B-128653, JUL. 31, 1956

B-128653, JUL. 31, 1956

TO MR. M. FEFFERMAN, PRESIDENT, MERCANTILE TRADING COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTER OF JULY 2, 1956, REQUESTING A REFUND OF THE AMOUNT OF $887.91 PAID BY YOU REPRESENTING DAMAGES OCCASIONED THE UNITED STATES BY REASON OF YOUR DEFAULT IN PERFORMANCE UNDER SALES CONTRACT NO. 04-197-0I-/S/-264-55, AWARDED YOU ON MARCH 4, 1955, BY THE QUARTERMASTER DIVISION, SFPE PROPERTY DISPOSAL BRANCH, OAKLAND ARMY BASE, CALIFORNIA.

BY THE TERMS OF THE CONTRACT YOU AGREED TO PURCHASE APPROXIMATELY 12,000 ROLLS OF UNUSED ,WADDING, SHEET, COTTON," FOR THE BID PRICES OF ?156, ?166, AND ?156 PER ROLL, AS LISTED OPPOSITE ITEMS NOS. 8, 9, AND 10 OF THE BID SCHEDULE, MAKING A TOTAL CONSIDERATION OF $1,994.17 FOR THE QUANTITIES LISTED. THE PROPERTY WAS SOLD TO YOU SUBJECT TO THE FOLLOWING PERTINENT CONDITIONS:

"1. INSPECTION.--- BIDDERS ARE INVITED AND URGED TO INSPECT THE PROPERTY TO BE SOLD PRIOR TO SUBMITTING BIDS. PROPERTY WILL BE AVAILABLE FOR INSPECTION AT THE PLACES AND TIMES SPECIFIED IN THE INVITATION. THE GOVERNMENT WILL NOT BE OBLIGED TO FURNISH ANY LABOR FOR SUCH PURPOSE. NO CASE WILL FAILURE TO INSPECT CONSTITUTE GROUNDS FOR A CLAIM OR FOR THE WITHDRAWAL OF A BID AFTER OPENING.

"2. CONDITION OF PROPERTY.--- ALL PROPERTY LISTED HEREIN IS OFFERED FOR SALE "AS IS" AND ,WHERE IS," AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. IF IT IS PROVIDED HEREIN THAT THE GOVERNMENT SHALL LOAD, THEN "WHERE IS" MEANS F.O.B. CONVEYANCE AT THE POINT SPECIFIED IN THE INVITATION. THE DESCRIPTION IS BASED ON THE BEST AVAILABLE INFORMATION, BUT THE GOVERNMENT MAKES NO GUARANTY, WARRANTY, OR REPRESENTATION, EXPRESSED OR IMPLIED, AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT, SIZE, OR DESCRIPTION OF ANY OF THE PROPERTY, OR ITS FITNESS FOR ANY USE OR PURPOSE, AND NO CLAIM WILL BE CONSIDERED FOR ALLOWANCE OR ADJUSTMENT OR FOR RESCISSION OF THE SALE BASED UPON FAILURE OF THE PROPERTY TO CORRESPOND WITH THE STANDARD EXPECTED; THIS IS NOT A SALE BY SAMPLE.'

THE RECORD SHOWS THAT AFTER THE AWARD YOU REFUSED TO ACCEPT DELIVERY OF THEM ON THE GROUND THAT THEY DID NOT CONFORM TO THE DESCRIPTION OF THE ITEMS AS SET FORTH IN THE BID SCHEDULE. IT IS YOUR CONTENTION THAT THE ITEMS PROPERLY SHOULD HAVE BEEN DESCRIBED AS "FILTER SHEETS, ROLLS, WITH THIN LAYER OF COTTON FILTER, 1/2 LBS., " INSTEAD OF "WADDING, SHEET, COTTON," THE DESCRIPTION USED. TO SUBSTANTIATE THIS CONTENTION YOU HAVE FURNISHED A SAMPLE OF THE ITEMS PURCHASED BY YOU UNDER THE PRESENT INVITATION AND A SAMPLE OF A SIMILAR PRODUCT ALLEGEDLY PROCURED UNDER ANOTHER GOVERNMENT INVITATION WHICH WAS DESCRIBED AS "FILTER DISKS.' HOWEVER, AS PROOF THAT THE ITEMS OFFERED UNDER THE PRESENT INVITATION WERE CORRECTLY ADVERTISED, THE CONTRACTING OFFICER HAS FURNISHED THE MANUFACTURER'S BRAND LABEL, TAKEN FROM ONE OF THE ROLLS, WHICH READS: "THE STEARNS AND FOSTER CO. SHEET WADDING, COTTON.'

WHILE FOR THE REASONS HEREINAFTER INDICATED THE POINT IS NOT MATERIAL, IT MAY BE OBSERVED THAT THERE WOULD SEEM TO BE NO MORE ACCURATE METHOD OF DESCRIBING SURPLUS PROPERTY OFFERED FOR SALE THAN TO EMPLOY THE PRECISE TERMS USED BY THE MANUFACTURERS THEMSELVES. IN ANY EVENT THERE CAN BE NO SERIOUS QUESTION CONCERNING THE GOOD FAITH OF THE GOVERNMENT CONTRACTING OFFICER IN THIS CASE, IN HAVING OFFERED FOR SALE WHAT HE HAD AMPLE REASON TO BELIEVE WAS COTTON WADDING. SEE, IN THIS CONNECTION, LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90; 28 COMP. GEN. 306.

FURTHERMORE, IT IS TO BE NOTED THE MATERIAL WAS OFFERED FOR SALE BY THE GOVERNMENT UPON AN "AS IS" AND "WHERE IS" BASIS, WITHOUT WARRANTY AS TO "DESCRIPTION," "QUALITY," OR "WEIGHT," AS RECITED IN ARTICLE 2 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE CONTRACT. IN THEIR INTERPRETATION OF DISCLAIMER CLAUSES CONTAINING SIMILAR LANGUAGE, THE COURTS AND THE GENERAL ACCOUNTING OFFICE CONSISTENTLY HAVE RULED THAT SUCH A DISCLAIMER OF WARRANTY VITIATES ANY AND ALL WARRANTIES WHICH OTHERWISE MIGHT ARISE OUT OF A SALES TRANSACTION. SEE, PARTICULARLY, THE CASE OF MAGUIRE AND COMPANY V. UNITED STATES, 273 U.S. 67, ALSO INVOLVING AN "AS IS" SALE OF CLOTH BY THE GOVERNMENT UNDER AN INVITATION WHICH GAVE THE WEIGHT PER YARD OF THE MATERIALS. IN THAT CASE IT TURNED OUT THAT THE MATERIALS DID NOT CONFORM TO THE SPECIFIED WEIGHT. IN DENYING THE PLAINTIFF RECOVERY, THE SUPREME COURT OF THE UNITED STATES HELD THAT THE GIVEN WEIGHT COULD NOT BE CONSIDERED AS A WARRANTY UNDER THE ADVERTISED CONDITIONS OF THE SALE. SEE, ALSO, W. E. HEDGER COMPANY V. UNITED STATES, 52 F.2D 31, CERTIORARI DENIED, 284 U.S. 676; UNITED STATES V. KELLY, 112 F.SUPP. 831; 30 COMP. GEN. 188, 34 ID. 300.

CONCERNING YOUR CONTENTION THAT THE AMOUNT CHARGEABLE TO YOU BY REASON OF YOUR DEFAULT SHOULD BE LIMITED TO THE AMOUNT OF YOUR BID DEPOSIT OF $400, YOU WILL OBSERVE THAT SUCH BID DEPOSIT WAS FURNISHED IN COMPLIANCE WITH ARTICLE 4 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE CONTRACT WHICH READS, IN PERTINENT PART:

"4. BID GUARANTEE.--- THE BIDDER AGREES THAT * * * IN THE EVENT OF ANY DEFAULT BY THE BIDDER OR ANY FAILURE BY THE BIDDER TO COMPLY WITH ALL TERMS AND CONDITIONS OF THIS CONTRACT, ANY DEPOSIT MADE BY THE BIDDER MAY BE APPLIED BY THE GOVERNMENT TO ANY LOSS, COST, AND EXPENSE OCCASIONED TO THE GOVERNMENT THEREBY, INCLUDING ANY LOSS, COST, AND EXPENSE INCURRED IN SELLING THE PROPERTY AND INCLUDING ANY DIFFERENCE BETWEEN THE AMOUNT SPECIFIED IN THE BID AND THE AMOUNT FOR WHICH THE GOVERNMENT MAY SELL THE PROPERTY, IF THE LATTER AMOUNT BE LESS THAN THE FORMER. * * *"

THUS, THE PURPOSE OF THE REQUIRED BID DEPOSIT WAS TO SAFEGUARD THE GOVERNMENT AGAINST POSSIBLE LOSS WHICH MIGHT RESULT FROM YOUR DEFAULT OR YOUR FAILURE TO PERFORM. SEE 23 COMP. GEN. 234, 235, 34 ID. 300, 303. UPON YOUR DEFAULT UNDER THE INSTANT CONTRACT, THE THE AMOUNT OF YOUR BID DEPOSIT OF $400 WAS CORRECTLY APPLIED TOWARD THE LIQUIDATION OF YOUR TOTAL INDEBTEDNESS TO THE UNITED STATES OF $887.91 ARISING OUT OF YOUR DEFAULT, AS WAS SPECIFICALLY AUTHORIZED BY THE EXPRESS TERMS OF YOUR CONTRACT.

WE HAVE NO INFORMATION RELATIVE TO THE ACTION OF CERTAIN GOVERNMENTAL ACTIVITIES IN WITHHOLDING THEIR GOODS FROM SALE ON OR AROUND THE TIME OF OPENING OF THE BIDS, AS REPORTED BY YOU. IN ANY EVENT, THIS IS ESSENTIALLY A MATTER WHICH LIES WITHIN THE DISCRETION OF THE PARTICULAR ADMINISTRATIVE AGENCY CONCERNED, AND SHOULD THIS PRACTICE CONTINUE TO YOUR DETRIMENT, IT IS SUGGESTED THAT YOU TAKE SUCH MATTER UP DIRECTLY WITH THE RESPONSIBLE GOVERNMENTAL DEPARTMENT.

IN THE INSTANT MATTER, WE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT ANY LOSS SUSTAINED BY YOU ON THIS TRANSACTION RESULTED SOLELY FROM YOUR FAILURE TO INSPECT THE ARTICLES PRIOR TO BIDDING THEREON AS YOU WERE URGED TO DO UNDER ARTICLE 1 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE GOVERNMENT'S INVITATION. AS YOU ARE AWARE, THIS ARTICLE SPECIFICALLY PROVIDES THAT "IN NO CASE" WILL FAILURE TO INSPECT CONSTITUTE GROUNDS FOR A CLAIM AGAINST THE UNITED STATES.

IN THE CIRCUMSTANCES, WE MUST CONCLUDE THAT THERE EXISTS NO LEGAL BASIS UPON WHICH YOUR CLAIM MAY BE ALLOWED.