In this appeal the Government has again advanced the argument that the contract as modified is not binding on the Government because, it says, the contracting officer: “*** exceeded the authority vested in him to make an adjustment that is 'equitable' resulting in an unauthorized and unlawful waiver of the Government's vested right (under the Changes article) to savings effected by the deviation." In disposing of a somewhat similar argument advanced in the appeal of Liberty Coat Company, ASBCA Nos. 4119, 4138, and 4139 (1957), we stated: "The Government seeks to distinguish these cases from our prior holdings on the ground that in their determination the Board did not consider its present argument that the original contracting officer acted 'outside the bounds of his authority' in agreeing to allegedly grossly inadequate price adjustments. Under the terms of the Standard 'Changes' article of these contracts, and procurement regulations, the contracting officer had clear authority to make changes in the specifications of the contracts. Upon doing to he was specifically charged with the responsibility of determining whether the change caused ‘an increase or decrease in the cost of *** this contract* * *,' and, upon such a determination, the clause continues, 'an equitable adjustment shall be made in the contract price *** and the contract shall be modified in writing accordingly.' The Government's argument, reduced to its lowest common denominator, is that while the contracting officer had authority to make a good bargain, he had no authority to make a bad one. We are unable to accept such an argument. It confuses the contracting officer's authority to act with the judgment displayed by him in performing the act. It seeks to measure authority by the results obtained upon its exercise. Counsel has not cited, and we have been unable to find, any cases supporting this method of measuring authority. Were the argument valid, there would be no need for excess profits tax acts and renegotiation statutes. The fact that federal legislators found such statutes necessary to protect the public interest is persuasive evidence that the argument is unsound. The action of the original contracting officer on these deviations was within the scope of his authority and binding upon the Government." The Government now invites our attention to decisions of the Comptroller General found at 18 Comp. Gen. 114, rendered on 2 August 1938, and in Ms. Comp. Gen. B-133890, 20 December 1957. In these decisions the Comptroller General held that certain contract modifications entered into by a contracting officer were not binding on the Government. Although both contain broad statements concerning the authority of contracting officers, we think it clear that the real basis for decision in each instance are facts which establish the existence of one of the bases recognized by law for the avoidance of a contract, i.e., fraud and its equivalents, collusion, or mutual mistake. These decisions are distinguishable from the case now before us on their facts. The Government has also invited our attention to some statements appearing in decisions of the courts which, until analyzed, appear to lend support to the position contended for. As we read these decisions, the statements are dicta of the most dangerous type-generalizations which are broader than the facts of the cases said to support them. Such generalizations are subject to many unexpressed exceptions and are a trap for the mentally unwary. In many of the cases cited it was held that a contract was not binding on the Government because an agent of the Government exceeded the authority vested in him. However, none holds that a contracting officer duly designated as such exceeds his authority in making, pursuant to a contract clause providing for such action, an "equitable adjustment" which, in the opinion of his successor or of some other reviewing official of the Government, is "inequitable," or that such an act constitutes a “waiver" of any "vested right" of the Government, or that the Government may avoid a contract for either reason, alone or in recognizable combination. We confess to some difficulty in following the reasoning advanced by the Government as quoted above. Having considered the several facets of this argumentative gem, we find them, despite much polishing, untenable both in logic and in law. The Government may, under some circumstances, avoid contract modifications entered into by its contracting officers effecting equitable adjustments in contract price. But the basis for avoidance is not that the contracting officer "exceeded his authority" in agreeing to a sum later determined “inequitable," but facts which bring the case within recognized rules of law and equity for the avoidance of contracts. This the Government has failed to show. Appellant's motion is granted. The appeal is sustained. NOTES 1. The Comptroller General has refused to recognize the validity of supplemental agreements where the Government did not receive "adequate" consideration. 18 Comp. Gen. 114 (1938). The reasoning seems to be that officers or agents of the Government "are without authority to waive or surrender gratuitously any vested right or interest acquired by the United States under contract, or otherwise." 35 Comp. Gen. 230, 232 (1955). Accord: 35 Comp. Gen. 56 (1955); 22 Comp. Gen. 260 (1942); Reid Murdoch, ASBCA No. 1523 (4 Nov. 1953). The emphasis on valuable as opposed to sufficient consideration deviates from generally accepted contract law. See Restatement, Contracts § 81; 1 Corbin, Contracts § 127 (1952). In United States v. Lennox Metal Mfg. Co., 225 F.2d 302 (2d Cir. 1955), adequate consideration was found where the contractor agreed to reduce the contract price by 1% in exchange for the Government's promise to make partial payments. But see United States v. American Trading Co., 138 F. Supp. 536 (N.D. Cal. 1956) (contractor bound by modification where consideration only "sufficient”). Did the Government receive "adequate" consideration in Circle Clothing? 2. Where a supplemental agreement effects a substantial modification of an existing contract it may conflict with the statutes requiring formal advertising. In Schneider v. United States, 19 Ct. Cl. 547 (1884), a construction contract was modified by substituting marble for sandstone, thus increasing the price by $85,000. The court held that the modification should have been formally advertised since it provided for additional work of considerable magnitude. See also, 39 Comp. Gen. 566 (1960), where the advertising requirement was applied to an amendment requiring additional facilities that were not an inseparable part of the original contract and enlarged its scope. The amendment, however, did not affect the cost limitation on the project. CHAPTER IV THE TERMINATION OF GOVERNMENT CONTRACTS Section 1. FOR DEFAULT OF THE CONTRACTOR NATIONAL RAG & WASTE COMPANY v. UNITED STATES 237 F.2d 846 (5th Cir. 1956) JOHN R. BROWN, Circuit Judge. Acknowledging with a candor that is almost beguiling that successful defense to an admitted total breach of a Government supply contract rests wholly upon the extreme technicality of an asserted failure to give written notice of default, the Contractor appeals from adverse jury verdict and judgment. By this approach, premised on the fact that, "*** When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals," *** an attitude which receives hospitable reception as we attempt to put Sovereign and citizen on substantial parity in litigation ***; the Contractor then insists that since the contractor fails against the Government for want of literal, albeit technical, tee crossing, eye dotting, compliance with the contract terms, *** equality of sauce for goose and gander compels a denial of recovery to the Government where it has failed in similar literal, punctilious ***. compliance Whether these principles present a conflict of policy and whether, as claimed, Conti v. United States, 1 Cir., 158 F.2d 581, stands alone as an unpersuasive exception, we need not determine. For in our view, there was compliance and the notice was timely and adequate. The two contracts, effective June 1, required delivery by July 31, 1950 of a specified quantity of wiping rags meeting indicated U.S. Navy specifications. No rags were ever delivered. A quantity was prepared for delivery, but rejected by Naval Inspectors on predelivery inspection about July 3. Attacking, on the trial, the inspection as arbitrary and capricious, the Contractor now acquiesces in the adverse jury verdict finding the inspection fair and the rags unacceptable. |