT PARTS HAD BEEN ORDERED BUT BY THE TIME THESE PARTS WOULD BE RECEIVED AND INSTALLED REMOVAL WOULD REQUIRE UP TO MARCH 15, 1963. IN RESPONSE TO THIS LETTER YOU WERE INFORMED BY LETTER OF DECEMBER 28, 1962, THAT DSSO WOULD INVESTIGATE THE SITUATION AND WOULD ADVISE YOU UPON COMPLETION OF THE INVESTIGATION.

SUBSEQUENTLY, BY LETTER OF JANUARY 8, 1963, YOU REQUESTED PARTIAL RESCISSION OF THE CONTRACT COVERING THE FIVE LOCOMOTIVES ON THE BASIS THAT THE LOCOMOTIVES COULD NOT BE TRANSPORTED TO A COMMERCIAL RAILROAD SHOP AND NO FACILITIES WERE AVAILABLE TO PERFORM REPAIRS IN THEIR PRESENT LOCATIONS. THEREAFTER, AN EFFORT WAS MADE, PURSUANT TO A SUGGESTION BY DSSO, TO INTEREST CERTAIN CARRIERS IN UNDERTAKING REMOVAL OF THE LOCOMOTIVES BY WATER BUT THIS EFFORT FAILED.

BY LETTER OF JANUARY 23, 1963, DSSO ADVISED YOU THAT YOU WERE IN DEFAULT OF THE CONTRACT AND UNLESS THE DEFAULT WAS CURED BY FEBRUARY 13, 1963, YOU WOULD LOSE ALL RIGHT, TITLE AND INTEREST IN THE PROPERTY IN ACCORDANCE WITH PARAGRAPH 7 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE CONTRACT. IN A LETTER OF JANUARY 28, 1963, TO DSSO YOU STATED THAT IT WAS YOUR POSITION THAT THE GENERAL SALE TERMS AND CONDITIONS AND SPECIAL CONDITIONS OF THE CONTRACT WERE NOT APPLICABLE TO THE SPECIAL SITUATION WHICH DEVELOPED SUBSEQUENT TO SEPTEMBER 14, 1962, THE DATE OF THE AUCTION SALE. AT THAT TIME, YOU CONTEND, THE EXISTENCE OF THE FOLLOWING CONDITIONS WERE UNKNOWN TO YOU OR TO DSSO: (1) THAT THE LOCOMOTIVES COULD NOT BE MOVED, EVEN A SHORT DISTANCE, TO A COMMERCIAL LOCOMOTIVE REPAIR SHOP; (2) THAT REPAIRS COULD NOT BE ACCOMPLISHED ON THE SITE OF CRANE AMMUNITION DEPOT, RED BANK, NEW JERSEY; AND (3) THAT REMOVAL WAS NOT POSSIBLE, EVEN BY BARGE OR WATER. BY LETTER OF FEBRUARY 4, 1963, THE CONTRACTING OFFICER INFORMED YOU THAT HE HAD NO AUTHORITY TO RESCIND THE INCOMPLETE PORTION OF THE CONTRACT AND THAT THE MATTER WAS BEING SUBMITTED TO OUR OFFICE FOR DETERMINATION. YOU WERE FURTHER ADVISED THAT PENDING DETERMINATION OF YOUR CLAIM, TERMINATION ACTION WOULD BE WITHHELD.

THE SUBJECT INVITATION FOR BIDS CONTAINED STANDARD FORM 114-C (1960 EDITION), GENERAL SALE TERMS AND CONDITIONS. PERTINENT CONDITIONS CONTAINED IN THIS FORM PROVIDE AS FOLLOWS:

"1. INSPECTION. THE BIDDER IS INVITED, URGED, AND CAUTIONED TO INSPECT THE PROPERTY TO BE SOLD PRIOR TO SUBMITTING A BID. PROPERTY WILL BE AVAILABLE FOR INSPECTION AT THE PLACES AND TIMES SPECIFIED IN THE INVITATION. IN NO CASE WILL FAILURE TO INSPECT CONSTITUTE GROUNDS FOR THE WITHDRAWAL OF A BID AFTER OPENING.

"2. CONDITION AND LOCATION OF PROPERTY. UNLESS OTHERWISE SPECIFICALLY PROVIDED IN THE INVITATION, ALL PROPERTY LISTED THEREIN IS OFFERED FOR SALE "AS IS" AND "WHERE IS.' IF IT IS PROVIDED THEREIN 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. HOWEVER, THE GOVERNMENT MAKES NO WARRANTY, EXPRESS 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. EXCEPT AS PROVIDED IN CONDITIONS NO. 8 AND 10, NO REQUEST FOR ADJUSTMENT IN PRICE OR FOR RESCISSION OF THE SALE WILL BE CONSIDERED. THIS IS NOT A SALE BY SAMPLE.'

CONDITIONS 8 AND 10 DEAL WITH ADJUSTMENTS FOR VARIATION IN QUANTITY OR WEIGHT AND RISK OF LOSS, RESPECTIVELY, AND ARE NOT PERTINENT TO THE MATTER BEFORE US.

ARTICLE "Y" OF THE SPECIAL CONDITIONS OF THE INVITATION ENTITLED "LOADING AND REMOVAL" PROVIDES THAT:

"/1) PROPERTY WILL BE LOADED AND REMOVED ON NORMAL WORKDAYS, MONDAYS THRU FRIDAYS (LEGAL HOLIDAYS EXCLUDED). WHEN IT IS PROVIDED HEREIN THAT THE GOVERNMENT WILL LOAD, THIS MEANS ,TAILGATE OR ON BOARD" LOADING ONLY. THE GOVERNMENT WILL NOT PACKAGE, BLOCK, LASH, BAND, PACK, ETC. CARGO ON PURCHASER'S CONVEYANCE. WHEN IT IS PROVIDED HEREIN THAT THE GOVERNMENT WILL NOT LOAD, THIS MEANS THE PROPERTY IS SOLD "AS IS," "WHERE IS" AND IT IS THE SOLE RESPONSIBILITY OF THE PURCHASER TO MAKE ALL ARRANGEMENTS AND PERFORM ALL WORK NECESSARY TO EFFECT REMOVAL OF PROPERTY. * * *"

ARTICLE "Y" FURTHER SPECIFICALLY PROVIDED THAT THE GOVERNMENT WOULD NOT LOAD ITEMS 247 THROUGH 252.

IT SHOULD ALSO BE NOTED THAT ITEMS 247 THROUGH 252 WERE ALL DESCRIBED IN THE SCHEDULE OF THE INVITATION WITH RESPECT TO THEIR CONDITION AS "USED (REPAIRS REQUIRED) FAIR.' MOREOVER, ALL BIDDERS WERE EXPRESSLY CAUTIONED ON PAGE 13 OF THE INVITATION BY A NOTICE, IN LARGE PRINT, STATING "INSPECT THE PROPERTY.'

IT IS APPARENTLY YOUR POSITION THAT YOU ARE ENTITLED TO RESCISSION ON THE BASIS OF MUTUAL MISTAKE OF FACT IN VIEW OF YOUR CONTENTIONS, AS SET FORTH IN YOUR LETTER OF JANUARY 28, 1963, THAT THE GENERAL SALE TERMS AND CONDITIONS AND SPECIAL CONDITIONS OF THE CONTRACT ARE INAPPLICABLE TO THE PRESENT SITUATION WHICH DEVELOPED SUBSEQUENT TO THE DATE OF THE AUCTION SALE AND THAT BOTH YOU AND DSSO WERE NOT AWARE, AT THAT TIME, OF THE DIFFICULTY OF REMOVAL. WE ARE UNABLE TO FIND ANY SUPPORT FOR YOUR POSITION IN THE RECORD BEFORE US. IT IS READILY APPARENT THAT THE SITUATION OF WHICH YOU COMPLAIN, AND UPON WHICH YOU BASE YOUR CLAIM FOR RESCISSION, DID NOT DEVELOP SUBSEQUENT TO THE DATE OF THE SALE BUT WAS, IN FACT, A PREEXISTING CONDITION SPECIFICALLY BROUGHT TO YOUR ATTENTION BY AMPLE NOTICE IN THE INVITATION. THE PROPERTY WAS DESCRIBED AS "USED (REPAIRS REQUIRED) FAIR" AND BIDDERS WERE CAUTIONED TO INSPECT PRIOR TO SUBMITTING BIDS. IN THIS CONNECTION, THE ADMINISTRATIVE OFFICE REPORTS THAT IT IS NOT KNOWN WHETHER YOU INSPECTED THE PROPERTY PRIOR TO BIDDING. APPARENTLY YOU DID NOT INSPECT PRIOR TO BIDDING SINCE YOUR LETTER OF DECEMBER 26, 1962, STATES THAT "INSPECTION OF THE UNITS WAS MADE SHORTLY AFTER PURCHASE.' IN ANY EVENT, HAD YOU SUBJECTED THE PROPERTY, PRIOR TO BIDDING, TO THE SAME EXTENSIVE INSPECTION ACTUALLY GIVEN IT AFTER AWARD YOU COULD READILY HAVE ASCERTAINED ITS TRUE STATE AND THE EXPECTED DIFFICULTIES TO BE ENCOUNTERED IN MAKING THE REMOVAL. FURTHERMORE, ALTHOUGH IT IS CONCEDED THAT YOU ARE FACED WITH A SITUATION WHEREIN REMOVAL OF THE LOCOMOTIVES MAY BE ECONOMICALLY UNFEASIBLE THERE IS NO EVIDENCE TO INDICATE THAT REMOVAL OF THE LOCOMOTIVES IS IMPOSSIBLE.

ON THE OTHER HAND, EVEN IF WE CONCEDE, FOR THE SAKE OF ARGUMENT, THAT A MUTUAL MISTAKE OF FACT DID EXIST AT THE TIME OF THE SALE, SUCH A MISTAKE WOULD RENDER THE CONTRACT VOIDABLE ONLY IF THE PARTIES HAVE NOT AGREED THAT THE RISK OF SUCH MISTAKE SHALL BE ASSUMED BY THE PURCHASER. IN VIEW OF THE EXPRESS PROVISIONS OF PARAGRAPH 2 OF THE GENERAL SALE TERMS AND CONDITIONS IT MUST BE CONCLUDED THAT YOU AGREED TO ASSUME THE RISK OF ANY DIFFICULTY THAT MIGHT BE ENCOUNTERED IN REMOVING THE PROPERTY. SEE UNITED STATES V. F. C. HATHAWAY, 242 F.2D 897, WHERE, ON FACTS ALMOST IDENTICAL TO THOSE PRESENT HERE, THE UNITED STATES NINTH CIRCUIT COURT OF APPEALS DENIED A PURCHASER'S CLAIM FOR RELIEF UNDER A SURPLUS SALES CONTRACT WITH THE GOVERNMENT. IN THE HATHAWAY CASE THE GOVERNMENT SOLD FOUR SETS OF STEEL LOCK GATES WHICH WERE SITUATED BELOW THE LEVEL OF THE WATERS OF THE LAKE FORMED BY BONNEVILLE DAM. AFTER REMOVING TWO LOCK GATES THE PLAINTIFF DISCOVERED THAT ONE OF THE REMAINING TWO LOCKS WAS SPRUNG, AND THAT THIS CONDITION, COMBINED WITH THE DEPTH OF THE LOCKS AND THE ACCUMULATED SILT AND DEBRIS, MADE REMOVAL OF THE LOCKS ECONOMICALLY UNFEASIBLE AND TOO PERILOUS FOR DIVING OPERATIONS. WORK ON THE LOCKS WAS THEN TERMINATED, THE PLAINTIFF BROUGHT SUIT FOR BREACH OF CONTRACT, AND THE GOVERNMENT COUNTERCLAIMED FOR THE UNPAID BALANCE DUE ON THE CONTRACT. THE CONTRACT CONTAINED A CLAUSE ENTITLED "CONDITIONS OF PROPERTY" WHICH EMBODIED PROVISIONS ESSENTIALLY THE SAME AS THOSE CONTAINED IN PARAGRAPH 2 OF THE GENERAL SALE TERMS AND CONDITIONS IN THE PRESENT CONTRACT. THE COURT HELD THAT UNDER THE CONTRACT OF SALE OF STEEL OFFERED BY THE GOVERNMENT ON AN "AS IS" AND "WHERE IS" BASIS WITHOUT RECOURSE AGAINST THE GOVERNMENT AND WITHOUT GUARANTY, WARRANTY OR REPRESENTATION AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT OR SIZE, THE CONTRACTOR ASSUMED THE RISK OF CONDITIONS WHICH IMPAIRED REMOVAL OF THE STEEL AND THE FACT THAT IT WAS ECONOMICALLY UNFEASIBLE AND TOO DANGEROUS TO REMOVE THE STEEL DID NOT RELIEVE THE CONTRACTOR FROM HIS CONTRACTUAL OBLIGATIONS. THE COURT STATED, IN PERTINENT PART, AS FOLLOWS:

"PROSPECTIVE BUYERS WERE INFORMED THAT THE LOCKS WERE LOCATED BENEATH THE WATER SURFACE. THEY WERE URGED TO INSPECT THE LOCKS BEFORE BIDDING AND ADMONISHED BY THE EXPRESS LANGUAGE OF THE CONTRACT THAT THE GOVERNMENT WOULD NOT BEAR THE RESPONSIBILITY OF FAILURE TO INSPECT. AMPLE OPPORTUNITY WAS AFFORDED FOR THIS PURPOSE.

"* * * ONE CAN HARDLY ENVISAGE CONTRACTUAL TERMS WHICH COULD MORE CLEARLY IMPOSE ON THE PURCHASER THE RISK OF LOSS RESULTING FROM SUCH CONTINGENCIES AS HERE OCCURRED. THIS WAS THE VERY ESSENCE OF THE BID INVITATION. THE GOVERNMENT'S MANIFESTED INTENTION WAS TO SHIFT THE BURDEN OF RESPONSIBILITY FOR ANY FORTUITOUS CONDITIONS WHICH MIGHT ARISE UPON THE BIDDER. THERE CAN BE NO OTHER INTERPRETATION GIVEN THE PLAIN AND UNEQUIVOCAL TERMS OF THE BID INVITATION.

"PLAINTIFF BOUGHT ON A "GRAB BAG" BASIS. THE VERY TERM "AS IS, WHERE IS" TELLS THE BUYER TO BEWARE--- TO INVESTIGATE. PLAINTIFF WAS AWARE THAT RISKS EXISTED. HE VENTURED AND LOST. HIS BARGAIN WAS BAD. HOWEVER, THE LAW PROVIDES NO REMEDY FOR BAD BARGAINS WILLINGLY RISKED WITH WIDE OPENED EYES.

"THE DETERMINATION THAT PLAINTIFF ASSUMED THE RISK OF THE CONDITIONS WHICH IMPAIRED THE REMOVABILITY OF ALL THE STEEL ANSWERS NOT ONLY THE QUESTION AS TO HIS RIGHTS BUT ALSO THE MATTER OF HIS DUTIES. JUST AS THE VISCISSITUDE OF THE SPRUNG LOCK AND THE ACCUMULATED SILT DOES NOT BESTOW ANY RIGHTS IN HIM NEITHER DOES IT ABSOLVE HIM OF HIS OBLIGATIONS. THIS IS NOT A CASE OF EITHER IMPOSSIBILITY OR COMMERCIAL FRUSTRATION JUSTIFYING EXCUSE FROM PERFORMANCE, FOR PLAINTIFF ASSUMED THE RISK OF THE DIFFICULTIES HE ENCOUNTERED. * * *" ACCORDINGLY, IT MUST BE CONCLUDED, AS IN THE HATHAWAY CASE, THAT YOU ASSUMED ANY AND ALL RISKS INVOLVED IN REMOVING THE LOCOMOTIVES PURCHASED. YOUR CLAIM FOR PARTIAL RESCISSION OF THE CONTRACT AND REFUND OF $28,500 IS, THEREFORE, DENIED.