B-141000, NOVEMBER 7, 1960, 40 COMP. GEN. 261

B-141000: Nov 7, 1960

Additional Materials:

Contact:

Julie Matta
(202) 512-4023
MattaJ@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

SUBJECT TO A MAXIMUM LIMITATION CONSTITUTES AN ACCORD AND SATISFACTION WOULD NOT BE INVALID MERELY BECAUSE THE AMOUNT PAID IS THAT WHICH THE GOVERNMENT HAD PREVIOUSLY OFFERED OR THAT THE GOVERNMENT'S VIEW OF THE CONTROVERSY AS DISTINGUISHED FROM THE CONTRACTOR'S WAS ADOPTED IN THE SETTLEMENT. THE TENDER OF A GOVERNMENT CHECK IN THE AMOUNT CERTIFIED BY THE GENERAL ACCOUNTING OFFICE AS FULL AND FINAL SETTLEMENT OF THE CONTRACTOR'S CLAIM CONSTITUTES AN ACCORD AND DOES NOT COME WITHIN THE PURVIEW OF THE RULE THAT ACCEPTANCE OF A CHECK IN FULL PAYMENT WHILE NEGOTIATIONS OF THE DISPUTE ARE BEING CONDUCTED DOES NOT REPRESENT AN ACCORD. THE PLACING BY A CONTRACTOR OF A RESTRICTIVE ENDORSEMENT ON A GOVERNMENT CHECK WHEN THE ACCOMPANYING VOUCHER CLEARLY INDICATED THAT THE CHECK WAS TENDERED IN FULL AND FINAL SETTLEMENT OF THE CONTRACTOR'S CLAIM DOES NOT MODIFY THE TERMS OF THE TENDER WITHOUT THE CONCURRENCE OF THE GOVERNMENT.

B-141000, NOVEMBER 7, 1960, 40 COMP. GEN. 261

CONTRACTS - PAYMENTS - ACCORD AND SATISFACTION - VALIDITY THE ACCEPTANCE OF A GOVERNMENT CHECK, REPRESENTING COSTS IN EXCESS OF THE ORIGINAL CONTRACT ESTIMATE, BY A CONTRACTOR WHO FAILED TO COMPLY WITH THE EXCESS COST NOTICE REQUIREMENTS IN A CONTRACT WHICH PROVIDED FOR THE REIMBURSEMENT TO THE CONTRACTOR OF ACTUAL COSTS, PLUS AN AGREED FIXED FEE, SUBJECT TO A MAXIMUM LIMITATION CONSTITUTES AN ACCORD AND SATISFACTION WOULD NOT BE INVALID MERELY BECAUSE THE AMOUNT PAID IS THAT WHICH THE GOVERNMENT HAD PREVIOUSLY OFFERED OR THAT THE GOVERNMENT'S VIEW OF THE CONTROVERSY AS DISTINGUISHED FROM THE CONTRACTOR'S WAS ADOPTED IN THE SETTLEMENT. A CERTIFICATION OF A VOUCHER BY THE GENERAL ACCOUNTING OFFICE OF AN AMOUNT FOUND DUE A CONTRACTOR AND THE DISALLOWANCE OF THE BALANCE OF THE CONTRACTOR'S CLAIM REPRESENTS A DETERMINATION OF THE MERITS OF THE CLAIM SO THAT IT NO LONGER MAY BE CONSIDERED PENDING BEFORE THE GENERAL ACCOUNTING OFFICE; THEREFORE, THE TENDER OF A GOVERNMENT CHECK IN THE AMOUNT CERTIFIED BY THE GENERAL ACCOUNTING OFFICE AS FULL AND FINAL SETTLEMENT OF THE CONTRACTOR'S CLAIM CONSTITUTES AN ACCORD AND DOES NOT COME WITHIN THE PURVIEW OF THE RULE THAT ACCEPTANCE OF A CHECK IN FULL PAYMENT WHILE NEGOTIATIONS OF THE DISPUTE ARE BEING CONDUCTED DOES NOT REPRESENT AN ACCORD. THE PLACING BY A CONTRACTOR OF A RESTRICTIVE ENDORSEMENT ON A GOVERNMENT CHECK WHEN THE ACCOMPANYING VOUCHER CLEARLY INDICATED THAT THE CHECK WAS TENDERED IN FULL AND FINAL SETTLEMENT OF THE CONTRACTOR'S CLAIM DOES NOT MODIFY THE TERMS OF THE TENDER WITHOUT THE CONCURRENCE OF THE GOVERNMENT, THE CONTRACTOR HAVING A RIGHT ONLY TO ACCEPT THE CHECK UPON THE TERMS TENDERED OR TO REJECT THE CHECK. A CHECK WHICH WAS SENT TO THE SUCCESSOR OF THE ORIGINAL CONTRACTOR, ENDORSED BY AN OFFICER OF THE ORIGINAL CONTRACTING FIRM WHO WAS FAMILIAR WITH THE CONTRACT AND PARTICIPATED IN THE SETTLEMENT PROCEEDINGS DOES NOT APPEAR TO BE AN ACCEPTANCE BY A PARTY WHO DOES NOT HAVE AUTHORITY OR CAPACITY TO EFFECT AN ACCORD AND SATISFACTION; HOWEVER, THE RETENTION OF THE PROCEEDS OF THE CHECK FOR NINE MONTHS WITHOUT PROTEST OR INDICATION OF OBJECTION, EXCEPT FOR AN ATTEMPTED RESTRICTIVE ENDORSEMENT, MUST BE REGARDED AS AN AFFIRMATIVE OF THE ACCEPTANCE OF THE CHECK ON THE BASIS OF THE FULL AND FINAL SETTLEMENT CONDITION OFFERED BY THE GOVERNMENT. UNDER A CONTRACT WHICH PROVIDED FOR REIMBURSEMENT TO THE CONTRACTOR OF ACTUAL COSTS, PLUS AN AGREED FIXED FEE, SUBJECT TO THE PROVISO THAT COSTS IN EXCESS OF $8,000 PER TRUCK SHOULD NOT BE INCURRED WITHOUT NOTICE TO AND APPROVAL OF THE CONTRACTING OFFICER, AN EXCESS COST SETTLEMENT WHICH WAS NOT SUPPORTED BY EXACT COST RECORDS NOR ANY SHOWING THAT THE COSTS EQUALED OR EXCEEDED THE SETTLEMENT FIGURE MAY NOT BE REGARDED AS THE SETTLEMENT OF A LIQUIDATED AMOUNT TO PRECLUDE ITS CONSIDERATION AS A VALID ACCORD AND SATISFACTION OF THE CONTRACTOR'S CLAIM.

TO THE OTIS ELEVATOR COMPANY, NOVEMBER 7, 1960:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 7, 1958, WITH ENCLOSURES, REQUESTING REVIEW OF THE VOUCHER SETTLEMENT DATED JANUARY 14, 1959, WHICH DISALLOWED $55,000 OF YOUR CLAIM FOR $66,943.59, COVERING ALLEGED EXCESS COSTS INCURRED UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. DA- 44-177-TC-326.

THE FACTS GIVING RISE TO THE CLAIM ARE REPORTED HERE AS FOLLOWS:

CONTRACT NO. DA-44-177-TC-326 WAS ENTERED INTO WITH THE BAKER RAULANG COMPANY ON JULY 29, 1955 (AT WHICH TIME THE COMPANY WAS A WHOLLY OWNED SUBSIDIARY OF THE OTIS ELEVATOR COMPANY). THE CONTRACT CALLED FOR THE INSPECTION AND REPAIR TO NEW OPERATING CONDITION OF 15 GOVERNMENT-OWNED 6,000-POUND CAPACITY FORK-LIFT TRUCKS, AND THE DISASSEMBLY AND INSPECTION OF FOUR GOVERNMENT-OWNED 10,000-POUND CAPACITY FORK-LIFT TRUCKS, ALL AT AN ESTIMATED COST OF $113,056.41, PLUS A FIXED FEE OF $5,277.70. THE CONTRACT WAS NEGOTIATED AS A SOLE SOURCE PROCUREMENT, SINCE BAKER-RAULANG HAD PREVIOUSLY ACQUIRED THE COMPANY THAT HAD MANUFACTURED THE TRUCKS INVOLVED UNDER THE CONTRACT.

ALL OF THE GOVERNMENT-OWNED VEHICLES AND SPARE PARTS WERE DELIVERED TO THE CONTRACTOR BY SEPTEMBER 9, 1955, AND, ON SEPTEMBER 14, 1955, THE CONTRACTOR'S PLAN FOR PERFORMANCE WAS APPROVED WITH SOME MODIFICATIONS. SUPPLEMENTAL AGREEMENT ( MODIFICATION NO. 1 TO THE CONTRACT WAS ENTERED INTO ON NOVEMBER 4, 1955, AND PROVIDED IN PART AS FOLLOWS:

IN THE EVENT THE CONTRACTOR DETERMINES AFTER DISASSEMBLY THAT ANY ONE OF THE FIFTEEN (15) RG6A ROUGH TERRAIN FORK LIFT TRUCKS WILL REQUIRE REPAIRS IN EXCESS OF EIGHT THOUSAND DOLLARS ($8,000) EACH, TO PLACE THE SAME INTO "NEW OPERATING CONDITION" AS REQUIRED BY THE PRINCIPAL CONTRACT, THE CONTRACTOR SHALL DISCONTINUE FURTHER WORK ON EACH OF SUCH VEHICLES UNTIL DIRECTED BY THE CONTRACTING OFFICER TO PROCEED WITH SAID WORK. AUTHORITY TO PROCEED WITH SAID WORK SHALL BE EVIDENCE BY MODIFICATION TO THE PRINCIPAL CONTRACT.

UNDER THE TERMS OF THE ORIGINAL CONTRACT, DELIVERY OF THE FIRST FIVE UNITS WAS TO BE ACCOMPLISHED WITHIN 135 DAYS FROM THE TIME THE CONTRACTOR RECEIVED THE TRUCKS, WITH DELIVERY OF FIVE UNITS EACH MONTH THEREAFTER UNTIL ALL THE TRUCKS HAD BEEN REPAIRED. HOWEVER, DUE TO DELAY IN THE PERFORMANCE OF THE WORK, THE FINAL DATE OF DELIVERY WAS EXTENDED UNTIL JUNE 30, 1956. AFTER FINAL DELIVERY, CERTAIN DEFICIENCIES WERE CORRECTED BY THE CONTRACTOR IN ACCORDANCE WITH THE REQUIREMENTS OF THE CONTRACT, SO THAT ACTUAL COMPLETION OF THE CONTRACT DID NOT OCCUR UNTIL FEBRUARY 25, 1957.

THE CONTRACTOR SUBMITTED A VOUCHER, DATED MARCH 20, 1957, IN THE AMOUNT OF $191,241.05 FOR COSTS, WHICH EXCEEDED THE CONTRACT ESTIMATE OF COSTS BY $78,184.64. THE CONTRACTING OFFICER DISALLOWED THE EXCESS COSTS OVER THE ESTIMATED CONTRACT AMOUNT. BY LETTER OF JUNE 28, 1957, THE CONTRACTOR REQUESTED RECONSIDERATION OF THE AMOUNT DISAPPROVED. PURSUANT TO THE CONTRACTING OFFICER'S REQUEST, THE COGNIZANT AUDIT AGENCY CONDUCTED AN AUDIT OF THE CONTRACTOR'S COSTS AND IT REPORTED, ON SEPTEMBER 27, 1957, THAT COSTS APPLICABLE TO THE CONTRACT TOTALED $180,000, FOR AN OVERRUN OF $66,943.59 OVER ESTIMATED COSTS.

UNDER DATE OF JUNE 15, 1956, THE CONTRACTOR HAD SUBMITTED ITS CURRENT PROGRESS REPORT STATING ACCUMULATED COSTS UNDER THE CONTRACT, THROUGH MAY 1956, OF $73,180.46, REPRESENTING APPROXIMATELY 85 PERCENT OF THE TOTAL WORK CONTRACTED FOR. ON MAY 22, 1956, THE CONTRACTOR HAD ADVISED THAT ITS ESTIMATE INDICATED THE COST OF REPAIRING THE LAST TWO VEHICLES WOULD NOT EXCEED $8,000 EACH. THE CONTRACTOR SUBSEQUENTLY ADVISED THAT ITS PROGRESS REPORTS HAD UNDERSTATED COSTS BECAUSE OF INCOMPLETE COST RECORDS.

IN NOVEMBER 1957 A CONFERENCE WAS HELD BETWEEN THE CONTRACTING OFFICER, HIS REPRESENTATIVES, AND OFFICIALS OF THE BAKER-RAULANG COMPANY, TO RESOLVE THE DISAGREEMENT BETWEEN THE PARTIES AS TO THE AMOUNT OF COSTS TO BE ALLOWED. THESE CONFERENCES WERE ATTENDED ON BEHALF OF THE CONTRACTOR BY MR. V. A. PITZER, THEN TREASURER OF BAKER RAULANG, AND MR. R. T. TIEBOUT. AT THIS CONFERENCE THE CONTRACTING OFFICER ADHERED TO THE GOVERNMENT'S POSITION THAT NO OVERRUN COULD BE ALLOWED BECAUSE OF THE CONTRACTOR'S FAILURE TO GIVE NOTICE AND OBTAIN APPROVAL OF THE EXPENDITURES IN EXCESS OF $8,000 PER TRUCK.

IT APPEARS THAT EFFECTIVE DECEMBER 31, 1957, THE CONTRACTOR CEASED TO OPERATE AS A WHOLLY OWNED SUBSIDIARY OF OTIS ELEVATOR COMPANY. IT WAS DISSOLVED AND MADE A DIVISION OF OTIS UNDER THE NAME " BAKER INDUSTRIAL TRUCKS DIVISION.' ON APRIL 25, 1958, A MEETING WAS HELD BETWEEN THE GOVERNMENT'S REPRESENTATIVES AND REPRESENTATIVES OF OTIS, FOR THE PURPOSE OF SETTLING THE CONTRACT, BUT THE MEETING PROVED INCONCLUSIVE. AT THAT TIME THE CONTRACTING OFFICER HAD OFFERED TO APPROVE REIMBURSEMENT FOR APPROXIMATELY $124,000 OF COSTS.

ON JULY 24, 1958, A RELEASE OF THE GOVERNMENT UNDER THE SUBJECT CONTRACT WAS EXECUTED BY " BAKER INDUSTRIAL TRUCKS, A DIVISION OF OTIS ELEVATOR CO., " BUT A CLAIM FOR $66,943.59 WAS EXCEPTED FROM THE RELEASE. AUGUST 4, 1958, MODIFICATION NO. 6 TO THE CONTRACT WAS EXECUTED, RECOGNIZING BAKER INDUSTRIAL TRUCKS DIVISION OF OTIS ELEVATOR COMPANY, WITH OFFICES IN CLEVELAND, OHIO, AS THE SUCCESSOR IN INTEREST IN AND TO THE SUBJECT CONTRACT.

BY LETTER DATED AUGUST 25, 1958, OTIS ELEVATOR COMPANY, NEW YORK CITY, FILED A CLAIM WITH THE GENERAL ACCOUNTING OFFICE FOR $66,943.59, AS AN AMOUNT CLAIMED ON A "QUANTUM MERUIT" BASIS, FOR THE REIMBURSEMENT OF EXCESS COSTS INCURRED IN THE PERFORMANCE OF THE SUBJECT CONTRACT. PURSUANT TO A REQUEST FROM OUR CLAIMS DIVISION, AN ADMINISTRATIVE REPORT FROM THE DEPARTMENT OF THE ARMY WAS RECEIVED ON JANUARY 2, 1959. IT WAS ADMINISTRATIVELY RECOMMENDED THAT $11,943.59 OF THE $66.943.59 CLAIMED BY OTIS ELEVATOR COMPANY BE ALLOWED AS SETTLEMENT. OUR CLAIMS DIVISION ISSUED A VOUCHER SETTLEMENT DATED JANUARY 14, 1959, FOR $11,943.59, TO OTIS ELEVATOR COMPANY ( BAKER INDUSTRIAL TRUCKS DIVISION), CLEVELAND, OHIO, WHICH STATED ON ITS FACT: " FULL AND FINAL SETTLEMENT OF CONTRACTOR'S CLAIM.' THE BALANCE OF $55,000 CLAIMED WAS DISALLOWED FOR THE REASON THAT THE CONTRACTOR HAD NO AUTHORITY FROM THE CONTRACTING OFFICER TO INCUR SUCH EXCESS COSTS.

THE VOUCHER SETTLEMENT WAS RETURNED TO THE DEPARTMENT OF THE ARMY, FORT EUSTIS, VIRGINIA, AND A CHECK WAS ISSUED THERE TO THE ORDER OF OTIS ELEVATOR COMPANY, BAKER INDUSTRIAL TRUCKS DIVISION, CLEVELAND, OHIO, FOR $11,943.59. THE CHECK DID NOT INDICATE THAT IT WAS ISSUED IN FULL PAYMENT OF THE CLAIM. HOWEVER, A COPY OF THE SETTLEMENT VOUCHER ACCOMPANIED THE CHECK.

THE CHECK FOR $11,943.59 WAS NEGOTIATED IN EARLY FEBRUARY 1959, TO THE ORDER OF BAKER INDUSTRIAL TRUCK DIVISION, BY V. A. PITZER, WITH THE FOLLOWING ENDORSEMENT: " ACCEPTED SUBJECT TO FURTHER APPEAL.' PAYMENT HAD ALREADY BEEN RECEIVED BY THE CONTRACTOR IN THE TOTAL AMOUNT OF $117,606.79 (WHICH INCLUDED THE TOTAL ESTIMATED CONTRACT AMOUNT OF $118,334.11, LESS A CREDIT OF $727.32 FOR GOVERNMENT MATERIAL NOT ACCOUNTED FOR BY THE CONTRACTOR).

ON OCTOBER 9, 1959, WE RECEIVED A LETTER FROM OTIS ELEVATOR COMPANY, NEW YORK CITY, DATED OCTOBER 7, 1959, REQUESTING A REVIEW OF THAT PORTION OF THE SETTLEMENT OF JANUARY 14, 1959, WHICH DISALLOWED $55,000 OF THE CLAIM FOR $66,943.59. BY LETTER DATED JANUARY 21, 1960, WE REPLIED THAT THE SETTLEMENT OF JANUARY 14, 1959, WAS ISSUED IN " FULL AND FINAL SETTLEMENT OF CONTRACTOR'S IM," AND THAT THE CASHING OF THE CHECK IN THE AMOUNT OF $11,943.59, ISSUED PURSUANT TO THE SETTLEMENT, CONSTITUTED FULL ACCORD AND SATISFACTION OF THE CLAIM AND PRECLUDED OUR FURTHER CONSIDERATION OF THE MATTER.

YOU NOW REQUEST PERMISSION TO REFUND THE $11,943.59 PAYMENT AND RETURN THE CLAIM TO ITS ORIGINAL STATUS IN ORDER TO AVOID A SITUATION WHERE CONSIDERATION OF YOUR CLAIM ON THE MERITS IS PRECLUDED BY THE CASHING OF THE GOVERNMENT'S CHECK. YOU CONTEND THAT THE CASHING OF THE CHECK DID NOT CONSTITUTE AN ACCORD AND SATISFACTION OF THE CLAIM OF AUGUST 25, 1958, BECAUSE THE ESSENTIAL ELEMENTS OF A VALID ACCORD AND SATISFACTION--- NAMELY, (1) A CONSIDERATION, (2) AN ASSENT OR MEETING OF THE MINDS OF THE PARTIES, AND (3) COMPETENT PARTIES--- WERE ALL LACKING.

IT IS YOUR CONTENTION THAT THE AMOUNT YOU RECEIVED FROM THE GOVERNMENT'S CHECK WAS NO GREATER THAN THE AMOUNT OF LIABILITY ADMITTED BY THE GOVERNMENT IN PREVIOUS CONFERENCES, SO THAT CONSIDERATION WAS LACKING TO SUPPORT AN ACCORD AND SATISFACTION. IN THIS REGARD THE GENERAL RULE IS THAT THE PAYMENT AND ACCEPTANCE, AS FULL SETTLEMENT, OF AN AMOUNT LESS THAN THAT CLAIMED BY THE CREDITOR CONSTITUTES AND EFFECTS A GOOD ACCORD AND SATISFACTION OF THE WHOLE CLAIM OR DEMAND, WHERE IT IS NOT LIQUIDATED, OR IS THE SUBJECT OF A DISPUTE BETWEEN THE PARTIES. 1 C.J.S. ACCORD AND SATISFACTION, PAR. 32 (A). THE CONTRACT ENTERED INTO HERE PROVIDED, GENERALLY, FOR THE REIMBURSEMENT TO THE CONTRACTOR OF ACTUAL COSTS, PLUS AN AGREED FIXED FEE, SUBJECT TO THE PROVISO THAT COSTS IN EXCESS OF $8,000 PER TRUCK SHOULD NOT BE INCURRED WITHOUT NOTICE TO, AND APPROVAL BY, THE CONTRACTING OFFICER. AT THE TIME YOU SUBMITTED THE CLAIM HERE THE CONTRACTING OFFICER HAD REFUSED TO ALLOW ANY COSTS IN EXCESS OF THE ORIGINAL ESTIMATE, BECAUSE OF YOUR FAILURE TO COMPLY WITH THE NOTICE PROVISION. IN THESE CIRCUMSTANCES WE BELIEVE THAT YOUR CLAIM WAS SUBJECT TO SETTLEMENT BY AN ACCORD AND SATISFACTION, AND SUCH SETTLEMENT WOULD BE NO LESS VALID MERELY BECAUSE THE AMOUNT PAID IS THAT WHICH THE GOVERNMENT HAD PREVIOUSLY OFFERED, OR THAT ITS VIEW OF THE CONTROVERSY WAS ADOPTED IN THE SETTLEMENT. SEE DEAL V. FEDERAL HOUSING ADMINISTRATION, 260 F.2D 793, 800-802, AND CASES CITED THEREIN, CF. KEENE V. GAUEN, 22 F.2D 723, 724, CERTIORARI DENIED 276 U.S. 632. ACTUALLY, WE DO NOT UNDERSTAND THAT THERE WAS EVER ANY ADMISSION BY A GOVERNMENT REPRESENTATIVE THAT THE AMOUNT OF $120,000 WAS PROPERLY PAYABLE UNDER THE TERMS OF THE CONTRACT, AND WE DO NOT FIND THAT SUCH AN ADMISSION WOULD HAVE BEEN JUSTIFIED. AS WE INTERPRET THE CONTRACT AND THE LIMITING PROVISO, IF THE COST OF REPAIRING TEN OF THE TRUCKS HAD BEEN $7,500 EACH, AND THE CONTRACTOR HAD, WITHOUT NOTICE, SPENT $9,000 EACH FOR THE OTHER FIVE, REIMBURSEMENT WOULD HAVE BEEN LIMITED TO THE $75,000 SPENT ON THE TEN, PLUS $8,000 EACH FOR FIVE, OR $115,000 IN ALL, ALTHOUGH THE AGGREGATE COSTS HAD NOT AVERAGED MORE THAN $8,000 PER TRUCK. THERE HAS BEEN NO SHOWING THAT AS MUCH AS $8,000 WAS SPENT ON EACH AND EVERY TRUCK, AND WE THEREFORE CONCLUDE THAT THE GOVERNMENT'S OFFER OF $120,000 (PLUS AN ALLOWANCE, NOT SUPPORTED BY EXACT COST RECORDS, FOR DISMANTLING OF THE 10,000-POUND TRUCKS), WHICH WAS ADOPTED AS THE BASIS FOR THE SETTLEMENT, WAS NOT AN ACKNOWLEDGMENT OF A LIABILITY, BUT AN OFFER TO SETTLE A BONA FIDE DISPUTE AS TO WHETHER THERE WAS ANY LIABILITY. WE THEREFORE HAVE NO DIFFICULTY IN FINDING A VALID CONSIDERATION FOR AN ACCORD. YOUR ATTORNEY CONTENDS THAT THE FINANCE OFFICER AT FORT EUSTIS, VIRGINIA, ON HIS OWN INITIATIVE, PLACED UPON THE SETTLEMENT VOUCHER THE STATEMENT " FULL AND FINAL SETTLEMENT OF CONTRACTOR'S CLAIM," AND THAT HE TENDERED PAYMENT TO THE CONTRACTOR WHILE THE CLAIM WAS PENDING BEFORE THE GENERAL ACCOUNTING OFFICE. ON THIS BASIS THE CASES OF UNITED STATES V. GENERAL PETROLEUM CORPORATION, 73 F.1SUPP. 25; AND WHEPLEY OIL CO. V. ASSOCIATED OIL CO., 44 P.2D 670, ARE CITED AS ILLUSTRATING INSTANCES WHERE IT WAS HELD THAT THE ACCEPTANCE OF A CHECK OFFERED IN FULL PAYMENT, WHILE NEGOTIATIONS FOR ARBITRATION WERE BEING CONDUCTED, WAS NOT INDICATIVE OF AN ACCORD. HOWEVER, YOU APPEAR TO MISUNDERSTAND WHERE THE SETTLEMENT ACTION ORIGINATED IN THIS SITUATION. THE VOUCHER WAS PREPARED AT FORT EUSTIS AND FORWARDED HERE, UNCERTIFIED, WITH THE ADMINISTRATIVE REPORT ON YOUR CLAIM. THE CERTIFICATION AND THE DISALLOWANCE OF THE BALANCE WAS THE ACTION OF THIS OFFICE. BY THIS ACTION, WE RESPONDED ON THE MERITS TO YOUR CLAIM, AND THE MATTER WAS NO LONGER PENDING HERE. PAYMENT WAS MADE BY THE ARMY UPON OUR CERTIFICATION. IN THE TWO MENTIONED CASES, THE PARTIES ANTICIPATED THAT DETERMINATION OF THE MATTER IN DISPUTE WOULD BE MADE ELSEWHERE, AND IT WAS HELD THAT THEY DID NOT INTEND TO ARRIVE AT AN ACCORD WHILE THE ISSUES WERE PENDING ARBITRATION. IN THIS CASE THE DETERMINATION WAS MADE HERE AND THE ARMY TOOK NO ACTION IN CONNECTION WITH IT, EXCEPT TO MAKE THE PAYMENT AS DIRECTED.

IT IS FURTHER CONTENDED THAT THE RESTRICTIVE ENDORSEMENT PLACED UPON THE CHECK INDICATES THAT YOU DID NOT INTEND TO ACCEPT THE CHECK IN FULL PAYMENT OF THE CLAIM. IT WAS CLEAR FROM THE ACCOMPANYING VOUCHER THAT THE GOVERNMENT'S CHECK WAS TENDERED TO YOU IN FULL SETTLEMENT OF YOUR CLAIM, WHICH YOU COULD NOT HAVE FAILED TO UNDERSTAND, AS INDICATED BY THE RESTRICTIVE ENDORSEMENT. UNDER SUCH FACTS, THE GREAT WEIGHT OF AUTHORITY HOLDS, AS A MATTER OF LAW, THAT THE CASHING OF THE CHECK NECESSARILY INVOLVES AN ACCEPTANCE OF THE CONDITION UPON WHICH IT WAS TENDERED, FOR THE CASHING OF THE CHECK WOULD BE TORTIOUS EXCEPT ON THE ASSUMPTION OF A TAKING IN FULL SATISFACTION. WILLISTON ON CONTRACTS, PAR. 1854 ( REV. USED.), RESTATEMENT OF CONTRACTS, PAR. 72 (2), 420 (A). ALSO ANNOTATIONS AT 75 ALR 905; 34 ALR 1035. IT WAS NOT YOUR PRIVILEGE TO MAKE A NEW CONTRACT BY RESTRICTIVELY ENDORSING THE CHECK SO AS TO APPLY THE PROCEEDS THEREOF ON ACCOUNT WITHOUT OBTAINING THE PRIOR ASSENT OF THE GOVERNMENT. IT WAS YOUR RIGHT TO ACCEPT THE CHECK UPON THE TERMS TENDERED, OR TO REJECT IT, BUT YOU COULD NOT MODIFY THE TERMS OF THE TENDER BY A RESTRICTIVE ENDORSEMENT WITHOUT THE CONCURRENCE OF THE PARTY TENDERING THE CHECK. UNITED STATES V. TAPOR IDEAL DAIRY COMPANY, 175 F.1SUPP. 678; ASHLAND COAL AND COKE CO. V. OLD BEN COAL CORPORATION, 187 A, 596; ALSO MODERN DUST BAG CO. V. COMMERCIAL TRUST CO., 104 A.2D 378. YOU ASSERT THAT THERE WAS NO AGREEMENT HERE BETWEEN RESPONSIBLE PARTIES SINCE THE SETTLEMENT WAS NOT FORWARDED TO THE REPRESENTATIVE OF THE CLAIMANT, WHO WAS IN COMMUNICATION WITH THE GENERAL ACCOUNTING OFFICE, AND WHO COULD EITHER ACCEPT OR REJECT A SETTLEMENT, BUT RATHER WAS FORWARDED TO THE DIVISION OF THE COMPANY WHICH HAD PERFORMED UNDER THE CONTRACT GIVING RISE TO THE CLAIM, WHICH DIVISION WAS NOT RESPONSIBLE FOR SETTLEMENT OF THE CLAIM. YOU CITE ECKERT-FAIR CONST. CO. V. CAPITAL STEEL AND IRON CO., 178 F.2D 338, WHEREIN IT WAS HELD THAT NO ACCORD AND SATISFACTION AROSE WHERE THE CREDITOR'S AUDITING DEPARTMENT ACCEPTED A CHECK TENDERED IN FULL PAYMENT, WHEN THE SETTLEMENT WAS PROMPTLY REJECTED BY THE CREDITOR UPON BECOMING AWARE THAT HIS AUDITING DEPARTMENT HAD ACCEPTED THE CHECK. WAS POINTED OUT THAT OPINION, HOWEVER, THAT A PARTY PROPERLY AUTHORIZED TO ENTER INTO A CONTRACT OF ACCORD AND SATISFACTION MAY ACCEPT BY WAY OF RATIFICATION. FOR IT IS A WELL-ESTABLISHED PRINCIPLE OF LAW THAT UPON ACQUIRING KNOWLEDGE OF AN AGENT'S UNAUTHORIZED ACT, THE PRINCIPAL SHOULD PROMPTLY REPUDIATE THE ACT. OTHERWISE, IT WILL BE PRESUMED HE HAS RATIFIED AND AFFIRMED IT. SEE ADRIAN V. ELMER, 284 P.2D 599, 603, 2 C.J.S. AGENCY, PAR. 34 (A). WE ARE NOT ENTIRELY PERSUADED THAT THE SETTLEMENT CHECK WAS SENT TO, AND ACCEPTED BY, A PARTY WITHOUT THE CAPACITY TO BIND YOU TO AN ACCORD AND SATISFACTION ON YOUR CLAIM, SINCE THE CHECK WAS SENT TO THE SUCCESSOR OF THE ORIGINAL CONTRACTOR AND WAS ENDORSED BY AN OFFICER OF THE ORIGINAL CONTRACTING FIRM (V. A. PITZER) WHO, IT APPEARS FROM THE RECORD, WAS FAMILIAR WITH, AND HAD PARTICIPATED IN, ALL THE PRIOR PROCEEDINGS.

IN ANY EVENT, YOU RETAINED THE PROCEEDS OF THE GOVERNMENT'S CHECK FROM THE TIME IT WAS CASHED IN EARLY FEBRUARY 1959 UNTIL OCTOBER 7, 1959, WITHOUT ANY PROTEST OR INDICATION OF OBJECTION EXCEPT THAT CONTAINED IN THE ATTEMPTED RESTRICTIVE ENDORSEMENT. WE BELIEVE THAT BY THIS CONTINUED RETENTION OF THE PROCEEDS OF THE CHECK, YOU HAVE AFFIRMED THE ACCEPTANCE OF THE CHECK ON THE CONDITION THAT IT WAS OFFERED TO YOU.

YOU INITIALLY FILED A CLAIM HERE IN AUGUST 1958 ON A QUANTUM MERUIT BASIS, FOR AN AMOUNT WHICH WAS A MATTER OF DISPUTE BETWEEN YOU AND CONTRACTING REPRESENTATIVES OF THE GOVERNMENT. AFTER CONSIDERING THE MATTER, OUR CLAIMS DIVISION ISSUED A SETTLEMENT VOUCHER, WHICH, IN EFFECT, WAS AN OFFER TO PAY THE BALANCE STATED THEREIN IN FULL AND FINAL SETTLEMENT OF YOUR CLAIM. SEE BAIRD V. UNITED STATES, 96 U.S. 430. WITH ANY PRIVATE PARTY ENGAGING IN COMMERCIAL TRANSACTIONS, THE GOVERNMENT MAY TAKE STEPS TO PUT AN END TO DISPUTES AND CONTROVERSIES ATTENDANT THERETO, INCLUDING SETTLEMENTS OF ACCORD WITH ITS CREDITORS. SEE MAER V. UNITED STATES, 123 CT. CL. 474, 479. YOU CASHED THE SETTLEMENT CHECK AND RETAINED THE PROCEEDS FOR NINE MONTHS BEFORE GIVING ANY DIRECT NOTICE THAT YOU DESIRED FURTHER CONSIDERATION OF YOUR CLAIM. IT MAY BE THAT YOU DID NOT CONTEMPLATE THE EFFECT OF CASHING AND RETAINING THE PROCEEDS OF THE CHECK AS OPERATING IN DISCHARGE OF YOUR ENTIRE CLAIM. HOWEVER, IT IS WELL SETTLED THAT MERE IGNORANCE OF LEGAL CONSEQUENCES DOES NOT PREVENT ONE'S VOLUNTARY ACTS FROM HAVING SUCH CONSEQUENCES. SEE CORBIN ON CONTRACTS, PAR. 1279, NOTE 21. WE HAVE EXAMINED THE AUTHORITIES YOU CITE IN SUPPORT OF THE CONTENTION THAT NO EFFECTIVE ACCORD AND SATISFACTION WAS CONSUMMATED BY THE CASHING OF THE CHECK ISSUED PURSUANT TO THE SETTLEMENT VOUCHER OF JANUARY 14, 1959.

THE RECENT CASE OF EASTOVER COMPANY V. ALL METAL FABRICATORS, INC., 221 MD. 428, 158 A.2D 89, CITED BY YOUR ATTORNEY, SUPPORTS THE PROPOSITION THAT ENDORSEMENT AND CASHING A CHECK WHICH CONTAINED A NOTATION ACKNOWLEDGING ITS RECEIPT AS PAYMENT IN FULL DID NOT EFFECT AN ACCORD AND SATISFACTION WHEN THE AMOUNT OF THE CHECK WAS LESS THAN THE LIQUIDATED AND UNDISPUTED CLAIM OF THE PAYEE. THE CLAIM INVOLVED IN THAT CASE AROSE UNDER A CONTRACT PROVIDING FOR PAYMENT FOR MATERIALS AT COST PLUS 25 PERCENT AND LABOR AT $5 PER HOUR. THERE WAS NO DISPUTE AS TO THE MATERIAL COSTS OR THE HOURS OF LABOR AND THE DETERMINATION OF THE AMOUNT DUE WAS THEREFORE A MATTER MERELY OF ARITHMETIC. IN THE MATTER IN HAND THE AMOUNT USED AS THE BASIS FOR SETTLEMENT COULD BE REGARDED AS LIQUIDATED AND CERTAIN ONLY IF THE CONTRACT OBLIGATED THE GOVERNMENT TO PAY $8,000 FOR THE OVERHAULING OF EACH AND EVERY 6,000 POUND VEHICLE, PLUS $5,000 FOR TEARDOWN AND INSPECTION OF THE 10,000 POUND VEHICLES. AS POINTED OUT ABOVE, THE CONTRACT DID NOT SO PROVIDE, AND THERE HAS NEVER BEEN ANY SHOWING THAT THE COSTS PROPERLY REIMBURSABLE UNDER THE TERMS OF THE CONTRACT EQUALED OR EXCEEDED THE SETTLEMENT FIGURE OF $125,000 PLUS $5,277.70 FEE.

FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT A VALID ACCORD AND SATISFACTION HAS BEEN CONSUMMATED. WE HAVE, NEVERTHELESS, REVIEWED THE RECORD PERTINENT TO YOUR CLAIM AND REACHED THE CONCLUSION THAT IT WOULD NOT, FOR REASONS WHICH SHOULD BE SUFFICIENTLY CLEAR FROM THE DISCUSSION OF THE FACTS CONTAINED HEREIN, JUSTIFY THE ALLOWANCE OF ANY FURTHER PART OF THE COSTS INCURRED UNDER THE CONTRACT.

Feb 19, 2019

Feb 14, 2019

Feb 13, 2019

Feb 12, 2019

Looking for more? Browse all our products here