B-149620, OCT. 31, 1962

B-149620, OCT. 31, 1962

TO KINDIG, BEEBE, MCCLUHAN AND RAWLINGS:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 16, 1962, ALLEGING AN ERROR ON THE PART OF THE WESTERN CONTRACTING CORPORATION IN ITS BIDS ON ITEMS NOS. 314 (50-TON FLOATING CRANE) AND 404 (VANEAXIAL FAN) OFFERED AT AUCTION SALE NO. 11-070-S-62-35. YOU REQUESTED THAT YOUR CLIENT BE RELIEVED FROM LIABILITY FOR LIQUIDATED DAMAGES ASSESSED AGAINST THE PURCHASER BY THE DISPOSAL AGENCY BECAUSE OF ITS DEFAULT IN PAYMENT OF THE PURCHASE PRICE.

THE AUCTION SALE WAS CONDUCTED ON JANUARY 30-31, 1962, AND EACH BIDDER WAS REQUIRED TO REGISTER AND TO MAKE A REGISTRATION DEPOSIT OF $200 WHICH WOULD BE APPLIED AGAINST PAYMENT DUE FOR ANY PROPERTY PURCHASED AND OTHERWISE RETURNED TO UNSUCCESSFUL BIDDERS IF REQUESTED UPON LEAVING THE AUCTION. SUBPARAGRAPH (3) OF ARTICLE A OF THE "SPECIAL CONDITIONS" PROVIDED AS FOLLOWS:

"ONCE A LOT OR ITEM IS KNOCKED DOWN TO A PURCHASER, HIS BID MAY NOT BE WITHDRAWN. THE CONTRACTING OFFICER WILL FURNISH A WRITTEN STATEMENT OF THE PROPERTY AWARDED TO PURCHASER WHICH WILL BE THE PURCHASER'S AUTHORITY, UPON FULL PAYMENT OF THE PURCHASE PRICE AND ANY STORAGE CHARGES THAT MAY BE ASSESSED UNDER THE CONTRACT, TO REMOVE THE PURCHASED MATERIAL FROM THE GOVERNMENT PREMISES.'

PARAGRAPH 4 OF THE GENERAL SALES TERMS AND CONDITIONS PROVIDED THAT THE PURCHASER AGREES TO PAY FOR THE PROPERTY AWARDED TO HIM IN ACCORDANCE WITH THE PRICES QUOTED IN HIS BID. PARAGRAPH 7 PROVIDED AS FOLLOWS:

"DEFAULT. IF, AFTER THE AWARD, THE PURCHASER BREACHES THE CONTRACT BY FAILING TO MAKE PAYMENT AS REQUIRED BY CONDITION NO. 4, OR BY FAILING TO REMOVE THE PROPERTY AS REQUIRED BY CONDITION NO. 6, THEN THE GOVERNMENT MAY SEND THE PURCHASER A FIFTEEN-DAY WRITTEN NOTICE OF DEFAULT (CALCULATED FROM DATE OF MAILING), AND UPON PURCHASER'S FAILURE TO CURE SUCH DEFAULT WITHIN THAT PERIOD (OR SUCH FURTHER PERIOD AS THE CONTRACTING OFFICER MAY ALLOW), THE PURCHASER SHALL LOSE ALL THE RIGHT, TITLE AND INTEREST WHICH HE MIGHT OTHERWISE HAVE ACQUIRED IN AND TO THE PROPERTY AS TO WHICH A DEFAULT HAS OCCURRED. THE PURCHASER AGREES THAT IN THE EVENT HE FAILS TO PAY FOR THE PROPERTY OR REMOVE THE SAME WITHIN THE PRESCRIBED TIME, THE GOVERNMENT AT ITS ELECTION AND UPON NOTICE OF DEFAULT SHALL BE ENTITLED TO RETAIN (OR COLLECT) AS LIQUIDATED DAMAGES A SUM EQUAL TO 20 PERCENT OF THE PURCHASE PRICE OF THE ITEM (OR ITEMS) AS TO WHICH THE DEFAULT HAS OCCURRED. WHENEVER THE GOVERNMENT EXERCISES THIS ELECTION, IT SHALL SPECIFICALLY APPRISE THE PURCHASER EITHER IN ITS ORIGINAL NOTICE OF DEFAULT (OR IN SEPARATE SUBSEQUENT WRITTEN NOTICE) THAT UPON THE EXPIRATION OF THE PERIOD PRESCRIBED FOR CURING THE DEFAULT THE FORMULA AMOUNT WILL BE RETAINED (OR COLLECTED) BY THE GOVERNMENT AS LIQUIDATED DAMAGES. THE MAXIMUM SUM, MOREOVER, WHICH MAY BE RECOVERED BY THE GOVERNMENT AS DAMAGES FOR FAILURE OF THE PURCHASER TO REMOVE THE PROPERTY AND PAY FOR THE SAME SHALL BE SUCH FORMULA AMOUNT. IF THE PURCHASER OTHERWISE FAILS IN THE PERFORMANCE OF HIS OBLIGATIONS THEREUNDER, THE GOVERNMENT MAY EXERCISE SUCH RIGHTS AND MAY PURSUE SUCH REMEDIES AS ARE PROVIDED BY LAW OR UNDER THE CONTRACT.'

THE FACTS AS ADMINISTRATIVELY REPORTED SHOW THAT ITEMS NOS. 314 AND 404 WERE AWARDED TO YOUR CLIENT FOR $75,000 AND $175, RESPECTIVELY. THE TRANSCRIPT RECORDING OF THE SALE OF ITEM NO. 314 SHOWS SPIRITED BIDDING AND THAT IT WAS KNOCKED DOWN TO WESTERN FOR $75,000. THE NEXT HIGH BID ON ITEM NO. 314 WAS $72,500. IT IS REPORTED THAT THE NOTICE OF AWARD ON THESE TWO ITEMS, ALTHOUGH DATED JANUARY 30-31, WAS ACTUALLY THERE IS NOTHING IN YOUR LETTER OF AUGUST 16, 1962, OR IN THE RECORD HERE, ALLEGING THAT ANY MISTAKE WAS MADE WITH RESPECT TO ITEM NO. 404, THE RECORD SHOWS THAT WESTERN DEFAULTED WITH RESPECT TO THAT ITEM AS WELL AS ITEM NO. 314. SPECIFICALLY, THE RECORD SHOWS THAT BY LETTER DATED FEBRUARY 15, 1962, THE CONTRACTING OFFICER ISSUED WESTERN A NOTICE OF DEFAULT AS REQUIRED BY PARAGRAPH 7 OF THE GENERAL SALE TERMS AND CONDITIONS AND NOTIFIED THE PURCHASER THAT IF COMPLETE PAYMENT WAS NOT RECEIVED BY MARCH 2, 1962, THE GOVERNMENT WOULD ASSESS A SUM EQUAL TO 20 PERCENT OF THE PURCHASE PRICE AS LIQUIDATED DAMAGES AND RESELL THE PROPERTY. SINCE WESTERN FAILED TO COMPLY WITH THE NOTICE OF DEFAULT THE CONTRACTING OFFICER BY LETTER DATED MARCH 8, 1962, NOTIFIED WESTERN THAT CONTRACT NO. DA (S) 11-070-ORD-424 WAS THEREBY TERMINATED; THAT WESTERN HAD LOST ALL RIGHT, TITLE AND INTEREST IN THE PROPERTY AND THAT (20 PERCENT OF THE PURCHASE PRICES OF ITEMS NOS. 314 AND 404, LESS $200 REGISTRATION DEPOSIT) AS LIQUIDATED DAMAGES.

AS TO THE CIRCUMSTANCES UNDER WHICH THE ALLEGED MISTAKE OCCURRED IT IS STATED IN YOUR LETTER OF AUGUST 16, 1962, THAT WESTERN'S VICE PRESIDENT, MR. H. H. EVERIST, JR., WHO WAS IN CHARGE OF EQUIPMENT FOR THE CORPORATION, DETERMINED THAT FOR NOT MORE THAN $15,000 WESTERN MIGHT BENEFIT BY PURCHASING AND THEN SCRAPPING FOR SALVAGE THE FLOATING CRANE DESIGNATED AS ITEM NO. 314 IN THE AUCTION CATALOG; THAT OPPOSITE EACH ITEM OF INTEREST TO HIM HE ENTERED IN HIS OWN HANDWRITING THE AMOUNT HE WAS WILLING TO BID; THAT AT ITEM NO. 314 HE AT FIRST WROTE $20,000 THEN CROSSED THAT OUT AND WROTE UNDERNEATH $150,000 INSTEAD OF $15,000 AS INTENDED; AND THAT SUCH INTENTION IS VERIFIED WITH RESPECT TO ITEM NO. 315, AN IDENTICAL UNIT, WHERE AGAIN HE ORIGINALLY INSERTED $20,000 BUT CROSSED IT OUT AND INSERTED $15,000. IT IS STATED FURTHER THAT ONE OF MR. EVERIST'S ASSISTANTS TOOK THE CATALOG TO THE AUCTION SALE AND AS VARIOUS ITEMS WERE OFFERED HE SUBMITTED BIDS ON THEM AS INDICATED IN MR. EVERIST'S HANDWRITING AND THAT WHEN HE CAME TO ITEM NO. 314, BEING UNAWARE OF THE TRUE VALUE OF HIS COMPANY'S NEED THEREFOR, HE SUBMITTED A BID OF $75,000 WHICH WAS ACCEPTED. IN CONCLUSION IT IS STATED THAT UPON THE ASSISTANT'S RETURN TO SIOUX CITY HE WAS ADVISED OF THE ERROR AND FOR THE FIRST TIME REALIZED THAT MR. EVERIST INTENDED THAT HIS BID SHOULD NOT EXCEED $15,000; THAT WESTERN NOTIFIED THE CONTRACTING OFFICER BY TELEPHONE OF THE ERROR WITHIN 24 HOURS AFTER THE BID WAS MADE; AND THE WESTERN REFUSED TO ACCEPT THE AWARD AND TAKE DELIVERY OF THE EQUIPMENT.

GENERALLY, A SALE BY AUCTION IS COMPLETE WHEN THE AUCTIONEER ANNOUNCES ITS COMPLETION, AND TITLE TO THE SUBJECT MATTER OF THE SALE PASSES TO THE SUCCESSFUL BIDDER AT THAT TIME UNLESS THE PARTIES INTEND TO THE CONTRARY. 7 C.J.S. AUCTIONS AND AUCTIONEERS, SEC. 8; 1 RESTATEMENT OF THE LAW OF CONTRACTS, 34 SEC. 27; 2 WILLISTON ON SALES (REV.ED.) 200 SEC. 296; 11 A.L.R. 543. THE INVITATION HERE PROVIDED UNDER SUBPARAGRAPH (3) OF ARTICLE A OF THE "SPECIAL CONDITIONS" THAT ONCE A LOT OR ITEM WAS KNOCKED DOWN TO A PURCHASER, HIS BID MIGHT NOT BE WITHDRAWN. BASED UPON SUCH PROVISION VALID AND BINDING CONTRACTS WERE FORMED AS TO ITEMS NOS. 314 AND 404 WHEN THESE TWO ITEMS WERE KNOCKED DOWN TO WESTERN BY THE AUCTIONEER. SEE 37 COMP. GEN. 75. THEREFORE, THE AUCTION SALE WAS COMPLETE AND BINDING UPON WESTERN AT THE TIME THE ERROR WAS FIRST ALLEGED BY TELEPHONE AFTER MR. EVERIST'S RETURN TO SIOUX CITY. THERE IS NOTHING IN THE RECORD WHICH COULD HAVE INDICATED THAT AN ERROR HAD BEEN MADE BY WESTERN ON ITEM NO. 314 OR ANY INDICATION THAT THE CONTRACTING OFFICER EITHER KNEW OR SHOULD HAVE HAD CONSTRUCTIVE NOTICE OF THE MISTAKE. IN THIS REGARD THE DESCRIPTION OF ITEM NO. 314 SHOWS THE TOTAL ACQUISITION COST AS $245,000 AND THE TRANSCRIPT RECORDING OF THE BIDDING ON THAT ITEM SHOWS THAT THE NEXT HIGH BID WAS $72,500.

UNDER THESE CIRCUMSTANCES THIS OFFICE WOULD NOT BE JUSTIFIED IN RELIEVING WESTERN FROM LIABILITY FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $15,290 ASSESSED AGAINST IT BY THE DISPOSAL AGENCY.