B-150793, MAR. 13, 1963

B-150793, MAR. 13, 1963

TO THE ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 7, 1963, REQUESTING A DECISION AS TO WHETHER THE FEDERAL HOUSING ADMINISTRATION, AN HHFA CONSTITUENT AGENCY, MAY CONSIDER AMENDING BROKER CONTRACT NO. 115-38 DATED JUNE 13, 1962, WITH MR. FRANK MCCOY, D.B.A. FRANK MCCOY AGENCY, BECAUSE OF AN APPARENT MISTAKE IN BID ON THE SERVICES COVERED BY THE CONTRACT.

ON MAY 29, 1962, THE FEDERAL HOUSING ADMINISTRATION ISSUED INVITATION FOR BIDS NO. 5896 COVERING SERVICES DESIRED IN CONNECTION WITH THE MANAGEMENT, RENTAL AND SALE OF PROPERTIES, INCLUDING THE LOT AREAS, IDENTIFIED AS MEADOWVIEW HOMES LOCATED IN VICTORIA, TEXAS. THE INVITATION PROVIDED FOR THE SUBMISSION OF BIDS ON THE BASIS OF A PERCENTAGE OF THE GROSS CASH RENTAL INCOME, PLUS 5 PERCENT OF GROSS SALES PRICES AND AN ALLOWANCE OF $50 PER MONTH OR FRACTION OF A MONTH FOR THE PREPARATION OF ACCOUNTING REPORTS AND THE PERFORMANCE OF CLERICAL FUNCTIONS. THREE BIDS WERE RECEIVED WHICH QUOTED THE FOLLOWING PERCENTAGES OF GROSS CASH RENTAL INCOME: .045 PERCENT, 6.9 PERCENT AND 7.5 PERCENT. THE LOWEST RATE WAS QUOTED BY MR. MCCOY AND HIS BID WAS ACCEPTED BY LETTER DATED JUNE 13, 1962. A CONTRACT WAS SUBSEQUENTLY EXECUTED IN ACCORDANCE WITH THE TERMS OF THE ACCEPTED BID.

AN AUDIT OF THE REPORTS OF THE FRANK MCCOY AGENCY FOR THE MONTHS OF JULY, AUGUST, SEPTEMBER AND OCTOBER 1962 DISCLOSED THAT A RATE OF 4 1/2 PERCENT WAS USED IN THE COMPUTATIONS OF THE AGENCY'S COMMISSIONS ON RENTAL COLLECTIONS. THE CLAIMED COMMISSIONS AGGREGATED THE SUM OF $781.47 AND THE AMOUNT DUE THE AGENCY WAS COMPUTED AT ONLY $7.81 BASED UPON AN INTERPRETATION OF THE CONTRACT RATE OF .045 PERCENT AS HAVING BEEN INTENDED TO BE 45 THOUSANDTHS OF ONE PERCENT. IN DECEMBER 1962 MR. MCCOY WAS REQUESTED TO DEPOSIT THE DIFFERENCE OF $773.66 IN THE PROJECT BANK ACCOUNT. HE CONTENDED THAT HIS BID WAS INTENDED AS 4 1/2 PERCENT OF GROSS CASH RENTAL INCOME AND STATED THAT HE WISHED TO SUBMIT HIS RESIGNATION IN ACCORDANCE WITH THE TERMS OF HIS CONTRACT IF HIS MANAGEMENT FEE PERCENTAGE "IS INTERPRETED AS FORTY FIVE ONE HUNDREDTHS OF ONE PERCENT.'

THE RECORD INDICATES THAT ON A SIMILAR INVITATION FOR BIDS ON A 1959 BROKER CONTRACT MR. MCCOY QUOTED 3 7/8 PERCENT OF GROSS CASH RENTAL INCOME. IN A LETTER DATED DECEMBER 23, 1962, MR. MCCOY ALLEGED THAT WHEN PREPARING HIS BID ON INVITATION NO. 5896 HE ORIGINALLY USED A PERCENT SIGN AS A DESCRIPTIVE MODIFIER TO THE .045 FIGURE BUT THAT THE PERCENT SIGN WAS ERASED WHEN IT WAS REALIZED THAT THE PERCENT SIGN CHANGED THE VALUE OF THE QUOTED COMMISSION RATE. HE SUGGESTED THAT THE PERCENT SIGN MAY NOT HAVE BEEN ERASED ON ALL COPIES OF THE BID AND STATED THAT "MY INTENT ALL ALONG WAS FOUR AND ONE-HALF PERCENT.'

THE CONTRACTING OFFICER HAS REPORTED THAT BIDS ON THIS TYPE OF INVITATION VARY OVER A WIDE RANGE AND THAT, FREQUENTLY, THE LOW BID WILL BE A MINUS FIGURE RESULTING IN PAYMENT TO THE GOVERNMENT BY THE CONTRACTOR. CONSEQUENTLY, THE CONTRACTING OFFICER CONSIDERED THAT THE ACCEPTED BID WAS NOT SO LOW AS TO HAVE NECESSARILY PLACED THE GOVERNMENT ON NOTICE THAT AN ERROR WAS MADE IN THE BID. HOWEVER, HE EXPRESSED THE OPINION THAT AN HONEST MISTAKE WAS MADE AND THAT THE GOVERNMENT WOULD NOT OBTAIN AN ADVANTAGE BY TERMINATION OF THE CONTRACT AND SOLICITATION OF BIDS ON A NEW CONTRACT. MR. MCCOY HAS COMPLIED SUBSTANTIALLY WITH THE PROVISIONS OF ARTICLE 2 OF HIS CONTRACT RESPECTING CANCELLATION OR TERMINATION BY GIVING THE OTHER PARTY NOT LESS THAN 60 DAYS' WRITTEN NOTICE OF THE DECISION TO TERMINATE THE CONTRACT, AND IT APPEARS THAT HE WILL NOT BE OBLIGATED TO CONTINUE PERFORMANCE AFTER FEBRUARY 1963 UNLESS THE GOVERNMENT AGREES TO PERMIT HIM TO RETAIN 4 1/2 PERCENT OF THE GROSS CASH RENTAL INCOME FROM THE MEADOWVIEW HOME PROPERTIES.

ASSUMING THAT THERE WAS IN FACT A MISTAKE IN BID, WE BELIEVE THAT THE CONTRACTING OFFICER REASONABLY COULD NOT BE PRESUMED TO HAVE BEEN ON NOTICE OF THE MISTAKE, PARTICULARLY IF HE WERE UNAWARE OF THE FACT THAT MR. MCCOY HAD SUBMITTED A PREVIOUS BID OF 3 7/8 PERCENT ON A COMPARABLE 1959 BROKER CONTRACT.

HOWEVER, WE DOUBT THAT MR. MCCOY'S BID HAS BEEN PROPERLY INTERPRETED AS AN OFFER TO ACCEPT ONLY 45 THOUSANDTHS OF ONE PERCENT OF GROSS CASH RENTAL INCOME AS A PART OF THE CONSIDERATION FOR THE MANAGEMENT AND OTHER SERVICES WHICH HE AGREED TO PERFORM. THE DECIMAL FRACTION OF .045 WOULD EQUAL 4 1/2 PERCENT OF THE WHOLE (IN THIS CASE--- GROSS CASH RENTAL INCOME), AND IT APPEARS THAT THE ADDITION OF THE PERCENT SYMBOL SHOULD NOT HAVE THE EFFECT OF REDUCING THIS PERCENTAGE TO .00045, SINCE THE DECIMAL FRACTION USED WAS NOT CLEARLY REPRESENTED AS A PART OF ONE PERCENT OF THE BASIC FIGURE TO WHICH THE PERCENTAGE WAS TO BE APPLIED. SEE HACKNEY V. ELLIOTT, 137 N.W. 433, IN WHICH THE SUPREME COURT OF NORTH DAKOTA REJECTED THE APPELLANT'S ARGUMENT THAT CERTAIN DRAINAGE ASSESSMENT TAXES WERE 100 TIMES WHAT THEY SHOULD HAVE BEEN BECAUSE THE TAX ASSESSMENT STATEMENT CONTAINED THE WORDS "PERCENT" AT THE TOP OF THE COLUMN OF PERCENTAGE APPORTIONMENTS BY DECIMAL FRACTIONS.

HOWEVER, IRRESPECTIVE OF THE FACT AS TO WHETHER MR. MCCOY MADE A MISTAKE IN HIS BID, THE COURTS, AND ALSO THIS OFFICE, FREQUENTLY HAVE RULED THAT THE WAIVER OF A LEGAL RIGHT, OR THE FORBEARANCE TO EXERCISE SUCH RIGHT, CONSTITUTES SUFFICIENT CONSIDERATION FOR A PROMISE MADE ON ACCOUNT OF IT. IN RE. ALL STAR FEATURE CORP., 232 F. 1004; B-89196, OCTOBER 10, 1949. ALSO, IT HAS BEEN HELD THAT THE WAIVER OF THE LEGAL RIGHT TO RESCIND A CONTRACT CONSTITUTES A SUFFICIENT CONSIDERATION FOR SUCH A PROMISE. FURTHER, THE LAW IS WELL SETTLED THAT THE RELATIVE VALUES OF A PROMISE AND THE CONSIDERATION FOR IT DO NOT AFFECT THE SUFFICIENCY OF THE CONSIDERATION. HENCE, IT MUST BE CONCLUDED THAT MR. MCCOY'S FORBEARANCE IN EXERCISING HIS CONTRACTUAL RIGHT TO TERMINATE THE ORIGINAL CONTRACT IN EXCHANGE FOR THE GOVERNMENT'S PROMISE TO CHANGE THE TERMS OF THE CONSIDERATION TO A FAIRER AND MORE EQUITABLE BASIS, AND IN SUCH A MANNER AS TO ELIMINATE THE LOSSES SUSTAINED UNDER THE BASIC AGREEMENT, WOULD CONSTITUTE ADEQUATE CONSIDERATION FOR MODIFYING THE TERMS OF THE ORIGINAL CONTRACT TO PROVIDE FOR PAYMENT OF 4 1/2 PERCENT RENTAL COMMISSION EFFECTIVE JULY 1, 1962.

AS REQUESTED, WE ARE RETURNING THE CORRESPONDENCE AND DOCUMENTS FORWARDED WITH YOUR LETTER.