Rules and regulations for carrying into effect the provisions of this section are published in Treasury Department Circular No. 39, May 20, 1936 (Federal Register, May 29, 1936, p. 575).

Notes of Decisions

In general. By reason of the broad and general terms of this section and in the light of the principle that the sovereign must possess incidental powers necessary to carry general statutes giving general powers into effect, the United States may accept an offer of a railroad company to compromise a claim of the United States against said company in the sum of $204,862.74 for fire trespass, by the payment of $10,000 in cash and the relinquishment of the right of the company to receive from the United States certain lands selected by it in accordance with the terms of a congressional grant. (1933) 37 Op. Atty. Gen. 298.

Authority of Attorney General.-Where liability has been established by a valid judgment, or is certain-i. e., liquidated or

undisputed-and there is no doubt as to the ability of the Government to collect, there is no room for mutual concessions and therefore no basis for compromise under R. S. 3469; but where there is a bona fide dispute as to either a question of fact or of law, and accordingly room for mutual concession, compromise settlement is not precluded, the adequacy of the offer to be determined by the exercise of sound discretion. This should not, however, be understood to curtail the inherent and statutory power of the Attorney General to absolutely dismiss or discontinue suits in which the Government is interested. and, a fortiori, to terminate the same upon terms at any stage by way of compromise or settlement. (1933) 38 Op. Atty. Gen. 94; (1934) 38 Op. Atty. Gen. 98.

724. Priority. Whenever any person indebted to the United States is insoivent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed. R. 8. 3466; 31 U. S. C. 191.

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725. Liability for failure to give priority to the United States.-Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and unpaid. R. S. 3467; 31 U. S. C. 192.

725a. Survival of action to recover damages.-That no civil action to recover damages, brought by the United States or in its behalf, or in which the United States shall be directly or indirectly interested, and pending against any defendant prior to the time of his death, in any court of the United States, shall abate by reason of the death of any such defendant; but any such action shall survive and be enforceable against the estate of any such deceased defendant. This Act shall not be construed to deprive the plaintiff in any such action of any remedy which he may have against a surviving defendant. Act of June 16, 1933 (48 Stat. 311); 28 U. S. C. 780a.

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726. Authority and appropriations.-No executive department or other Government establishment of the United States shall expend, in any one fiscal year, any sum in excess of appropriations made by Congress for that fiscal year, or involve the Government in any contract or other obligation for the future payment of money in excess of such appropriations unless such contract or obligation is authorized by law. R. S. 3679; sec. 3, act Feb. 27, 1906

(34 Stat. 48); 31 U. S. C. 665.

No contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the War and Navy Departments, for clothing, subsistence, forage, fuel, quarters, or transportation, which, however, shall not exceed the necessities of the current year. R. S. 3732; 41 U. S. C. 11.

* Provided, That no contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the War and Navy Departments, for clothing, subsistence, forage, fuel, quarters, transportation, or medical and hospital supplies, which, however, shall not exceed the necessities of the current year. Act of June 12, 1906 (34 Stat. 255); 41 U. S. C. 11.

No contract shall be entered into for the erection, repair, or furnishing of any public building, or for any public improvement which shall bind the Government to pay a larger sum of money than the amount in the Treasury appropriated for the specific purpose. R. S. 3733; 41 U. S. C. 12.

The heads of the executive departments were required to apportion the appropriations for the contingent funds among the bureaus and offices of the departments by act of Aug. 23, 1912, sec. 6, post, 1743.

Restrictions on contracts for the rent of any building in the city of Washington, until an appropriation therefor had been made, were made by a provision of act Mar. 3, 1877, post, 961.

Apportionment of appropriations for contingent expenses in monthly or other allotments, 1731, post.

Appropriations for printing not to be exceeded, limitation on number of reports, etc.. post, 1751a. 1780, 1782.

Notes of Decisions

Southern Surety Co. v. U. S. (1932), 75 Ct. Cl. 47.

Requisites and validity; authority to ex- | binding. ecute. It is axiomatic that Government officials must act within the scope of their authority, and that all persons dealing with them must be held to know the extent of their authority. Alliance Construction Co. v. U. S. (1934), 79 Ct. Cl. 730.

The failure of the Government to comply with statutory requirements relative to public contracts enacted solely for the protection of the Government does not render such contracts void, but only voidable at the Government's option; and only the Government can take advantage of such failure. (1935) 38 Op. Atty. Gen. 328.

Consideration.-Public officers are without authority to make a contract for which the Government receives no benefit or consideration. Vulcanite Cement Co. V. U. S. (1932), 74 Ct. Cl. 693.

Congress may by statute require Government contracts to contain provisions governing the wages to be paid by the contractors, and for the determination of facts relating thereto by a specified Government official; and whether or not such provisions be actually contained in the contract as written and executed, they become a part of it by virtue of the statute itself. Alliance Construction Co. v. U. S. (1934), 79 Ct. Cl. 730.

Rights and liabilities of Government.When the United States, with constitutional authority, makes contracts, it has rights and incurs liabilities similar to those of individuals who are parties to such instruments. Banister v. Lollis (S. C., 1937), 190 S. E. 511.

Contingent fees.-Contingent fee Bids. Where the United Shipbuilding and contracts are valid where not in contraven- Dry Dock Corporation, a subsidiary of United tion of public policy and are condemned only Dry Docks, Incorporated, received an award where attorney has taken advantage of client's through competitive bidding to construct two circumstances to exact an unreasonable and torpedo boat destroyers for a specific amount, unconscionable proportion of client's claim and accompanying its bid was a copy of a (Mason's Minn. St. 1927, sec. 9470). Hol- contract between it and the United Dry lister v. Ulvi (Minn., 1937), 271 N. W. 493. Docks, Incorporated, showing the relationForms and provisions.-The pro- ship between the two companies, and an posed contract between the Department of undertaking on the part of the latter comCommerce and the Remington-Rand Company to furnish the shipyards, equipment pany, for the rental of 42 tabulating ma- and labor in case of award, it was Held, That chines at $1,850 per month, the contract although the bid was formally submitted stipulating that said rental is based upon the by the former company only, such bid might understanding that all cards used with the be properly considered the joint bid of the equipment shall be purchased from the lessor two companies, and the award amended to and that if such cards are not purchased make both companies jointly and severally from the lessor the machine rentals shall parties to the formal contract. (1934) 38 be $2,170 per month, is illegal in respect of Op. Atty. Gen. 91. the restriction upon the purchase and use of cards, which is in violation of Sec. 3 of the Clayton Act (38 Stat. 731). The execution of the proposed contract will not impose upon the Department of Commerce any legal obligation to refrain from purchasing cards from other sources, or to pay the increased rental for doing so. (1932), 36 Op. Atty. Gen. 524.

There is no prohibition, express or implied, preventing the head of a department or independent establishment from inserting in contracts for the purchase of supplies such provisions, in addition to those specifically required by statute, as he may deem to be desirable in the interest of the Government or of the public welfare. Such authority must necessarily be included within the discretion vested in him. (1933), 37 Op. Atty. Gen. 199.

A provision in a Government contract that the contractor "will make no claim against the United States by reason of estimates, tests, or representations of any officer or agent of the United States," is valid and

Construction of terms; in general.—(1) It is the duty of the court to give effect, if possible, to every word or phrase of a contract and to avoid a construction that would imply that the parties used meaningless or superfluous words, or that they were ignorant of the meaning of the language employed by them. (2) Courts can not amend or alter the terms of contracts under the guise of construing them. Bethlehem Steel Co. v. U. S. (1932), 75 Ct. Cl. 845.

By parties.-Practical construction of contract by parties to contract is entitled to great weight, where their interpretation is a fair one. U. S. v. I. B. Miller, Inc. (C. C. A., 1936), 81 F. (2d) 8.

Preliminary negotiations.-Where the meaning of a contract is clearly expressed in the formal written instrument, the negotiations leading up to its execution are irrelevant. The written contract merged all previous negotiations, and is presumed, in law, to express the final understanding of the parties. Tiedemann Corp. v. U. S. (1933), 78 Ct. Cl. 16.

It is elementary that prior negotiations, in | might be purchased by it at a reduced price the absence of fraud or mutual mistake, form no part of a written lease unless incorporated therein. Goldstein v. U. S. (1934), 79 Ct. Cl. 477.

Trade customs.-General and universal customs applicable to the trade or business are binding upon buyer and seller unless there is a notice or contractual stipulation that the transaction is without regard to the custom. Vulcanite Cement Co. v. U. S. (1932), 74 Ct. Cl. 693.

Contract price; in general.-Contractor may recover full purchase price of canned goods sold Quartermaster Corps which complied with only standard specified. Wabash Valley Packing Co. v. U. S. (1927), 63 Ct. Cl. 344.

Contractor, required to follow plans, cannot be denied compensation because work in accord with plans does not develop intended results. Dayton-Wright Co. v. U. S. (1928), 64 Ct. Cl. 544.

Where the Government mistakenly contracts for, and the contractor furnishes, certain office equipment, the fact that it was not of the particular character desired, and which the contracting officer thought was being contracted for, does not release the Government from its obligation to accept the equipment and pay the purchase price. Ferris v. U. S. (1933), 77 Ct. Cl. 294.

Advance payments.-Where under a supplemental contract the contractor is advanced a sum of money by the United States for working capital, repayment to be made by deductions from vouchers presented for work done, with interest on balances due, secured by an interest-bearing promissory note, and the principal contract is canceled by the United States before any deliveries are possible thereunder, the note so given is to be considered merely collateral security, and the United States upon settlement is due the principal sum, with interest not on the note, but only on the advancement, computed from the date of the advancement to the date of cancelation of the principal contract. Lutz Co. v. U. S. (1932), 76 Ct. Cl. 405.

to be determined by the parties to the contract and that such rejected cloth should be offered to the Government before it could be disposed of elsewhere, the contractor was not free to sell it to anyone else until the Government had finally refused to take it; and where the Government had not finally refused to take the cloth, but had retained and kept it as its own, and later sold it at a loss as surplus Government property, there can be no recovery by the Government on a counterclaim for such loss. White, Receiver v. U. S.

(1936), 82 Ct. Cl. 218.

Where the plaintiff contracted to furnish coal to the Government the ash content of which was specified at 9 per cent, with reduction in price in case the ash exceeded by more than 2 per cent the specified 9 per cent, the Government was entitled to the specified reduction in price where the ash exceeded over 12 per cent; and it was immaterial that plaintiff prior to the execution of the contract told the Government's officials an error had been made in the bid. Perryman-Burns Coal Co. v. U. S. (1937), 84 Ct. Cl. 567.

Existing contract at lower price.Where airplane radiators were ordered by the Government and supplied by a contractor under a procurement order which provided for a price of $45.00 each, the contractor was entitled to the price specified, notwithstanding there was existing another contract between the Government and the contractor for supplying similar radiators at $39.00 each. Marlin-Rockwell Corp. v. U. S. (1935), 80 Ct. Cl. 394.

Performance after expiration. Acceptance of delivery under an executory contract after the time set therein is a waiver of the time limitation, and the buyer is liable for the agreed price. Kentucky Oxygen-Hydrogen Co. v. U. S. (1932), 75 Ct. Cl. 687.

Variable price. Where a contractor's proposal stating that the amount of his bid for the contract work was based, among other things, upon certain specified Government prices for materials and the then market price of labor was accepted by the Government and made a part of the contract, and the contractor refused to sign the contract until assured that under its provisions he would be entitled to a revision of the contract price in case of an advance in the price of labor, the contract is to be construed as providing for such revision, and also for revision in the case of advance in the price of materials.

Defective performance accepted.Where a Government contract for coal provides for certain contents of moisture, ash, and British thermal units, with deductions from the contract price for unfavorable variation therefrom, such deductions are proper without credit for variations that are favorable. The contract construed and held to authorize deduction for the amount of a permissible variation in addition to any excess Increase in the contract price contemover it, where there was such excess. Pitts-plated by the contract on account of inburgh & Midway Coal Mining Co. v. U. S. (1933), 77 Ct. Cl. 8.

Where the government paid for cloth delivered under a contract which provided that any of the cloth rejected by the Government 136307-40-21

crease in the prices of labor or materials is not limited to the contract period for performance of the contract where there was delay in completion of the contract and the delay was caused both by the contractor and

by the Government. Monks et al., Exrs. v. U. S. (1934), 79 Ct. Cl. 302.

Variance from estimates.-Where a contract for a dredging project, at unit rates, states the yardage estimated as necessary to be dredged to complete the work, but provides that "the United States reserves the right to require the removal of such yardage as will complete the work, be it more or less than the quantity above estimated," the words "more or less" must be given a more extensive meaning than in their ordinary use for denoting slight variations in estimated amounts, and the contract held to require the completion of the project. Morris & Cumings Dredging Co. v. U. S. (1933), 78 Ct. Cl. 511.

Withholding by Government.-A provision in a Government contract that payment of the contract price is to be made upon completion and acceptance of the contract work and upon presentation of satisfactory evidence that all obligations of the contractor against the contract had been paid in full, did not, after completion and acceptance of the work, authorize the withholding of payment by the Government until the contractor should present satisfactory evidence that it had paid all sums due from it to its materialmen; and where payment was being so with held, the contractor is entitled to recover as damages the expense in securing payment incurred by reason of the Government's failure to pay as provided for by the contract. King & Co. v. U. S. (1934), 80 Ct. Cl. 325.

Fraud. The burden of proving fraud in the "Proof, statement, establishment, or allowance of any claim or any part of any claim against the United States" (sec. 172, Judicial Code), is upon the defendant in a suit against the United States. Carroll et al. v. U. S. (1932), 76 Ct. Cl. 103.

Where a subcontractor violates his principal's agreement with the Government by carrying on the operations in such a manner as to work a fraud upon the Government, and the Government officers stop the principal contractor's pay, until the amount due may be ascertained, the contractor is not thereby given a right to cease performing.

The fraud contemplated by section 172, Judicial Code (U. S. C., Title 28, sec. 279) is not fraud in the performance of a contract, but fraud in the prosecution of a claim.

Fraud by a subcontractor, in the performance of a contract, in the absence of knowledge of or approval by the prime contractor or a plaintiff representative of the prime contractor, is not the fraud of such prime contractor or plaintiff. Baird v. U. S. (1933), 76 Ct. Cl. 599.

Upon finding and conclusion that the plaintiff attempted to and did practice a fraud against the United States in the proof and establishment of his claim by changing certain entries in his books of account after

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their introduction in evidence by him in support of the claim, the claim held and adjudged forfeited to the Government under the provisions of section 172 of the Judicial Code; Title 28, section 279, U. S. Code. Blume v. U. S. (1935), 81 Ct. Cl. 210.

Liquidated damages; in general. The rule is now well established that parties to a contract may agree upon liquidated damages, not by way of penalty, but in lieu of actual damages, and whether such is the agreement is to be determined by the intention of the parties as disclosed by the language used. Hickey v. U. S. (1928), 65 Ct. Cl. 729; MacDonald et al. v. U. S. (1932), 74 Ct. Cl. 572.

Where liquidated damages are provided for specified delays, such damages are not to be construed as a penalty merely because it is also provided that delay shall not be charged in case one of the parties certifies it has not been damaged thereby. Id.

Where there is no proof that actual damages have been sustained, and where party claiming damages is equally at fault, and amount of delay caused by either party cannot be ascertained with reasonable accuracy, liquidated damages will not be allowed. U. S. v. United Engineering & Contracting Company, 234 U. S. 236, 242; Wyant v. U. S., 46 Ct. Cl. 205; Monks et al., Exrs. v. U. S., 79 Ct. Cl. 302, 338. Wharton Green & Co., Inc. v. U. S. (1937), 86 Ct. Cl. 100, certiorari denied, 303 U. S. 661.

Change orders.-Where a construction contract authorizes the Government to make changes in the specifications as the work progresses, and change orders issued during the contract period, pursuant thereto, increasing the contract price, stipulate that no change in time for completion is involved, and the orders are accepted, the contractor is not entitled to recover liquidated damages imposed upon him for delay in completion due to work performed under the change orders. Griffiths v. U. S. (1932), 74 Ct. Cl. 245.

Where extra work is performed under an order therefor issued after the fixed date for completion of a contract, a provision in the order that it would involve no extension of time for completion is meaningless, for if enforced it would impose upon the contractor liquidated damages for delay no matter how expeditiously the extra work was performed. (Plack et al. v. United States, 66 Ct. Cl. 641, 651). Sun Shipbuilding Co. v. U. S. (1932), 76 Ct. Cl. 154.

Computation.-A construction contract provided that the work was to be completed within a certain time from the date of receipt of notice from the Government to begin work. The contractor, having signed the contract, was ready to begin work ten days before receipt of said notice: Held, that this period was not within that provided for completion, and could not be used as a basis

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