B-171608, JAN 21, 1971

B-171608, JAN 21, 1971

CONTRACTS - MISTAKES - REFORMATION ALLOWING CLAIM BY JOHN L. BELL LOGGING CO., FOR REFORMATION OF A CONTRACT WITH THE FOREST SERVICE ON BASIS OF A MUTUAL MISTAKE REGARDING A MATERIAL FACT. A BID FORM WHICH INCORRECTLY IDENTIFIED 300M BOARD FEET OF TIMBER AS "SUGAR PINE AND OTHER SPECIES OF PINE LOGS", APPRAISED AT $68.85 PER M BOARD FEET INSTEAD OF ONLY 58.8% SUGAR PINE AND THE REMAINING WHITE FIR, HEMLOCK AND CEDAR THAT SHOULD HAVE BEEN APPRAISED ON AN AVERAGE AT $49.15 PER M BOARD FEET, GROSSLY OVERSTATED THE APPRAISAL VALUE ON WHICH THE BIDDERS BASED THEIR BIDS AND WAS THEREFORE A MUTUAL MISTAKE OF A MATERIAL FACT. THEREFORE, THE CONTRACT SHOULD BE REFORMED TO ACCORD WITH THE ACTUAL INTENTION OF THE PARTIES.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER 2430 DATED DECEMBER 22, 1970, FROM THE ACTING CHIEF OF THE FOREST SERVICE, REQUESTING A DECISION WHETHER TIMBER SALE CONTRACT 006711 WITH THE JOHN L. BELL LOGGING CO. MAY BE REFORMED.

THE CONTRACT PROVIDES FOR THE SALE OF 1,600 M BOARD FEET OF DOUGLAS FIR AND 300 M BOARD FEET OF "SUGAR PINE AND OTHER CONIFEROUS SPECIES OF LOGS." REFORMATION IS REQUESTED ONLY WITH RESPECT TO THE LATTER GROUPING OF TIMBER SPECIES.

ALTHOUGH THE NEWSPAPER ADVERTISEMENT OF THE TIMBER SALE, A COPY OF WHICH NOTICE WAS ATTACHED TO THE TIMBER SALE PROSPECTUS, AND THE TIMBER SALE CONTRACT WHICH WAS AVAILABLE FOR EXAMINATION BEFORE BIDDING ALL DESCRIBED THE 300 M BOARD FEET OF TIMBER AS "SUGAR PINE AND OTHER CONIFEROUS SPECIES OF LOGS," THE BID FORM WHICH WAS PROVIDED FOR BIDDING IDENTIFIED THE TIMBER AS "SUGAR PINE AND OTHER SPECIES OF PINE LOGS." THE APPRAISAL VALUE OF THIS TIMBER WAS STATED AS $68.85 PER M BOARD FEET. BOTH THE CONTRACTOR AND THE OTHER BIDDER BID THE APPRAISED VALUE OF THIS TIMBER.

THE CONTRACTOR HAS STATED THAT BECAUSE THE VOLUME OF TIMBER WAS SMALL, NO EXAMINATION WAS MADE OF THE TIMBER AREA BEFORE BIDDING, BUT THAT AS A RESULT OF AN EXAMINATION MADE SINCE THE CONTRACT WAS AWARDED, IT HAS BEEN DISCOVERED THAT A CONSIDERABLE PORTION OF THE TIMBER VOLUME IS OTHER THAN PINE. HENCE, AN ADJUSTMENT IN THE APPRAISED PRICE IS REQUESTED. IN THAT REGARD, THE FOREST SERVICE HAS REPORTED THAT THE APPRAISAL INCLUDED IN THE BIDDING DOCUMENTS WAS BASED UPON THE TIMBER BEING 100 PERCENT SUGAR PINE WORTH $68.85 PER M BOARD FEET, BUT THAT ACTUALLY ONLY 58.8 PERCENT OF THE VOLUME IS SUGAR PINE AND THE REMAINING 41.2 PERCENT IS WHITE FIR, HEMLOCK AND CEDAR THAT SHOULD HAVE BEEN APPRAISED AT $21.09 PER M BOARD FEET, OR AN AVERAGE OF $49.15 PER M BOARD FEET. THUS, IT APPEARS THAT THE APPRAISAL WAS GROSSLY OVERSTATED.

IN VIEW OF THE ERRONEOUS APPRAISAL AND THE DISCREPANCY BETWEEN THE BID FORM AND OTHER BIDDING MATERIAL, THE FOREST SERVICE RECOMMENDS THAT THE CONTRACT BE REFORMED TO LIMIT THE $68.85 PRICE TO SUGAR PINE AND OTHER SPECIES OF PINE. IT IS INDICATED THAT IF THAT IS DONE THE PRICE FOR THE SPECIES OTHER THAN PINE WILL BE ESTABLISHED AT $21.09 PER M BOARD FEET IN ACCORDANCE WITH SECTION B3.41 OF THE CONTRACT WHICH PROVIDES THAT FOR ANY SPECIES OR PRODUCT NOT LISTED IN THE VOLUME ESTIMATE TABLE IN THE CONTRACT, THE FOREST SERVICE SHALL ESTABLISH TIMBER PAYMENT RATES IN ACCORDANCE WITH STANDARD APPRAISAL METHODS AS STATED IN THE FOREST SERVICE MANUAL.

THE CONTRACT PROVIDES A $68.85 PER M BOARD FEET PRICE FOR "SUGAR PINE AND OTHER CONIFEROUS SPECIES OF LOGS." HOWEVER, THE CONTRACTOR'S BID PRICE WAS SPECIFICALLY LIMITED TO "SUGAR PINE AND OTHER SPECIES OF PINE LOGS." FURTHER, THE FOREST SERVICE APPRAISAL INCLUDED IN THE BID WAS BASED UPON THE TIMBER BEING SUGAR PINE. THUS, IT IS APPARENT THAT, DESPITE THE DESCRIPTION OF THE TIMBER IN THE CONTRACT, BOTH PARTIES CONSIDERED THAT THE TIMBER OFFERED FOR SALE WAS PINE AND THAT THE $68.85 PRICE WAS FOR PINE. THEREFORE, THE CONTRACT DID NOT REFLECT THE UNDERSTANDING OF THE PARTIES AND SHOULD BE REFORMED TO PROVIDE THAT THE $68.85 PRICE IS LIMITED TO SUGAR PINE AND OTHER SPECIES OF PINE. THIS IS IN ACCORDANCE WITH THE PRINCIPLE OF LAW THAT A WRITTEN AGREEMENT NOT IN CONFORMITY WITH THE ACTUAL INTENTION OF THE PARTIES BECAUSE OF A MUTUAL MISTAKE REGARDING A MATERIAL FACT MAY BE REFORMED TO ACCORD WITH THE ACTUAL INTENTION. SEE 39 COMP. GEN. 363, 365 (1959).

FOLLOWING SUCH REFORMATION, IT WOULD BE APPROPRIATE TO ESTABLISH THE PRICE FOR TIMBER OTHER THAN PINE UNDER SECTION B3.41 OF THE CONTRACT, AS SUGGESTED.