B-62890, MARCH 5, 1947, 26 COMP. GEN. 654

B-62890, MARCH 5, 1947, 26 COMP. GEN. 654

CONTRACTS - REFORMATION - UNILATERAL MISTAKE AS TO PREEXISTING FACT WHERE A CONTRACT FOR TERMINALLING SERVICES REPRESENTED THE INTENTION AND UNDERSTANDING OF THE GOVERNMENT CONTRACTING OFFICER AND THE CONTRACTOR, INFORMED AS THEY WERE, AT THE TIME OF ENTERING INTO THE CONTRACT, THE ALLEGED ERROR OF THE CONTRACTOR IN USING OTHER THAN THE APPLICABLE WHARFAGE RATE IN COMPUTING ITS PRICE, BEING A UNILATERAL--- NOT A MUTUAL-- - MISTAKE WHICH IN NOWISE WAS CONTRIBUTED TO BY THE CONTRACTING OFFICER, CONSTITUTES NO BASIS FOR REFORMATION OF THE CONTRACT TO PROVIDE FOR AN INCREASE IN PRICE TO COMPENSATE THE CONTRACTOR FOR THE WHARFAGE IT WAS REQUIRED TO PAY AT A RATE HIGHER THAN THAT CONTEMPLATED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, MARCH 5, 1947:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 31, 1946, WITH ENCLOSURES, REQUESTING AUTHORITY TO REFORM--- BY REASON OF A MUTUAL ERROR--- CONTRACT NO. N6SX-1266, DATED APRIL 5, 1946, WITH SOUTHEASTERN OIL.

UNDER THE PROVISIONS OF THE CONTRACT, THE CONTRACTOR AGREED TO FURNISH UNDER ITEM I (A) TRANSPORTATION, (B) TERMINALLING, (C) STORAGE, AND (D) OPERATION (CLEANING AND CONDITIONING TANKS) IN CONNECTION WITH THE HANDLING OF A QUANTITY OF GOVERNMENT-OWNED GASOLINE FOR A PERIOD OF TWO YEARS COMMENCING MAY 1, 1946, AT CERTAIN SPECIFIED PRICES, THE ESTIMATED TOTAL OF WHICH WAS STATED IN THE CONTRACT TO BE $624,000. THE PRICES FOR THE TERMINALLING SERVICES UNDER ITEM (I) (B) ARE AS FOLLOWS:

(B) TERMINALLING

OPERATION BASED ON A CALENDAR MONTH

RECEIVING AND LOADING AS FOLLOWS: UNIT PRICE

OUTHANDLING PER MONTH

10-50,000 BARRELS ---------------------------- $1,800.00 43,200.00

PER BARREL

50,0001-100,000 BARRELS --------------------- $0.03 18,000.00

OVER 100,000 BARRELS ------------------------ .02

ITEM I (E) OF THE CONTRACT PROVIDES AS FOLLOWS:

(E) ITEM I (B) OF THIS CONTRACT INCLUDES A WHARFAGE RATE OF $0.005 PER BARREL IMPOSED BY THE BROWARD COUNTY PORT AUTHORITY CURRENTLY IN EFFECT AT THE TIME OF THE EXECUTION OF THIS CONTRACT. THE CONTRACT PRICE FOR TERMINALLING UNDER I (B) OF THIS CONTRACT SHALL BE INCREASED IN THE SAME AMOUNT IF THE WHARFAGE RATE AND/OR PORT CHARGES CONSTITUTING SUCH WHARFAGE RATE IS INCREASED BY THE BROWARD COUNTY PORT AUTHORITY ON A PER BARREL BASIS TO BE EFFECTIVE UPON PRESENTATION BY THE CONTRACTOR TO THE GOVERNMENT OF AUTHENTICATED NOTIFICATION OF SUCH INCREASE BY AFORESAID BROWARD COUNTY PORT AUTHORITY.

BY LETTER DATED NOVEMBER 26, 1946, THE CONTRACTOR ADVISED THE BUREAU OF SUPPLIES AND ACCOUNTS AS FOLLOWS:

RE: CONTRACT N6SX-1266

SUBJECT ITEM 1 (E)

WHEN NEGOTIATING THIS CONTRACT, WE CALCULATED THE RATE UNDER ITEM 1 (B) FOR 10-50,000 BARRELS TO BE $0.036 PER BARREL WHICH INCLUDED THE WHARFAGE CHARGE AT HALF A CENT PER BARREL. INASMUCH AS WE ARE NOW OBLIGED TO PAY THREE-QUARTERS OF A CENT PER BARREL FOR WHARFAGE, THIS RATE SHOULD BE INCREASED FROM $0.036 TO $0.0385 PER BARREL.

WHEN NEGOTIATING THE CONTRACT, IT WAS CONTEMPLATED WE WOULD BE ABLE TO OPERATE UNDER THE THEN EXISTING WHARFAGE AGREEMENT BETWEEN BROWARD COUNTY PORT AUTHORITY AND PACIFIC MOLASSES COMPANY IN WHICH EVENT, WE WOULD HAVE ONLY PAID HALF A CENT PER BARREL. A CERTIFIED COPY OF THAT PART OF THE WHARFAGE CONTRACT PERTAINING TO THE RATE IS ENCLOSED HEREWITH.

IT LATER DEVELOPED THAT THE PORT AUTHORITY REQUIRED A SEPARATE WHARFAGE CONTRACT TO BE DRAWN BETWEEN SOUTHEASTERN OIL, INC. AND THE PORT AUTHORITY IN WHICH EVENT, THIS BEING A NEW CONTRACT, WE WERE OBLIGED TO PAY THE GOING RATE WHICH INCREASED THE WHARFAGE FROM HALF A CENT A BARREL TO THREE -QUARTERS OF A CENT. CERTIFIED COPY OF THAT PORTION OF THE CONTRACT PERTAINING TO THE RATE IS ENCLOSED HEREWITH.

AT THE TIME WE WERE NEGOTIATING THE CONTRACT WITH THE NAVY, THE BROWARD COUNTY PORT AUTHORITY HAD NOT GIVEN US DEFINITE ASSURANCE WE WOULD BE ALLOWED TO USE THE THEN EXISTING WHARFAGE CONTRACT BETWEEN PACIFIC MOLASSES COMPANY AND THE PORT AUTHORITY WHICH WAS THE REASON FOR THE INCLUSION OF PARAGRAPH 1 (E) IN THE CONTRACT. IN OTHER WORDS, IT WAS NOT OUR DESIRE TO CHARGE THE NAVY ANYTHING MORE FOR WHARFAGE THAN WE WOULD HAVE TO PAY; AND THE INCLUSION OF PARAGRAPH 1 (E) IN THE CONTRACT, MERELY TAKES CARE OF THE EVENTUALITY WE WERE AFRAID MIGHT HAPPEN BUT DOES NOT CHARGE THE NAVY ANYTHING MORE FOR WHARFAGE THAN WE ARE ACTUALLY PAYING.

WE ARE ENCLOSING A CERTIFIED LETTER FROM THE PORT AUTHORITY STATING THE WHARFAGE RATE ON GASOLINE IS THREE-QUARTERS OF A CENT PER BARREL AND THIS RATE APPLIES TO ALL OIL COMPANIES OPERATING IN THE PORT.

IF THERE IS ANY MORE INFORMATION YOU DESIRE WHICH WILL LEAD TOWARD PAYMENT OF THIS BILL, PLEASE DO NOT HESITATE TO CALL ON US.

IT APPEARS FROM A COPY OF A PART OF THE REFERRED-TO CONTRACT BETWEEN THE PACIFIC MOLASSES COMPANY AND THE BROWARD COUNTY PORT AUTHORITY, DATED DECEMBER 13, 1940, THAT WHARFAGE CHARGES WERE TO BE AT THE RATE OF 1/2 CENT PER BARREL FOR THE FIRST 10 1/2 YEARS; AT THE RATE OF 1 CENT PER BARREL FOR THE REMAINDER OF THE CONTRACT PERIOD. ALSO, IT APPEARS FROM A COPY OF A PART OF THE REFERRED-TO CONTRACT BETWEEN SOUTHEASTERN OIL AND THE BROWARD COUNTY PORT AUTHORITY, DATED MAY 1, 1946, THAT WHARFAGE CHARGES WERE TO BE AT THE RATE OF 3/4 CENT PER BARREL FOR THE TERM OF THE CONTRACT, AND FOR THE TERM ENDING MARCH 31, 1941, IF RENEWED, AND AT THE RATE OF 1 CENT PER BARREL FOR THE REMAINDER OF THE RENEWAL TERM.

THE CERTIFIED COPY OF LETTER DATED SEPTEMBER 30, 1946, FROM THE PORT MANAGER, PORT EVERGLADES STATION, FORT LAUDERDALE, FLORIDA--- REFERRED TO IN THE QUOTED LETTER OF NOVEMBER 26, 1946--- READS AS FOLLOWS:

ANSWERING YOUR LETTER OF SEPTEMBER 24 I HAVE TO ADVISE THAT THE WHARFAGE RATE OF THREE-QUARTERS OF ONE CENT PER BARREL IS THE REGULAR CONTRACT RATE WITH ALL OIL COMPANIES FOR THE WHARFAGE CHARGE FOR GASOLINE PASSING OVER OUR DOCKS.

THIS IS TRUE OF ALL OIL COMPANIES DATING FROM THEIR FIRST CONTRACTUAL RELATIONS WITH US. THE FIRST CONTRACT WAS MADE IN DECEMBER, 1932 AND OTHERS IN YEARS THAT FOLLOWED. THERE ARE CONTRACTS WITH SEVEN OIL COMPANIES AT THIS RATE.

HOPING THIS GIVES YOU THE INFORMATION YOU DESIRE. IF NOT PLEASE ADVISE ME.

ON THE BASIS OF THE STATEMENTS MADE IN THE QUOTED LETTER OF NOVEMBER 26, 1946, IT APPEARS THAT IN COMPUTING ITS BID PRICES FOR ITEM 1 (B), THE CONTRACTOR INCLUDED 1/2 CENT PER BARREL FOR WHARFAGE CHARGES, IT HAVING ASSUMED THAT IT COULD OPERATE UNDER THE REFERRED-TO WHARFAGE AGREEMENT BETWEEN THE PACIFIC MOLASSES COMPANY AND THE BROWARD COUNTY PORT AUTHORITY. THE CONTRACTOR ADMITS IN SAID LETTER THAT AT THE TIME THE CONTRACT WAS BEING ENTERED INTO THE PORT AUTHORITY "HAD NOT GIVEN US DEFINITE ASSURANCE WE WOULD BE ALLOWED TO USE THE THEN EXISTING WHARFAGE CONTRACT BETWEEN PACIFIC MOLASSES COMPANY AND THE PORT AUTHORITY.' CONNECTION THEREWITH THE CONTRACTOR STATED IN SAID LETTER THAT BECAUSE OF LACK OF SUCH ASSURANCE PARAGRAPH I (E) WAS INCLUDED IN THE CONTRACT. HOWEVER, THE INCREASE IN TERMINALLING CHARGES UNDER ITEM I (E) IS AUTHORIZED ONLY IN THE EVENT OF AN INCREASE IN WHARFAGE CHARGES BY THE PORT AUTHORITY IN THE LETTER OF SEPTEMBER 30, 1946, THAT THE RATE OF 3/4 CENT PER BARREL WAS "THE REGULAR CONTRACT RATE WITH ALL OIL COMPANIES FOR THE WHARFAGE CHARGE FOR GASOLINE PASSING OVER OUR DOCKS.'

THE RESPONSIBILITY FOR DETERMINING THE PRICE AT WHICH THE TERMINALLING SERVICES WOULD BE FURNISHED WAS UPON THE CONTRACTOR. SUCH RESPONSIBILITY INCLUDED ASCERTAINING ALL ELEMENTS OF COST FOR PERFORMING THE TERMINALLING SERVICES INCLUDING THE AMOUNT OF ANY WHARFAGE CHARGES. HOWEVER, IT APPEARS THAT THE CONTRACTOR ELECTED TO FURNISH TERMINALLING SERVICES AT THE PRICES SPECIFIED IN ITEM I (B) WITHOUT ASCERTAINING THE AMOUNT OF THE WHARFAGE CHARGES IT WOULD BE REQUIRED TO PAY IN CONNECTION WITH FURNISHING SAID SERVICES. SUBSEQUENTLY, IT DEVELOPED THAT A HIGHER WHARFAGE CHARGE WOULD BE REQUIRED TO BE PAID THAN THE CONTRACTOR CONTEMPLATED. UNDER THE CIRCUMSTANCES, ANY ERROR IN THE PRICE OF ITEM I (B) WAS DUE SOLELY TO THE NEGLIGENCE OF THE CONTRACTOR AND WAS IN NO WAY INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT. SEE ELLICOTT MACHINE COMPANY V. UNITED ^STATES, 44 C.CLS. 127, WHEREIN IT IS STATED, QUOTING FROM THE SYLLABUS, THAT---

IT IS WELL SETTLED THAT WHERE A CONTRACT IS VALID ON ITS FACT AND NO FRAUD OR CONCEALMENT HAS BEEN SHOWN, A PARTY CANNOT BE RELIEVED FROM ITS OBLIGATIONS FOR MISTAKE UNLESS THE MISTAKE WAS MUTUAL. A PARTY CAN NOT SET UP HIS OWN NEGLIGENCE AND CALL IT A MUTUAL MISTAKE. ( ITALICS SUPPLIED.)

THERE IS NOTHING IN THE PRESENT RECORD TO SHOW THAT THE CONTRACTING OFFICER FOR THE GOVERNMENT KNEW--- OR WAS REQUIRED TO ASCERTAIN--- THE AMOUNT OF THE WHARFAGE CHARGE, SAID CHARGE BEING ONE OF THE ELEMENTS OF COST REQUIRED TO BE ASCERTAINED BY THE CONTRACTOR PRIOR TO CONTRACTING. SO FAR AS THE PRESENT RECORD SHOWS, THE CONTRACT REPRESENTS THE ENTIRE UNDERSTANDING AND INTENTION OF THE CONTRACTING OFFICER WHO SIGNED THE CONTRACT ON BEHALF OF THE GOVERNMENT, NAMELY, LIEUTENANT COMMANDER K. M. SKAGGS, THERE BEING NO STATEMENT BY HIM TO THE EFFECT THAT THE WHARFAGE RATE OF 1/2 CENT PER BARREL--- WHICH WAS STATED IN ITEM I (E) TO HAVE BEEN INCLUDED IN THE RATE FOR TERMINALLING SERVICES SPECIFIED IN ITEM I (B/--- WAS NOT THE RATE WHICH HE INTENDED TO BE INCLUDED IN THE TERMINALLING PRICES, AND THAT THERE WAS ERROR ON HIS PART IN ENTERING INTO THE CONTRACT SPECIFYING TERMINALLING PRICES WHICH INCLUDED A WHARFAGE CHARGE OF ONLY 1/2 CENT PER BARREL. ON THE BASIS OF THE FACTS OF RECORD, IT APPEARS THAT SUCH ERROR AS WAS MADE BY INCLUDING 1/2 CENT PER BARREL AS THE WHARFAGE RATE IN THE TERMINALLING PRICES UNDER ITEM I (B) WAS UNILATERAL--- NOT MUTUAL.

MOREOVER, THE GENERAL RULE IS THAT A MISTAKE, TO JUSTIFY THE REFORMATION OF AN INSTRUMENT, MUST HAVE BEEN MADE IN DRAWING THE INSTRUMENT AND NOT IN MAKING THE CONTRACT OUT OF WHICH IT GREW, THAT IS, IT MUST OCCUR IN REDUCING TO WRITING THE CONTRACT UPON WHICH THE PARTIES HAD AGREED, AND, ALSO, THE MISTAKE MUST BE MATERIAL, AFFECTING SUBSTANTIALLY THE RIGHTS AND OBLIGATIONS OF THE PARTIES. 53 C.J. 928. IT IS NOT ENOUGH TO JUSTIFY REFORMATION THAT THE COURT IS SATISFIED THAT THE PARTIES WOULD HAVE COME TO A CERTAIN AGREEMENT HAD THEY BEEN AWARE OF THE ACTUAL FACTS. SEE SECTION 1548, WILLISTON ON CONTRACTS ( REV. USED.). AS STATED IN RUSSELL ET AL. V. SHELL PETROLEUM CORPORATION, 66 F.2D 864, 867---

* * * A MISTAKE AS TO THE EXISTING SITUATION, WHICH LEADS EITHER ONE OR BOTH OF THE PARTIES TO ENTER INTO A CONTRACT WHICH THEY WOULD NOT HAVE ENTERED INTO HAD THEY BEEN APPRAISED OF THE ACTUAL FACTS, WILL NOT JUSTIFY REFORMATION. IT IS NOT WHAT THE PARTIES WOULD HAVE INTENDED IF THEY HAD KNOWN BETTER, BUT WHAT DID THEY INTEND AT THE TIME, INFORMED AS THEY WERE.

WILLISTON ON CONTRACTS, VOL. 3, SEC. 1549, STATES THE RULE AS FOLLOWS:

"IF, BECAUSE OF MISTAKE AS TO AN ANTECEDENT OR EXISTING SITUATION, THE PARTIES MAKE A WRITTEN INSTRUMENT WHICH THEY MIGHT NOT HAVE MADE, EXCEPT FOR THE MISTAKE, THE COURT CANNOT REFORM THE WRITING INTO ONE WHICH IT THINKS THEY WOULD HAVE MADE, BUT IN FACT NEVER AGREED TO MAKE.'

TO THE SAME EFFECT IS THE DECISION IN THE CASE OF WISE ET AL. V. BROOKS ET AL., 13 S. 836, 837, WHEREIN THE COURT SAID---

* * * IT IS NOT WHAT THE PARTIES WOULD HAVE INTENDED IF THEY HAD KNOWN BETTER, BUT WHAT DID THEY INTEND AT THE TIME, INFORMED AS THEY WERE.

IN DONIPHAN, K. AND S.R. CO. V. MISSOURI AND N.A.R.CO., 149 S.W. 60, 64, THE COURT, IN CONSIDERING THE MATTER OF REFORMATION OF WRITTEN INSTRUMENTS, STATED---

IN ALL SUCH CASES, THE QUESTION IS NOT WHAT THE PARTIES WOULD HAVE INTENDED BUT FOR A MISAPPREHENSION, NOT WHAT THEY WOULD HAVE INTENDED HAD THEY KNOWN BETTER, BUT RATHER, DID THE PARTIES UNDERSTANDINGLY EXECUTE THE INSTRUMENT, AND DOES IT EXPRESS THEIR INTENTION AT THE TIME, INFORMED AS THEY WERE? COURTS OF EQUITY WILL NOT REFORM A CONTRACT ON THE ALLEGED GROUND OF MISTAKE WHEN SUBSEQUENT EVENTS SHOW THAT SOMETHING DESIRED WAS OMITTED. SUCH COURTS MAY COMPEL PARTIES TO EXECUTE THEIR CONTRACTS, BUT CANNOT MAKE CONTRACTS FOR THEM. THEY MAY CORRECT AN INSTRUMENT SO AS TO MAKE IT CONFORM TO THE AGREEMENT, BUT THEY CANNOT CORRECT BAD JUDGMENT OR THE RESULT OF INATTENTION OR CARELESSNESS. * * *

ON THE BASIS OF THE FACTS OF RECORD, IT APPEARS THAT THE CONTRACT, INSOFAR AS ITEMS I (B) AND I (E) ARE CONCERNED, REPRESENTED THE INTENTION AND UNDERSTANDING OF THE PARTIES, INFORMED AS THEY WERE, AT THE TIME OF ENTERING INTO THE CONTRACT; AND THAT SUCH ERROR AS MAY HAVE BEEN MADE IN SAID PARAGRAPHS WERE UNILATERAL--- NOT MUTUAL. UNDER THE CIRCUMSTANCES, REFORMATION OF THE CONTRACT TO PROVIDE FOR AN INCREASE OF 1/4 CENT PER BARREL IN THE TERMINALLING PRICES IS UNAUTHORIZED.