B-131986, DECEMBER 6, 1957, 37 COMP. GEN. 392

B-131986: Dec 6, 1957

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CONTRACTS - DAMAGES - LIQUIDATED - DELAYS - TIME ESTABLISHMENT LIQUIDATED DAMAGES FOR BREACH OF THE TERMS UNDER A CONTRACT IN WHICH THE DELIVERY DATE WAS QUALIFIED BY THE WORD "APPROXIMATELY" MAY NOT BE ENFORCED UNTIL A SPECIFIC DATE ON WHICH THE CONTRACTOR WOULD BE BOUND TO MAKE DELIVERY IS FIXED. WHICH WAS 14 DAYS AFTER THE APPROXIMATE DATE SPECIFIED IN THE CONTRACT. EVIDENCE WHICH SHOWS THE POSSIBILITY OF AVAILABLE SPACE PRIOR TO THE ACTUAL DATE OF DELIVERY IS INSUFFICIENT TO SUPPORT ASSESSMENT OF LIQUIDATED DAMAGES. INCLUSION OF A LIQUIDATED DAMAGE CLAUSE WHICH WOULD REQUIRE INSPECTION OF THE ITEMS TO BE FURNISHED FOR OVERSEAS USE BY A SPECIFIED DATE AND WOULD FURTHER INDICATE THAT TIMELY COMPLIANCE WAS ESSENTIAL TO THE PREPARATION OF TIMETABLES FOR OVERSEAS SHIPMENTS IS PROPER.

B-131986, DECEMBER 6, 1957, 37 COMP. GEN. 392

CONTRACTS - DAMAGES - LIQUIDATED - DELAYS - TIME ESTABLISHMENT LIQUIDATED DAMAGES FOR BREACH OF THE TERMS UNDER A CONTRACT IN WHICH THE DELIVERY DATE WAS QUALIFIED BY THE WORD "APPROXIMATELY" MAY NOT BE ENFORCED UNTIL A SPECIFIC DATE ON WHICH THE CONTRACTOR WOULD BE BOUND TO MAKE DELIVERY IS FIXED, AND, IN THE ABSENCE OF A DEMAND FOR DELIVERY HAVING BEEN MADE PRIOR TO THE DATE THE CONTRACTOR MADE DELIVERY TO THE VESSEL, WHICH WAS 14 DAYS AFTER THE APPROXIMATE DATE SPECIFIED IN THE CONTRACT, EVIDENCE WHICH SHOWS THE POSSIBILITY OF AVAILABLE SPACE PRIOR TO THE ACTUAL DATE OF DELIVERY IS INSUFFICIENT TO SUPPORT ASSESSMENT OF LIQUIDATED DAMAGES. INCLUSION OF A LIQUIDATED DAMAGE CLAUSE WHICH WOULD REQUIRE INSPECTION OF THE ITEMS TO BE FURNISHED FOR OVERSEAS USE BY A SPECIFIED DATE AND WOULD FURTHER INDICATE THAT TIMELY COMPLIANCE WAS ESSENTIAL TO THE PREPARATION OF TIMETABLES FOR OVERSEAS SHIPMENTS IS PROPER; ALSO, INCLUSION OF A LIQUIDATED DAMAGE PROVISION BASED ON A PERCENTAGE OF THE CONTRACT PRICE APPLICABLE TO THE DELINQUENT QUANTITY FOR EACH DAY OF DELAY IS NOT OBJECTIONABLE SO LONG AS THE AMOUNT MAY NOT BE REGARDED AS A PENALTY.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, DECEMBER 6, 1957:

REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 4, 1957, REFERRING TO OUR DECISION OF JULY 23, 1957, B-131986, IN WHICH WE EXPRESSED OUR OPINION THAT NO LEGAL LIABILITY WAS IMPOSED UPON THE CONTRACTOR UNDER THE TERMS OF CONTRACTS NOS. GS-OOS-2244-ICA AND GS-OOS-2336-ICA TO PAY LIQUIDATED DAMAGES FOR FAILURE TO MEET INSPECTION DATES.

YOU INDICATE THAT, WHILE YOU AGREE WITH OUR OPINION ON THE BASIS OF THE RECORD THEN AVAILABLE TO US, IT IS YOUR BELIEF THAT THE DECISION AS PERTAINS TO CONTRACT NO. GS-OOS-2244-ICA MAY HAVE BEEN BASED ON THE LACK OF EVIDENCE TENDING TO SHOW THE EARLIEST DATE AFTER THE DATE SPECIFIED FOR INSPECTION ON WHICH THE GOVERNMENT COULD HAVE DELIVERED THE MATERIALS TO A CARRIER IF SUCH MATERIALS HAD BEEN AVAILABLE FOR INSPECTION ON THE SPECIFIED INSPECTION DATE. IN THIS REGARD, YOU CALL OUR ATTENTION TO THE FACT THAT THE CONTRACT CALLED FOR DELIVERY F.A.S. VESSEL, LOS ANGELES, CALIFORNIA,"APPROXIMATELY FEBRUARY 9, 1956" AND THAT THE MATERIAL WAS NOT AVAILABLE FOR INSPECTION UNTIL FEBRUARY 15, 1956. ADDITIONALLY, YOU POINT OUT THAT, WHILE YOUR LETTER OF JUNE 27, 1957, ADVISED THAT YOU HAD NO RECORD OF ANY VESSELS WHICH MAY HAVE BEEN AVAILABLE FOR SHIPMENT PRIOR TO FEBRUARY 23, 1956, THE DATE ON WHICH DELIVERY WAS ACTUALLY MADE, IT NOW APPEARS PROBABLE FROM EXAMINATION OF PUBLISHED SAILING DATES THAT A BOOKING COULD HAVE BEEN OBTAINED SHORTLY AFTER FEBRUARY 3, 1956, THE STIPULATED INSPECTION DATE, IF THE MATERIALS HAD BEEN AVAILABLE FOR INSPECTION ON SUCH DATE. YOU STATE THAT NO EFFORT WAS MADE UNDER CONTRACT NO. GS-OOS-2244-ICA TO ASCERTAIN THE AVAILABILITY OF SPACE ON ANY OF SUCH VESSELS, NEVERTHELESS, IT IS YOUR OPINION THAT DELIVERY ON FEBRUARY 23RD WAS NOT A DELIVERY ON APPROXIMATELY FEBRUARY 9TH. CONSEQUENTLY YOU CONTEND THE CONTRACTOR DID BREACH THE DELIVERY TERMS OF THE CONTRACT AND LIQUIDATED DAMAGES SHOULD BE ASSESSED FOR SUCH BREACH. IN VIEW THEREOF, YOU REQUEST RECONSIDERATION OF SO MUCH OF OUR PRIOR DECISION AS AFFECTS CONTRACT NO. GS-OOS-2244-ICA.

WHILE THE WORD "APPROXIMATELY" WHEN USED TO QUALIFY AN OTHERWISE SPECIFIC DELIVERY DATE IN A CONTRACT MAY BE CONSTRUED UNDER CERTAIN CIRCUMSTANCES TO SUPPORT AN ACTION FOR BREACH OF CONTRACT OR A PURCHASER'S REFUSAL TO ACCEPT DELIVERY WHICH WAS SUBSTANTIALLY DELAYED (SEE 55 C.J. SALES 337; 77 C.J.S. SALES 149 (4) (, IT IS OUR OPINION THAT THE PROVISION FOR LIQUIDATED DAMAGES IN THE INSTANCE CASE COULD NOT BE ENFORCED UNLESS AND UNTIL A SPECIFIC DATE ON WHICH THE CONTRACTOR WOULD BE BOUND TO MAKE DELIVERY WAS FIXED. SEE BARDOCH IRON AND STEEL CO. V. TENENBAUM, 118 S.E. 502, 507; 55 C.J. SALES 338; 77 C.J.S. SALES (5). SEE ALSO THE DISCUSSION OF THE RESPECTIVE DUTIES OF BUYER AND SELLER UNDER FAS DELIVERY TERMS AS SET OUT AT PAGES 193-194 OF THE PRACTICAL HANDBOOK OF INDUSTRIAL TRAFFIC MANAGEMENT BY RICHARD C. COLTON.

EVEN IT IT WERE CONCEDED THAT IN THIS CASE LIQUIDATED DAMAGES WERE PROPERLY ASSESSABLE, THERE WOULD BE CONSIDERABLE DOUBT THAT THE AMOUNT OF THE LOW BID SHOULD BE USED AS THE MEASURE OF DAMAGES SINCE IT IS CONTENDED --- AND NOT DISPUTED IN YOUR PRIOR LETTER OF MAY 23, 1957--- THAT THE GOVERNMENT HAD ACCEPTED THE ENTIRE QUANTITY OFFERED BY SUCH LOW BIDDER AT ITS QUOTED PRICE.

IN THE CIRCUMSTANCES, AND IN THE ABSENCE OF ANY DEMAND FOR DELIVERY PRIOR TO FEBRUARY 23, 1956, IT DOES NOT APPEAR THAT THE POSSIBILITY OF AVAILABLE SHIPPING SPACE PRIOR TO FEBRUARY 23RD, BASED UPON AN EXAMINATION OF PUBLISHED SAILING SCHEDULES, WOULD BE SUFFICIENT TO SUPPORT THE ASSESSMENT OF LIQUIDATED DAMAGES UNDER CONTRACT GS-OOS-2244 ICA.

YOUR LETTER ALSO REQUESTS OUR COMMENTS ON THE INCLUSION, IN FUTURE CONTRACTS FOR THE PROCUREMENT OF VARIOUS ICA MATERIALS, OF A LIQUIDATED DAMAGE CLAUSE BASED UPON THE DOCTRINE SET OUT IN PRIEBE AND SONS V. UNITED STATES, 332 U.S. 407. YOUR LETTER INDICATES THAT THE LANGUAGE OF SUCH CLAUSE WOULD BE BASED UPON A REQUIREMENT FOR INSPECTION BY A SPECIFIED DATE WITH A FURTHER PROVISION TO THE EFFECT THAT TIMELY COMPLIANCE WITH INSPECTION REQUIREMENT WOULD SERVE AN ESSENTIAL FUNCTION IN THE PREPARATION OF TIMETABLES FOR OVERSEAS SHIPMENTS. ADDITIONALLY, WE HAVE BEEN INFORMALLY ADVISED THAT THE MEASURE OF DAMAGES IN SUCH CLAUSE WOULD BE BASED UPON A PERCENTAGE OF THE CONTRACT PRICE FOR EACH DAY OF DELAY IN MEETING THAT SPECIFIED INSPECTION DATE.

THE DECISION IN THE PRIEBE CASE STATED THAT A DIFFERENT SITUATION MIGHT HAVE BEEN PRESENTED HAD THE CONTRACT PROVIDED FOR NOTICE TO THE GOVERNMENT WHEN THE CERTIFICATES WERE READY SINCE THE COURT THEN MIGHT POSSIBLY HAVE INFERRED THAT PROMPTNESS IN OBTAINING THE CERTIFICATES SERVED AN IMPORTANT FUNCTION IN THE PREPARATION OF TIMETABLES FOR OVERSEAS SHIPMENTS. THIS IS OBVIOUSLY DICTA BUT WE BELIEVE IT TO BE SUFFICIENTLY INDICATIVE OF THE POSITION OF THE COURT TO JUSTIFY THE INCLUSION OF SUCH A PROVISION IN FUTURE CONTRACTS FOR ICA MATERIALS EXECUTED BY YOUR ADMINISTRATION.

WITH RESPECT TO THE AMOUNT OF LIQUIDATED DAMAGES, WE CAN SEE NO LEGAL OBJECTION TO THE INCLUSION OF A FORMULA BASED UPON A PERCENTAGE OF THE CONTRACT PRICE APPLICABLE TO THE DELINQUENT QUANTITY FOR EACH DAY OF DELAY, SO LONG AS THE AMOUNT OF SUCH PERCENTAGE IS NOT SO GREAT AS TO BE REGARDED AS A PENALTY.

IN VIEW OF THE NATURE OF THE DAMAGES RESULTING FROM LATE SHIPMENT OF ICA MATERIALS AND THE IMPOSSIBILITY OF DETERMINING THE EXTENT OF SUCH DAMAGES, AS SET OUT AT PAGE 2 OF YOUR LETTER OF MAY 23, 1957, RELATIVE TO CONTRACTS NOS. GS-OOS-2336 AND 2244, WE BELIEVE THE CONTEMPLATED PROVISION WOULD BE ENTIRELY PROPER.

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