B-141532, OCT. 12, 1960

B-141532, OCT. 12, 1960

TO NAGASAKA SHOJI COMPANY, LTD.:

FURTHER REFERENCE IS MADE TO A LETTER DATED AUGUST 22, 1960, AND PRIOR CORRESPONDENCE, FROM YOUR ATTORNEY, ROGER E. BROOKS, ESQUIRE, CONCERNING YOUR CLAIM AGAINST THE GOVERNMENT ARISING OUT OF AN ALLEGED SHORTAGE IN THE SURPLUS PROPERTY PURCHASED BY YOU UNDER CONTRACT NO. DA/S/-92-557-FEC- 11573, DATED JULY 20, 1956.

UNDER DATE OF JUNE 8, 1960, WE TRANSMITTED TO THE SECRETARY OF THE ARMY COPIES OF THE SEVERAL AFFIDAVITS AND STATEMENTS FURNISHED BY MR. BROOKS ON YOUR BEHALF, AND REQUESTED A FURTHER REPORT IN THE MATTER. WE POINTED OUT IN OUR LETTER THAT THE RECORD INDICATED THE EXISTENCE OF APPROXIMATELY 4,697 SHORT TONS OF MATERIALS AS AVAILABLE PRIOR TO THE AWARD, AND WE EXPRESSED THE VIEW THAT YOUR COMPANY HAD MADE A PRIMA FACIE SHOWING TO THAT EFFECT. SINCE THE ESTIMATES BY GOVERNMENT REPRESENTATIVES AND YOUR REPRESENTATIVES WERE THAT 4,697 SHORT TONS OF MATERIALS WERE INCLUDED IN THE 17 LOTS OFFERED FOR SALE, AND SINCE YOU ALLEGED, AND THE GOVERNMENT CONCEDED, THAT ONLY 3,634 SHORT TONS WERE DELIVERED, WE REQUESTED, AMONG OTHER THINGS, THAT WE BE FURNISHED WITH THE FURTHER COMMENTS OF THE CONTRACTING OFFICER CONCERNING THE BASIS FOR THE GOVERNMENT ESTIMATES.

WE HAVE NOW RECEIVED FROM THE DEPARTMENT OF THE ARMY A FURTHER REPORT, WITH A NUMBER OF STATEMENTS BY COGNIZANT PERSONNEL SETTING FORTH ADDITIONAL FACTS CONCERNING THE ALLEGED SHORTAGE. FOR YOUR INFORMATION, WE ARE ENCLOSING COPIES OF A STATEMENT DATED JULY 11, 1960, BY MAJOR DAVID D. FIELD, QMC, PROPERTY DISPOSAL OFFICER, A STATEMENT DATED SEPTEMBER 23, 1960, BY COLONEL KENT L. WALITSCHEK, QMC, AND THE ADMINISTRATIVE REPORT OF THE QUARTERMASTER GENERAL, TOGETHER WITH A COPY OF REPORT DATED DECEMBER 10, 1956, MADE AS A RESULT OF THE FIRST COMPLAINTS RECEIVED. THE ENCLOSED STATEMENTS ARE SELF EXPLANATORY AND NO COMMENT THEREON BY OUR OFFICE APPEARS TO BE REQUIRED EXCEPT TO POINT OUT THAT THE EVIDENCE SUBMITTED IS TO THE EFFECT THAT THE PROPERTY IN QUESTION WAS CONTINUALLY UNDER GUARD AND THAT, EXCEPT FOR POSSIBLE PETTY PILFERAGE, THE QUANTITY OF THE PROPERTY WAS NOT REDUCED DURING THE STORAGE PERIOD--- SEE PAGE TWO OF MAJOR FIELD'S STATEMENT. IT HAS BEEN NOTED THAT YOUR REPRESENTATIVES HAVE NOT ALLEGED THAT THEY HAD ANY PERSONAL KNOWLEDGE OF PILFERAGE; HOWEVER, YOUR CLAIM IS LARGELY BASED UPON YOUR BELIEF THAT THERE WAS SUBSTANTIAL PILFERAGE OR UNAUTHORIZED REMOVAL. IN THE CIRCUMSTANCES WE MUST CONCLUDE THAT YOUR EVIDENCE IS NOT ADEQUATE TO OVERCOME THE EFFECT OF THE ADMINISTRATIVE REPORT OF THE FACTS AND THE DECISION OF THE CONTRACTING OFFICER.

IN THIS CONNECTION, YOUR ATTENTION IS DIRECTED TO THE DISPUTES CLAUSE OF THE CONTRACT--- ARTICLE 15 OF THE GENERAL SALE TERMS AND CONDITIONS--- WHICH PROVIDES AS FOLLOWS:

"15. DISPUTES. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS CONTRACT, ALL QUESTIONS OF FACT INVOLVED IN DISPUTES ARISING UNDER THIS CONTRACT SHALL BE DECIDED BY THE CONTRACTING OFFICER, WHOSE DECISION UPON SAID FACTS SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES, SUBJECT TO WRITTEN APPEAL BY THE PURCHASER WITHIN THIRTY (30) DAYS TO THE HEAD OF THE DEPARTMENT OR HIS DULY AUTHORIZED REPRESENTATIVE, WHOSE DECISION ON SAID FACTS SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES HERETO. IN THE MEANTIME, THE PURCHASER SHALL DILIGENTLY PROCEED WITH PERFORMANCE.'

THE ONLY LEGAL PROBLEM REMAINING FOR CONSIDERATION IS WHETHER UNDER THE TERMS AND CONDITIONS OF THE CONTRACT THE GOVERNMENT IS LIABLE FOR THE CLAIMED SHORTAGE UNDER ANY OTHER THEORY THAN THAT THE PROPERTY DELIVERED WAS NOT THE SAME AS THAT ORIGINALLY OFFERED FOR INSPECTION. THE GENERAL SALE TERMS AND CONDITIONS ON PAGE TWO OF THE CONTRACT CONTAIN THE FOLLOWING PROVISIONS:

"2. CONDITION OF PROPERTY.--- ALL PROPERTY LISTED HEREIN IS OFFERED FOR SALE "AS IS" AND ,WHERE IS," AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. * * * 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.

"8. ADJUSTMENT FOR VARIATION IN QUANTITY OR WEIGHT.--- ANY VARIATION BETWEEN THE QUANTITY OR WEIGHT LISTED FOR ANY ITEM AND THE QUANTITY OR WEIGHT OF SUCH ITEM TENDERED OR DELIVERED TO THE PURCHASER WILL BE ADJUSTED ON THE BASIS OF THE UNIT PRICE QUOTED FOR SUCH ITEM; BUT NO ADJUSTMENT FOR SUCH VARIATION WILL BE MADE WHERE AN AWARD IS MADE ON A "PRICE FOR THE LOT" BASIS.

"10. RISK OF LOSS.--- (1) AFTER MAILING NOTICE OF AWARD AND PRIOR TO PASSAGE OF TITLE TO THE PURCHASER, THE GOVERNMENT WILL BE RESPONSIBLE FOR THE CARE AND PROTECTION OF THE PROPERTY AND ANY LOSS, DAMAGE OR DESTRUCTION OCCURRING DURING SUCH PERIOD WILL BE ADJUSTED BY THE CONTRACTING OFFICER. (2) AFTER PASSAGE OF TITLE TO THE PURCHASER, AND PRIOR TO THE DATE SPECIFIED FOR REMOVAL, THE GOVERNMENT'S RESPONSIBILITY WILL BE LIMITED TO THE EXERCISE OF REASONABLE CARE FOR THE PROTECTION OF THE PROPERTY. (3) AFTER THE DATE SPECIFIED FOR REMOVAL OF THE PROPERTY ALL RISK OF LOSS, DAMAGE, OR DESTRUCTION FROM ANY CAUSE WHATSOEVER SHALL BE BORNE BY THE PURCHASER.

"12. VERBAL MODIFICATIONS.--- ANY ORAL STATEMENT BY ANY REPRESENTATIVE OF THE GOVERNMENT MODIFYING OR CHANGING ANY CONDITIONS OF THIS CONTRACT, IS AN EXPRESSION OF OPINION ONLY AND CONFERS NO RIGHT UPON THE PURCHASER.'

IN CONSTRUING THE QUOTED LANGUAGE OF ARTICLE 2 IT HAS CONSISTENTLY BEEN HELD BY THE COURTS THAT SUCH A CONTRACT PROVISION CONSTITUTES AN EXPRESS DISCLAIMER OF WARRANTY, AND THAT, WHILE ORDINARILY THERE IS AN IMPLIED WARRANTY IN THE SALE OF PERSONAL PROPERTY BY DESCRIPTION THAT THE PROPERTY WILL CORRESPOND WITH THE DESCRIPTION, WHERE THERE EXISTS AN EXPRESS DISCLAIMER OF WARRANTY AS TO QUANTITY--- AS IN THE INSTANT CASE--- NO SUCH WARRANTY MAY BE IMPLIED FROM THE ADVERTISED DESCRIPTION OF THE PROPERTY SOLD. SEE W. E. HEDGER COMPANY V. UNITED STATES, 52 F.2D 31, CERTIORARI DENIED 283 U.S. 676; UNITED STATES V. KELLY, 112 F.SUPP. 831; TRIAD CORPORATION V. UNITED STATES, 63 CT.CL. 151; I. SHAPIRO COMPANY V. UNITED STATES, 66 CT.CL. 424, 428; AND SILBERSTEIN AND SON V. UNITED STATES, 69 CT.CL. 412. THESE CASES AND OTHERS CONCLUDE THAT UNDER SUCH DISCLAIMER PROVISION IN THE ABSENCE OF BAD FAITH OR FRAUD, BUYERS HAVE NO RIGHT TO EXPECT, HAVE NOTICE NOT TO EXPECT, AND CONTRACT NOT TO EXPECT ANY WARRANTIES WHATEVER.

AS HAVING PARTICULAR APPLICATION TO THE FACTS OF THIS CASE, ATTENTION IS INVITED TO THE CASE OF LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90, IN WHICH IT WAS UNSUCCESSFULLY CONTENDED THAT THE UNITED STATES WAS LIABLE IN DAMAGES FOR A SHORTAGE IN DELIVERY OF SPECIFIED LOTS OF SCRAP IRON AND STEEL WHICH HAD BEEN OFFERED FOR SALE IN A SCHEDULE SHOWING THE VARIOUS FORTS WHERE THE SCRAP IRON WAS ACCUMULATED AND THE APPROXIMATE WEIGHTS AT EACH LOCATION, AND WHICH HAD BEEN PURCHASED ,AS IS" FOR A STIPULATED LUMP- SUM PRICE.

IN THAT CASE THE COURT STATED AT PAGE 92 THAT---

"* * * THE NAMING OF QUANTITIES CANNOT BE REGARDED AS IN THE NATURE OF A WARRANTY BUT MERELY AS AN ESTIMATE OF THE PROBABLE AMOUNTS IN REFERENCE TO WHICH GOOD FAITH ONLY COULD BE REQUIRED OF THE PARTY MAKING IT.'

SINCE THIS SALE WAS STRICTLY ON A LOT BASIS RATHER THAN BY UNIT PRICE, ARTICLE 8 CLEARLY PRECLUDES ANY ADJUSTMENT ON THE THEORY OF ERRONEOUS ESTIMATES OF WEIGHT.

CONSIDERED UNDER ARTICLE 10, YOUR CLAIM PRESENTS A QUESTION OF FACT WHICH IS CONTROLLED BY ARTICLE 15. AS INDICATED ABOVE, WE FIND NO GROUND TO DISTURB THE CONTRACTING OFFICER'S DECISION. WE THEREFORE CONCLUDE THAT THE ACTION TAKEN BY OUR CLAIMS DIVISION IN SETTLEMENT OF APRIL 29, 1958, DENYING YOUR CLAIM, WAS CORRECT, AND THE SAME IS HEREBY SUSTAINED.