B-124041, OCTOBER 24, 1955, 35 COMP. GEN. 228

B-124041: Oct 24, 1955

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CONTRACTS - DAMAGES - ACTUAL - DELAYS IN DELIVERY WHERE A CONTRACTOR FAILED TO MAKE DELIVERIES OF EMBOSSED PLATES WITHIN THE TIME SCHEDULED IN THE CONTRACT AND IT WAS NECESSARY FOR THE GOVERNMENT TO EMBOSS AND PUNCH SUFFICIENT PLATES TO MEET ITS IMMEDIATE NEEDS. THE GOVERNMENT IS ENTITLED TO RECOVER THE DIRECT AND PROXIMATE COSTS INCURRED AS RESULT OF THE CONTRACTOR'S FAILURE TO DELIVER PLATES ON TIME EVEN THOUGH THE CONTRACT DID NOT CONTAIN ANY PROVISIONS FOR ASSESSMENT OF LIQUIDATED DAMAGES AND THE GOVERNMENT SUBSEQUENTLY ACCEPTED THE DELINQUENT DELIVERIES. ACCEPTANCE OF DELAYED PERFORMANCE UNDER A CONTRACT IS NOT INCONSISTENT WITH A RIGHT TO DEMAND DAMAGES FOR DELAY. HENCE IS NOT IN AND OF ITSELF A WAIVER OF DAMAGES.

B-124041, OCTOBER 24, 1955, 35 COMP. GEN. 228

CONTRACTS - DAMAGES - ACTUAL - DELAYS IN DELIVERY WHERE A CONTRACTOR FAILED TO MAKE DELIVERIES OF EMBOSSED PLATES WITHIN THE TIME SCHEDULED IN THE CONTRACT AND IT WAS NECESSARY FOR THE GOVERNMENT TO EMBOSS AND PUNCH SUFFICIENT PLATES TO MEET ITS IMMEDIATE NEEDS, THE GOVERNMENT IS ENTITLED TO RECOVER THE DIRECT AND PROXIMATE COSTS INCURRED AS RESULT OF THE CONTRACTOR'S FAILURE TO DELIVER PLATES ON TIME EVEN THOUGH THE CONTRACT DID NOT CONTAIN ANY PROVISIONS FOR ASSESSMENT OF LIQUIDATED DAMAGES AND THE GOVERNMENT SUBSEQUENTLY ACCEPTED THE DELINQUENT DELIVERIES. ACCEPTANCE OF DELAYED PERFORMANCE UNDER A CONTRACT IS NOT INCONSISTENT WITH A RIGHT TO DEMAND DAMAGES FOR DELAY, AND HENCE IS NOT IN AND OF ITSELF A WAIVER OF DAMAGES.

TO G. L. HEGDAHL, TREASURY DEPARTMENT, OCTOBER 24 1955:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, TREASURY DEPARTMENT, A RECLAIM VOUCHER IN THE AMOUNT OF $800.01, STATED IN FAVOR OF THE AMERICAN EXPANSION BOLT AND MANUFACTURING COMPANY, UNDER CONTRACT NO. T-3-FS-112, DATED AUGUST 30, 1954, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER THE VOUCHER MAY BE CERTIFIED FOR PAYMENT.

THE AMOUNT RECLAIMED REPRESENTS A DEDUCTION WHICH WAS MADE FROM PAYMENTS DUE THE CONTRACTOR UNDER THE SUBJECT CONTRACT BY REASON OF DELAYS IN DELIVERIES OF EMBOSSED PLATES, WHICH MADE IT NECESSARY FOR CERTAIN REGIONAL DISBURSING OFFICES TO EMBOSS 101,650 PLATES AT A COST OF $800.01 IN EXCESS OF THAT WHICH WOULD HAVE BEEN CHARGED FOR THE SAME NUMBER OF PLATES UNDER THE CONTRACT.

UNDER THE TERMS OF THE CONTRACT, THE CONTRACTOR AGREED TO FURNISH APPROXIMATELY 2,250,000 (15 PERCENT VARIATION) EMBOSSED PLATES FOR DELIVERY TO NINE DIFFERENT REGIONAL DISBURSING OFFICES. IT WAS RECITED IN THE SPECIFICATIONS THAT IT WAS NECESSARY BY REASON OF INCREASED VETERANS' PENSION AND COMPENSATION RATES, WHICH WERE TO BECOME EFFECTIVE OCTOBER 1, 1954, TO ENTER INTO A CONTRACT BY AUGUST 30, 1954, FOR SUPPLYING THE SPECIFIED PLATES AND SERVICES, WITH PARTIAL SHIPMENTS (20 PERCENT OF SPECIFIED PLATES) TO BE MADE TO EACH OFFICE WITHIN 5 CALENDAR DAYS AFTER RECEIPT OF ORDER, AND COMPLETE DELIVERY TO BE MADE WITHIN 25 CALENDAR DAYS AFTER RECEIPT OF ORDER. THE 25-CALENDAR-DAY DELIVERY PERIOD WAS EXTENDED TO 30 DAYS BY TELEGRAM DATED AUGUST 21, 1954. THE CONTRACT CONTAINED NO PROVISION FOR THE ASSESSMENT OF LIQUIDATED DAMAGES, AND NO PROVISION FOR EXCESS COSTS EXCEPT IN THE EVENT OF TERMINATION FOR DEFAULT BY WRITTEN NOTICE TO THE CONTRACTOR. THE " DEFAULT" CLAUSE, HOWEVER, DID CONTAIN AN EXPRESS DECLARATION THAT THE REMEDIES THEREIN SPECIFIED WERE NOT EXCLUSIVE, BUT WERE IN ADDITION TO ANY OTHER REMEDIES PROVIDED BY LAW.

THE RECORD SHOWS THAT THE CONTRACTOR FAILED TO MEET THE PRESCRIBED PRODUCTION SCHEDULE FOR PRACTICALLY ALL DELIVERIES. WHILE, IN SOME INSTANCES, THE DIVISION OF DISBURSEMENT'S WORK PROGRAM WAS NOT INTERFERED WITH, IT IS REPORTED BY THE CONTRACTING OFFICER THAT IT BECAME NECESSARY FOR FIVE REGIONAL OFFICES, IN ORDER TO MEET THEIR MAILING SCHEDULES, TO EMBOSS AND PUNCH 101,650 PLATES AT AN EXCESS COST OF $800.01, THE AMOUNT OF THE RECLAIM. COMPLETE DELIVERY SCHEDULES WERE FORWARDED TO THE CONTRACTOR BY LETTER DATED SEPTEMBER 3. RECORDS OF SHIPMENTS SHOW THAT VIRTUALLY ALL SCHEDULED SHIPMENTS WERE MADE FROM FIVE DAYS TO TWO WEEKS LATE, AND THAT AT LEAST 136,500 PLATES WERE NOT SHIPPED UNTIL MORE THAN TWO WEEKS AFTER THE LATEST DATE SCHEDULED. WE HAVE, HOWEVER, BEEN ADVISED INFORMALLY THAT THE DELINQUENT QUANTITIES WERE ACCEPTED BY THE TREASURY DEPARTMENT TO FILL OTHER NEEDS.

IN SUBMITTING THE RECLAIM VOUCHER THE CONTRACTOR CONTENDS THAT THE DEDUCTION CONSTITUTED AN ARBITRARY CHARGE AS REPRESENTING AN ALLEGED "LIQUIDATED DAMAGE" PENALTY NOT DISCLOSED AT ANY TIME IN THE INVITATION OR IN THE PURCHASE ORDER.

IT IS WELL ESTABLISHED THAT A PARTY WHO IS INJURED BY ANOTHER'S BREACH OF CONTRACT IS ENTITLED TO RECOVER FROM THE LATTER SUCH DAMAGES AS ARE THE DIRECT, NATURAL, AND PROXIMATE RESULT OF THE BREACH, OR WHICH, IN THE ORDINARY COURSE OF EVENTS, WOULD LIKELY RESULT FROM THE BREACH AND WHICH REASONABLY COULD BE SAID TO HAVE BEEN FORESEEN, CONTEMPLATED, OR EXPECTED BY THE PARTIES AT THE TIME THEY EXECUTED THE CONTRACT AS A PROBABLE AND NATURAL RESULT THEREOF. SEE 30 COMP. GEN. 191, 193, AND THE COURT CASES THERE CITED.

IN THE INSTANT CASE THE SPECIFICATIONS CLEARLY PLACED THE CONTRACTOR ON NOTICE THAT TIME WAS OF THE ESSENCE OF THE CONTRACT AND IT READILY COULD BE FORESEEN WHEN THE AGREEMENT WAS EXECUTED THAT THE GOVERNMENT WOULD SUFFER ACTUAL DAMAGES IF THE PRESCRIBED DELIVERY SCHEDULES WERE NOT MET. IN CASES WHERE DAMAGES ARE FOR ASSESSMENT THE MEASURE OF THE DAMAGES IS THE LOSS SUSTAINED AS A RESULT OF THE CONTRACTUAL BREACH. SEE UNITED STATES V. BEHAN, 110 U.S. 338. ALSO, SEE WING AND BOSTWICK COMPANY V. UNITED STATES FIDELITY AND GUARANTY CO., 150 F. 672, 676-7; AND MASSACHUSETTS BONDING AND INSURANCE CO. V. JOHN R. THOMPSON CO., 88 F.2D 825, 832. HERE THE $800.01 CLEARLY WAS A COST WHICH THE GOVERNMENT NECESSARILY INCURRED AS A DIRECT AND IMMEDIATE CONSEQUENCE OF THE CONTRACTOR'S FAILURE TO DELIVER ON TIME. IT FOLLOWS THAT THE DEDUCTION OF THAT SUM FROM AMOUNTS OTHERWISE DUE THE CONTRACTOR WAS CORRECT AND PROPER, NOTWITHSTANDING THE FACT THAT DELAYED PERFORMANCE BY THE CONTRACTOR SUBSEQUENTLY WAS ACCEPTED.

IT IS WELL SETTLED THAT ACCEPTANCE OF DELAYED PERFORMANCE UNDER A CONTRACT IS NOT INCONSISTENT WITH A RIGHT TO DEMAND DAMAGES FOR DELAY, AND HENCE IS NOT IN AND OF ITSELF A WAIVER. COHN V. UNITED STATES SHIPPING BOARD, 20 F.2D 56; VERNON LUMBER CORP. V. HARCEN CONST. CO., 155 F.2D 348; MAWHINNEY V. MILLBROOK WOOLEN MILLS, 137 N.E. 318. SEE ALSO SECTION 49 (93) OF THE UNIFORM SALES ACT, 50 STAT. 40, AND SECTION 1390, WILLISTON ON CONTRACTS. THE CONTRARY STATEMENT IN 29 COMP. GEN. 57, WHICH WAS NOT NECESSARY TO THE DECISION IN THAT CASE, IS HEREBY DISAPPROVED.

FOR THE REASONS STATED THE VOUCHER, WHICH IS RETURNED HEREWITH, MAY NOT BE CERTIFIED FOR PAYMENT.

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