B-152939, FEB. 7, 1964

B-152939, FEB. 7, 1964

TO MR. GEORGE BALES:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 7, 1963, WITH ENCLOSURES, REQUESTING REVIEW OF SETTLEMENT DATED OCTOBER 31, 1963, WHICH DISALLOWED YOUR CLAIM FOR $148.40, THE AMOUNT PAID BY YOU FOR CERTAIN PROPERTY PURCHASED UNDER SALES CONTRACT NO. DSA-11-S-2038.

IN RESPONSE TO INVITATION NO. 11-S-63-105, ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, PHILADELPHIA NAVAL SHIP YARD, PHILADELPHIA, PENNSYLVANIA, YOU SUBMITTED A BID OFFERING TO PURCHASE 20 MOTOR GENERATOR SETS COVERED BY ITEMS 69 AND 70 AT UNIT PRICES OF $6.16 AND $8.26 EACH OR FOR AN AGGREGATE TOTAL PRICE OF $148.40. YOUR BID AS TO ITEMS 69 AND 70 WAS ACCEPTED ON JUNE 25, 1963.

AFTER PAYMENT OF THE PURCHASE PRICE YOU ADVISED THE DISPOSAL OFFICER BY LETTER DATED JULY 16, 1963, THAT UPON INSPECTION OF ITEMS 69 AND 70 YOU DISCOVERED THAT THE EQUIPMENT COVERED BY THOSE ITEMS HAD BEEN MISDESCRIBED IN THAT THE INVITATION DESCRIBED THE MOTOR-GENERATOR SETS AS 115 VOLTS A.C. AND AS HAVING AN OUTPUT VOLTAGE OF 28 VOLTS, 60 CYCLES D.C., WHEREAS THE SETS ARE ACTUALLY ALTERNATORS, CONVERTING 115 VOLTS A.C. TO 27 VOLTS A.C. YOU STATED THAT YOU HAD NO USE FOR THIS TYPE OF EQUIPMENT AND REQUESTED THAT YOU BE REFUNDED THE FULL PURCHASE PRICE OF SUCH EQUIPMENT. BY LETTER DATED AUGUST 27, 1963, THE CONTRACTING OFFICER ADVISED YOU THAT HE HAD NO AUTHORITY TO HONOR YOUR REQUEST FOR REFUND OF THE PURCHASE PRICE OF THE EQUIPMENT IN VIEW OF THE GENERAL SALE TERMS AND CONDITIONS OF THE INVITATION RESPECTING DISCLAIMER OF WARRANTY AND INSPECTION CLAUSES. THE CONTRACTING OFFICER ALSO STATED THAT IF YOU WISHED TO PURSUE YOUR CLAIM YOU SHOULD ADDRESS YOUR REQUEST FOR RELIEF TO THE CLAIMS DIVISION OF THE GENERAL ACCOUNTING OFFICE.

YOUR CLAIM WAS FORWARDED BY THE DEFENSE LOGISTICS SERVICES CENTER TO OUR CLAIMS DIVISION FOR SETTLEMENT. AS INDICATED IN THE SETTLEMENT OF OCTOBER 31, 1963, THE CLAIM WAS DISALLOWED ON THE GROUND GENERALLY THAT THE PROPERTY INVOLVED WAS OFFERED FOR SALE ON AN "AS IS," "WHERE IS" BASIS AND WITHOUT EXPRESS OR IMPLIED WARRANTY OR GUARANTY OF ANY KIND.

AN INVESTIGATION BY THE CONTRACTING OFFICER FOLLOWING THE RECEIPT OF YOUR LETTER DISCLOSED THAT THE MOTOR-GENERATOR SETS COVERED BY ITEMS 69 AND 70 ARE ACTUALLY ALTERNATORS, AS YOU ALLEGED. ALTHOUGH IT IS ADMITTED THAT AN ERROR WAS MADE BY THE HOLDING ACTIVITY IN DESCRIBING THE EQUIPMENT COVERED BY ITEMS 69 AND 70, SUCH ADMISSION, HOWEVER, WITHOUT MORE MAY NOT BE ACCEPTED AS RENDERING INAPPLICABLE THE EXPRESS TERMS AND CONDITIONS OF THE SALE TO WHICH YOU AGREED.

UNDER PARAGRAPH 2 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE INVITATION, ALL PROPERTY WAS OFFERED FOR SALE "AS IS" AND "WHERE IS" WITHOUT EXPRESS OR IMPLIED GUARANTY OR WARRANTY OF ANY KIND, INCLUDING THE CONDITION AND DESCRIPTION OF THE PROPERTY. THEREFORE IF YOU WERE NOT WILLING TO ASSUME THE RISK OF A VARIANCE BETWEEN THE ACTUAL CONDITION AND DESCRIPTION OF THE PROPERTY, YOU SHOULD NOT HAVE SUBMITTED A BID WITHOUT THE BENEFIT OF AN INSPECTION. SEE DADOURIAN EXPORT COMPANY V. UNITED STATES, 291 F. 2D 178. SEE ALSO 41 COMP. GEN. 185.

IT IS EVIDENT, THEREFORE, THAT YOU HAD ACTUAL NOTICE OF THE FACT THAT THE GOVERNMENT'S DESCRIPTION OF THE PROPERTY BEING SOLD UNDER ITEMS 69 AND 70 WAS NOTHING MORE THAN A MERE STATEMENT OF OPINION. MOREOVER, WHILE THE DESCRIPTION OF THE PROPERTY IN QUESTION WAS ERRONEOUS, YOU DO NOT ALLEGE AND THERE IS NOTHING IN THE RECORD TO INDICATE THAT IT WAS INTENTIONALLY MISDESCRIBED IN THE INVITATION, OR THAT THE DISPOSAL OFFICER ACTED OTHER THAN IN GOOD FAITH THROUGHOUT THE SALES TRANSACTION. UNDER THE CONDITIONS OF THE SALE THE GOVERNMENT WAS OBLIGED TO ACT IN GOOD FAITH, AND THIS IT DID. SEE LUMBRAZO V. WOODRUFF, 175 N.E. 525 AND LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90, 92.

IN VIEW OF THE FOREGOING, THERE IS NO LEGAL BASIS FOR RELIEVING YOU OF YOUR OBLIGATIONS UNDER THE CONTRACT IN QUESTION. SINCE YOU HAVE NOT REMOVED THE PROPERTY IN QUESTION, THE GOVERNMENT, PURSUANT TO THE PROVISIONS OF PARAGRAPH 7 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE CONTRACT, WILL RETAIN 20 PERCENT OF THE PURCHASE PRICE OF ITEMS 69 AND 70 AS LIQUIDATED DAMAGES. IN VIEW THEREOF WE ARE TODAY INSTRUCTING OUR CLAIMS DIVISION TO ALLOW THAT PORTION OF THE SUM DEPOSITED BY YOU WHICH IS IN EXCESS OF 20 PERCENT OF THE PURCHASE PRICE OF ITEMS 69 AND 70.