B-152938, FEB. 10, 1964

B-152938, FEB. 10, 1964

TO ALLIED SURPLUS STORES:

WE REFER TO YOUR LETTER DATED NOVEMBER 13, 1963, ADDRESSED TO THE DIRECTOR, CLAIMS DIVISION, UNITED STATES GENERAL ACCOUNTING OFFICE, REQUESTING REVIEW OF THE DISALLOWANCE OF YOUR CLAIM FOR REFUND IN THE AMOUNT OF $125.31 UNDER DISPOSAL CONTRACT NO. DSA-33-S-507 ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, GRANITE CITY ARMY DEPOT, GRANITE CITY, ILLINOIS.

YOU COMPLAIN THAT THE MISCELLANEOUS INDIVIDUAL FIELD EQUIPMENT (ITEM 22 OF THE INVITATION) AWARDED TO YOU AS HIGH BIDDER WAS DISCOVERED AFTER DELIVERY TO CONSIST OF CONSIDERABLE SCRAP AND UNREPAIRABLE ITEMS CONTRARY TO THE DESCRIPTION IN THE INVITATION WHICH CHARACTERIZED THE 50 EACH INTRENCHING SHOVELS, 300 EACH PISTOL BELTS, 61 EACH CARTRIDGE BELTS, 800 EACH CANTEEN COVERS, AND 100 EACH CANVAS FIELD PACKS AS "USED, FAIR, REPAIRS REQUIRED.'

ALTHOUGH YOU DID NOT INSPECT THE ITEMS PRIOR TO SUBMITTING YOUR BID YOU CONTEND THAT INSPECTION WOULD HAVE BEEN INEFFECTUAL SINCE THE EQUIPMENT WAS BALED. YOU STATE THAT THERE CAN BE NO QUESTION RAISED AS TO THE ACTUAL CONDITION OF THE GOODS RECEIVED SINCE THE MISDESCRIPTION WAS OBSERVED AFTER AWARD AT YOUR PLACE OF BUSINESS BY A REPRESENTATIVE OF THE SALES ACTIVITY.

THE GOVERNMENT ACKNOWLEDGES THE OCCURRENCE OF A MISDESCRIPTION IN THIS CASE AND DOES NOT DENY YOUR CLAIM THAT THE EQUIPMENT DELIVERED TO YOU DID NOT, IN PART, CONFORM TO THE DESCRIPTION OF THE EQUIPMENT UPON WHICH YOU THOUGHT YOU WERE BIDDING. ALL THAT THE PARAGRAPH FROM THE SETTLEMENT CERTIFICATE OF OUR CLAIMS DIVISION, WHICH YOU QUOTE IN YOUR LETTER, SEEKS TO CONVEY IS THAT PERSONNEL OF THE SALES ACTIVITY HAD NO INFORMATION THAT ITEM 22 WAS OTHER THAN AS DESCRIBED IN THE INVITATION PRIOR TO AWARD OF A CONTRACT TO YOU. THE MATERIALITY OF THIS FACT WILL BECOME APPARENT UPON A BRIEF REVIEW OF THE LAW APPLICABLE TO THE SUBJECT AND ITS RATIONALE.

IN DISPOSING OF SURPLUS GOODS THE GOVERNMENT IS NOT ENGAGED IN NORMAL TRADE. AS WAS STATED IN THE CASE OF DADOURIAN EXPORT CORPORATION V. UNITED STATES, 291 F.2D 178, 182:

"* * * WHEN THE GOVERNMENT SELLS SURPLUS GOODS IT IS TRYING TO DISPOSE OF A VAST MISCELLANY OF USED AND UNUSED PROPERTY IN AN EFFORT, SO FAR AS MAY UNDER THE CIRCUMSTANCES BE POSSIBLE, TO MINIMIZE ITS LOSS. SALES OF THIS CHARACTER ARE PROCESSED ON A MASS QUANTITY BASIS BY MEMBERS OF THE ARMED FORCES WHO SELDOM IF EVER HAVE ANY EXPERTISE IN THE PARTICULAR ITEMS WHICH COME TO THEIR WAREHOUSES AND DEPOTS. BUYERS OF SUCH SURPLUS PROPERTY KNOW PERFECTLY WELL THAT THERE IS ALWAYS THE CHANCE OF BUYING PROPERTY THAT MAY TURN OUT TO BE OF LITTLE VALUE, OR MAY DEVELOP INTO A GREAT BARGAIN WITH A HUGE WINDFALL OF PROFIT. ACCORDINGLY, THE GOVERNMENT VERY PROPERLY HAS PROTECTED ITSELF BY FORMULATING ITS CONTRACT FOR THE SALE OF SUCH SURPLUS PROPERTY SO AS TO SHIFT THE RISK FROM ITSELF TO THE BUYER. AS PROFESSOR CORBIN TELLS US, A PARTY TO A CONTRACT MAY AGREE TO ASSUME CERTAIN RISKS THAT IN THE ABSENCE OF AGREEMENT THE LAW WOULD NOT CAST UPON HIM. SEE 3 CORBIN, CONTRACTS (1960), SECTION 598.'

THE RISK OF WHICH THE COURT IN THE DADOURIAN CASE SPEAKS IS THE RISK OF LOSS IN THE EVENT OF MISDESCRIPTION. WHEN THE GOVERNMENT OFFERS PROPERTY FOR SALE ON AN "AS IS" AND "WHERE IS" BASIS, NO WARRANTY IS MADE TO THE PURCHASER THAT THE ITEMS DELIVERED WILL CONFORM TO THE DESCRIPTION IN THE INVITATION. THE INVITATION FOREWARNS THE BIDDER TO INSPECT THE PROPERTY PRIOR TO SUBMITTING HIS BID. THE FACT THAT THE ITEMS ARE BALED WILL IN NOWISE EXCUSE A FAILURE TO MAKE PERSONAL INSPECTION. B-145551 DATED AUGUST 31, 1961. BALED GOODS HAVE BEEN PERMITTED TO BE OPENED FOR INSPECTION. THAT INSPECTION OF BALED GOODS MIGHT PROVE PROTRACTED AND TEDIOUS WILL NOT EXCUSE FAILURE TO INSPECT.

AN EXCEPTION TO THE APPLICATION OF THE RULE OF CAVEAT EMPTOR IN GOVERNMENT SURPLUS SALES SITUATIONS IS MADE IN CASES WHERE IT CAN BE SHOWN THAT THE DESCRIPTION OBJECTED TO WAS NOT BASED UPON THE BEST AVAILABLE INFORMATION. THIS EXCEPTION AMOUNTS TO NO MORE THAN A REQUIREMENT THAT SALES PERSONNEL ACT IN GOOD FAITH AND NOT DELIBERATELY, OR THROUGH CARELESS CONDUCT, MISLEAD. THUS WHEN, AS HERE, IT CAN BE DEMONSTRATED THAT THE HOLDING ACTIVITY AND NOT THE SALES ACTIVITY WAS THE SOURCE OF THE MISDESCRIPTION, AND THAT THE SALES ACTIVITY MERELY TRANSCRIBED THE MISDESCRIPTION ON COMPILING THE CATALOGUE, IT IS GENERALLY HELD THAT THE BEST INFORMATION AVAILABLE HAS BEEN UTILIZED IN THE INVITATION IN RECOGNITION OF THE HEAVY WORKLOAD PLACED UPON SALES PERSONNEL WHICH NECESSARILY PRECLUDES THE POSSIBILITY OF INSPECTION BY THEM IN MOST CASES. 41 COMP. GEN. 185.

IN THE LIGHT OF THE ABOVE WE MUST ADVISE YOU THAT YOUR REQUEST FOR REVERSAL OF THE DISALLOWANCE OF YOUR CLAIM FOR REFUND IS DENIED.