B-143438, SEP. 9, 1960

B-143438, SEP. 9, 1960

TO FRANKLIN FLOETE, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 19, 1960, WITH ENCLOSURES, SUBMITTING A REPORT IN CONNECTION WITH THE REQUEST OF THE CAPITOL TRASH REMOVING COMPANY, INC., FOR REFORMATION OF CONTRACT NO. GS-03B-7665, DATED FEBRUARY 2, 1960, ENTERED INTO BETWEEN THAT CONCERN AND THE PUBLIC BUILDINGS SERVICE, REGION 3, PUBLIC BUILDINGS MANAGEMENT DIVISION, PROVIDING FOR REMOVAL AND DISPOSAL OF TRASH AND DEBRIS FROM CERTAIN DESIGNATED BUILDINGS, AS DESCRIBED IN THE SPECIFICATIONS.

IN A LETTER DATED JULY 6, 1960, SOLOMON DIMOND, ESQUIRE, ATTORNEY FOR THE CONTRACTOR, ALLEGED, AMONG OTHER THINGS, THAT SHORTLY AFTER PERFORMANCE UNDER THE CONTRACT BEGAN THERE WAS NOTED A WIDE DISCREPANCY IN THE NUMBER OF CUBIC YARDS OF TRASH ACTUALLY REMOVED WHEN COMPARED WITH THE ESTIMATES SET FORTH IN THE INVITATION FOR BIDS; THAT BY LETTER OF MARCH 26, 1960, THE CONTRACTOR COMPLAINED TO YOUR AGENCY CONCERNING THE ERRORS IN THE ESTIMATES, AND THAT AS A RESULT YOUR AGENCY CAUSED AN INVESTIGATION TO BE MADE WHICH SHOWED THAT THE TRASH ACTUALLY BEING REMOVED BY THE CONTRACTOR WAS OVER 100 PERCENT GREATER THAN THE GOVERNMENT ESTIMATES.

YOUR LETTER OF AUGUST 19, 1960, SUBSTANTIALLY CONFIRMS THE FACT THAT THE CONTRACTOR HAS BEEN REMOVING OVER 100 PERCENT IN EXCESS OF THE ESTIMATED QUANTITIES FOR CERTAIN INDICATED GROUPS AND HAS BEEN DOING SO SINCE THE BEGINNING OF THE CONTRACT--- MARCH 15, 1960. YOUR LETTER ALSO CONTAINS AN EXPLANATION CONCERNING THE INCREASE IN THE REQUIRED TRASH REMOVAL TO THE EFFECT THAT THE QUANTITIES WERE UNDERESTIMATED PRIMARILY BECAUSE CERTAIN RENOVATION WORK IS CONTINUALLY IN PROGRESS IN THE BUILDING WHICH CREATES WASTE WOOD MATERIAL, WHICH MATERIAL, IT IS INFORMALLY UNDERSTOOD, SHOULD BE CLASSIFIED AS "BURNABLE TRASH," AND THAT THE "BURNABLE TRASH" WAS NOT TAKEN INTO ACCOUNT IN THE GOVERNMENT'S ESTIMATES. ALSO, IT WAS STATED THAT THE INCREASED EMPLOYEE POPULATION IN THE STATE ANNEX WAS OVERLOOKED.

THE CONTRACT PROVIDES, IN PERTINENT PART, THAT THE CONTRACTOR IS TO:

"FURNISH ALL REQUIRED TRASH AND DEBRIS REMOVAL AND DISPOSAL SERVICES AS ITEMIZED AND DESCRIBED IN THE ATTACHED SPECIFICATIONS AND GENERAL CONDITIONS * * * FOR A PERIOD OF ONE YEAR BEGINNING ON THE DATE SPECIFIED IN THE NOTICE OF AWARD AT THE SITES INDICATED IN EXHIBITS "A" AND "B" (SITES TO BE SERVICED AND SCHEDULED OF REMOVALS) OF THIS SCHEDULE * * *.'

ALSO, THE LANGUAGE OF THE INVITATION FOR BIDS CLEARLY INDICATES THAT THE SPECIFIED QUANTITIES OF TRASH AND DEBRIS TO BE REMOVED ARE ONLY ESTIMATES OF SUCH QUANTITIES. OBVIOUSLY, THESE FIGURES WERE NOT INTENDED TO BE EXACT, NOR WERE THEY INTENDED TO BE THE MEASURE OF THE CONTRACTOR'S OBLIGATION UNDER THE CONTRACT. FROM THE VERY NATURE OF THE SERVICES INVOLVED IT WOULD HAVE BEEN IMPOSSIBLE TO SPECIFY THE EXACT AMOUNT OF TRASH TO BE REMOVED DURING THE LIFE OF THE CONTRACT. TRASH IS GENERATED ON A CONTINUOUS AND VARIABLE BASIS AND ITS GENERATION IS DEPENDENT UPON A NUMBER OF FACTORS WHICH CANNOT BE ACCURATELY FORECAST IN ADVANCE. IT IS BECAUSE OF THIS INABILITY TO FORECAST QUANTITIES OF GOODS OR SERVICES THAT MAY BE NEEDED, THAT REQUIREMENTS TYPE CONTRACTS ARE UTILIZED IN THE COMMERCIAL WORLD. AS STATED BY THE COURT OF CLAIMS IN A RECENT CASE SIMILAR TO THE ONE BEFORE US IN DESCRIBING SUCH CONTRACTS (SHADER CONTRACTORS, INC. AND CITIZENS NATIONAL BANK OF ORLANDO, ASSIGNEE V. UNITED STATES, CT.CL. NO. 186-58, DECIDED APRIL 6, 1960):

"THE LAW CONCERNING THE REQUIREMENTS CONTRACT, AND ITS ANALOGUE, THE OUTPUT CONTRACT, IS OF COMPARATIVELY RECENT DEVELOPMENT. A REQUIREMENTS CONTRACT IS SIMPLY ONE IN WHICH ONE PARTY PROMISES TO SUPPLY ALL THE SPECIFIC GOODS OR SERVICES WHICH THE OTHER PARTY MAY NEED DURING A CERTAIN PERIOD AT AN AGREED PRICE. THE OTHER PARTY IMPLICITLY PROMISES THAT HE WILL OBTAIN HIS REQUIRED GOODS OR SERVICES FROM THE FIRST PARTY EXCLUSIVELY. THOUGH THIS TYPE OF CONTRACT LACKS THE FIXED AND DEFINABLE SIGNPOSTS OF QUANTITY WHICH ARE ORDINARILY FOUND IN SUPPLY CONTRACTS, BUSINESS NECESSITIES REQUIRE THAT THEY BE DEEMED ENFORCEABLE.

"DURING THE LAST CENTURY, IN A FEW INSTANCES, CONTRACTS OF THE REQUIREMENTS VARIETY WERE HELD TO BE INVALID FOR A WANT OF MUTUALITY OF OBLIGATION. BUT TODAY'S COURTS UPHOLD SUCH CONTRACTS AND FIND IN THEM BOTH MUTUALITY OF CONSIDERATION AND ENFORCEABLE CROSS-PROMISES. THEIR UTILITY IN THE COMMERCIAL WOULD DEMANDS THAT THEY BE RECOGNIZED AS BINDING.

"OF COURSE, SINCE THE REQUIREMENTS CONTRACT OFTEN ABSOLUTELY FIXES THE UNIT PRICE, THERE IS A TEMPTATION FOR ONE PARTY TO TAKE UNFAIR ADVANTAGE OF THE OTHER IN THE MATTER OF THE QUANTITY ORDERED OR SUPPLIED IN TIMES OF SHARPLY RISING OR SHARPLY FALLING MARKETS. MARKET CONDITIONS MAY EVEN RESULT IN AN ECONOMIC LOSS TO ONE OR THE OTHER PARTY EVEN WHERE THERE IS NO SUGGESTION OF UNFAIR DEALING. THIS IS ONE REASON WHY THE REQUIREMENTS CONTRACT DID NOT WIN IMMEDIATE JUDICIAL APPROBATION.

"GENERALLY, THE COURTS WILL NOT INHIBIT THE PERFORMANCE OF THE KIND OF CONTRACT IN WHICH THE EXPRESSED UNDERSTANDING IS FOR THE SALE OR PURCHASE OF ALL REQUIRED GOODS OR SERVICES. ORDINARILY, WHERE THE QUANTITY ORDERED IS CONSIDERABLY MORE OR CONSIDERABLY LESS THAN THAT ANTICIPATED FROM A READING OF THE CONTRACT TERMS, THE COURTS WILL PROTECT THE AGGRIEVED PARTY FROM UNFAIR USAGE BY APPLYING A TEST OF GOOD FAITH TO THE OTHER PARTY'S SECTIONS.'

SEE, ALSO, BRAWLEY V. UNITED STATES, 96 U.S. 168; MARX V. AMERICAN MALTING CO., 169 F. 582; IN RE UNITED CIGAR STORES CO., 8 F.SUPP. 243. CLEARLY, THEN, THE GOVERNMENT BY PROVIDING THAT THE CONTRACTOR FURNISH "ALL REQUIRED" TRASH AND DEBRIS REMOVAL AND DISPOSAL SERVICES AND DESCRIBING THE QUANTITY OF TRASH TO BE REMOVED IN ESTIMATED FIGURES, DID NOT INTEND TO LIMIT THE SERVICES TO BE PROVIDED TO THE AMOUNT ESTIMATED. UNDER THE SPECIFIC TERMS OF THE CONTRACT, THE GOVERNMENT HAS A RIGHT TO RECEIVE ALL OF THE SERVICES REQUIRED TO COMPLETE THE WORK, WHETHER THOSE SERVICES EXCEED, OR ARE LESS THAN, THE ESTIMATED AMOUNT. THE CONTRACTOR MUST BE HELD TO HAVE ASSUMED THE RISK THAT THE GOVERNMENT'S REQUIREMENTS MIGHT EXCEED THE ESTIMATE. SEE 37 COMP. GEN. 688. IN LIKE MANNER, HAD THE ACTUAL REQUIREMENTS IN THIS CASE BEEN LESS THAN THE ESTIMATES, THE GOVERNMENT WOULD HAVE ASSUMED THE RISKS THEREOF AND COULD NOT LATER BE HEARD TO RAISE OBJECTIONS TO THE CONTRACTOR'S GOOD BARGAIN.

WITH REGARD TO YOUR REQUEST TO REFORM THE CONTRACT BECAUSE OF THE ACTUAL MISTAKE OF THE PARTIES IN ESTIMATING THE QUANTITIES OF TRASH TO BE REMOVED, THERE IS NO LEGAL JUSTIFICATION FOR SUCH ACTION HERE. REFORMATION OF AN INSTRUMENT MUST BE PREDICATED UPON THE MUTUAL MISTAKE OF THE PARTIES, AS WHERE THE CONTRACT, AS FINALLY DRAWN, DOES NOT REFLECT THE ACTUAL INTENT OF THE PARTIES AND IT IS ESTABLISHED CLEARLY WHAT THE CONTRACT ACTUALLY WAS OR WOULD HAVE BEEN BUT FOR THE MISTAKE. 30 COMP. GEN. 220; 26 ID. 899; 37 ID. 688; 20 ID. 533. THE PURPOSE OF REFORMATION IS NOT TO MAKE A NEW AGREEMENT BETWEEN THE PARTIES, BUT, RATHER, TO ESTABLISH THE ALREADY EXISTING ONE. IN ORDER TO JUSTIFY THE REFORMATION OF ANY INSTRUMENT, THE MUTUAL MISTAKE MUST HAVE BEEN IN DRAWING THE INSTRUMENT AND NOT IN MAKING THE CONTRACT OUT OF WHICH IT GREW OR WHICH IT EVIDENCES. SEE 76 C.J.S., REFORMATION OF INSTRUMENTS, SEC. 25 (C), AND AUTHORITIES THERE SHOWN THAT THE PARTIES WOULD HAVE COME TO A CERTAIN AGREEMENT HAD THEY BEEN AWARE OF THE ACTUAL FACTS. 39 COMP. GEN. 660, CITING WILLISTON ON CONTRACTS (REV.ED.), SECTION 1548.

APPLYING THE ABOVE RULES TO THE PRESENT CASE, THERE CAN BE NO DOUBT THAT THE CONTRACT, AS MADE, WAS THE INTENDED AGREEMENT OF THE PARTIES. WHILE IT MAY BE TRUE, AS STATED IN YOUR REPORT, THAT A MISTAKE WAS MADE IN ESTIMATING THE QUANTITIES OF TRASH REQUIRED TO BE REMOVED AND DISPOSED OF, THERE IS NO EVIDENCE IN THE RECORD THAT THE CONTRACTOR WAS AWARE OF THE MISTAKE PRIOR TO THE REDUCTION OF THE AGREEMENT TO WRITING. THE MISTAKE WAS MADE BY ONE PARTY ONLY (THE GOVERNMENT) AND IT IS WELL SETTLED THAT A MISTAKE BY ONE PARTY COUPLED WITH IGNORANCE THEREOF BY THE OTHER PARTY DOES NOT CONSTITUTE MUTUAL MISTAKE. 76 C.J.S., REFORMATION OF INSTRUMENTS, SEC. 28 (B). NOR WAS THERE ANY MISTAKE IN DRAWING THE CONTRACT; AS FINALLY FORMALIZED IT CLEARLY EXPRESSED THE INTENTION AND AGREEMENT OF THE PARTIES. UPON ACCEPTANCE OF THE BID, THE CONTRACT (CONSISTING OF THE BID, ITS ACCEPTANCE, AND THE INVITATION FOR BIDS WITH ITS ACCOMPANYING SCHEDULES, SPECIFICATIONS AND GENERAL CONDITIONS), WAS COMPLETE AND THERE WAS NOTHING FURTHER TO DRAW.

UNDER THE CIRCUMSTANCES, WE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT THERE IS NO LEGAL BASIS FOR REFORMING THE CONTRACT AND RELIEVING THE CONTRACTOR FROM ITS OBLIGATION THEREUNDER TO FURNISH ALL REQUIRED TRASH REMOVAL AND DISPOSAL SERVICES DURING THE PERIOD COVERED BY THE CONTRACT.