Petition for Writ of Certiorari — Federal Electric Corp. v. United States

Supreme Court brief1974

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Text

Fepmnat Exeoraro Compoeinion, Petitioner .

sy. v.

Tue Unrrer States

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INDEX

Page

COUN TN ogc in oo havo REA SANSA OR SEROREEAARO 1

POMIIIIIE gh vo kcinka cede a vateaeereenadkasksteans 2

QURSTIONS PRESENTED .... 22s cssscccssesccnnccesense 2

eg: | ne rr. eee 3

SRR ERY OP CE CAE oacc ccc scncanens ccccuanaies 3

REASONS FOR GRANTING THE WRIT ..........00.00ce00. 8

I. The Decision of the Court of Claims Is in Con-

fliet With Decisions of the United States Court

of Appeals for the Second Circuit and Other

Federal Courts as Well as With Its Own Earlier

PRE ery re Fer rT Tee Pr T eT Pee ere 11

II. The Court of Claims Erroneously Considered

Itself Bound by a Decision of This Court Which

Is Inapplicable to This Case on Its Facts ...... 20

Il. The Court of Claims Erred in Holding That the

Government May Issue Reprocurement Orders

Under an Indefinite Quantity Contract for the

Sole Benefit and Account of a Defaulted Govern-

PTT ee ree errr 22

Me rE ey TTT TET CETTE eT CTET 25

PE BE. own c eee kak rak (kk se we Reka habe en la

SE Oe 5b 565s RRs CEES eee l5a

pt rey Cee a rere rer Tarr pry re 16a

pT Peer Peer Teer ye Tere Tr ere Tere 39a

POT Oa FFT i eee ee nn Gere eo

, EE, BIR ILENE SSE

a ra

ii Index Continued

CITATIONS

CASES: Page

Armstrong Metals & Plasties Co. v. United States, Ct.

Cl. No. 239-70, Trial Judge Opinion (Sept. 17,

| Pn repre Tyrer ec Tree rer Tere te 15

Carpenter Steel Co., AECBCA No. 5-65, 65-1 BCA

BOED Ni cikksisncctveussdsekeaenetweneassaeees 18

G. L. Christian & Associates v. United States, 160

Ct. Cl. 1, 312 F.2d 418, rehearing denied, 160 Ct. Cl.

58, 320 F.2d 345, cert. denied, 375 U.S 954 (1968) 12

Cudahy Packing Co. v. United States, 109 Ct. Cl. 833,

75 F. Supp. 239 (1948) ........cccccccccsccccees 18

Everett Plywood & Door Corp. v. United States, 190

Ct. Cl. 80, 419 F.2d 425 (1969) ............000. 10, 15

Federal Pac. Elec. Co., IBCA No. 334, 1964 BCA

TOE vcs nab ndwasds ss 5kbee¥essesabxthostuneaen 1s

Garrity Co., ASBCA No. 12174, 67-2 BCA 7 6586 .... 10

General Elec. Co., IBCA No. 442-6-64, 65-2 BCA [4974 18

Grain Merchants Inc. v. Union Bank, 408 F.2d 209 (7th

ONE: DD aacdecancacdechuscnssasaevesiesenaes 15

Mazur Bros. & Jaffe Fish Co., VACAB No. 512, 65-2

Be EE x ecg Ra ki ek Od bab ue Ueda eeceseeaaues 18

Meeks Transfer Co., ASBCA No. 11419, 68-1 BCA

Serer a rn ener ee 11

Northern Helex Co. v. United States, 197 Ct. Cl. 118,

ef 8 8. er er er 10, 15, 16, 17

Paul v. United States, 371 U.S. 245 (1963) ........... 12

Priebe & Sons, Ine. v. United States, 322 U.S. 407

SEES Rccncencdiccbavnapaned) tapharecauetnaee 13, 19

Reeves Sounderaft Corp., ASBCA Nos. 9030, 9130,

oR OE Se rere re Serer re 18

John Reiner & Co. v. United States, 163 Ct. Cl. 381,

325 F.2d 438 (1963), cert. denied, 377 U.S. 931

(|: Sey eon ree eer errr ree 4

J. %. Simplot Co., ASBCA No. 3952, 59-1 BCA § 2112,

modified on mot. for recon., 59-2 BCA § 2306 .... 18

Harry Thuresson Inc. v. United States, 197 Ct. Cl. 88,

Se Te CORD nn 6 cancun sees esanenkus ses 10, 15

United States v. Carlo Bianchi & Co., 373 U.S. 709

PRE Cdk ccendkupehare PeneeSkvecaceeee vbeweeee 4

Index Continued iil

Page

United States v. First National Bank of Boston, 203

P. Sapp. 298 (D. Muss. 1967) ...... 2.0.60... 15

United States v. Hamden Co-operative Creamery Co.,

185 F. Supp. 541 (E.D. N.Y. 1960) ........¢..... 1S

United States v. Hext, 444 F.2d 804 (Sth Cir. 1971) ..13,15

United States v. National Optical Stores Co., 407 F.2d

759 (7th Cir. 1969)

RM SSUNT ER EL Sao oe ee 15

United States v. Wegematie Corp., 360 F.2d 674 (2d

EE a laa woe orc sae Se tee 10, 14, 15

Whitin Mach. Works v. United States, 175 F.2d 504

Pe SNE ral Men Coun se tA Re 18

Willard, Sutherland & Co. v. United States, 262 U.S.

Se MOE ca ene veek tic wuvwect 9, 11, 12, 13, 20, 21, 22

STATUTES:

Armed Services Proeurement Act of 1947, as amended,

10 U.S.C. § 2304 et seq. (1970) ............. .3, 12, 19

Armed Services Procurement Regulation, §§ 7-103.12,

S-701(a), 8-G02.6, 1-300 ... os. cccus.. .3, 4, 12, 19, 23

Constitution of the United States, Fifth Amendment. .3, 19

Defense Production Act of 1950, as amended and ex-

tended, 50 U.S.C. $$ 2071-73 (1970) ............ 3, 19

Uniform Commercial Code, §¢ 1-207 ........ 3, 9, 10, 11, 13,

14, 15, 18, 19, 22

Wunderlich Act, 4 U.S.C. $$ 321, 322 oe 7

OTHER:

Gusman, Article 2 of the UCC and Government Pro-

curcment;: Selected Areas of Discussion, 9 B.C.And.

CAomn.LaRev. 1 (1967) ccc cece ccnscunncese 14

Traynor, Statutes Revolving in Common-Law Orbits,

17 Cath.U.L.Rev. 401 (1967) .................... 19

SOE H TEAS RE ANY NESTE NG ees

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IN THE

Supreme Court of the United States

OcTroBER TERM, 1973

No.

¥ . . E

FeperaL HLECTRIC Corporation, Petitioner e

THE UNITED STATES

SOONG PIO STS ETS

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF CLAIMS

EYL OE PERS LANE A ROH HT ME RIT

Petitioner, Federal Electrie Corporation, respect-

fully prays that a Writ of Certiorari issue to review

the opinion and judgment of the United States Court

of Claims in this proceeding.

OPINIONS BELOW

The opinion of the Court of Claims, as yet unre-

ported, appears in Appendix A, infra, pages la-14a.

The order of the Court of Claims denying petitioner’s

motion for rehearing, also unreported, appears in

Appendix B, infra, page 15a. The opinion of the Armed

CPR Ls ae? Pied abs r ‘

- Aa rt a Ee Co a le

Services Board of Contract Appeals (‘ASBCA") is

reported at 68-1 BCA © 6854, and appears in Appendix

C, infra, pages 16a-38a.

JURISDICTION

The judgment of the Court of Claims was entered on

January 23, 1974. The Chief Justice extended the time

within which to file a petition for a writ of certiorari

to and ineluding May 23, 1974. This Court’s jurisdic-

tion is invoked under 28 U.S.C. § 1255(1) (1970).

QUESTIONS PRESENTED

1. Whether, contrary to the decision of the Court

of Claims in this case, the Uniform Commercial Code

(“*UCC”’) is the controlling federal law applicable to

disputes under Government contracts in the absence of

otherwise applicable federal statutes or regulations, as

has been held by the Court of Appeals for the Seeoud

Cireuit and other federal courts.

9. Whether the UCC has now superseded previous

judicial decisions as controlling authority in disputes

under Government contracts, when there are no other-

wise applicable federal statutes or regulations.

3. Whether the acquisition by the United States of

goods at unreasonably low prices under a Government

contract which is unenforceable and has been validly

rescinded is a taking of private property without just

compensation, in violation of the Fifth Amendment to

the Constitution.

4. Whether the Court of Claims properly dis-

regarded well-established standards, set forth in appli-

eable statutes and in the decisions of this Court, with

respect to the construction of Government contracts.

®. Whether the Government may place reprocure-

ment orders under an indefinite quantity contrect for

the sole benefit and account of a defaulted Government

contractor, in violation of the Armed Services Procure-

ment Regulation (ASPR) and contrary to the previ-

ous interpretations and agreements of the parties.

STATUTES INVOLVED

The relevant provisions of the Armed Services Pre-

curement Act of 1947, as amended, 10 U.S.C. § 2304

et seq. (1970), as implemented by the Armed Services

Procurement Regulation (ASPR), §§ 7-103.12 (Dis-

putes), 8-701(a) (Termination for Convenience of the

Government), 8-602.6 (Repurchase Against Contrac-

tor’s Account) and 1-309 (Solicitations for Informa-

tional or Planning Purposes) (1965); the Uniform

Commercial Code, § 1-207; the Defense Production Act

of 1950, 50 U.S.C. §§ 2071-73 (1970), as amended and

extended; and the Fifth Amendment to the Constitu-

tion of the United States are set forth in Appendix D,

infra, pages 39a-52a.

STATEMENT OF THE CASE

This case arises out of a contract between petitioner

and the United States Government, acting through the

Department of the Air Force, entered into on Deecem-

ber 17, 1965. The contract called for the production

and purchase of an indefinite quantity of five types of

mobile generator sets of various sizes and e>pacities.

The contract provided that the Government would order

a minimum quantity of 453 generators and reserved

the Government's right to place additional orders for

generators up to a maximum quantity of 3,600 within a

period of 12 months beginning one day after the effee-

tive date of the contract.

ORTON PEP REE

Peer pemaessi ey gemimmmremeyenctan cs

The contract specifically prohibited the Government

from issuing orders for the minimum quantity simul-

taneously with the effective date of the contract. At

the same time, by means of the standard Termination

clause, the Government reserved the right to terminate

the entire contract before issuing orders for the mini-

mum quantity.' In accordance with these provisions,

the order for the ninimum quantity was not placed by

the Air Force contemporaneously with the effective

date of the contract. To the contrary, the order for

the minimu a quantity was net issued by the Air Force

until three days after the effective late of the contract.

The contract also contained a Disputes clause of the

type normally found in Government supply contracts.°

This clause required petitioner to continue perform-

ance and pursue its administrative remedies under the

contract in the event that a dispute with the Govern-

ment arose during performance.

Some time after petitioner’s acceptance of the first

two delivery orders under the contract, petitioner be-

came aware of certain errors in its proposal for the

contract which resulted in petitioner’s incurring sub-

stantial unanticipated losses on each generator ordered

by the Air Force, Petitioner advised the Air Force

of the errors, and informed the Air Foree that it was

withdrawing its offer to supply any additional genera-

tors, other than those which had already been ordered.

Petitioner contended that the contract was void

1The standard Termination clause is considered in John Reiner

& Co. vy. United States, 163 Ct. Cl. 381, 390, 325 F.2d 4388, 442

(1963), cert. denicd, 377 U.S. 931 (1964).

2 The standard Disputes clause is set forth and considered in

United States v. Carlo Bianchi & Co., 373 U.S. 709, 710 (1963).

“b initio because it did not contain any binding con-

sideration running from the Government to petitioner.

At the time of award, all that the Government prom-

ised was to place orders at some future date; but the

Government also retained the right under the Termina-

tion clause of the contract to rescind or revoke its

promise or to terminate the contract for its convenience

and at its discretion? The Government's promise was

thus illusory, and the contract was one-sided and unen-

forceable.

In accordance with the Disputes clause ot the eon-

tract, petitioner also informed the Air Force on March

29, 1966, that it would continue to manufacture, under

protest, any additional generators ordered by the Air

Force, without prejudice to its right to reeover, in an

appropriate administrative or judicial proceeding, the

reasonable price for the delivery of such generators.

Thereafter, the Air Force placed orders for 2.174 addi-

ticnal generators and made payment to petitioner only

at the erroneously low prices set forth in the contract.

Petitioner thus seeks in this litigation to recover the

difference between the erroneous contract prices and

the reasonable prices for these generators.

Prior to the time that petitioner and the Govern-

ment entered into the contract, the Government, acting

through the same Air Force procuring activity, entered

into a similar contract with another company, Bogue

Electric Company (‘*Bogue’’), for substantially simi-

lar generators, The Bogue contract was terminated

for default on November 19, 1965, approximately one

mouth prior to the exeeution of the contract between

petitioner and the Government. On January 31, 1966,

% Supra, note 1,

———

}é

after the execution of the contract with petitioner, the

Air Force issued a ‘*Request for Proposal’? to repro-

cure a quantity of generators ‘tfor the acconut’? of

Bogue. This reprocurement was in accordance with

the provisions of the Default clause in the contract be-

tween Bogue and the Air Force. Pursuant to that

clause, Bogue was liable for the difference between

the unit price set forth in its contract and the unit

price at which the Air Force reprocured the defaulted

generators.

Four proposals were received by the Air Force in

response to the Bogue reprocurement request, including

one from petitioner. Petitioner's proposed prices were

the lowest among the four offerors. Tlowever, peti-

tioner’s proposed prices were substantially higher than

the erroneous prices set forth in the contract between

petitioner and the Government.

At the invitation of the Air Foree, negotiations were

entered into by petitioner and the Air Force under the

Bogue reprocurement request. During the negotia-

tions, the Air Force offered petitioner additional con-

sideration to permit the Government to reprocure the

defaulted Bogue units under petitioner’s contract, and

so stipulated before the Armed Services Board of Con-

tract Appeals (ASBCA). However, petitioner refused

this offer. An agreement was subsequently reached on

prices and other terms under the Bogue reprocurement

request, subject to availabliity of funds and approval

of higher authority. The prices agreed upon were com-

parable to those which petitioner had quoted in its

original response to the reprocurement request and,

significantly, were as much as $2,700 per unit higher

than the erroneous prices set forth in the basie contract

with petitioner. The Government stipulated before the

ASBCA that these higher prices were “fair and reason-

able.”

Some time after March 1966, the Air Force reversed

its position, abandoned the Bogue reprocurement re-

quest, and determined to reprocure the defaulted Bog: »

units under petitioner's contract at the erroneous prices

set forth in that contract. On April 15 and June 13,

1966, the Air Force issued delivery orders under the

contract to reprocure 753 units for the aceount of

Bogue. Alternatively, petitioner thus seeks in this

litigation to recover the difference between the ervone-

ous prices set forth in the contract and the reasonable

prices for the generator reprocured by the Air Force

for Bogue’s account.

Petitioner sought to recover the difference between

the erroneous prices and its actual costs through admin-

istrative procedures provided for in the Disputes clause

of its contract with the Government. In an opinion

rendered on January 26, 1968, the Armed Serviecs

Board of Contract Appeals denied petitioner's claims

under the contract. The Board held that the contract

was legally enforceable as to all orders issued there-

under and at the prices set forth therein. The Board

further held that the requirement in ASPR § 8-602.6(2)

that the contracting officer reprocure defaulted units at

“as reasonable a price as practicable’? means at the

“lowest practicable price,” and that the Air Force was

only ‘testing the market’ when it issued the Bogue

reprocurement request. (68-1 BCA at 31, 598; Appen-

dix C, page 36a).

On January 21, 1973, petitioner appealed the ASBCA

decision to the United States Court of Claims. The

appeal sought review of the ASBCA decision pursuant

to the Wunderlich Act, 41 U.S.C, §§ 321, 322 (1970).

MEINE Bree one ye

Petitioner contended that the Government breached the

contract by its insistence upon petitioner’s continued

performance at the erroneous prices set forth in the con-

tract and by its demand that petitioner fill orders for the

account of another contractor. Finally, petitioner con-

tended that the Government's actions under the con-

tract constituted a taking of petitioner’s property with-

out just compensation within the meaning of the Fifth

Amendment to the Constitution.

On October 25, 1973, the Court of Claims granted

the Government’s cross-motion for summary judgment

and dismissed petitioner’s appeal. With respect to

the enforceability of the contract, the court adopted

the result reached by the ASBCA, but declined to follow

its reasoning. Although the court recognized that

recent federal court decisions have applied the provi-

sions of the UCC to disputes arising under Govern-

ment contracts, it refused in this case to apply those

provisions. The court substantially followed the rea-

soning of the Board with respect to the Bogue repro-

envement issue. It did not reach petitioner’s conten-

tions under the Fifth Amendment.

REASONS FOR GRANTING THE WRIT

This case raises issues of substaigial and compelling

national importance to the law applicable to disputes

under Government contracts. It presents to this Court

for the first time the basie question of whether the Uni-

form Commercial Code, which has been adopted by 49

states and by Congress for the District of Columbia, is

the prevailing ‘* federal common law’ applicable to dis-

putes under Government contracts in the absence of

otherwise applicable federal statutes and regulations.

As we show below, the decisions of the lower federal

courts are directly in conflict with respect to this mat-

ter. In addition, this case presents the question of

whether the Court of Claims may properly disregard

well-settled principles, set forth in applicable statutes

and in the decisions of this Court, with respect to the

construction of Government contracts. The prompt

resolution of these Guestions by this Court is a matter

of genuine importance for the fair and orderly adminis-

tration of Government contracts.

The uncertainty and confusion regarding the proper

status of the UCC in disputes arising under Govern-

ment contracts are the result of a decision rendered by

this Court more than 50 years ago. The Court of Claims

stated in this case that, although it “might find per-

suasive the contemporary view of performance under

protest as restated in Section 1-207 of the Uniform

Commercial Code... , we hesitate to extend this view

in the face of a clear, contrary rule established and

affirmed, albeit a half century ago, by the Supreme

Court."" (Appendix A, page 9a) The ‘contrary

rule” to which the court referred as governing

authority is the decision of this Court in Willard,

Sutherland & Cov. United States, 262 U.S, 489 (1923).

On the basis of Willard Sutherland, the Court of

Claims held that petitioner's contract was valid to the

extent that petitioner performed thereunder, although

the contract contained a Disputes clause and peti-

tioner’s performance was under protest.

In electing to follow what Judge Nichols, concurring,

described as “elderly”? decisions of this Court, and dis-

* UCC $ 1-207 provides: ‘A party who with explicit reservation

of rights performs or promises performance or assents to perform-

ance in a manner demanded or offered by the other party does not

thereby prejudice the rights reserved ... .”’

AC yee ces om

Oo ead neat)

MME AEROS SNORE UBL DENI

wy ro 4 ih #

regarding the currently prevailing view of perform-

ance under protest as set forth in the UCC, the Court of

Claims ignored the recent trend of its own decisions.

Those decisions have consistently recognized the UCC

as a principal source of the federal common law for

purposes of Government contracts. See Northern IHeler

Co. vy. United States, 197 Ct. Cl. 118, 455 F.2d 546

(1972); Harry Thuresson, Ine. vy. United States, 197

Ct. Cl. 88, 453 F.2d 1278 (1972); Everett Plywood &

Door Corp. v. United States, 190 Ct. Cl. 80, 419 F.2d 425

(1969).

Additionally, the decision of the Court of Claims in

this case is directly in confliet with the landmark deci-

sion of the Court of Appeals for the Second Circuit in

United States v. Wegematie Corp., 360 F.2d 674 (2d

Cir. 1966). In an opinion by Chief Judge Friendly, the

Second Cirenit held in Wegematic that the UCC is an

important source of the federal common law regarding

Government contracts. The court emphasized that it

would be a ‘distinct disservice’”’ to disregard the UCC,

as did the Court of Claims here. Jd. at 676.

The conflict between the Court of Claims and the

Second Cireuit regarding the applieability of the UCC

to disputes under Government contracts has already

resulted in substantial uncertainty in the administra-

tion of Government contracts. The confused state of

the law in this area is reflected in decisions of the

administrative boards of contract appeals. Consistent

with Wegematic, some of those decisions recognize the

UCC as the most reliable source for determining the

federal common law applicable to Government con-

tracts. See, e.g., Garrity Co., ASBCA No, 12174, 67-2

BCA 6586. Others, however, like the Court of Claims

in this proceeding, have refused to apply the require-

ments of the UCC. See, eg. Mecks Transfer Co.,

ASBCA No. 11819, 68-1 BCA © 7063. It is important

that this Court act promptly to dispel the confusion and

uncertainty regarding the applicability of the UCC in

disputes arising under Government contracts.

A separate question in this proceeding involves the

Government's reprocuren.. it rights in the event of

default by a Government contractor. The resolution

of this question is also of substantial importance to the

Jaw of Government contracts. The issue in this ease

is whether the Government may ignore the guidelines

set forth by applicable statutes, as implemented by the

Armed Services Procurement Regulation, and by the

decisions of this Court with respect to the constuction

of Government contracts.

I. The Decision of the Court of Claims Is in Conflict with Deci-

sions of the United States Court of Appeals for the Second

Circuit and Other Federal Courts as Well as With Its Own

Earlier Decisions.

The Court of Claims in this ease held that it was

unnecessary ‘for it to resolve the central issue of the

unenforceability ab initio of petitioner’s contract with

the Government, sinee the ‘present ease is governed

hy” the decision of this Court in Willard, Sutherland

d Co. v. United States, supra. ( Appendix A, page 7a).

The court held that under the Willard, Sutherland

rule, petitioner was bound to the erroneous contract

price for all of the generators which it delivered, re-

gardless of whether its performance was under protest.

The Court of Claims stated:

Though we might find persuasive the eontem-

porary view of performance under protest as re-

stated in Section 1-207 of the Uniform Commercial

“oh Petar oh FRM MALCR RAAT IUR UG oe

Bivse

Code and accepted by the court under the special

circumstances of the Northern Hele case, we hesi-

tate to extend this view in the face of a clear, eon-

trary rule established and affirmed, albeit a half

century ago, by the Supreme Court. We are re-

minded in this connection of the Court’s recent

expression of ‘‘difficulty in comprehending how

decisions by lower courts can ever undermine the

authority of a decision of [the Supreme] Court.”’

United States vy. Mason, 412 U.S. 391 (1973).

What the Court of Claims referred to as the ‘con-

temporary view”? of performance under protest is

embodied in Section 1-207 of the Uniform Commercial

Code. The Section provides that a party, such as peti-

tioner, which performs ‘*with explicit reservation of

rights . . . does not thereby prejudice the rights re-

served ....°’ Although there is no specifically appli-

‘able provision in the Armed Services Procurement

Regulation,’ the contractual requiremeit of continued

performance, contained in the standard Disputes

clause, obviously indicates that such performance will

not take place at the expense of the eontractor’s specifi-

cally reserved legal rights.

As shown in Section II of this petition, Willard,

Sutherland is inapplicable to this case on its facts be-

>The Armed Services Procurement Act of 1947, as amended,

10 U.S.C. § 2304 ef seq. (1970), is the organie statute autho izing

the Department of Defense to issue procurement regulations.

These regulations are known collectively as the Armed Services

Procurement Regulation (ASPR) and are codified in Title 32 of

the Code of Federal Regulations. This Court has held that the pro-

visions of ASPR have the full force and effect of law. Paul vy.

United States, 371 U.S. 245, 255 (1963). See G. L. Christian and

Associates v. United States, 160 Ct. Cl. 1, 312 F.2d 418, rehearing

denicd, 160 Ct. Cl. 58, 320 F.2d 345, cert. denied, 375 U.S. 954

(1963).

ee a ee

‘ause of the presence of a modern Disputes clause in

petitioner’s contract and because of the valid rescis-

sion of petitioner’s contract. However, it is important

to note at this point that, regardless of Willard, Suther-

land, the refusal of the Court of Claims to apply the

UCC in this case directly confliets with prior decisions

of that court and with decisions of the United States

Court of Appeals for the Second Circuit and other

federal courts. It also conflicts with the reasoning of

this Court in Priche & Sons, Inc. vy. United States, 322

U.S. 407, 411 (1947).°

Tn 1947, this Court stated in Priebe that:

It is customary, where Congress has not adopted

a different standard, to apply to the construction of

Government coutracts the princi ples of general

contract law, United States vy. Standard Rice Co.,

323 U.S. 106, 111 and cases cited. [ Emphasis

added] :

There can be no question of the dramatie impact of

the Uniform Commercial Code on the “principles of

general contract law.’’ The Code has been adopted by

49 states and by Congress for the District of Columbia.

Sce United States vy. Hext, 444 F.2d 804, 811 (5th Cir.

1971). A review of the Court of Claims and other fed-

eral court decisions rendered since the publication of

* Judge Nichols, concurring in the Court of Claims decision in

this proceeding, suggested that the court should not have departed

from the reasoning of the ASBCA.

One beauty (among many) of the Board’s opinion is that it

avoids the Scylla and Charybdis between which this court, on

its chosen course, must pass: that is, either we must ignore

what we call ‘‘the contemporary view of performance under

protest’’ or we must presumptuously overrule some elderly

Supreme Court decisions. (Appendix A, page 13a).

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the UCC, as well as the decisions of the Government

boards of contract appea!s, indicates that application

of the Code to disputes under Government contracts in

the absence of otherwise applicable statutes or regula

tions is the ru/e and not the exception. Accordingly,

the decision of the Court of Claims in this proceeding

is contrary to che prevailing law.

It is a matter of genuine importance that the proper

funetion of the UCC in Government contracts disputes

be expeditious!y resolved. As one commentator has

emphasized, the **wniform application of an inde-

pendent federal common law’ is essential to protect

federal contracts from the multiplicity of litigation

which inevitably results from confusion with respect to

the applicable law. Gusman, Article 2 of the UCC and

Government Procurement: Selected Areas of Discus-

sion, 9 B.C.Ind. & Com.L.Rev. 1,3 (1967).

The landmark case in this field is United States v.

Wegematie Cor p., 269 F.2d 674 (2d Cir. 1966), an action

by the United States seeking damages for delay

under a Government computer contract. Chief Judge

Friendly stated for the Second Circuit :

We find persuasive the defendant’s suggestion

of looking to the Uniform Commercial Code as a

souree for the ‘‘federal’’ law of sales. The Code

has been adopted by Congress for the District of

Columbia, 77 Stat. 630 (1963), has been enacted in

over forty states and is thus well on its way to be-

coming a truly national law of commerce, which, as

Judge L. Hand said of the Negotiable Instruments

Law, is ‘‘more complete and more certain, than

any other which ean coneeivably be drawn from

those sources of ‘general law’ to which we were

accustomed to resort in the days of Swift v.

Tyson.”’ New York, N.H. & H.R. Co. v. Recon-

struction Finance Corp., 180 F.2d 241, 244 (2 Cir.

SY EL LES NIMS B OIL a ln

1950). When the states have gone so far in achiev-

ing the desirable goal of a uniform law yoverning

commercial transactions, it would be a distinct dis-

service lo insist ona differcut one for the segment

of commerce, important but still small in relation

to the total, consisting of transactions with the

United States. [360 F.2d at 676; emphasis added. ]

Contrary to its position before the Court of Claims,

the Government has frequently acknowledged the appli-

cability of the U.C.C, to federal contracts. Wegematic

has substential progency; and no contrary authority

among the circuit courts of appeals exists. See United

States vy. Heat, supra, 444 F.2d at 809-811 (5th Cir.):

Grain Merchanis, Liev. Union Bak, 408 F.2d 209, 218

(7th Cir. 1969), United States v. National Optical

Stores Co., 407 F.2d 759, 761 n. 3 (7th Cir. 1969) ;

(United States vy. First National Bank of Boston, 203

F.Supp. 298, 300 (D. Mass. 1967) (per Judge

Wyzanski).

Similarly, the Court of Claims accepted and relied

upon the U.C.C. in Everett Plywood &: Door Corp. V.

United States, supra, 190 Ct. Cl. at 89-90, 419 F.2d at

450, where the court quoted with approval the language

of Chief Judge Friendly in Wegematie. In Harry

Phuresson, Tuc. ¥. United States, supra, the court also

found support for its decision in the U.C.C., which, as

it acknowledged, “we have applicd in the past.”” (197

Ct. Cl. at 97, 453 F.2d at 1282; emphasis added), See

also Armstrong Metals & Plastics Co. y. United States,

No, 239-70, Trial Judge Opinion (Sept. 17, 1973).

In Northern Helex Co., supra, to which the Court of

Claims referred in its opinion, the eourt adhered to the

“more modern position’? of the UCC and lauded the

“fairness of following the modern UCC rule.” which

SFO RLS SS

Bear Risic tect iteass

permits continued performance under protest after a

breach of contract by the Government. The very sane

UCC provision which was at issue in Northern IHeler

is also at issue, here, and was distinguished, erroneously,

by the Court of Claims. In Northern Heler, the court

stated as follows:

We reject the contractor’s point that in fact

defendant consented to continued performance,

but adhere to the more modern position of the Uni-

form Commercial Code, in its Section 1-207, that

the opponent’s assent is not au prerequisite. ‘As

always, the federal contract law we apply should

take account of the best in modern decision and

diseussion.’’ Pabloe Co, v. United States, 161 Ct.

Cl. 369, 377 (1963). This court has explicitly recog-

nized the authority and relevance of the Uniform

Commercial Code in the field of public contracts.

Everett Plywood & Door Corp. v. United States,

[supra] ..., as has the Second Cireuit, United

States v. Wegematic Corp., [supra] .... See,

also, Harry Thuresson, Inc. v. United States,

[supra] ....

We are convinced of the fairness of following

the modern UCC rule in this case because of the

harshness of a contrary result on our special facts,

where cessation of production was commercially

impossible and avoidanee of waste most desirable.

As Wiliston explains the rationale behind the

strict doctrine of election of remedies (Williston,

Contracts, supra, sec, 684), that theory has little

impact here. He says: ‘*The law simply does not,

under the circumstances, permit a party to exercise

two alternative or inconsistent rights or remedies.”’

In this instance, continued delivery was not an in-

consistent, voluntarily chosen, course of action, but

an indispensable route which was the only practi-

eable one. [197 Ct. Cl. at 130, 455 F.2d at 553-554 ;

emphasis added.]

FOES VD iOS EA dene C sn Eh OO ONL Ae a : rs EE EN AOE sre eee AWE eceoness

The course of action followed by petitioner in this

cease—namely, performance under protest—was also an

“indispensable route.” Petitioner was required here to

continue performance by virtue of the Disputes clause

In its coutrace and by virtue of directives issued by

the Business and Defense Services Administration

(BDSA) of the Department of Commerce.” There

are civil and criminal penalties in the Defense Pro-

duction Act for the willful violation of such BDSA

directives,”

* The BDSA, now renamed the Bureau of Domestic Commeree

(BDC), under the authority of the Defense Production Act of

1990, 50 U.S.C. $$ 2071-73 (1970). as amended and extended, op-

erates the Defense Materials System (DMS). That system con-

sists of a body of regulations, orders and procedures desizied to

channel the flow of materials and products to the nation’s vital

military defense, atomic energy, Space, construction and research

and development programs, by seiting priorities for the purchase

and supply of materials by and to Government prime contractors

and subcontractors at every tier,

*The Court of Claims also erred in attempting to distingnish

this ease from Northern Heler on the grounds of the alleged

“special circumstances’? in Northern Heler. “Special” cireum-

stances are also present here, Additionally, the court failed to

point out that Northern Melos vested, “equally.” on the significant

facts that the contractor in that ease had made an express reserva-

tion of its rights (197 Ct. Cl. at 128-29, 455 F.2d at 552-53); and

that the ‘Government was not hurt and it did not change its

position.”’ (197 Ct. CL at 130, 455 F.2d at 554).

Petitioner meets both of the two co-equal eriteria set forth by

the Court of Claims in Northern Telvr. Petitioner can point

both to the ‘particular circumstances’ of this case, ¢.9., the pres-

ence of a modern disputes clanse, the applicability of BDSA diree-

tives carrying civil and criminal penalties, and the Government

requirements for the ordered generators for the Vietoam War;

and to “special facts," eg., petitioner made an express protest and

reservation of its rights, and the Government was not hurt (but

rather, benefitted) by petitioner's continued performance and did

not change its position in reliance thereon,

The boards of contract appeals have also recognized

the applicability of the UCC to the resolution of dis-

putes under Government contracts in the absence of

otherwise applicable statutes and regulations. See Gen-

eral Elec. Co., IBCA No, 442-6-64, 65-2 BCA ‘ 4974

(§ 2-317 cited in support of cumulation of warranties) ;

Mazur Bros. & Jaffe Fish Co., VACAB No, 512, 65-2

BCA £4982 (§§ 2-602(1), 2-606, and 2-607 cited to

show acceptance of supplies); Carpenter Steel Co.,

AECBCA No, 5-65, 65-1 BCA { 4848 (§ 2-202 used to

support admission of prior negotiations) ; Federal Pac.

Elec. Co., IBCA No. 334, 1964 BCA { 4494 (§ 2-317 cited

for cumulation of remedies) ; Reeves Soundcraft Corp.,

ASBCA Nos. 9030, 9130, 1964 BCA { 4817 (§ 2-315 cited

for implied warranty of fitness for particular purpose

and § 2-316(3) to negate warranty ).”

Finally, the commentators have also recognized that

the Uniform Commercial Code applies to the resolu-

tion of disputes under Government contracts in the

absence of otherwise applicable statutes and regula-

tions. For example, retired Chief Justice Traynor of

the California Supreme Court has stated in a ecompre-

hensive article that:

The Uniform Commercial Code has become a

major influence in the development of common law

“In the past, the Uniform Sales Act, which was modified and

supplanted by Article IT of the UCC, was regarded as a source

of principles for use in deciding Government contract cases. See

Whitin Mach. Works vy. United States, 175 F.2d 504 (1st Cir.

1949) ; Cudahy Packing Co. v. United States, 109 Ct. Cl. 883, 75 F.

Supp. 239 (1948); United States v. Hamden Co-operative Cream-

ery Co., 185 F. Supp. 541 (E.D. N.Y. 1960); J. R. Simplot Co.,

ASBCA No, 3952, 59-1 BCA ©2112, modified on mot. for recon.,

59-2 BCA § 2306.

in the federal courts to govern cases involving gov-

ernment contracts and other commereial transac-

tions. Judge Friendly, speaking for the Court of

Appeals for the Second Circuit, has reinforced with

appellate approval the established practice of lower

courts and federal agencies to make use of the

Code as a source of federal! law. He notes that its

widespread enactment put it ‘well on its way to be-

coming a truly national law of commerce” and that

this promise of uniformity would be disserved if

transactions with the government were not subject

to kindred rules. [17 Cath.U.L.Rey. 401, 422-23

(1967) ; footnotes omitted]

In summary, the Court of Claims decision in this

case is in direct conflict with: (1) the deeision of this

Court in Priche vy. United States, supra; (2) prior deci-

sions of the Court of Claims which recognize the

“authority and relevance’ of the Uniform Commercial

Code in the field of public contracts; (3) decisions of

the Second Circuit and other federal courts which have

held the Code applicable to disputes arising under

Governnient contracts; (4) applicable statutes, such as

the Armed Services Procurement Act of 1947, as imple-

mented by the Armed Services Procurement Regula-

tion, which has the full force and effect of statutory

law, and the Defense Production Act of 1950, as imple-

mented by the Department of Conmeree BDSA regula-

tions; and (4) the Fifth Amendment to the Constitu-

tion.

The inconsistencies in the Court of Claims decision,

the conflict between that decision and the decisions of

ether federal courts, and the court’s failure to adhere

fully to this Court’s decision in Pricbe have created sub-

stantial uncertainty and confusion with respect to the

law applicable to Government contract disputes. The

WAR ILO My eer one ate RS MIO GU

Bhekaiceuas Bi Mae

resolution of that uncertainty by this Court is a matter

of urgent national importanee.

Ii. The Court of Claims Erroneously Considered Itself Bound

by a Decision of This Court Which Is Inapplicable to This

Case on Its Facts.

As stated above, the Court of Claims held with

apparent reluctance that it could not reach the question

of the unenforceability ab initio of petitioner’s contract

with the Government because ‘tthe present case is gov-

erned by”? this Court’s decision in Willard, Suther-

land & Co. v. United States, supra. In the absence of

Willard, Sutherland, the court stated that it might have

found persuasive the contemporary view of perform-

ance under protest as set forth in Section 1-207 of the

UCC. (Appendix A, page 9a)

The Court of Claims obviously erred in concluding

that it could not reach the question of the unenforee-

ability of petitioner's contract. Willard, Sutherland is

clearly inapplicable because, unlike the contract here,

the contract in Willard, Sutherland was not impacted

by BDSA directives and did not contain a modern Dis-

putes clause which required performance during the

pendency of a dispute and because in this case peti-

tioner not only registered a ** prior protest’? but, more-

over, effectively terminated and rescinded the contract.

In this case, unlike Willard, Sutherland, no coutract

existed under which the Government could issue any

additional orders.

Willard, Sutherland eoneerned a contract for the

purchase by the Government of an indefinite quantity

of coal, This Court held that there was nething in the

contract which required the Government to take or

limited its demand to any ascertainable quantity, and

accordingly held that ** ... for lack of consideration

and mutuality, the contract was not euforceable.”’ (262

U.S. at 493).

ILowever, the Court held that the contractor in

Willard, Sutherland was bound to the contract price to

the extent that it had performed. It held “to no avail”’

an early protest by the contractor which the Govern-

ment had refused to accept, and concluded that the con-

tractor’s deliveries were *tvoluntary.’’ (262 U.S. at

494).

In contrast, petitioner’s deliveries in this ease were

not *voluntary.”’ Petitioner here acted under the com-

pulsion of BDSA directives and a Disputes clause

which obligated it to comply with any order issued by

the contracting officer, albeit unoer protest. Thus, the

Disputes clause, and the BDSA. directives, which have

the force and effect of statutory law,’ effectively re-

versed Willard, Sutherland with respect to perform-

ance under protest, making the UCC applicable. In

light of the Disputes clause and of the BDSA diree-

tives, petitioner’s performance under protest obviously

was not voluntary, and the claim of aequieseence

asserted successfully by the Government in Willard,

Sutherland is simply irrelevant here.

There is yet another reason why the Willard, Suther-

land decision is inapplicable here. There is no dis-

agreement between the parties with respect to the fact

that the basic contract was unenforceable. The Gov-

ernment has admitted that petitioner could have de-

19 See note 5, supra.

clared the contract cancelled and would not have been

liable for breach.’ Petitioner did, in fact, caneel the

contract by letter to the contracting officer dated March

29, 1966. The Government has thus essentially

admitted that no contract existed between the parties

after March 29, 1966. Since the rule stated in Willard,

Sutherland applies only to an existing contract, that

rule is clearly inapplicable here.

In these circumstances, the Court of Claims plainly

erred in applying Willard, Sutherland and in holding

that the UCC is inapplicable to this case. Unless the

Court of Claims decision is reviewed by this Court, and

guidance provided with respect to the proper applica-

tion of the UCC to Government contracts, the law appli-

cable to such contracts will become inereasingly con-

fused and uncertain. The standard Disputes clause,

which appears in virtualy all Government contracts and

which is the foundation of the system for administrative

resolution of Government contract disputes, will be

undermined. For this reason alone, petitioner urges

that review of this case by this Court is required in the

public interest.

III. The Court of Claims Errec in Holding that the Govern-

ment May Issue Reprocurement Orders Under an In-

definite Quantity Contract for the Sole Benefit and Account

of a Defaulted Government Contractor.

Petitioner contended before the Court of Claims that

the Government’s issuance of reprocurement orders

under petitioner’s contract for the sole benefit and

account of a defaulted Government contractor was in

" Defendant’s Reply to Plaintiff's Response to Defendant’s

Cross-Motion for Summary Judgment, pp. 7-8: Defendant’s Memo-

randum In Response to Plaintiff's Supplemental Statement, p. 2.

23 |

violation of the applicable provisions of the Armed

Services Procurement Regulation, § 8-602.6(a), and

contrary to the previous interpretations and agree-

ments Gf the partics, The court held that it was

unnecessary to even consider whether the Government

Violated the applicable regulations, since the orders

placed by the Government under petitioner’s contract

for Bogue’s account were “subject neither to repro-

curement nor new-contract guidelines.”? (Appendix A,

page 22a) This ruling by the Court of Claims is

erroneous as a matter of fact and law. Additionally, it

places in substantial doubt the integrity of all Govern-

ment indefinite quantity contracts and ignores the

guidelines set forth by this Court with respect to the

standards applicable to the coustruetion of Govern-

ment contracts.

Contrary to the decision of the Court ef Claims, the

actual facts are that the orders in question were

reprocurement orders and so stated on their face.

Orders 4 and G stated as follows:

Note 1: This is a reproenrement of supplies which

were terminated for default under Contract AF

04(606)-12917 [the Bogue contract}.”

Moreover, the applicable law prohibited the place-

ment ef such orders under petitioner’s contract. ASPR

§ 8-602.6(a) requires that contracting officers award

reprecurement contracts at ‘tas reasonable a price as

practicable.” Petitioner argued to the Board that a

fortiori’ the prices set forth in the subject contract were

not “tas reasonable as practicable’? within the meaning

of ASPR, since the prices were based on errors and

"Orders 4 and 6 appeared in the administrative record as Tabs

Cand F in the Rule 4 file (ASBCA No. 11918, Vol. 2).

;

yee ima Sree >

PRIORY RI OER TN &

CORP eh

Phere pero se cece pre aeer erneet or:

mistakes in petitioner’s bid, and since the Government

stipulated before the ASBCA that higher prices than

those set forth in petitioner’s contract were ‘*fair and

reasonable.”’ However, as shown above, the Board held

that ‘tas reasonable a price as practicable’? means ‘the

lowest practicable price.’’ [68-1 BCA at 31,598; Appen-

dix C, page 36a (Emphasis added)]. Petitioner urges

that the Board’s interpretation of ASPR was erroneous

as a matter of law, and that the result reached by the

Court of Claims is patently unfair.

The deficiencies of the result reached by the Court of

Claims are concisely stated in the separate opinion of

Judge Davis:

To sanction what was done here is to permit the

defendant te elect to bail out Bogue at the expense

of FEC—which had, of course, nothing to do with

Bogue’s transgression. The defendant was not

obligated to Bogue to use FEC as the reprocure-

ment vehicle. The ASPR regulation, 32 C.F.R.

§ 8.602-6(a) (1965), calling for reprocurement at

‘fas reasonable a price as practiceal,’’ does not direct

that the reprocurement order must be given to a

low offeror who fiiids out he has bid teo low because

of a mistake. Octagon Process, Inc., ASBCA No.

10371, 65-2 BCA £5168. Similarly, this standard

of Sas reasonable a price as practical’? would not

require reprocurement under plaintiff’s contact

which likewise had set the price too low because of

mistake. On this basis that the Government was

legally free to reprocure elsewhere, J would hold it

overreaching, and not within the parties’ reasou-

able contemplation, to insist on reprocuring under

the FEC contract although it was by then known to

be a loss arrangement. Bogue, not the innocent

plaintiff, should bear that portion of the loss.

[ Emphasis added.

CONCLUSION

For the foregoing reasous, a Writ of Certiorari

should be issued to review the decision of the Court of

Claims.

Respectfully submitted,

GILBERT A. CUNEO

1625 K Street, N.W.

Washington, D. C. 20006

Attorney for Plaintiff

Of Counsel:

(, STANLEY DEES

ILanvey G. SHERZER

SELLERS, CONNER & CUNEO

1625 KK Street, N.W.

Washington, D.C. 20006

“N. J. VIntarosa

Frank X. Prevost

International Telephone &

Telegraph Corporation

320 Park Avenue

New York, New York 10022

PEIN TPM eee

Ree ERR TST a tee see ae RNS

Prayers,

APPENDIX

_————

ore tite venient

APPENDIX A

IN THE UNITED STATES COURT OF CLAIMS

No. 166-72

(Decided October 25, 1973)

Feperat Exectric Corporation v. THE Unitep States

C. Stanley Dees for plaintiff, Gilbert A. Cuneo, attorney

of record for plaintiff. Harvey G. Sherzer, N. J. Villarosa

and Frank X. Prevost, of counsel.

Sheldon J. Wolfe, with whom was Acting Assistant At-

torney General Irving Jaffe, for defendant.

Before Cowen, Chief Judge, Davis, SKELTON, NICHOLS,

Kasurwa, Kuxzic and Bennett, J udges.

ON PLAINTIFF’S MOTION AND DEFENDANT’S CROSS MOTION FOR

SUMMARY JUDGMENT

Keunzic, Judge, delivered the opinion of the court:

Plaintiff Federal Electrie Corporation (FEC) presents

a five-count elaim for relief in this case involving an indefi-

nite quantity contract between FEC and the Government:

Count I requests a Wunderlich Act (41 U.S.C. $§ 321, 322

(1970)) review of an adverse decision by the Armed Serv-

ices Board of Contract Appeals (the Board).

Count I] asserts the Government breached the contract by

insisting plaintiff perform following plaintiff’s purported

revocation.

Count III asserts the Government breached the contract

hy improperly reprocuring under the contract for another

supplier’s account.

———

1 Federal Electrie Corporation, 68-1 BCA { 6834.

tee Ate

~_e

Sieg ako SRR St eh Re RL

Bette

Ba Rie

Count IV alleges a &fth amendment taking of property as

a result of the Government’s action described in count I.

Count V alleges a fifth amendment taking of property as

a result of the Government’s action deseribed in count IIT.

Plaintiff moves for summary judgment on counts |

through III, while the Government cross-moves for sum-

mary judgment on these three counts and moves for sum-

mary judgment on counts IV and V.

We hold that the Board’s conclusion in favor of the Gov-

ernment withstands Wunderlich review (count I). We fur-

ther hold that plaintiff’s arguments gain no greater credence

by casting the dispute in terms of a breach of an implied-in-

fact contract (counts I] and II1). Thus, our legal conelu-

sions in favor of the Government under Wunderlich review

equally dispose of plaintiff’s breach claims. Accordingly,

the Government’s motion for summary judgment on counts

I, If and III should be granted, and the plaintiff’s motion

should be denied.

Having so concluded, it is unnecessary for the court to

discuss plaintiff’s fifth amendment argument (counts 1V

and V). Only if the contract had been held unenforceable or

the reprocurement erroneous would plaintiff possibly have

had an argument that its performance under such condi-

tions constituted a taking without just compensation. Ac-

cordingly, the Government’s motion for summary judgment

on counts IV and V should be granted.

Background

FEC responded to an Air Force Request for Proposal

(RFP) for the production and delivery of five types of

mobile generator sets of varying sizes and capacities. The.

RFP called for an indefinite quantity contract with a mini-

mum of 453 and a maximum of 3600 generators to be or-

dered within a 12-month period.2) On December 17, 1965,

the contract (AF 04(606)-15369) was approved by an

authorized representative of the Secretary of the Air Force.

Thereafter, on December 20, 1965, the Air Foree mailed an

official acceptance of plaintiff’s proposal and at the same

time issued the first delivery order for the minimum quan-

tity. On January 11, 1966, the Air Force issued a second

delivery order for an additional six generators.

Subsequent to receipt of the first two orders, plaintiff

realized that it had made some substantial errors in its re-

sponse to the RFP which were resulting in unanticipated

losses. Plaintiff had anticipated a small loss on the con-

tract, but not to the extent that became apparent once pro-

duction began. After meeting with the appropriate Air

Force ofticials, plaintiff notified the Government by letter

dated March 29, 1966 that it considered the contract unen-

foreesable with respect to all future unordered goods. The

contractor further asserted that its offer to supply the

Government up to 3600 generators constituted a revocable

offer by plaintiff for those units not yet ordered by the

Government. In accordance with this position the contrac-

tor advised the Government as follows:

1. Federal Electrie Corporation hereby withdraws its

offer to supply the unordered generators under Con-

tract AIF 04(606)-15369 at the prices quoted in the

contract.

2. Notwithstanding the above, should the Govern-

ment deem that the offer of Federal Electric Corpora-

“Part XI of the contract reads:

**This contract shall be effective and binding as of the date of ap-

proval thereof by the Secretary or his duly authorized representa-

tive as set forth in General Provision 37. The Government reserves

the right to issue orders against this contract for a period not to

exceed 12 months from the date of approval. For the purposes

of computing the aforementioned 12 month time period on this

contract, the first day of the contract period shall be excluded and

the last day of the contract shall be included.’’

SRR EATEN 8 REAL TET Le IS Erte eee ee ae

tion, as contained in Contract AF 04(606)—15369, is

irrevocable and, as a result thereof determines to place

additional orders for generators, then Federal Electric

Corporation will promptly proceed to manufacture the

unit so ordered under protest and without prejudice to

its rights.

3. Should, as a result of subsequent actions by FEC

and/or the Government, it be determined that FEC’s

position is correct, as defined above, an equitable ad-

justment shall be made in aceordance with the

‘*Changes’’ and/or ‘‘ Extras’’ clauses of the aforemen-

tioned contract.

4. Production under future orders for additional

generators will not be deemed as a waiver of FEC’s

rights to recover the losses it experiences in supplying

the generators because of mistakes made by FEC in

bidding contract AF 04(606)-15369.

5. FEC further asserts that its actions herein are

taken solely for the purpose of protectiag FEC’s legal

rights and that nothing herein should be deemed in any

manner whatsoever as a refusal to perform pending

resolution of the dispute or disputes between the parties

hereto or in any way serve as grounds for terminating

the contractor’s right to proceed.

Subsequent to FEC’s letter of March 29, 1966, the Air

Force issued the following orders:

Order

number Date Quantity

3 SE DRO FG sae e cheats wae keene een 292

+ DG DE AEE oh esa h hi haek eae eee ees 662

5 SE Ge Cc akuds sdeas tanec eusenwene 8

6 Sw SR ring ae easier ar 101

: UE BBO 56 80s via we che beeen 199

8 pe EEE T ETC re ere re 43

9 GEE Ty TOE oo i vcce inch en eexkaens 443

10 EO Bi Be us aac caelakeeece es 426

Plaintiff objected to receipt of each of these and, with the

exception of orders number 9 and 10, individual appeals

were taken from adverse decisions of the contracting officer

regarding plaintiff’s obligation to deliver the items.2 Addi-

tionally, plaintiff objected to orders four and six on the

separate basis that they had been expressly made to cover

generators ordered but never delivered under a different

contract with the Bogue Electric Company (Bogue) and,

therefere, intended to mitigate that defaulting contractor’s

damages. Throughout this period, plaintiff adhered to its

position, as outlined in the March 29, 1966 letter, that it

would continue to perform, but under protest.

Plaintiff’s appeals from the decisions of the contracting

officer were consolidated before the Board. The Board de-

cided for the Government, concluding:

(1) That the FEC contract came into effect on De-

cember 20, 1965, simultaneously with defendant’s plac-

ing of the minimum order and, henee, was enforceable

ab initio. Plaintiff was thus bound to supply all orders

placed under the contract at the prices set forth therein.

(2) The contracting officer was entitled to issue or-

ders under the subject contract to accomplish the re-

procurement for the account of Bogue.

*The following stipulation was submitted by the parties to the

Board:

‘*5. That appellant timely appealed from final decisions uphold-

ing the right of the Government to issue Orders 3 through 8 under

the subject contract. Should the Board determine that appellant

was n't obligated to accept orders under the contract subsequent

to its le.ter of 29 March 1966 (Tab S, Rule 4 Documents for

ASBCA No. 11726, and Tab M for ASBCA No. 11918), a de-

cision by the ASBCA will affect Orders 3 through 10. * * *’’

We will deal with these two issues separately in the sections

which follow.

Enforceability of the Indefinite Quantity Contract

In deciding for the Government with regard to the en-

forceability of the FEC contract, we depart from the

Board’s reasoning.

An indefinite quantity contract provides for the furnish-

ing of an undetermined quantity of supplies or services

during a specified period. The advantages to the Govern-

ment of this type of contract are clearly set forth in the

applicable Armed Services Procurement Regulations

(ASPR):

(i) Flexibility with respect to both quantities and

delivery scheduling;

(ii) Supplies or services need be ordered only after

actual needs have materialized;

(iii) The obligation of the Government is limited;

and

(iv) It permits stocks to be maintained at minimum

levels and allows direct shipment to the user.

32 C.F.R. § 3.409(e)(2) (1965). In order to avoid an attack

upon this type of contract for lack of mutuality of obliga-

tion (7.c., one party to the contract being obligated to per-

form while the other is not‘), the contract must obligate

the Government to order a stated minimum quantity. 32

C.F.R. § 3.409-3(a) (1972). See Willard, Sutherland d& Co.

v. United States, 262 U.S. 489, 493 (1923).

Although the instant contract did provide for a minimum

order of 453 generators, the contractor contends that, since

‘See 1A A. Corpin, Contracts 152 (1950), 1 S. Wituiston,

Contracts 105A (3d ed. 1957) ).

GIRLIE LAC OLO LCE DE? CORE LP BREA. OT we BIBI a VR AEE NO SE i Pater neRe.

the Government did not place the minimum order until three

days after the effective date of the contract, the entire con-

tract is unenforceable ab initio due to lack of mutuality of

obligation.

The Government counters that the contract was enforce-

able because the minimum order was incorporated in or

issued contemporaneously with the execution of the contract,

and that plaintiff was entitled only to compensation pro-

vided for in the contract. In the alternative, the Govern-

ment contends that, if the contract was unenforceabie,

plaintiff is barred from seeking additional relief because

plaintiff performed and an unenforceable contract is en-

forceable to the extent that it is performed.

We deem it unnecessary to resolve the issue of enforee-

ability ab initio since we accept the Government’s alterna-

tive contention. The present case is governed by the

Supreme Court decision of Willard, Sutherland & Co. v.

United States, supra, where the Court held that an indefi-

nite quantity government contract, unenforceable at its

inception due to a lack of mutuality of obligation, became

valid and would be enforced to the extent it was performed.

Td. at 493-94,

This court applied the Willard, Sutherland ruie to hold

enforceable an indefinite quantity contract to the extent that

orders had been placed by the Government under it, without

determining whether or not the contract was valid ab initio.

Tennessee Soap Co. v. United States, 130 Ct. Cl. 154, 158,

126 F. Supp. 439, 441 (1954). This precedent squarely

governs the situation at hand. The required minimum or-

der having been satisfied, FEC’s entitlement to compensa-

tion fur supplying 2633 generator units, including the 2174

supplied following plaintiff’s purported revocation, is gov-

erned by the terms of the subject contract.

Nor is this result affected by the fact FEC continued to

perform after March 29, 1966 under protest. The contrac-

tor in Willard, Sutherland clearly stated that it was ‘‘doing

BPA trie Oe

this [7.e., performing despite the unenforceability of the

contract] under protest which can be straightened out

later.’’ The protest issue was also raised in Larly & Daniel

Co. vy. United States, 271 U.S. 140 (1926), which involved an

indefinite quantity contract to deliver hay. When a dispute

arose over an alleged breach by the Government, the con-

tractor stated:

[W]e want it distinctly understood that we are doing

this under protest and are going to put the matter up to

proper authorities in Washington; and if they rule in

our favor, [we] want settlement at fair market price for

amount we overfill.

271 U.S. at 141. This language is strikingly similar to that

used in FEC’s letter of March 29, 1966. Nevertheless, the

Supreme Court held in Farly & Daniel that the contractor

had the option of delivering or no* delivering. Having

chosen to deliver, even under protest, the Willard. Suther-

land rule applied and the contractor was bound to the con-

tract price to the extent that the contractor performed. Id.

at 142.

In an attempt to avoid the effect of the Willard, Suther-

land rule, plaintiff raises two arguments which we feel are

without merit. First, plaintiff contends that ‘‘under the

contract’’ the Government’s actions constituted a ‘‘change”’

and that the disputes clause compelled continued perform-

ance under protest by plaintiff while pursuing an adminis-

trative adjustment. See Dynamics Corp. of America v.

United States, 182 Ct. Cl. 62, 389 F.2d 424 (1968).

In Dynamics Corp. we held that plaintiff’s performance

under protest in order to comply with its contract’s stand-

ard disputes clause distinguished its situation from the

Willard, Sutherland and Early & Daniel precedents, in

which disputes clauses were not present. No challenge was

made, however, to the enforceability of the indefinite quan-

tity contract in Dynamics Corp.; the dispute involved only

Be MER Pe Pe SACL AAA ot 2 MB BSS PSP AE IE

performance by the contractor subsequent to the termina-

tion of the admittedly valid agreement. In the present case,

on the other hand, FEC seeks first to disavow the existence

of the subject contract and then, by citing the Dynamics

Corp. precedent, to take advantage of the disputes clause

which is a part of that very agreement. We cannot abide

this effort by the plaintiff to ‘‘come up under”’ the same

contract it seeks to have nullified. Plaintiff ‘‘ecan’t have it

both ways.”’

Secondly, under its breach-of-contract theory, plaintiff

contends that the Willard, Sutherland rule has been modi-

fied by recent cases which allow continued performance

despite a pre-existing breach. See, e.g., Northern IHelex

Co. v. United States, 197 Ct. Cl. 118, 455 F. 2d 546 (1972).

Plaintiff’s reliance on Northern Helex is misplaced. Al-

though the court there allowed continued performance with-

out prejudice after a breach had occurred, the court empha-

sized that it takes ‘‘particular cireumstances”’ in ‘‘ specific

cases’? to warrant such action. The special circumstances

of Northern Helex (i.e., the processing and storing of

helium, a valuable national resource, as a by-product of

another chemical process) clearly distinguishes that case

from the instant one.

Though we might find persuasive the contemporary view

of performance under protest as restated in section 1-207 of

the Uniform Commercial Code * and accepted by the court

under the special circumstances of the Northern Helezx case,

we hesitate to extend this view in the face of a clear, con-

trary rule established and affirmed, albeit a half century

ago, by the Supreme Court. We are reminded in this con-

nection of the Court’s recent expression of ‘difficulty in

comprehending how decisions by lower courts can ever

°**A Party who with explicit reservation of rights performs or

promises performance or assents to perform in a manner demanded

or offered by the other party does not thereby prejudice the rights

reserved. * ¢ ©’?

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undermine the authority of a decision of [the Supreme]

Court.’’? United States v. Mason, 412 U.S. 391 (1973).

In summary, we hold that the subject contract was en-

forceable to the extent that it was actually performed.

Ill

The Bogue Reprocurement

Having concluded that the instant contract was enforce-

able to the extent that it was performed irrespective of the

contractor’s protests, it is necessary to discuss plaintiff’s

secondary contention—that the Air Foree was not entitled

to place orders under the contract for the account and

benefit of a defaulted contractor. We find that the Board’s

decision for the Government was correct as a matter of

law.

Prior to the execution of the instant contract, the Air

Force was having difficulties with Bogue, another supplier

of the same generators. A contract with Bogue was termi-

nated for default on November 19, 1965, thus necessitating

a reprocurement to satisfy the requirements of that agree-

ment. Accordingly, the Government on January 31, 1966

issued a reprocurement RFP. FEC responded to this new

RFP. The bid price was substantially higher than the one

which resulted in the FEC December 1965 contract, yet was

still the lowest bid submitted in response to the reprocure-

ment RFP. Rather than issue a new contract, the Govern-

ment on or about February 21, 1966 offered FEC additional

consideration to permit the Government to reprocure the

Bogue units under the original FEC contract. FEC re-

jected this proposal. The Government then decided to

utilize the existing contract to satisfy its reprecurement

needs. Accordingly, the Air Force issued the fourth and

sixth delivery orders under the original contract on April

15, 1966 and June 13, 1966 for 763 units which had been

LET A POE, ARMA TIPE A ww

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ordered but not delivered under the Bogue contract.

Plaintiff delivered these units, as all others in question,

under protest.

FEC contends that the Government was not entitled to

reprocure the Bogue requirements under the instant con-

tract, since it was clear that a substantial loss to FEC would

result from said reprocurement. The grounds for this posi-

tion are first that the Beard erred in interpreting 32 C.F.R.

§ 8.602-6(a) (1965), requiring that the contracting officer

reprocure at ‘‘as reasonable a price as practical,’’ to mean

the ‘‘lowest practical price.’’ Secondly, plaintiff cites the

‘*mistake in bid’’ cases for the proposition that its original

contract was a mistake and thus could not be utilized as the

basis for the reprocurement. See Royal Pioneer Paper Box

Mfg. Co., 69-1 BCA ©7631; Octagon Process, Inc., 65-2

BCA 4 5168.

We deem it unnecessary to reach these difficult questions

in this case because we hold that, as far as FEC was con-

cerned, orders four and six were subject neither to repro-

curement nor new-contract guidelines because they were

merely additional orders under a pre-existing contract.

Admittedly, it appears harsh to place the financial burden

of Bogue’s default upon plaintiff. Nevertheless, by the

terms of the FEC contract the Government was free to

order up to 3600 generators within one year, regardless of

the reason why said generators were needed. As long as

orders four and six did not result in the quantity limita-

tions of the original contract being exceeded and were con-

sistent in all other respects with the specifications of the

contract, there was nothing to prohibit the Government

from placing the orders under the original contract. The

fact that these were reproeurement orders is relevant

only to the Government’s duty to mitigate damages to the

defaulted contractor. In an effort to accomplish this goal,

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the contracting officer is not limited to specific methods of

reprocurement, but rather is given broad discretion. Astro-

Space Laboratorics, luc. v. United States, 200 Ct. Cl. 282,

508, 470 F. 2d 1008, 1017 (1972).

Plaintiff finally contends that the parties’ negotiation for

reprocurement under the FEC contract (but at a higher

consideration) represented a contemporaneous interpreta-

tion by the parties that defendant was not entitled to

accomplish the Bogue reprocurement under the subject

contract according to its original terms, an interpretation

that should be given great weight by the court. See, e.g.,

Dynamics Corp. of America v. United States, supra 182

Ct. Cl. at 73, 389 F. 2d at 430. We reject this assertion

because of its speculative nature. The fact that defendant

initially considered increasing plaintiff’s compensation does

not necessarily mean defendant felt it could not procure

under the original terms of the FEC contract, especially

since defendant ultimately did exactly that. Henee, we do

not feel the alleged contemporaneous interpretation merits

sufficient weight to rebut our decision that the procurement

of 763 generators under the FEC contract was proper.

In light of the foregoing, we conclude that the Board’s

decision withstands Wunderlich review, though we reject

some of the Board’s reasoning in reaching this result. Be-

cause the subject contract is found enforceable to the extent

performed and the Bogue reprocurzment was proper, plain-

tiff’s breach-of-contract arguments are without merit. For

the same reasons, we find it unnecessary to reach plaintiff’s

fifth amendment allegations,

Accordingly, plaintiff’s motion for summary judgment on

counts I, JI and III is denied; defendant’s cross motion for

summary judgment on counts I, II and IIT and its motion

for summary judgment on counts IV and V are granted;

and the petition is dismissed.

13a

Nicuots, Judge, concurring:

I join in the judgment of the court, but I would not reject

the reasoning of the Board, 68-1 BCA § 6834, or any sub-

stantial part thereof. Its handling of the contentions also

made here I find simple, sound, and convincing. One beauty

(among many) of the Board’s opinion is that it avoids the

Seylla and Charybdis between which this court, on its

chosen course, must pass: that is, either we must ignore

what we call ‘‘the contemporary view of performance under

protest’’ or we must presumptuously overrule some elderly

Supreme Court decisions. Sinee we can’t ‘‘undermine”’

their authority, I hope it is true we can’t add to it either.

Davis, Judge, dissenting in part:

I join Parts I and II of the court’s opinion, but on the

Bogue reprocurement (Part ITI) I differ. In my view the

parties did not contemplate, \when they made this contract,

that the Government would ke able to use the agreement as

a vehicle for reprocuring itéms under someone else’s de-

faulted contract, where FEQ would suffer a loss through

such an order (and therefore\objected to it). It seems to

me most unlikely that, if the question had been raised during

the negotiations, FEC would have agreed that it was obli-

gated to fill the order. To do justice, I would construe the

contract, despite its all-embracing language, as not cover-

ing this particular situation.

To sanction what was done here is to permit the defendant

to elect to bail out Bogue at the expense of FEC—which had,

of course, nothing to do with Bogue’s transgression. The

defendant was not obligated to Bogue to use FEC as the

reprocurement vehicle. The ASPR regulation, 32 C.F.R.

§ 8.602-6(a) (1965), calling for reprocurement at ‘‘as rea-

sonable a price as practical,’’? does not direct that the re-

procurement order must be given to a low offeror who finds

out he has bid too low because of a mistake. Octagon

ES See Ne ee ee CN ee ee

l4a

Process, Inc., ASBCA No. 10371, 65-2 BCA 75168. Simi-

larly, this standard of ‘‘as reasonable a price as practical’’

would not require reprocurement under plaintiff’s contract

which likewise had set the price too low because of mistake.

On this basis that the Government was legally free to repro-

cure elsewhere, I would hold it overreaching, and not within

the parties’ reasonable contemplation, to insist on reprocur-

ing under the FEC contract although it was by then known

to be a loss arrangement. Bogue, not the innocent plaintiff,

should bear that portion of the loss.

The rationale of Willard, Sutherland & Co., supra, does

not, in my view, control this aspect of the case because the

two Bogue reprocurement orders were an authorized con-

structive cuange in the original coverage of the contract,

entitling plaintiff to an equitable adjustment. With respect

to a changes claim ‘‘under the contract,’’ the contractor is

required to continue performance, and by doing so does not

forfeit his claim for additional payment. There is no prob-

lem of invalidity on this portion of the case. The de-

fendant affirmatively asserts the full validity of the con-

tract, and the plaintiff assumes it, and must assume it, for

this facet of its claim.

APPENDIX B

IN THE UNITED STATES COURT OF CLAIMS

166-72 Ferperau Evectric Corporation

Tue Unitep Srares

Before Cowen, Chief Judge, Durrex, Senior Judge, Davis,

SKELTON, Nicos, Kasuiwa, Kunzic and Bennett, Judges,

except that Durree, Senior Judge, participated only in No.

250-67 in which Kasuiwa, Judge, took no part.

Order

These cases come before the court on motions for rehear-

ing, to alter judgment, for reconsideration, for oral argu-

ment and for further relief under Rules 151 and 152 of the

Rules of this court and, on consideration thereof,

It Is Orpverep this 23rd day of January, 1974, that said

motions be and the same are denied as follows:

* * * * * * ~ : ~ * *

166-72 Federal Electric Corporation. Plaintiff’s motion for

rehearing pursuant to Rule 151.

By tne Court

Wilson Cowen

Chief Judge

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APPENDIX C

ARMED SERVICES BOARD OF CONTRACT APPEALS

ASBCA Nos. 11726, 11918 and 12161

Appeals of

Federal Electrie Corporation

Under Contract No. AF 04(606)-15369

APPEARANCES FOR THE GOVERNMENT: Colonel David C. Yeo-

man, USAF—Chief Trial Attorney; Leonard F. Rob-

erts, Esq.—Trial Attorney

APPEARANCES FOR THE APPELLANT: Sellers, Conner & Cuneo

by: Gilbert A. Cuneo, Esq.; C. Stanley Dees, Esq. ;

Frank X. Prevost, Esq.

Opinion by Mr. Sobernhesm

This is an appeal from the contracting officer’s denial of

appeliant’s claim for an equitable adjustment in the con-

tract price of generators which appellant delivered to re-

spondent in response to delivery orders (sometimes re-

ferred to herein as ‘‘D. 0.’’) issued ander Contract No. AF

04(606)-15369. Appellant has claimed that the delivery

orders were contract changes or extras unilaterally imposed

on appellant by the contracting officer while the latter took

the view that compliance with these orders was the essenee

_ of appellant’s contractual obligation.

Subsidiarily, appellant has also argued that two of the

delivery orders, issued to procure generators which a de-

faulted contractor under another contract had failed to de-

liver, were invalid. It is urged that delivery orders under

the instant contract could not legally be used to reprocure

such supplies from appellant, when respondent knew that

compliance with the two orders would cause appellant heavy

losses due to the excessively low price mistakenly quoted by

appellant to the Government under the contract.

<p eas OX ATAOAIE AEN OLE 2B OLIPERD LAB ONE A ea IN Ci Ce he

l7a

Both of these issues are now before the Board for resolu-

tion. The parties have agreed that, should appellant pre-

vail, the matter will be sent back to the contracting officer for

ascertainment of the amount due appellant.

STATEMENT OF FACTS

1. The Contract

Contract No. AF 04(606)-15369 was entered into by the

parties as of 20 December 1965 as a result of competitive

negotiations. The Request for Proposals (RFP) leading up

to the execution of the contract called for quotations on the

delivery to the Government of five (5) sizes of generator

sets from 15 to 150 kw, but allowed quoters to limit their

proposals to one or more categories (ASBCA No. 11718, R4

doe. A, Sehed. p. 15). Appellant did not avail itself of this

permissible limitation on its proposal and quoted prices for

all five sizes.

In addition, after the proposals were opened, appellant’s

parent, International Telephone and Telegraph Corpora-

tion, at the request of the procuring activity, agreed to fur-

nish the financial requirements of appellant in connection

with the prospective contract performance in an amount not

to exceed twenty (20) million dollars (id., R4 doe. U). Ths

request was perhaps caused by the fact that appellant’s

unit prices, as disclosed by its pricing breakdowns (Form

DD 6533), indicated either a small loss or minimal profit.

Appellant explained to the Government negotiators that

it was willing to accept this loss, because it desired to obtain

the contract in order to provide work for its new plant at

Richland, Washington, but that it expected to recoup this

loss by future production economies and efficiency either

under this or other contracts (ASBCA No. 11918, R4 doe.

K).

Thereafter appellant Lecame the contractor under Con-

tract No. AF 04(606)-15396.

BEE IAT LD AIMLESS IMCL EI ATER 4 PONG Ma PTE itis BEING Mo, MA NRE ote = OE ALR AP ONE EER ARN RL LOE ie a

18a

The contract contained price and delivery schedules for

furnishing to the Government, on orders to be given there-

after, various quantities of five sizes of generators (15, 30,

60, 100 and 150 kw) with a minimum of 453 and maximum

of 3,600 units. The price for the minimum order, ineluding

packaging and a nominal charge for data, was $2,893,884.00.

and the price for all 3,600 units was $23,114,753.00, exelud-

ing spares which were to be provisioned and priced sepa-

rately. The minimum constituted about 12.5% of the maxi-

mum.

The unit prices for the generators were established on a

sliding seale, the highest price being established for the

quantity in each category designated as the minimum and

decreasing for each quantity up to the hundred nearest the

minimum and for each additional 50 units up to the maxi-

mum. In figuring the applicable bracket, the quantities of

each size of generator furnished by appellant were to be

cumulated.*) The primary item for which unit prices were

established was skid-mounted generators. Prices for wheel-

mounted generator sets were established on similar sliding

scales as an add-on to the basic price. Prices for packaging

were, however, flat unit prices, depending on the packaging

*) As an example, the price schedule for 150 kw generator sets

read as follows:

Unit Price

‘Minimum Quantity 59 $8,823

Subsequent Order Quantities 60-100 8,716

101-150 8,608

151-200 8,500

201-250 8,438

251-300 8,376

301-350 8,314

351-400 8,251”’

The eumulative pricing provision appears on page 16 of the con-

tract schedule (ASBCA No. 11726, R4 doe. A). Under it, if ap-

pellant furnished 100 generators of 150 kw eapacity, 59 would be

priced at $8,823 per unit and 41 at $8,716. <A further 100 gen-

erators of this size would be priced 50 at $8,608 each and 50 at

$8,500 each,

19a

and preservation level and the size and weight of the gen-

erator sets.

The obligation to furnish particular quantities of gen-

erators was to be triggered by delivery orders authorized

to be issued for the period of one year from date of ap-

proval of the contract (ASBCA No. 11726, R4 doc. A, Contr.

Sched. 1 Part XI, p. 21). As to these delivery orders the

contract provided in Part X of the contract schedule (ibid.)

as follows:

‘PART X ORDERS: (JAN 1963)

(a) The Contractor agrees to furnish to the Govern-

ment, when ordered, the supplies or services set forth

in the Schedule up to and including the quantity desig-

nated in the Schedule as the ‘maximum quantity.’ The

Government agrees to order the quantity of such sup-

plies and services designated in the Schedule as the

‘minimum quantity.’ Such supplies or services will be

furnished at the prices set forth in the Schedule.

(b) Delivery Orders for supplies or services shall

be issued by the Contracting Officer in writing, dated,

and numbered. They shall set forth (i) the supplies or

services being ordered, (ii) the quantities to be fur-

nished, (iii) delivery or performance dates, (iv) place

of delivery or performance, and (v) packing and ship-

ping instructions, if any. Amendments to delivery or-

ders may be issued by the Contracting Officer by writ-

ten change order. Each delivery order or change order

which increases the dollar amount, shall contain a cita-

tion of funds from which payment for the supplies or

services ordered shall be made.’’

The contract further included General Provisions for

fixed-price supply contracts with standard changes, extras,

default, convenience termination and disputes clauses.

2. Appellant’s Performance

(a) ASBCA No. 11726

Simultaneously with the contract, the contracting officer

mailed appellant D.O. No. (04-606)66-33747 *) for the mini-

mum quantity of each category of generator sets, totalling

453 units for an amount of $2,907,649. Appellant raised no

question as to this order, furnished the generator sets to

respondent and was apparently paid therefor at the prices

listed in the contract schedule. On 11 January 1966 the con-

tracting officer issued D.O. No. 34018 for 6 generator sets

and again appellant performed the order in accordance with

its terms and presumably was paid the contract price.

Soon after receipt of D.O. No. 34018 appellant apparently

became aware of the fact that its manufacturing costs out-

ran its prices. A meeting was held on 17 and 18 February

1966 at the offices of the Sacramento Air Materiel Area

(SAMA), the procuring actvity, when the appellant ex-

plained its situation. But what transpired in detail was not

spread on the record. On the day after the meeting appel-

lant wrote to SAMA in relevant part as follows:

‘* Current reviews of our proposal for this procurement

have reveaied several significant mistakes in our prep-

aration of costs which are much greater than the poten-

tial risk originally contemplated.* * *

Our identification of the following specific errors is re-

corded for your information and such assistance as you

may be able to furnish to overcome the financial impact

of these errors:

1. We estimated and included costs for only one item

where two were required for

a. Side shutters

b. Batteries

e. Contactors (150 kw units only),

*) D.O’s are hereafter referred to individually only by the last

five or four digits of their serial number.

EOE at Da de

2la

2. Freight costs for materials and components were

not included in the estimate,

3. An error was made in estimating costs of the

over/under voltage monitor,

4. Cosis of the chassis and housings were under-

estimated,

5. We assumed that a 5% reduction in vendor prices

could be obtained whereas, in fact, this has not

been possible because of Government directed

source vendors,

6. While a Plant Manager, a Quality Assurance Su-

pervisor, and 6 Inspectors where shown on the

manning chart, in our proposal, they are not in-

cluded in our cost calculations.

‘*The representatives of the Sacramento Air Materiel

Area have very considerately agreed to assist us in at-

tempting to alleviate the cost impact under Items 3.

and 5. above. ** * We are most appreciative of your

efforts to help us in the areas outlined above and wish

to assure you that we are making an all-out effort to

meet our commitments.’’

Diseussions apparently continued between the parties,

although fruitlessly.

On 253 March 1966 the contracting officer issued D.O. No.

35784 calling for delivery of 292 generator sets of various

sizes for a total price of close to $2,000,000. This order was

assertedly received by appellant on 30 March 1966. How-

ever, on 29 March 1966, appellant had already set forth its

position as to its rights under the contract. (ASBCA No.

11726, R4 doe. 8). It asserted that as to unordered goods the

contract was unenforceable, that its promise to furnish up

to 3,600 generator sets was a revocable offer and that it was

withdrawing its offer to furnish generator sets at the quoted

ee ee SAE EN NO ae

prices. Nevertheless, it offered simultaneously to furnish

generators ordered by the Government under the contract,

and under protest if the Government should deem appel-

lant’s offer irrevocable. It stated that, if the Government’s

position was found erroneous, it would seek a price adjust-

ment under the changes or extras clauses of the contract

and that its fulfillment of future orders for generators

Facdh ae eT ee

a OE well RLS Bae. 8,

i should not be deemed a waiver of its right to recover the

: losses caused by its mistake in bid. It concluded with a state-

4 ment that its letter should not be taken as a refusal to per-

form or as a basis for the termination of the contract.

After receipt of D.O. No. 35784 appellant on 8 April 1966

reiterated its position and requested a final contracting

officer’s decision on the right of the Government to issue

additional orders in view of appellant’s withdrawal of its

allegedly revocable offer. Appellant further advised the

contracting officer that in accordance with its letter of 29

March 1966 it would proceed with filling the order (ASBCA

No. 11726, R4 doe. T). Appellant’s position was rejected by

the contracting officer’s final decision of 31 May 1966 (id.,

R4 doe. U) and appeal ASBCA No. 11726 followed.

(b) ASBCA No. 11918

Thereafter the contracting officer issued D.O.’s as follows:

No. 35775 on 15 April 1966 for 662 units

No. 36567 on 10 May 1966 for 8 units

No. 41205 on 13 June 1966 for 101 units

No. 41206 on 14 June 1966 for 199 units

By letters dated 14 June 1966 (ASBCA No. 11918, R4 doe.

N), 1 August 1966 (id., R4 doc. Q), and 3 August 1966 (id.,

R4 doe. R) appellant protested the issuance of these four

D.0.’s and requested a final decision of the contracting offi-

cer on the Government’s right to proceed. On 19 September

1966 the contracting officer affirmed the Government’s right

to proceed as it had done and Appeal ASBCA No. 11918

23a

followed. This appeal also raises the reprocurement issue,

the facts of which are presented below.

On 17 August 1966 the contracting officer issued D.O. No.

41675 for 483 units, on 7 November 1966 D.O. No. 0061 for

443 units and on 9 December 1966 D.O. No. 0062 for 426

units, all within the one-year period of the contract, bring-

ing the total quantity of generators ordered under appcl-

lant’s contract to 2,633 units.

Appellant protested the issuance of D.O. No. 41675 on 20

October 1966 and on 22 November 1966 the contracting offi-

cer issued a final decision rejecting appellant’s position as

to the unenforceability of the contract (ASBCA No. 12161,

R4 does. U, V). No separate protest appears to have been

filed or final decision rendered as to the validity of the final

two D.O.’s but it has been stipulated by the parties under

date of 15 May 1967 that the Board’s decision in the instant

appeals shall be applicable to the validity of these two or-

ders.

Appellant also protested against the issuance of the last

two D.O.’s to the Comptroller General on grounds not

argued or relevant here. This protest was rejected by him

in his decision No. B-160560, dated 15 September 1967.

3. The Bogue Reprocurement

Prior to the time of the instant procurement respondent

acting through SAMA had entered into Contract No. AF

04(606)-12917 with Bogue Electric Company for similar

generators. This contract was terminated for Bogue’s un-

exeused default on 19 November 1965 somewhat over one

month prior to the execution of appellant’s contract. On 31

January 1966 respondent acting through SAMA issued RFP

No. 66-08334 to reprocure a minimum of 657 and a maximum

of 816 units, the exact quantities to be stated in the contract

to be entered into. The RFP provided further that the pro-

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24a

spective contractor would receive Government-furnished

components valued at $1,178,775.74 wich it was to repair

and utilize in the manufacture of the generators. However,

quoted unit prices were not to take into account the GFP,

which was Bogue’s parts inventory. Instead the price of

each generator set was to be reduced, whenever a GFP

component was incorporated therein, by the value of such

GFP component stated in the RFP.

Four proposals were received by SAMA, appellant’s be-

ing the lowest, though substantially higher than the prices

embodied in Contract No. AF 04(606)-15369. Negotiations

ensued but at an carly date swerved from the straight path

foreshadowed by the IF B. For on or about 21 February

1966 the Government representatives prepared a memoran-

dum pursuant to which the units sought to be procured

under the RFP of 31 January 1966 were to be procured

under appellant’s contract (ASBCA No. 11726, Stip. par. 4;

ASBCA No. 11918, R4 doe. V). This memorandum was not

aecepted by appellant and negotiations continued into

March 1966 when a preliminary agreement was reached on

prices and other terms ‘‘subject to availability of funds and

#pproval by higher authority’? (ASBCA No. 11918, R4 doe.

J; ASBCA No. 11726, Stip. pars. 2, 3). These prices were

comparable to those which appellant had quoted in its re-

sponse to RFP No. 66-08234 and from about $1,000 to $2,700

higher than the prices established by appellant’s contract,

depending on the size of the generators.

However, no contract was ever entered into on the basis

of RFP No. 66-08554 and the negotiations conducted by the

parties thereunder. For the Government reverted to its idea

of February 1966 that these units should be reprocured un-

der appellant’s contract notwithstanding the strong objee-

tions voiced by appellant against this course of action

(ASBCA No. 11918, R4 doe. L (letter dated 18 March

1966)). Accordingly, D.O. Nos. 35775 and 41205, previously

referred to, were issued to effect the reprocurement of 763

eer CRM © Fon ee , LSE EPL LLY ILE MLL i Tbe

25a

units defaulted under the Bogue contract and were so ear-

marked by the contracting officer. Simultaneously with the

issuance of D.O. No, 35775 the parties exeeuted Supple-

mental Agreement No. 1 thereto (ASBCA No. 11726, R4

doe. M) under which appellant agreed to accept the Bogue

inventory and to reduce its unit prices for the generators

ordered under D.O. No. 35775, as contemplated by RFP No.

66-08334. In accepting this agreement appellant reserved its

objections to the issuance of the D.O. except that it with-

drew its argument (ASBCA No. 11918, R4 doe. IL.) that the

contract of the parties did not contemplate an order such as

D.O. No. 55775 “utilizing Government furnished property

equivalent to one-third of the unit price’? (ASBCA No.

11726, R4 doc. M). The second D.O. effecting a reprocure-

ment under the Bogue contract was accepted without a sim-

ilar written note such as Rule 4 document M just referred to.

DECISION

The validity of a contract to manufacture and deliver a

fixed quantity of goods against payment of the purchase

price is well settled. But difficulties arise when, as here, the

quantity of goods to be furnished by the seller to the buyer

is not fixed beyond the ‘‘minimum quantity’’.

At the one end of the spectrum are contracts where the

quantity to be sold is defined in terms of a narrow range

and where the courts have spelled out an obligation of the

seller to furnish the minimum auantity. Feuchtwanger v.

Manitowoc Malting Co., 187 F. 713 (7th Cir. 1911). Simi-

larly, the courts have held that reference to the actual re-

quirements or needs of the buyer over a fixed period of time

sufficiently defines the quantity to be furnished by the seller

to the buyer so as to create a binding agreement. United

States v. Purcell Envelope Co., 249 U.S. 313 (1919) ; Shader

Contractors, Inc., et al. vy. United States, 149 Ct. Cl. 535

(1960); Neil A. Goldwassert d/b/a Century Offset Co.,

Sa |

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26a

ASBCA No. 7027, 61-2 BCA par. 3124;* Bronze Marker

Corp., ASBCA Nos. 5650, 6201, 60-2 BCA par. 2811; Lowell

O. West Lumber Sales Co., ASBCA No. 2560 (1955).

At the other end of the spectrum are those agreements in

which the seller does noi become obligated to furnish any

quantity of goods because the buyer is deemed not to have

obligated itself to purchase any specifie quantity of goods

or, in some instances, services. Cold Blast Transportation

Co. v. Kansas City Bolt & Nut Co., 114 F. 77 (8th Cir. 1902) ;

Meredith v. John Deere Plow Co. of Moline, 89 F. Supp.

787 (S.D. Iowa, 1956), aff’d 185 F.2d 481 (Sth Cir., 1951);

E. 1. DuPont de Nemours & Co. vy. Claiborne-Reno Co., 64

F.2d 224 (8th Cir., 1935). This rule has been applied equally

to Government contracts. Willard, Sutherland d& Co. v.

United States, 262 U.S. 489 (1923) ; Atwater & Co. v. United

States, 262 U.S. 495 (1923); Updike, Trustee v. United

States, 69 Ct. Cl. 394 (1929); Sanz Schooi of Languages,

ASBCA Nos. 9571, 9572, 1964 3CA par. 4257. Ta all of these

cases the obligation of the buye: to purchase any quantity

of goods or services from the selle> was deemed unascer-

tainable either by reference to a minimum quantity (see

Feuchtwanger, supra) or to the buyer’s requirements (see

U.S. vy. Purcell Envelope Co., supra). Sinee the purchaser

need only buy what he may wish or want, the seller did not

become obligated to furnish anything. But once he had ac-

cepted the buyer’s order, he became obligated to furnish at

the contract price the specifie quantity of goods which by

his acceptance of the order he had agreed to deliver. Wil-

lard, Sutherland & Co. vy. United States and Atwater & Co.

v. United States, supra.

In between these two poles is the range of contracts in

which the total quantity of goods to be furnished by the

seller is left indefinite but where the buyer undertakes an

obligation to purchase at the minimum a fixed quantity of

goods. Where this minimum quantity is purely nominal, the

legal obligation of the seller to deliver goods at the contract

* For the sequel see 160 Ct. Cl. 450 (1963).

6 ISOS TM

27a

price is no greater than if such nominal obligation to pur-

chase goods were omitted from the contract terms. The

Tennessee Soap Company v. United States, 130 Ct. Cl. 154,

158 (1954) ; see Neil A. Goldwasser, supra.

Thus Tennessee Soap involved a contract for the purchase

by the Navy of 120,000 pounds, more or less, of soap at

about 8 cents per pound, for the purpose of replenishing

the supply of vessels docking in United States ports. The

minimum purchase to which the Navy had obligated itself

was $10 worth of soap, or about 125 pounds. The plaintiff

argued that it was not bound, because of the $10 minimum

order, to deliver such indefinite amounts from time to time

as the defendant might see fit to order and the court im-

plicitly accepted this argument.

In Goldwasser this Board held that under a contract for

the printing of a monthly newspaper the bargain was for

the printing of the paper, as long as required, and not for a

#100 minimum payment upon which the Government would

he discharged of all further obligations to the contractor

under its contract.

In both of the cited cases it was clear to the Court of

Claims and to this Board that the minimum order was

without business justification or value—a sort of lagniappe

to give the appearance of consideration.

The instant appeal differs sharply on the facts from these

instances. For the minimum quantity, the purchase of which

was ‘‘not optional’? with but obligatory upon respondent

(see International Fermont, Inc., ASBCA No. 9097, 1964

BCA par. 4290) constituted a substantial order in itself

which any manufacturer of generator sets might well desire

to fill, even if standing alone.* ) Respondent’s minimum pur-

*) Appellant argues also that to be valid consideration for any

promise of appellant, the contract itself must embody the order.

However, the regulations cited by appellant by implication leave

the choice of the form of the minimum quantity erder, whether

in the contract or by separate instrument, to the eontracting

officer. International Fermont, supra, upholds the latter form as

sufficient.

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28a

chase involved a substantial quantity of generators in each

of the five sizes from 15 to 150 kw, and overall totalled be-

tween 12 and 13 percent in both quantity and value. Hence,

we must determine to what extent the fact that respondent’s

minimum order under the contract was a substantial pur-

chase of goods, involving an initial contract price of $2,893,-

884.00, affects the applicability of the rule laid down in the

Tennessee Soap decision. Neither party has cited decisions

in which a contract for the delivery of supplies up to a

maximum quantity, when ordered within a limited period of

time, was held unenforceable as to goods as yet unordered,

where, as here, a substantial minimum order for such goods

was required and given by the Government. In Infcernational

Fermont, Inc., supra, and Continental Electronics Corpora-

tion, ASBCA Nos. 8677, 8789, 1964 BCA par. 4287, cited by

respondent, the issue before us here was apparently not

raised and was not discussed by the Board. On the other

hand, Tennessee Soap Company and Sanz, relied on by ap-

pellant, are prima facie distinguishable on their facts, since

neither involves a substantial minimum order.

The basis on which indefinite quantity contracts not in-

volving a substantial minimum order have been held unen-

foreeable as to the delivery of goods not yet ordered has

been lack of ™utuality of obligation. The buyer was not re-

quired to order, hence the seller was not required to deliver.

Willard, Sutherland & Co. v. United States, supra. Mutual-

ity of obligation is required for the formetion of a binding

contract but the mutual obligations need not be equal as long

as they provide consideration which the law deems suffi-

cient. 1 Witustox, A Treatise ox Tur Law or Contracts

(3d ed. by W. HL. E. Jarcer, 1957) see. 105A, 101.

It is somewhat difficult to perceive why respondent’s ob-

ligation to order 455 generator sets from appellant for a

purchase price of almost $2,900,000 ix not sufficient consid-

eration in law and henee an obligation and promise provid-

OEE QPL Ps FR OE Ga rR

29a

ing consideration for appellant’s counter-obligation or

promise to deliver not only the 453 generator sets but addi-

tional units up to 3600 at the agreed upon prices. Inade-

quacy of consideration is generally not a proper subject of

legal inquiry. But to the extent that total inadequacy of

consideration sometimes is considered the equivalent of

lack of mutuality of obligation (Wiuiston, op. cit., supra,

at pp. 424-425), such inadequacy of consideration does not

exist here. Moreover, a promise such as that made by re-

spondent is sufficient as a matter of law to provide consid-

eration not only for its exact counterpart, but also for addi-

tional ‘‘options’’ such as appellant here made to respond-

ent. [bid. Supported by consideration furnished by respond-

ent such ‘‘options’’ are binding on appellant and cannot be

withdrawn without cause.

The view as to mutuality of consideration adopted here

has also been recently expressed by the Comptroller Gen-

eral (B-160065, dated 10 February 1967). After discussing

the distinetion between requirements contracts and those

in which performance is ‘totally dependent upon the wish,

will or want of one of the parties’’, he added:

‘We suggest, therefore, in the future that language be

used in estimated quantity type contracts which is suf-

ficient to obligate the Government so that contracts will

not be open to the allegation that they are unenforce-

able for lack of mutuality. This can be done simply

enough with the insertion of a phrase to the effect that

whatever quantities of the product in question which

the using activity may need it will purchase from the

contractor; or, if the using activity prefers, it may

promise to purchase at least a stated minimum number

of units from the contractor.”

The instant contract effectively meets the test of this sug-

gestion. The contract, in the absence of overriding consid-

erations to the contrary, must, therefore, be held binding on

appellant.

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From what has been said above it follows that the rule of

Tennessee Soap Company and similar decisions has no ap-

plication here, unless the contract between the parties, in the

light of all surrounding circumstances, must be read as ex-

pressing a different intent. We thus reach appellant’s con-

tention that it was not the intent of the parties that the

minimum quantity order should ercate mutuality of obliga-

tion between them as to the entire contract.

Appellant argues that i! clearly intended to accept a firm

obligation only as to the minimum quantity order, and that

as to all further quantities it merely reserved to itself the

option, revocable at any time, to accept such orders for

larger quantities up to 3600 units as respondent might there-

after issue. In support of its argument appellant cites the

fact that it consistently took this position—beginning with

its revocation letter of 29 March 1966. But this letter was

written after the dispute between the parties arose, is self-

serving, and cannot bolster appellant’s position except to

show that its position after the dispute arose was consist-

ent.*)

But to determine the parties’ intent we must go back fur-

ther. There is nothing shown of the original negotiations of

the parties which would indicate that appellant construed

the contract terms solely as a kind of framework for orders

which it might accept or decline to fill at will. On the con-

trary, the record discloses expressions of appellant’s intent

which, while not perhaps wholly conclusive, tend to contra-

dict its later stand.

Appellant was obviously anxious to obtain the contract

and hence willing to assume the risk of a small loss, about

*) As to the potential effect of inconsistent post litem motam

positions on a contractor's claim see Willard, Sutherland & Co. v.

United States, both supra. Under these ‘decisions appellant is

bound to the contract prices for the minimum quantity order D. O.

No. 33747 and the first additional order D. O. No. 34018.

312

'% of the maximum contract price. It was also willing to

quote decreasing unit prices for increments above the mini-

mum quantity order, an inducement to the Government to

place larger orders which would make little sense if appel-

lant had not been willing to present itself to the Govern-

ment as a firm source of supply.

When requested by SAMA to explain its apparent loss

~ quotation, appenant on 18 November 1965 explained its pro-

posal as a way of implementing a contract with the AEC,

about to be executed at that time. Under that contract, it

Was to assist in the industrialization of the tri-cities area in

the State of Washingion and had ‘‘committed”’ itself to a

**substantial employment and capital investment over a five-

year period’? (ASBCA No, 11918, R4 doe. K). It further ad-

vised SAMA that it had arranged for a term lease for plant

facilities inspected by SAMA representatives the previous

‘lay pending construction of its own plant. Moreover, on 19

November 1965 I.T.T., at appellant’s request, guaranteed

the latter’s ability to perform to an amount not to exceed

*20,000,000. Appellant has placed much emphasis on the use

of the words ‘‘not to exceed’ as indicating that appellant

did not intend to bind itself to fill $20,000,000 worth of

orders in excess of the minimum quantity. But the language

of the guaranty shows at most that there was leeway be-

tween appellant and ITT as to the actual amount which ITT

might be called upon to advance to appellant. Hence we

must, nevertheless, find that appellant’s letter of 18 No-

vember 1965 and its parent’s guaranty were far more com-

patible with a firm undertaking to fulfill respondent’s or-

ders for generator sets up to the maximum quantity in con-

sideration of the Government’s initial order, than with any

pre-existing intent to reject orders above the minimum as

not binding.

What apparently led appellant to this position was, in-

deed, not a preconceived plan at the time of contract nego-

tiation, but the diseovery of numerous improvident errors

in pricing which resulted in price quotations that would re-

32a

sult in assertedly substantial 'osses. Even when this error

was first discovered, appellant aid not assert that it was not

bound to fill orders above the minimum, but treated the

matter as a ‘‘problem area’’ which it hoped ‘‘to alleviate”’

in subsequent calls beyond the 453 unit minimum order.

Appellant, in its letter of 19 February 1966 (ASBCA No.

11918, R4 doe. W)—the earliest expression of its position

after execution of the contract which the record contains—

after the expressions quoted above, concluded:

‘‘We are pursuing a course of action of seeking every

possible means of meeting our delivery commitments

without suffering serious losses. We are most appre-

ciative of your efforts to help us in the areas outlined

above and wish to assure you that we are making an all-

out effort to meet our commitments.’’

These words are not expressing the position of the

grantor of a revocable option to sell, but those of a seller

who has obligated himself irrevocably to sell goods to a

purchaser, when ordered, and who now finds that due to

an inadequate price quotation, he has to take an unweleome

loss. The record leaves no doubt that appellant’s alleged

consistent position that it was not bound by its contract to

furnish generator sets above the minimum quantity, was

determined upon only some time after 19 February 1966

when appellant must have found out that such assistance as

SAMA was able to give it would not sufficiently ent its

losses. In the light of the evidence which we have examined,

we are compelled to find that appellant did not intend to

enter into Contract No. AF 04(606)-15369 as a revocable

option contract and did not express such intent during the

contract negotiations in such a manner that respondent

should have become aware thereof. It also did not thereafter

and prior to 29 March 1966 in its conduct reflect such posi-

tion. Hence, since there is in the Board’s view mutuality of

obligation, appellant was bound to furnish such generator

sets as respondent did in fact order, up to the maximum of

3600 units.

SN EAE AD AE ttt OF) 3

33a

Appellant, in aid of its main arguments, has pressed cer-

tain other points which are equally unpersuasive. Clearly,

in the light of the conclusion reached hereinabove, one can-

not find in the terms of PART X of the contract schedule

the kind of ambiguity to which the rule called ‘‘Contra Pro-

ferentem”’ can apply. The language of PART X is unam-

biguous aud can acquire the meaning now attributed to it

by appellant only as a matter of law—a view already re-

jected herein—or by the proof of a specific intent of the

parties as described by appellant. But contrary to appel-

lant’s argument, to apply the rule of interpretation against

the drafter in the manner advanced here by appellant would

be to frustrate what clearly appears to have been the intent

of the parties. Yet, even if there were an ambiguity, the rule

should not be mechanically applied to frustrate such intent.

Shedd, Resolving Ambiguities in Interpretation of Govern-

ment Contracts, 36 Geo. Wasu. Law Rev. 1, 7-8, 21 (1967).

Here quite clearly there is no place for the application of

this rule.

Appellant has further argued that the presence of a con-

venience termination clause relieves respondent of all effec-

tively binding obligation to order even the minimum quan-

tity. That argument has heretofore been raised against the

binding nature of requirements contracts and has been re-

jected conclusively both by this Board and the Court of

Claims. Gulf Coast Aviation Co., Inc., ASBCA Nos. 10189

and 10380, 65-2 BCA par. 4928; Shader Contractors, Inc.,

ASBCA Nos. 3957 and 4276, 58-1 BCA par. 1579; Aetna

Plywood & Veneer Co., ASBCA No. 2526 (1955); Shader

Contractors, Inc. vy. United States, supra. The argument

can be no more effective here.

Finally, appellant has argued that each order by respond-

ent is a separable contractual entity and that so considered,

the minimum quantity order cannot be consideration for ap-

pellant’s promise to supply generators in excess of the

minimum quantity when ordered by the Government there-

after. There is no doubt that separate delivery orders, such

= eo 34a

as respondent used here, can for some purposes be consid-

ered as separate contracts. The decisions cited by appellant

are not, however, as clearly applicable as might seem. For

here, the several orders which might be given are tied to-

gether among themselves and with the minimum order for

each class of generator sets by a sliding scale of unit prices

operating cumulatively. Thus each crder ean only be priced

by reference to prior orders in each class. To that extent

the contract on its face does not reflect the concept of sepa-

rability of orders on which appellant relies. Moreover, to

treat each D.O. given by respondent to appellant as a sepa-

rate contract requiring its own consideration has been found

by the Board to be contrary to the intent of the parties at

the time when the contract was entered into. Just as the

rule of ‘‘Contra |Proferentem”’ will not be so applied, so

appellant’s separability interpretation will not be applied

to thwart the intent of the parties.

Appellant was, therefore, bound to furnish to the Gov-

ernment generator sets, when ordered, up to the maximum

quantity and, in the absence of a suitable price revision

clause, at the prices stated in the contract. >

Appellant has argued that, even if the Board were to de-

termine that appellant had entered into a binding contract

for the delivery of up to 3600 generator sets, when ordered,

the contract could not be used to reprocure 763 generator

sets under D.O.’s Nos. 35775 and 41205, when respondent

knew that this order would inflict a substantial loss upon

appellant.

The contract, construed by the Board as binding upon

appellant up to the maximum quantity for each class of

generators, did not contain any limitation in its terms as to

the causes or motives which might lead respondent to order

generator sets from appellant within the maximum pre-

scribed. As the events showed, the maximum was a generous

35a

figure, for respondent ordered only 2,633 generator sets out

of a possible grand total of 3,600. There was nothing in the

contract, in particular, which restricted respondent to order

only quantities which had not yet been ordered from other

contractors. On the contrary, one would assume that the

contract, with its flexibility as to the number of generator

sets to be delivered thereunder, provided a suitable and

ready means for reordering those quantities of generator

sets which other contractors had failed to deliver. This

Board has held that a contractor is not discharged from its

obligation to furnish supplies in response to orders of the

Government which were issued after the contractor had

decided to discontinue the manufacture thereof as unprofit-

able and after the Government had become aware of this

fact. Standard Steel & Tube Corporation, ASBCA No.

12076, 67-1 BCA par. 6199; Lucas Aircraft Supply Co.,

ASBCA No. 11167, 66-1 BCA par. 5671. The same rule ap-

plies where the contractor continues in the business of

manufacturing the supplies contracted for, as appellant

here did. Hence, there was nothing in the direct contractual

relationship of the parties which required respondent to

forego its contractual right to order generator sets at the

contract price, although at a loss to appellant.

Aceerding to appellant, the situation here is different be-

cause the Government is reprocuring supplies on the deliv-

ery of which the original contractor is said to have inexecus-

ably defaulted, and for the excess costs of which in the event

of reprocurement he is said to be liable. Octagon Process,

Inc., ASBCA No, 10371, 65-2 BCA par. 5168, is cited by ap-

pellant in support of the proposition that on reprocurement

the Government may pass up the lowest price bid by a pro-

spective reprocurement contractor, if such pric? is known to

infliet a loss upon him, and reprocure at a higher price,

charging the defaulied contractor with the difference. But

that is not the proposition for which Octagon stands. All

that this deeision held was that, where the Government be-

fore award became aware of a low bidder’s mistake and

36a

hence was not entitled to hold him to his bid (see Framlau

Corp., IBCA No. 228, 61-2 BCA par. 3116), it fulfills its duty

toward the defaulted contractor to mitigate damages by

awarding the reprocurement to the next lowest bidder (who

has thus become the lowest acceptable bidder).

Nor is the appellant served by the statement that repro-

curement is not for the Government’s account. The regula-

tions which govern the contracting officer’s conduct in

letting reprocurement contracts require him to reprocure

not, as appellant asserts (Br. p. 48), at a ‘‘reasonable’’ price

but ‘‘at as reasonable a price as practicable’’ (ASPR 8-602.6

(a)), that is, at the lowest practicable price. If he fails to

do so, for instance by not securing savings reasonably avail-

able, the amount of excess costs resulting from his failure is

‘‘unnecessary’’ and, hence, uncollectible. National Robe

Company, ASBCA Nos. 11227, 11333, 67-1 BCA par. 6365.

Nor is there anything in the laws of the United States,

applicable regulations, or the decisions of courts or contract

appeals boards which requires a contracting officer to incur

greater excess costs and thereby to create potential litiga-

tion and collection problems for the Government, when he

can by permissible contractual action avoid or minimize the

dangers presented by litigation as to the excusability or ex-

istence of a default, or the collectibility of the excess costs.

Since respondent was entitled to procure the 763 Bogue

units by ordering the same from appellant, the contracting

officer was under no obligation to enter into an additional

contract for their reprocurement unless he could do so at

prices lower than appellant’s.

It was perhaps this hope, tenuous as it might have been,

which induced SAMA to issue RFP’s for the reprocurement

of the Bogue units. If so, such hopes were disappointed. In

the ensuing negotiations SAMA adopted the idea of order-

ing the Bogue units under Contract No. AF 04(606)-15369.

A memorandum making certain concessions to appellant

(ASBCA No. 11918, R4 doc. V) was drafted by the SAMA

37a

negotiators but was not accepted by appellant. Further

price negotiations in March 1966 led to a tentative agree-

ment on terms and prices, substantially higher than those

listed in appellant’s then-existing contract. This tentative

agreement was, however, by its terms previously quoted,

conditional upon availability of funds and approval by

higher authority. Either or both must have been lacking

for the agreement was not consummated, and in April 1966

the first of the disputed D.O.’s was issued to reprocure units

which Bogue had failed to deliver. In the light of this record

it cannot be said that SAMA’s issuance of a RFP for the

reprocurement of the Bogue units under a separate contract

committed respondent to this course and, therefore, barred

it from obtaining these units by D.O.’s issued under «ppel-

lant’s existing contract.

Consequently the issuance of D.O. Nos. 35775 and 41205

must be upheld as valid against the attack that they could

not be used to procure or reprocure the units on which

Bogue had defaulted.

Accordingly, the three appeals challenging the validity of

the several delivery orders issued by respondent under

Contract No. AF 04(606)-15369 must be, and they hereby

are, in all respects denied.

Dated 26 January 1968.

/s/ Rvuvoir Sopernuem

Rudolf Sobernheim

Member of Division No. 7

Armed Services Board of

Contract Appeals

T eoneur

/s/ Josern P. Ramsay

Joseph P. Ramsay,

Colonel, JAGC

Member of Division No. 7

Armed Services Board of

Contract Appeals

I concur

/s/ Louis Spector

Louis Spector

Chairman, Armed Services

Board of Contract Appeals and

Member of Division No. 7

I concur

/s/ Davin Antuony Borre

David Anthony Botte, Colonel, USAF

Member of Division No.7

Armed Services Board of

Contract Appeals

I certify that the foregoing is a true copy of the decision

and opinion of the Armed Services Board of Contract Ap-

peals in ASBCA Nos. 11726, 11918 and 12161, Appeals of

Federal Electric Corporation, rendered in conformance

with the Board’s Charter.

Dated: 1 February 1968

/s/ Greorce L. Hawkes

George L. Hawkes, Recorder

Armed Services Board of

Contract Appeals

Sastiitanieded Patric. .ts nat aes le as sorrel semicon

———— 9 eee

APPENDIX D

STATUTES INVOLVED

Armed Services Procurement Regulation

Disputes

§ 7-103.12

‘(a) Except as otherwise provided in this contract, any

dispute concerning a question of fact arising under this con-

tract which is not disposed of by agreement shall be de-

cided by the Contracting Officer, who shall reduce his deci-

sion to writing and maii or otherwise furnish a copy thereof

to the Contractor. The decision of the Contracting Officer

shall be final and conclusive unless, within 30 days from the

date of receipt of such copy, the Contractor mails or other-

wise furnishes to the Contracting Officer a written appeal

addressed to the Secretary. The decision of the Secretary

or his duly authorized representative for the determination

- of such appeals shall be final and conclusive unless deter-

mined by a court of competent jurisdiction to have been

fraudulent, or capricious, or arbitrary, or so grossly errone-

ous asx necessarily to imply bad faith, or not supported by

substantial evidence. In connection with any appeal pro-

ceeding under this clause, the Contractor shall be afforded

an opportunity to be heard and to offer evidence in support

of its appeal. Pending final decision of a dispute hereunder,

the Contraetor shall proceed diligently with the perform-

ance of the contract and in accordance with the Contracting

Officer ’s decision.

(b) This e Disputes’’ clause does not preclude considera-

tion of law questions in connection with decisions provided

for in paragraph (a) above: Provided, That nothing in this

contract shall be construed as making final the decision of

any administrative official, representative, or board on a

question of law.

Oe OB TS" aes eb LEG AM te oe

§ 8-701(a)

TERMINATION FOR CONVENIENCE OF THE

GoveRNMENT (Jan. 1961)

(a) The performance of work under this contract may be

terminated by the Government in accordance with this

clause in whole, or from time to time in part, whenever the

Contracting Officer shall determine that such termination is

in the best interest of the Government. Any such termina-

tion shall be effected by delivery to the Contractor of a

Notice of Termination specifying the extent to which per-

formance of work under the contract is terminated, and the

date upon which such termination becomes effective.

(b) After receipt of a Notice of Termination, and except

as otherwise directed by the Contracting Officer, the Con-

tractor shall:

(i) stop work under the contract on the date and to

the extent specified in the Notice of Termination;

(ii) place no further orders or subcontracts for ma-

terials, services or facilities, except as may be

necessary for completion of such portion of the

work under the contract as is not terminated;

(iii) terminate all orders and subcontracts to the ex-

tent that they relate to the performance of work

terminated by the Notice of Termination;

(iv) assign to the Government, in the manner, at the

times, and to the extent directed by the Contract-

ing Officer, all of the right, title, and interest of

the Contractor under the orders and subcontracts

so terminated, in which case the Government

shall have the right, in its discretion, to settle or

pay any or all claims arising out of the termina-

tion of such orders and subcontracts;

(v)

(vi)

(vii)

4la

settle all outstanding liabilities and all claims

arising out of such termination of orders and

subcontracts, with the approval or ratification

of the Contracting Officer, to the extent he may

require, which approval or ratification shall be

final for all the purposes of this clause ;

transfer title and deliver to the Government, in

the manner, at the times, and to the extent, if

any, directed by the Contracting Offieer, (A) the

fabricated or unfabricated parts, work in proc-

ess, completed work, supplies, and other material

produced as a part of, or acquired in connection

with the performance of, the work terminated by

the Notice of Termination, and (B) the com-

pleted or partially completed plans, drawings,

information, and other property which, if the

contract had been completed, would have been

required to be furnished to the Government;

use his best efforts to sell, in the manner, at the

times, to the extent, and at the price or prices

directed or authorized by the Contracting Officer,

any property of the types referred to in (vi)

above; provided, however, that the Contractor

(A) shall not be required to extend credit to any

purchaser, and (B) may require any such prop-

erty under the conditions prescribed by and at a

price or prices approved by the Contracting

Officer; and provided further that the proceeds

of any such transfer or disposition shall be ap-

plied in reduction of any payments to be made

by the Government to the Contractor under this

contract or shall otherwise be credited to the

price or cost of the work covered by this contract

or paid in such other manner as the Contracting

Officer may direct ;

- —_ PE ie PR DORE BET RT 6. EI A Te PLE LAA ALLEL SO OB AAS

oh a ee

42a

(viii) complete performance of such part of the work

as shall not have been terminated by the Notice

of Termination; and

(ix) take such action as may be necessary, or as the

Contracting Officer may direct, for the protection

and preservation of the property related to this

contract which is in the possession of the Con-

tractor and in which the Government has or may

acquire an interest.

At any time after expiration of the plant clearance period,

as defined in Section VIII, Armed Services Procure-

ment Regulatior, as it may be amended from time

to time, the Contractor may submit to the Contract-

ing Officer a list, certified as to quantity and quality,

of any or all items of termination inventory not pre-

viously disposed of, exclusive of items the disposition

of which has been directed or authorized by the Con-

tracting Officer, and may request the Government to

remove such items or enter into a storage agreement cover-

ing them. Not later than fifteen (15) days thereafter, the

Government will accept title to such items and remove them

or enter into a storage agreement covering the same; pro-

vided, that the list submitted shall be subject to verification

by the Contracting Officer upon removal of the items, or if

the items are stored, within forty-five (45) days from the

date of submission of the list, and any necessary adjustment

to correct the list as submitted shall be made prior to final

settlement.

Jagat bi of ttn eS adn ie ATE aban dew ALO NNR ua

tractor shall submit to the Contracting Officer his termina-

tion claim, in the form and with certification preseribed by

the Contracting Officer. Such claim shall be submitted

promptly but in no event later than one year from the effec-

tive date of termination, unless one or more extensions in

writing or granted by the Contracting Officer, upon request

of the Contractor made in writing within such 2ne year

e777 noe oe IRL at PAR Os LET ely Li gt BS

43a

period or authorized extension thereof. However, if the Con-

tracting Officer determines that the facts justify such action,

he may receive and act upon any such termination claim at

any time after such one year period or any extension

thereof. Upon failure of the Contractor to submit his ter-

mination claim within the time allowed, the Contracting

Officer may, subject to any Settlement Review Board ap-

provals required by Section VIII of the Armed Services

Procurement Regulation in effect as of the date of execu-

tion of this contract, determine, on the basis of information

available to him, the amount, if any, due to the Contractor

by reason of the termination and shall thereupon pay to the

Contractor the amount so determined.

(d) Subject to the provisions of paragraph (c), and sub-

ject to any Settlement Review Board approvals required by

Section VIII of the Armed Services Procurement Regula-

tion in effect as of the date of execution of this contract, the

Contractor and the Contracting Officer may agree upon the

whole or any part of the amount or amounts to be paid to

the Contractor by reason of the total or partial termination

of work pursuant to this clause, which amount or amounts

may include a reasonable allowance for profit on work done;

provided, that such agreed amount or amounts, exclusive of

settlement costs, shall not exceed the total contract price as

reduced by the amount of payments otherwise made and as

further reduced by the contract price of work not termi-

nated. The contract shall be amended accordingly, and the

Contractor shall be paid the agreed amount. Nothing in

paragraph (e) of this clause, prescribing the amount to be

paid to the Contractor in the event of failure of the Con-

tractor and the Contracting Officer to agree upon the whole

amount to be paid to the Contractor by reason of the termi-

nation of work pursuant to this clause, shall be deemed to |

limit, restrict, or otherwise determine or affect the amount

or amounts which may be agreed upon to be paid to the

Contractor pursuant to this paragraph (d).

44a

(e) In the event of the failure of the Contractor and the

Contracting Officer to agree as provided in paragraph (d)

upon the whole amount to be paid to the Contractor by rea-

son of the termination of work pursuant to this clause, the

Contracting Officer shall, subject to any Settlement Review

Board approvals required by Section VIII of the Armed

Services Procurement Regulation in effect as of the date of

execution of this contract, determine, on the basis of infor-

mation available to him, the amount, if any, due to the Con-

tractor by réason of the termination and shall pay to the

Contractor the amounts determined as follows:

(i) for completed supplies accepted by the Govern-

ment (or sold or acquired as provided in para-

graph (b)(vii) above) and not theretofore paid

for, a sum equivalent to the aggregate price for

such supplies computed in accordance with the

price or prices specified in the contract, appro-

priately adjusted for any saving of freight or

other charges;

(ii) the total of—

(A) the costs incurred in the performance of the

work terminated, including initial costs and

preparatory expense allocable thereto, but

exclusive of any costs attributable to sup-

plies paid or to be paid for under paragraph

(e)(i) hereof;

(B) the cost of settling and paying claims arising

out of the termination of work under sub-

contracts or orders, as provided in para-

graph (b)(v) above, which are properly

chargeable to the terminated portion of the

contract (exclusive of amounts paid or pay-

able on acevunt of supplies or materials de-

livered or services furnished by subcon-

tractors or vendors prior to the effective date

of the Notice of Termination, which amounts

45a

shall ke included in the costs payable under

(A) above); and

part of the amount determined under (A)

above which represents the cost of articles

and materials not processed by the Con- '

tractor, plus a sum equa! to 8 percent of the

remainder of such amount, but the aggregate {

of such sums shall not exceed 6 percent of

the whole of the amount determined under

(A) above; provided, however, that if it ap-

pears that the Contractor would have sus-

tained a loss on the entire contract had it

been complet:«, no profit shall be included

or allowed under this subdivision (C) and an

appropriate adjustment shall be made redue-

ing the amount of the settlement to reflect

the indicated rate of loss; and

(iii) the reasonable costs of settlement, including ac-

counting, legal, clerical, and other expenses rea-

sonably necessary for the preparation of secttle-

ment claims and supporting data with respect to

the terminated portion of the contract and for the

termination and settlement of subcontracts there-

under, together with reasonable storage, trans-

portation, and other costs incurred in connection

with the protection or disposition of property

allocable to this contract.

The total sum to be paid to the Contractor under (i) and

(ii) of this paragraph (e) shall not exceed the total contract

price as reduced by the amount of payments otherwise

made and as further reduced by the contract price of work

not terminated. Except for normal spoilage, and except to

the extent that the Government shall have otherwise ex-

pressly assumed the risk of loss, there shall be excluded

from the amounts payable to the Contractor as provided in

AAEM BOS BOT i

A BIE ELGAR Ba OI STEEDS PA LOLITA PARIS al mh ae

46a

(e)(i) and (ii)(A) above, the fair value, as determined

by the Contractor Officer, of property which is destroyed,

:ost, stolen, or damaged so as to become undeliverable to the

Government, or to a buyer pursuant to paragraph (b) (vii).

(f) Any determination of costs under paragraph (c) or

(ec) hereof shall be governed by the principles for considera-

tion of costs set forth in Section XV, Part 2, of the Armed

Services Procurement Regulation, as in effect on the date

of this contract.

(g) The Contractor shall have the right of appeal, under

the clause of this contract entitled ‘‘Disputes,’’ from any

determination made by the Contracting Officer under para-

graph (c) (e) above, except that if the Contractor has failed

te submit his claim within the time provided in paragraph

he shall have no such right of appeal. In any case where the

Contracting Officer has made a determination of the amount

due under paragraph (c) or (e) above, the Government

shall pay to the Contractor the following: (:) if there is no

right of appeal hereunder or if no timely appeal has been

taken, the amount so determined by the Contracting Officer,

or (ii) if an appeal has been taken, the amount finally de-

termined on such appeal.

(h) In arriving at the amount due the Contractor under

this clause there shall be deducted (i) all unliquidated ad-

vance or other payments on account theretofore made to the

Contractor, applicabie to the terminated portion of this

contract, (ii) any claim which the Government may have

against the Contractor in connection with this contract, and

(iii) the agreed price for, or the proceeds of sale of, any

materials, supplies, or other things acquired by the Con-

tractor or sold, pursuant to the provisions of this clause,

and not otherwise recovered by or credited to the Govern-

ment.

(i) If the termination hereunder be partial, prior to the

settlement of the terminated portion of this contract, the

Eo AS DETR Pe ORATOR RR A O65 EL

47a

Contractor may file with the Contracting Officer a request

in writing for an equitable adjustment of the price or prices

specified in the contract relating to the continued portion

of the contract (the portion not terminated by the Notice

of Termination), and such equitable adjustment as may be

agreed upon shall be made in such price or prices.

(j) The Government may from time to time, under such

terms and conditions as it may prescribe, make partial pay-

ments and payments on account against costs incurred by

the Contractor in connection with the terminated portion

of this contract whenever in the opinion of the Contracting

Officer the aggregate of such payments shall be within the

amount to which the Contractor will be entitled hereunder.

If the total of such payments is in excess of the amount fi-

nally agreed or determined to be due under this clause, such

excess shall be payable by the Contractor to the Govern-

ment upon demand, together with interest computed at the

rate of 6 percent per annum, for the period from the date

such excess payment is received by the Contractor to the

date on which such exeess is repaid to the Government;

provided, however, that no interest shall be charged with

respect to any such excess payment attributable to a reduc-

tion in the Contractor’s claim by reason of retention or

other disposition of termination inventory until ten days

after the date of such retention or disposition, or such later

date as determined by the Contracting Officer by reason of

the circumstances.

(k) Unless otherwise provided for in this contract, or

by applicable statute, the Contractor, from the effective

date of termination and for a period of three years after

final settlement under this contract, shall preserve and make

available to the Government at all reasonable times at the

office of the Contractor but without direct charge to the

Government, all his books, records, documents, and other

evidence bearing on the costs and expenses of the Con-

tractor under this contract and relating to the work termi-

nated hereunder, or, to the extent approved by the Con-

tracting Officer, photographs, micro-photographs, or other

authentic reproduction thereof.

§ 8-602.6

Repurchase Against Contractor’s Account.

(a) Where the supplies or services are still required after

termination, repurchase of supplies or services which are

the same as or similar to those called for in the contract,

shall be made against the contractor’s account as soon as

practicable after termination. Such repurchase shall be at

as reasonable a price as practicable considering the quality

required by the Government and the time within which

the supplies or services are required. The contract of

repurchase may be made for a quantity in cxeess of the

undelivered quantity terminated for default, when such

excess quantity is needed, but excess cost may be charged

against the defaulting contractor for no more than the

undelivered quantity terminated for default (including vari-

ations in quantity permitted by the terminated contract).

(b) If the repurchase is for a quantity not in excess of the

undelivered quantity terminated for default, the require-

ments of 10 U.S.C. 2304(a), with respect to formal adver-

tising, are inapplicable. However, the contracting officer

may use formal advertising procedures. If the contracting

officer devides to negotiate the repurchase contract, he may

either (1) use any authority listed in 3-201 through 3-217

(10 U.S.C. 2304(a) (1)-(17)), as appropriate, or (2) if none

of those authorities to negotiate are used, the contract shall

identify the procurement as a repurchase in accordance

with the provisions of the Default clause in the defaulted

contract. If the repurchase is for a quantity in excess of

the undelivered quantity terminated for default, the entire

quantity shall be treated as new procurement.

price of the supplies terminated, the contracting officer

AO La OME ALLS ER LEC ODL NN AE BELT AAO A Se 40D»

49a

shall make a written demand on the contractor for the total

amount of such excess giving due consideration to any in-

creases or decreases in other ascertainable costs such as

transportation discounts, ete., and shall take such other

action as is required by Appendix E, Part 6, for collecting

claims in favor of the Government.

§ 1-309

Solicitations for Informational or Planning Purposes. It

is the general policy of the Department of Defense to solicit

bids, proposals or quotations only where there is a definite

intention to award a contract or purchase order. However,

in some cases solicitation for informational or planning pur-

poses may be justified. Invitations for bids and requests

for proposals will not be used for this purpose. Requests

for quotations may be issued for informational or planning

purposes only with prior approval of an individual at a level

higher than the contracting officer. In such cases, the

request for quotation shall clearly state its purpose and, in

addition, the following statement in capital letters shall be

placed on the face of the request: ‘THE GOVERNMENT

DOES NOT INTEND TO AWARD A CONTRACT ON

THE BASIS OF THIS REQUEST FOR QUOTATION,

OR OTHERWISE PAY FOR THE INFORMATION

SOLICITED.’ The foregoing does not prohibit the allow-

ance, in accordance with 15-205.3, of the cost - preparing

such quotations.

+ * * id * * * * * o

_ Uniform Commercial Code, § 1-207

Performance or Acceptance Under Reservation of Rights.

A party who with explicit reservation of rights per-

forms or promises performance or assents to performance

in a manner demanded or offered by the other party does

not thereby prejudice the rights reserved. Such words as

50a

‘‘without prejudice’’, ‘‘under protest’’ or the like are suf-

ficient.

* * * * * * * * * *

Defense Production Act of 1950, 50 U.S.C. §§ 2071-73 (1970)

TITLE I—PRIORITIES AND ALLOCATIONS

§ 2071. Priority in contre: ts and orders.

(a) Allocation of materials and faciltiies.

The President is authorized (1) to require that perform-

ance under contracts or orders (other than contracts of

employment) which he deems necessary or appropriate to

promote the national defense shall take priority over per-

formance under any other contract or order, and, for the

purpose of assnring such priority, to require acceptance and

performance of such contracts or orders in preference to

other contracts or orders by any person he finds to be eap-

able of their performance, and (2) to allocate materials and

facilities in such manner, upon such conditions, and to such

extent as he shall deem necessary or appropriate to pro-

mote the national defense.

* * * ¥* * * * * * *

(b) Critical and strategic materials.

The powers granted in this section shall not be used to

control the general distribution of any material in the

civilian market unless the President finds (1) that such

material is a scarce and critical material essential to the

national defense, and (2) that the requirements of the

national defense for such material cannot otherwise be met

without creating a significant dislocation of the normal dis-

tribution of such material in the civilian market to such a

degree as to create appreciable hardship. (Sept. 8, 1950,

ch. 932, title I, § 101, 64 Stat. 799; July 31, 1951, ch. 275,

title I, § 101(a), 65 Stat. 132; June 30, 1952, ch. 530, title I

$§ 101, 102, 66 Stat. 296; June 30, 1953, ch. 171, § 3, 67 Stat.

129.)

5la

§ 2072. Hoarding of designated scarce materials.

In order to prevent hoarding, no person shall accumulate

(i) in exeess of the reasonable demands of business, per-

sonal, or home consumption, or (2) for the purpose of

resale at prices in excess of prevailing market prices,

materials which have been designated by the President as

searce materials or materials the supply of which would be

threatened by such accumulation. The President shall order

published in the Federal Register, and in such other manner

as he may deem appropriate, every designation of materials

the accumulation of which is unlawful and any withdrawai

of such designation.

In making such designations the President may prescribe

such conditions with respect to the accumulation of

materials in excess of the reasonable demands of business,

personal, or home consumption as he deems necessary to

carry out the objectives of this Act [sections 2061, 2062,

2071 to 2073, 2091 to 2094, 2151 to 2163 and 2164 to 2168 of

this Appendix]. This section shall not be construed to limit

the authority contained in sections 101 and 704 of this Act

[sections 2071 and 2154 of this Append:«]. (Sept. 8, 1950,

ch. 932, title I, § 102, 64 Stat. 799; July 31, 1951, ch. 275,

title I, § 101(b), 65 Stat. 132.)

§ 2072. Penaities.

Any person who willfully performs any act prohibited,

or willfully fails to perform any act required, by the pro-

visions of this title [sections 2071 to 2073 of this Appendix]

or any rule, regulation, or order thereunder, shall, upon

conviction, be fined not more than $10,000 or imprisoned for

not more than one year, or both. (Sept. 8, 1950, ch. 932,

title I, § 103, 64 Stat. 799.)

52a

United States Constitution, Amendment V

* * * * * * * * * 7

Ne person shall be held to answer for a capital, or other-

wise infamous crime, unless on a presentment or indictment

of a Grand Jury, except in cases arising in the lend or naval

forces, or in the Militia, when in actual service in time of

War or publie danger; nor shall any person be subject for

the same offence to be twice put in jeopardy of life or limb;

nor shall be compelled in any criminal case to be a witness

against himself, nor be deprived of life, liberty, or prop-

erty, without due process of law; nor shall private property

be taken for public use, without just compensation.

+ ay eer

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.