B-2919, MAY 15, 1939, 18 COMP. GEN. 855

B-2919, MAY 15, 1939, 18 COMP. GEN. 855

CONTRACTS - DAMAGES - LIQUIDATED - KNOWN POSSIBILITY OF DELAY AS AN "UNFORESEEABLE" CAUSE, AND NONNECESSITY FOR PROOF OF ACTUAL DAMAGE WHERE CONTRACTOR WAS FULLY AWARE THAT THE MATERIAL REQUIRED WAS OF AN AN EXPERIMENTAL NATURE AND REQUIRED NEW AND UNUSUAL METHODS OF CONSTRUCTION, AND THE GOVERNMENT IN ITS SPECIFICATIONS INDICATED THE DOUBTFULNESS OF THE FEASIBILITY OF PERFORMING THE CONTRACT IN STRICT ACCORDANCE WITH THE WRITTEN SPECIFICATIONS AND PROVIDED FOR CONFORMANCE TO SUBSEQUENT EXPLANATORY INSTRUCTIONS OF THE CONTRACTING OFFICER, THE DELAY IN PERFORMANCE, FOR WHICH LIQUIDATED DAMAGES WERE DEDUCTED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT, MAY NOT BE CLASSIFIED AS "UNFORESEEABLE" FOR LIQUIDATED DAMAGE REMISSION PURPOSES. A LIQUIDATED DAMAGE STIPULATION IS FOR ENFORCEMENT WITHOUT THE NECESSITY OF INQUIRING INTO THE QUESTION OF WHETHER ACTUAL DAMAGE WAS INCURRED.

COMPTROLLER GENERAL BROWN TO KEYSTONE STEEL AND WIRE CO., MAY 15, 1939:

YOUR LETTER OF FEBRUARY 2, 1939, REQUESTS REVIEW OF SETTLEMENT DATED MAY 9, 1938, WHICH DISALLOWED YOUR CLAIM FOR REMISSION OF $1,420 DEDUCTED AS LIQUIDATED DAMAGES FOR DELAY IN DELIVERY OF CERTAIN WIRE FABRIC FURNISHED THE WAR DEPARTMENT UNDER CONTRACT NO. W-1096-ENG 4831, DATED OCTOBER 19, 1936.

UNDER THE TERMS OF THE CITED CONTRACT YOU AGREED TO FURNISH 156,000 SQUARE FEET OF STAPLED, GALVANIZED, WIRE FABRIC, IN STRICT ACCORDANCE WITH SPECIFICATIONS ATTACHED TO THE INVITATION IN RESPONSE TO WHICH YOUR BID WAS SUBMITTED. PAYMENT HAS BEEN MADE TO YOU IN THE NET AMOUNT OF $5,774.08, REPRESENTING THE GROSS CONTRACT PRICE OF $7,231.08, LESS DISCOUNT OF $37 FOR PROMPT PAYMENT, AND LESS $1,420 AS LIQUIDATED DAMAGES, COMPUTED AT THE SPECIFIED CONTRACT RATE OF $10 PER DAY FOR 142 DAYS OF DELAY IN DELIVERY OF THE FABRIC.

IT IS UNNECESSARY TO SET FORTH HERE THE TERMS OF THE CONTRACT RELATIVE TO LIQUIDATED DAMAGES OR THE CIRCUMSTANCES RELATIVE TO THE DELAY IN DELIVERY, SINCE YOU DO NOT APPEAR TO QUESTION THE METHOD OF COMPUTATION OF LIQUIDATED DAMAGES OR THE CORRECTNESS OF THE AMOUNT DEDUCTED ON ACCOUNT THEREOF. RATHER, YOU ALLEGE THAT THE DELAY WAS DUE TO UNFORESEEABLE CAUSES BEYOND YOUR CONTROL AND THAT LITTLE OR NO ACTUAL DAMAGE RESULTED TO THE GOVERNMENT BY REASON OF THE DELAY, AND THEREFORE YOU URGE THAT LIQUIDATED DAMAGES SHOULD NOT HAVE BEEN DEDUCTED IN ANY AMOUNT.

WITH RESPECT TO YOUR FIRST CONTENTION, IT IS STATED IN YOUR LETTER OF FEBRUARY 2, 1939, THAT CONSTRUCTION OF FABRIC OF THE TYPE REQUIRED TO BE FURNISHED UNDER THE CONTRACT WAS AND IS IN THE EXPERIMENTAL STAGE, BUT THAT BOTH YOUR ENGINEERS AND THE WAR DEPARTMENT ENGINEERS BELIEVED SUCH FABRIC COULD BE MADE "ACCORDING TO THE SPECIFICATIONS AS WRITTEN.' HOWEVER, YOU STATE THAT THEORIES FOR DESIGNING MACHINERY FOR MANUFACTURE OF THE FABRIC DID NOT PROVE ACCEPTABLE IN ACTUAL PRODUCTION AND THAT IN CONSEQUENCE OF THIS YOU FOUND IT DIFFICULT OR IMPOSSIBLE TO COMPLY WITH THE SPECIFICATIONS AND YOU THEREFORE REQUESTED AND RECEIVED PERMISSION TO MAKE SEVERAL CHANGES IN THE CONTRACT SPECIFICATIONS, ALTHOUGH SUCH CHANGES HAD NOT BEEN ANTICIPATED BY THE PARTIES AT THE TIME THE CONTRACT WAS MADE.

IN A REPORT OF MARCH 3, 1938, TO THE CHIEF OF ENGINEERS, THE CONTRACTING OFFICER, WILLIAM F. TOMPKINS, LIEUTENANT COLONEL, CORPS OF ENGINEERS, ADVISED WITH RESPECT TO DIFFICULTIES ATTENDING THE MANUFACTURE OF THE FABRIC, AS FOLLOWS:

3. WITH REGARD TO THE FIRST ITEM OF CLAIM, IT MAY BE SAID THAT THE CLAIMANT WAS FULLY AWARE OF THE FACT THAT THE MATERIAL REQUIRED WAS OF AN EXPERIMENTAL NATURE AND REQUIRED NEW AND UNUSUAL METHODS OF CONSTRUCTION AND THAT THIS FACT WAS FULLY BROUGHT OUT BY THE SPECIFICATIONS. THE UNITED STATES WAS FULLY COGNIZANT, ALSO, AND MADE EVERY EFFORT IN PREPARATION OF THE SPECIFICATIONS TO SHOW IN DETAIL ALL FEATURES NECESSARY IN MANUFACTURE AND TEST OF THE MATERIAL. * * *

THE ABOVE-QUOTED STATEMENTS OF THE CONTRACTING OFFICER SERVE TO EMPHASIZE YOUR STATEMENTS AS TO THE EXPERIMENTAL NATURE OF THE WORK INVOLVED. FURTHER INDICATION THAT THE PARTIES TO THE CONTRACT WERE DOUBTFUL OF THE FEASIBILITY OF PERFORMING THE CONTRACT IN STRICT ACCORDANCE WITH THE WRITTEN SPECIFICATIONS IS FOUND IN PARAGRAPH 6 THEREOF, WHICH PROVIDES:

CONTRACT SPECIFICATIONS.--- THE WIRE FABRIC SHALL CONFORM TO THESE SPECIFICATIONS AND TO PLAN A-973, DATED AUGUST 3, 1936, AND PLAN A-974 DATED SEPTEMBER 25, 1936, WHICH FORM A PART OF THESE SPECIFICATIONS, AND TO SUCH EXPLANATORY INSTRUCTIONS AS MAY BE ISSUED FROM TIME TO TIME BY THE CONTRACTING OFFICER OR HIS REPRESENTATIVE.

HOWEVER, THE NET RESULT OF THESE CONSIDERATIONS IS NOT THE ESTABLISHMENT OF YOUR CONTENTION THAT DELAYS ARISING THROUGH DIFFICULTY IN PERFORMANCE WERE UNFORESEEABLE. ON THE CONTRARY, SUCH CONSIDERATIONS CLEARLY DEMONSTRATE THAT DIFFICULTIES IN PERFORMANCE AND DELAYS IN CONSEQUENCE THEREOF WERE MATTERS WHICH COULD AND SHOULD HAVE BEEN ANTICIPATED BY YOU BEFORE THE CONTRACT WAS MADE. IN A SIMILAR CASE, WHERE A CONTRACTOR HAD ENGAGED TO MANUFACTURE CERTAIN ARMOR PLATE, OF A TYPE WHICH NEVER HAD BEEN MANUFACTURED PREVIOUSLY IT WAS ALLEGED THAT IN ORDER TO COMPLY WITH THE CONTRACT SPECIFICATIONS IT WAS NECESSARY TO PROVIDE PLATES POSSESSING CERTAIN METALLURGICAL QUALITIES OR CONDITIONS WHICH, UP TO THAT TIME, WERE UNKNOWN TO ANYONE AND THE NECESSITY FOR WHICH WAS NOT FORESEEABLE WHEN THE CONTRACT WAS MADE. IT WAS HELD THAT DELAY ON THIS ACCOUNT WAS NOT "UNAVOIDABLE" IN CONTEMPLATION OF LAW AND THE SUPREME COURT OF THE UNITED STATES DENIED REMISSION OF AMOUNTS WITHHELD AS LIQUIDATED DAMAGES FOR SUCH DELAY. CARNEGIE STEEL COMPANY V. UNITED STATES, 240 U.S. 156. THE CONCLUSION REACHED IN THE CITED CASE MUST BE REGARDED AS CONTROLLING IN THE DISPOSITION OF YOUR CLAIM, THERE BEING NOTHING IN THE RECORD TO WARRANT A DISTINCTION IN PRINCIPLE BETWEEN THE TWO CASES.

THE CONTRACT CONSIDERED IN THE CARNEGIE STEEL COMPANY CASE CONTAINED A PROVISION THAT THE CONTRACTOR SHOULD BE GIVEN CREDIT FOR DELAYS DUE TO "UNAVOIDABLE CAUSES, SUCH AS FIRES, STORMS, LABOR STRIKES, ACTIONS OF THE UNITED STATES, AND SO FORTH," BUT THE COURT HELD THAT THE REASONS ASSIGNED FOR THE DELAY DID NOT COME WITHIN ANY OF THE CAUSES ENUMERATED IN THE QUOTED CLAUSE OF THE CONTRACT. IN THE INSTANT MATTER, THE SIMILAR REASONS ASSIGNED FOR EXCUSING THE DELAY ARE EVEN LESS PERSUASIVE THAN IN THAT CASE, SINCE THE CONTRACT INVOLVED HERE CONTAINS NO PROVISION FOR REMISSION OF LIQUIDATED DAMAGES FOR DELAYS DUE TO ANY CAUSES WHATEVER. IT IS SETTLED AND FAMILIAR LAW THAT CONTRACTS ARE TO BE PERFORMED IN ACCORDANCE WITH THEIR TERMS AND SUCH TERMS MAY NOT BE DISPENSED WITH UNLESS THE PARTIES HAVE SO PROVIDED. UNFORESEEN DIFFICULTIES, HOWEVER GREAT, MAY NOT EXCUSE FAILURE TO PERFORM. SEE CASES CITED AND QUOTED FROM IN THE CARNEGIE STEEL COMPANY CASE, SUPRA, AND COLUMBUS RY. POWER AND LIGHT CO. V. COLUMBUS, 249 U.S. 399; DAY V. UNITED STATES, 245 U.S. 159; UNITED STATES V. GLEASON, 175 U.S. 88; DERMOTT V. JONES, 2 WALL. 1. ANY STATEMENT IN THE SETTLEMENT WHICH MIGHT BE REGARDED AS INDICATIVE OF A CONTRARY VIEW WAS INADVERTENT, THIS OFFICE HAVING LONG APPLIED THE RULE DEDUCIBLE FROM THE ABOVE-CITED CASES. SEE 18 COMP. GEN. 709; IBID., 503; 17 ID. 466; 11ID. 386, 388; 3ID. 344.

WITH RESPECT TO YOUR SECOND CONTENTION, IT IS ALLEGED THAT THE WIRE FABRIC WAS NOT USED UNTIL DECEMBER 1937, LONG AFTER IT WAS DELIVERED.

WHILE THE FACTS IN THIS REGARD ARE NOT ESTABLISHED BY THE RECORD, A DETERMINATION WITH RESPECT THERETO IS UNNECESSARY, SINCE THE PROVISION FOR LIQUIDATED DAMAGES IS FOR ENFORCEMENT WITHOUT THE NECESSITY OF INQUIRING INTO THE QUESTION OF ACTUAL DAMAGES. SEE 18 COMP. GEN. 709; IBID., 503, CITING FRICK CO. V. RUBEL CORP., 62 F./2D) 765. (C.C.A.2D), HOLDING THAT WHERE A CONTRACT FIXED LIQUIDATED DAMAGES FOR BREACH, THE DISTRICT COURT PROPERLY EXCLUDED AS IMMATERIAL CERTAIN EVIDENCE WHICH HAD BEEN OFFERED TO PROVE THAT THE ACTUAL LOSS CAUSED BY THE BREACH WAS INFINITESIMALLY SMALL AS COMPARED WITH THE STIPULATED LIQUIDATED DAMAGES, AND PROPERLY DIRECTED A VERDICT FOR THE AMOUNT OF LIQUIDATED DAMAGES AGREED UPON IN THE CONTRACT, IRRESPECTIVE OF THE AMOUNT OF ACTUAL DAMAGES.

IN VIEW OF THE PRINCIPLES ESTABLISHED BY THE ABOVE-CITED CASES, THE MATTERS PRESENTED IN YOUR LETTER AFFORD NO JUSTIFICATION FOR REMISSION OF ANY PART OF THE AMOUNT DEDUCTED AS LIQUIDATED DAMAGES.