Case ID: us-ct-cl_55/html/0007-01.html
Source: Caselaw Access Project
Author: {"author": "Downey, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PATRICK CORR AND SONS v. THE UNITED STATES.
    [No. 33298.
    Decided December 1, 1919.]
    
      On the Proofs.
    
    
      Contract; specifications.' — Where a contract to furnish cotton waste was upon a general form without modifications to suit the particular case, and certain specifications referred to therein were not submitted to the contractor, but bidders were-required to submit with their bids samples of the waste to be furnished, the court will construe the contract as one requiring the contractor to furnish such goods in accordance with the samples exhibited.
    
      Delays; deductions as liquidated damages. — Where a contract provides for liquidated damages, and gives the Governor of the Panama Canal or his authorized representative authority to determine the responsibility for delays, his decision is final in the absence of bad faith or such gross error as to justify an inference of bad faith.
    
      Rejection; use of rejected goods. — Where the defendants reject certain waste furnished under the contract as not coming up to the requirements of the sample furnished, but subsequently use the rejected material, the contractor is entitled to recover for the same at the then prevailing market value of the goods and not at the contract price.
    
      Charges against contractor; “ similar ” article. — Where a contract provides that “ similar ” articles may be purchased to replace articles that should have been furnished by a defaulting contractor and charged against the account of said contractor, the purchase of an article substantially different and of a higher price does not justify a charge back against the defaulting contractor.
    
      
      The Reporter’’s statement of the case:
    
      Messrs. David Mandel, jr., and Ii. Winship Wheatley for the plaintiff. Levi db Mandel were on the briefs.
    
      Mr. George H. Thorne, with whom was Mr. Assistant Attorney General Frank Davis, jr., for the defendants.
    The following are the facts of the case as found by the court:
    I. On the 8th day of July, 1915, the plaintiff, a corporation, entered into a contract with the United States, acting by and through A. L. Flint, acting general purchasing officer of the Panama Canal, for the delivery to the Panama Canal, on the dock at Colon, in such quantities as might from time to time be ordered, of approximately “ 300,000 pounds waste, cotton, colored, in accordance with sample £A,’ submitted by the contractor with proposal,” at 7 cents per pound, with the right in the Panama Canal to order such additional quantities as might be required not exceeding 50 per cent of the estimated quantity. A copy of the contract is attached to and made a part of plaintiff’s petition and is made a part of this finding by reference. The petition herein was filed June 15, 1916.
    II. “ Circular of the Panama Canal No. 922 ” referred to in the contract and also referred to therein as “ circular invitation No. 922 ” is not in the record and its contents are not shown. “ Standard Specifications for Waste,” 1910, No. 704, are in evidence, but it is not shown that they are the specifications said to be contained in circular 922, or that they are in any manner made a part of the contract. The plaintiff, with its accepted bid, submitted a sample marked “A” of the waste it proposed to furnish, and the parties treated the contract as a contract to furnish goods according to bid sample.
    III. Four orders, viz: No. 59959 for 75,000 pounds, No. 60480 for 25,000 pounds, No. 61167 for 25,000 pounds, and No. 61907 for 25,000 pounds were placed, filled, the goods accepted and paid for, and no question is in this suit as to any of said orders.
    IY. On or about November 1,1915, the defendant ordered of the plaintiff, under said contract, by an order known as W. O. 62743, approximately 25,000 pounds of waste, and directed its delivery on dock at Colon not later tban December 2., On November 9 the plaintiff notified defendant that the goods would be ready for inspection at its place of business in Philadelphia on November 12. The goods were inspected on that day, or soon thereafter, by an authorized inspector of the Panama Canal, but plaintiff was not notified that they had passed this preliminary inspection and given orders to ship until November 29. The goods were shipped by plaintiff by rail consigned to the Panama Railroad Steamship Co. on the day of the receipt of this order and were at the dock in time for shipment to the Isthmus on the Panama, sailing on December 2, but officers of the Panama Railroad Steamship Co. declined to receive them for shipment on that vessel, stating that they would give orders for their shipment on the Ancon, sailing on December 11. They were in fact not sent to the Isthmus until the sailing of the Panama on December 31, and were received there on January 7, 1916. The net weight of the shipment received was 24,375 pounds, which at contract price amounted to $1,706.25. There were 36 days’ delay in the delivery of this shipment, of which it was determined by officials of the Panama Canal, acting under authority of the governor, that 17 days were chargeable to the Panama Canal and 19 days to the plaintiff, and $32.42 was charged as liquidated damages for said 19 days’ delay and a voucher was issued to plaintiff for $1,673.83. Plaintiff objected to this deduction and declined to receive and execute the voucher and returned the same. Defendant then deducted 10 per cent to be retained pending settlement of the question as to deduction for delay and tendered a new voucher accordingly, which plaintiff declined to accept. The amount conceded to be due on account of this shipment, viz, $1,673.83, was carried into the defendant’s general account with plaintiff as a credit, but has never been paid.
    Y. On December 1, 1915, defendant, by order No. 63475, directed shipment, under the contract, of approximately 25,000 pounds of waste. Shipment was made and accepted, the net weight of which was 25,922 pounds, amounting at contract price to $1,814.54.
    There were 89 days’ delay in delivery, of which it was determined by authorized officials of the Panama Canal that 35 days were chargeable to the Panama Canal and four days to the contractor, and, deducting $7.26 on account of liquidated damages for the four days of delay chargeable to the contractor, a voucher was issued for $1,807.28, which, on account of the deduction, the plaintiff declined to accept and returned.
    Afterwards plaintiff, because of the small amount in controversy, concluded to accept the tendered payment and requested forwarding of the voucher, but because of apparent possibility that there might be other matters for adjustment between the parties, under the contract, the voucher was not transmitted. The amount was credited to the contractor in the Government’s general account, but was not paid, and, except as involved as a credit in said account, remains unpaid.
    VI.. On December 30, 1915, the defendant, by order No. 64226, directed the delivery under the contract of approximately 25,000 pounds of waste. Goods for the filling of this order, consisting of 40 bales of a net weight of 25,173 pounds, were inspected at the contractor’s plant by Inspector H. J. E. Doying, a sample was subjected to examination by the Bureau of Standards, shipping authority was issued by the inspector on January 14, 1916, and on January 19, 1916, the Panama Canal was notified, over the signature of J. E. Law-ton, “Acting Inspecting Engineer,” of the passing of the goods by the inspector and the issuance of shipping authority. Lawton then was and for several years theretofore had been in the Washington office of the Panama Canal, serving first as an inspector of materials and latterly as chief inspector.
    This shipment was inspected on the Isthmus and rejected because, as said, it was “ very short in strand, unmachined, and lumpy, and * * * full of small pieces of rags, and other foreign matter,” of which the plaintiff was notified by letter from the Washington office,, dated March 1, 1916, in which reference was made to a letter received from the quartermaster of the Panama Canal, dated February 19, 1916, and advice was requested of the plaintiff as to the disposition of the waste.
    Plaintiff requested reinspection; the defendant notified plaintiff that it would accept at 25 per cent reduction in price, and if offer was not accepted would proceed to purchase in the open market and charge any increased cost against the plaintiff, and the plaintiff declined the offer and elected to “ stand on its rights.”
    The Panama Canal, after rejection of this shipment, used 1,267 pounds of this waste, for which it gave the plaintiff credit in its general account at 75 per cent of the contract price and thereafter sold the remainder, the facts as to which will appear in another finding, ■post. (Finding IX.)
    On or about March 1, 1916, Lawton, referred to above, tendered his resignation as an employee of the Panama Canal, which resignation was accepted effective April 6 and, not having had the usual leave, he was granted leave with pay for the period thence to the effective date of his resignation. He left the service of the Panama Canal on March 6 and associated himself with Ward & Co., a concern with offices in Washington engaged, in representing manufacturers in their dealings with the United States. On said 6th day of March, 1916, he wrote to the plaintiff the following letter:
    Ward & Co.,
    
      1709 G Street, Washington, D. G., March 6,1916.
    
    Patrick Corr & SoN,
    
      £305 North Eighth Street, Philadelphia, Pa.
    
    GeNtuemeN : I have resigned my position as chief inspector of the Panama Canal to become associated with Ward & Co., manufacturers’ representatives, representing contractors before the Government, and wish to call your attention to the fact that I believe it will be to your interests to have us represent you in connection with yo.ur sales to the Government.
    I am myself interested in your concern, inasmuch as I am fully acquainted with the details as to the waste you have been shipping to the Isthmus and as to. the rejections which have been made on the Isthmus on the last shipment made by you. I also had occasion to read a letter from your attorneys in Philadelphia and believe that this office could be of considerable assistance to you on this particular case.
    While the data above was obtained while in my official capacity as chief inspector, I feel justified in putting the matter up to you, as I feel that we can be of considerable benefit if you care to turn over your business to this concern. I do not believe that the .authorities on the Isthmus are justified in rejecting the waste outright, inasmuch as it was passed on by our inspector and also by the Bureau of Standards.
    If you can positively state that there is no substitution on the material shipped after the inspector had passed it at your factory we believe that we will be able to have the rejection at the Isthmus withdrawn or accepted at a very slight reduction, but do not believe that even this will be necessary.
    Ward & Co., with whom I am now associated, have had more success along the lines of representing contractors than I believe any other concern in Washington. They have a large and efficient organization, and in addition to the experience with which I have had with the Panama Canal, we will be able to represent you legally, as in the organization there is a practicing lawyer employed.
    Furthermore, I believe Mr. Ward has better insight and closer association with the various Government departments than any other representative in the city of Washington.
    Furthermore, I believe that with my experience I will be able to advise you to some considerable extent in case you file another bid for future contracts.
    On account of the large organization that Ward & Co. maintain and with their standing and success they find it necessary to charge a larger commission than ordinarily required by other representatives, but I feel that the benefit the contractor derives from this organization would justify the paying of the same, but, of course, we do not desire to have a commission so large that it will interfere in any way with the manufacturer’s chances of obtaining the award, and in case you consider that the commission paid is a detriment we will consider lowering it to meet the circumstances.
    If, as stated before, you believe that we can relieve you of the distressing circumstances in connection with the last shipment, we shall be very glad to operate for you upon a commission of 5 per cent.
    I shall be very glad, indeed, to refer you to the inspecting engineer of the Panama Canal for reference as to the statements made above, and would feel gratified if you would call on him for same.
    
      As immediate attention- will be necessary if yon desire to have the waste now on the Isthmus accepted, we trust that you will let us have your reply to this at your earliest convenience.
    Yery truly, yours,
    (Signed) J. E. LawtoN, Sales Manager.
    
    Plaintiff did not avail itself of the services of Ward & Co. or Lawton. The fact of the writing of this letter was called to the attention of the Washington office of the Panama Canal and the Secretary of War, and after investigation leave was terminated, the acceptance of the resignation was rescinded, and Lawton was discharged. It is not shown that there was any collusion between Lawton and any of the officials of the Panama Canal having to do with the acceptance or rejection of this waste or that any of them had any knowledge of the writing of this letter or had had any com-immication with Lawton on the subject of this waste except as their official communications to the Washington office might pass through his hands.
    VII. On January 17, 1916, the defendant, by order No. 64690, directed the furnishing under the contract of approximately 50,000 pounds of waste. The goods were inspected at plaintiff’s plant, passed, and shipping authority duly issued. The shipment consisted of 80 bales of a net weight of 50,076 pounds. After receipt and inspection at the canal they were rejected as inferior to contract requirements. An offer to plaintiff to accept at 75 per cent of contract price was rejected. After rejection the Panama Canal used 23,911 pounds of this waste, for which it credited the plaintiff in the general account at 75 per cent of contract price and sol-d the remainder, together with a part of that shipped on order No. 64226, as to which the facts are shown in another finding. (Finding IX.)
    VIII. On January 31, 1916, the plaintiff, by order No. 65090, directed the furnishing under the contract of approximately 25,000 pounds of waste. Pursuant to said order, after inspection at its plant and issuance of shipping authority, the plaintiff provided 39 bales of waste of the net weight of 24,932 pounds, amounting at contract price to $1,745.24, which, upon receipt on the Isthmus, was accepted.
    
      There were 32 days’ delay in the delivery of this shipment, of which it was found by duly authorized authorities that 6 days were chargeable to the Panama Canal and 26 days to the contractor, and on account of said 26 days of delay the contractor was charged with $45.38 as liquidated damages. It was also charged with $13.50 as “ cost of unnecessary inspection trip, material not being ready.” In its general account the defendant credited the plaintiff with $1,686.36 on account of this shipment, but the amount has not been paid.
    . IX. In October, 1916, the defendant shipped to New York 80 bales of waste from that shipped by the plaintiff on order No. 64226 and order No. 64690 and rejected for resale for the account of the contractor. It arrived at New York on October 17,1916, was advertised for sale on October 18, and sold on October 25 at 9 cents per pound for an ascertained weight of 51,711 pounds, a total of $4,653.99. Expenses of transportation, advertising, handling, etc., were charged at $267.57, and the net amount,' $4,386.42, was credited to the plaintiff in defendant’s general account but not otherwise paid.
    X. By order No. 67043, dated April 25,1916, addressed to Dexter P. Lillie Co., Indian Orchard, Mass., the defendant directed the addressee to furnish the Panama Canal “ 75,000 pounds colored cotton waste, per our specification No. 704, and sample submitted by you,” at 10.4 cents per pound “ in accordance with your telegraphic proposal dated April 11, 1916,” shipment to be made on or about May 3, 1916. The telegram referred to was an offer by Dexter P. Lillie Co. to furnish at Colon 70,000 pounds colored cotton waste at 10.4 cents per pound, “ quality like sample by mail marked number eleven fifteen A.”
    This order was filled and paid for and was treated by the Panama Canal as a replacement of orders No. 64226 and No. 64690 for 25,000 pounds and 50,000 pounds, respectively, filled by the plaintiff and rejected. (Findings VI and VII.)
    There was charged against the plaintiff on account of replacement of order No. 64226, 25,000 pounds at the excess cost of 3.4 cents per pound, $850, and it was determined, computing from the date when order No. 64226 should have been delivered by plaintiff to the date of the shipment of the Lillie replacement order, that there had been 92 days’ delay, for which there was also charged against the plaintiff $161 as liquidated damages.
    On the same basis there was charged against the plaintiff on account of replacement of order No. 61690, $1,700 as excess cost of 50,000 pounds and as liquidated damages for 71 days’ delay determined to be chargeable to the plaintiff out of a total delay of 81 days there was also charged against the plaintiff $248.50.
    No advertisement for bids or invitation of any kind to bidders for the furnishing of this waste appear of record and it is not shown, except inferentially, whether the Lillie Co.’s bid was competitive or otherwise. Neither is the comparative quality of plaintiff’s bid sample and of the Lillie bid sample shown otherwise than by correspondence found in the record between the general purchasing officer of the Panama Canal and the Bureau of Standards, as follows:
    R. 1115-A-Waste.
    The Panama Canal,
    Purchasing Department,
    
      Washington, D. O., April 17,1916.'
    Bureau of Standards,
    
      Pierce Mill Road, Washington, D. O.
    
    Sirs : Under the above requisition we have called for quotations on 75,000 pounds of colored cotton waste. Quotations received range from 10£ to 13£ cents per pound. After comparing our samples accompanying the bids we finally concluded that the sample D, at 10| cents per pound, and the sample C, at 10| cents per pound, were inferior to the bid sample under A. C. 1033, while the sample from D. P. Lillie Co., at 10.4 cents per pound, appeared to be equal if not slightly superior to the bid sample under A. C. 1033.
    As we are contemplating making an open-market purchase of this material, on account of a rejection under A. C. 1033, we would request that these three samples which we are now forwarding you to be compared with the bid sample A forwarded you with our letter of July 16,1915, W. 59959, and again referred to in ours of July 17, same order.
    In order to facilitate matters as much as possible we are also sending under separate cover a portion of the original bid sample under Cir. 922, which was the basis of your report on the above sample, under W. 59959, but our reason for referring to your report rather than to the sample is that the bid sample has now been reduced to rather small size on account of the numerous controversies and handling of same.
    It is therefore requested that this matter be given special attention, and, if possible, we be advised by phone.
    Samples should be returned to this office when they have served their purpose.
    Very respectfully,
    
      Major, Corps of Engineers, ü. S. A.,
    
    
      General Purchasing Officer.
    
    DEPARTMENT OE COMMERCE,
    Bureau oe Standards,
    
      ~W ashington, April 19,1916.
    
    The Panama Canal,
    
      Purchasing Department, Washington, D. C.
    
    Sirs: In accordance with your letter of April 17, 1916, we have inspected three samples of colored cotton waste, submitted in connection with your requisition No. B. 1115-A. We beg to submit, as our opinion, the following:
    Sample marked “ Boyal Mfg. Co., C ” is of slightly better quality than sample marked “ Boyal Mfg. Co., D.” The threads are old and dirty. No rags were present. The percentage of colored threads is approximately equaled to that of the bid sample. The sample is inferior to the bid sample.
    Sample marked “Boyal Mfg. Co., D” is composed of old and dirty threads, and strips of rags are present. It is greatly inferior to the bid sample.
    Sample marked “ Dexter P. Lillie Co.” is better than the other two sample submitted, but is slightly inferior to the bid sample. The percentage of colored threads is equal or less than in the bid sample. The yarns are slightly dirty and there are small amounts of rags present.
    Bespectfully,
    S. W. Stratton, Director.
    
    The identity of the samples referred to in the communication quoted is nowhere extraneously shown.
    XI. The orders hereinbefore referred to, issued to, and filled by the plaintiff completed the 300,000 pounds covered by the contract. Thereafter the defendant, under its option to order further not in excess of 50 per cent of 300,000 pounds, placed with the plaintiff orders as' follows:
    No. 65822, March 1,1916, 25,000 pounds, delivery required by April 1, 1916.
    No. 66441, March 30, 1916, 25,000 pounds, delivery required by May 1, 1916.
    No. 67178, May 1, 1916, 25,000 pounds, delivery required by June 1, 1916.
    No. 67696, May 22, 1916, 75,000 pounds, delivery required by June 30, 1916.
    Material for the filling of the first two of these orders was prepared and was inspected at plaintiff’s plant, and on May 4, 1916, plaintiff was notified that “laboratory reports” showed same to be of inferior quality and was asked to advise when it would have new material to offer for inspection “ in accordance with specifications.”
    On May 9 the plaintiff wrote the Washington office of the Panama Canal that it would prepare material covering order Nos. 65822, 66441, and 67178, and would advise when same would be ready for inspection, but on May 16 wrote that they had had a breakdown of their machinery, but expected to have repairs made in a few days, when they would proceed with the orders and advise as soon as ready for inspection.
    A later inquiry from the Washington office of the Panama Canal as to these orders was turned over to plaintiff’s attorney. who, on June 20, wrote stating the rejections were unfair, that goods offered complied with sample, and that rejections were in bad faith. On June 21 plaintiff was notified that if material was not offered for inspection under these three orders by June 26, plaintiff’s right to deliver would be canceled and purchase against account made in the open market, and on June 27, goods not having been submitted for inspection, plaintiff was notified that right to make delivery under said orders were canceled and that purchase would be made in the open market, and excess cost, together with liquidated damages, charged to plaintiff.
    The Lawton letter had been called to the attention of the Secretary of War, and during the period of the pendency of these three orders there had been conferences between plaintiff’s representatives and the Secretary of War as to rejections of goods furnished. The plaintiff believed there was some connection between the Lawton letter and the rejections of order Nos. 64222 and 64690, and that it was not fairly treated in the matter of inspections. After an investigation because of the Lawton letter the Governor of the Panama Canal and the Assistant Secretary of War both found and reported that there was no collusion and no bad faith in the inspections.
    Plaintiff never at any time tendered for inspection or made delivery of the goods called for by order No. 67696, but refused to furnish the same, and on September 22,1916, plaintiff was notified that its right to make delivery under said order was terminated and that purchase would be made in the open market, and excess cost, together with liquidated damages, charged against its account.
    XII. On June 21, 1916, a “ bulletin ” was issued from the purchasing department, Panama Canal, Washington office, addressed to nine concerns in the waste business, requesting quotation of prices, with date of proposed delivery at Colon, on—
    “75,000 lbs. waste cotton, colored; in accordance with specifications shown under class 1, Circular 922, and general conditions of that circular so far as applicable. Copy of Circular 922 and I. C. C. Std. Spec. 704 inclosed herewith.”
    The “bulletin,” among other things, also stated:
    “Wherever practicable, it is desired that quotations be accompanied by samples, otherwise by cuts and descriptions. When samples or cuts are submitted bidders must state in what point, if any, the articles do not comply with the requirements of the specifications; in all points not thus specifically mentioned the requirements of the specifications will be held to govern.”
    Bids with samples were submitted from four bidders, one bidder submitting four samples at different prices, O’Neil Bros, submitted a sample, afterwards numbered “ 9,” at a bid price of 11 cents per pound. Bidders were requested to furnish further samples with quotations, which they did, O’Neil Bros, furnishing a sample, afterwards marked “ 10,” at 11 cents per pound. Samples were submitted to tbe Bureau of Standards for examination, it being stated in tbe communication of the general purchasing officer to tbe Bureau that “in view of tbe fact that we are making an open market purchase of the above with the idea of charging the difference, if any, against the contractor under the original A. C. 1033, it is especially desired that we should not at the present time purchase waste superior to that shown by the original bid samples, etc.” The Bureau of Standards reported July 13, 1916, that “in our opinion, samples No. 8 and No. 10, submitted by Lillie & Co. and O’Neil Bros., respectively, are equal in every way to the standard sample.”
    On July 17, 1916, an order was sent O’Neil Bros, requesting them to supply the Panama Canal with “ 75,000 pounds waste, cotton, colored, in accordance with specifications shown under class 1, circular 922, and general conditions of that circular so far as applicable,” at 11 cents per pound, “per samples submitted by you,” shipment to be made on or before July 27, 1916.
    The goods were furnished, accepted, and paid for, and there was charged against the plaintiff as excess cost on replacement of orders 65822, 66441, and 67178, 75,000 pounds, at a difference in cost of 4 cents per pound, $3,000. There was also charged against the plaintiff on account of delays in delivery $203 for 116 clays’ delay under No. 65822, $150.50 for 86 days’ delay under No. 66441, and $96.25 for 55 days’ delay under No. 67178, a total, as liquidated damages for delays, of $449.75.
    XIII. By order No. 71126, dated October 14, 1916, the Panama Canal purchased from the Royal Manufacturing Co. 75,000 pounds of waste at ll-§ cents per pound for replacement of order No. 67696 placed with plaintiff (Finding XT) but refused and not filled.
    No notice to dealers requesting bids for the furnishing of this replacement order appears in the record, and it is not shown that any such notice by publication or otherwise was given. At the time the R'oyal Manufacturing Co. was making deliveries of waste to the Panama Canal under an annual contract for the fiscal year ending June 30,1917, as to which it had bid for the furnishing of 300,000 pounds, the amount specified in the Panama Canal’s circular asking for bids, but was only called on to furnish 150¿000 pounds. On September 23, the Eoyal Manufacturing' Co., acknowledging receipt of a request of September 22 for quotation on 75,000 pounds of colored cotton waste, wired a quotation of 11-J cents per pound “ in accordance with material agreed upon and delivered on contract sixty seven eight hundred two ” and confirmed the telegram by letter in which it referred to the fact that the “ test department ” had decided favorably on the quality of the waste it was shipping under contract No. 67802 (which was its pending annual contract referred to), and stated that it therefore deemed it unnecessary to forward samples but had made quotation on the quality being furnished under that contract. A sample was thereafter furnished on request.
    In submitting proposals for furnishing the 300,000 pounds of waste to be furnished during the fiscal year 1917, contract No. 67802, the Eoyal Manufacturing Co. submitted four samples at different prices, of which the Panama Canal selected and placed its order for the highest grade. The waste furnished under this contract and upon which that company’s bid for the replacement order of 75,000 pounds was predicated was 65 per cent white threads. The Isthmian Canal Commission’s “ Standard Specifications for Waste” No. 704, specified for colored cotton waste a mixture of “ equal parts by weight of white and colored new cotton threads.” A greater percentage of white threads was one of the elements of a higher grade waste. The Bureau of Standards, on October 12, 1916, reported to the Panama Canal as to certain 'samples of waste submitted to it, stating that “ The Eoyal Manufacturing Co.’s sample was considered to be slightly superior to the bid sample.” The Eoyal Manufacturing Co. then had no contract with the Panama Canal or bid pending for furnishing waste thereto other than its contract No. 67802 and its bid of September 23 for the replacement order ‘of 75,000 pounds. The waste ordered of the Eoyal Manufacturing Co. by order No. 71126 for replacement of plaintiff’s rejected order No. 67696, was superior in quality to that which plaintiff contracted to furnish under A. C. 1033.
    
      On account of this purchase of 75,000 pounds of waste of the Koyal Manufacturing Co. by order No. 71126, at 11-J cents per pound, against the account of plaintiff contractor, the Panama Canal charged against the plaintiff $3,093.75, as the additional cost of said waste over the contract price of 7 cents per pound, and also charged against the plaintiff as liquidated damages for 147 days’ delay the sum of $771.75.
   Downey, Judge,

delivered the opinion of the court:

The plaintiff sues upon a contract made July 8, 1915, with the Panama Canal, for the delivery at Colon of 300,000 pounds of colored cotton waste with option in the latter to order such additional quantities as might be required not exceeding 50 per cent of the estimated quantity. The contract was an annual contract, i. e., for a fiscal year, and the estimated quantity referred to in the contract evidently was to meet the estimated needs for the fiscal year ending June 30,1916.

There were deliveries, acceptances, payments, acceptances without payment, deductions of liquidated damages for delay, rejections and purchases in the open market against the account of the contractor. The case involves a determination of the proper items of debit and credit as between the parties and a statement of account. Details as to the various transactions are set out in the findings and will not be repeated here except as they naturally enter into the discussion of questions involved.

The construction of the contract in one respect is material. it refers in its preamble to “ Circular Invitation No. 922,” and in Article I it recites that the contractor agrees to furnish “in accordance with the requirements of the invitation for proposals and the specifications contained in circular of the Panama Canal No. 922, dated April 26, 1915, which invitation and specifications are made a part hereof,” but in describing what it is that the contractor is to furnish the language used is “ 300,000 pounds, waste, cotton, colored, in accordance with sample ‘A’ submitted by the contractor with proposal.” It is contended by the defendant that the waste to be furnished was. not only to be in accordance with the sample submitted but also in accordance with certain specifications; but the specifications mentioned in the. contract are said to be specifications contained in Circular No. 922, and it is shown in the findings that Circular No. 922 is not in evidence. Certain specifications called “ standard specifications for waste ” contained in a small pamphlet numbered 704 are found in the files, and the record shows they were introduced in connection with the testimony of one of the witnesses, but it is not shown that they are the specifications which were contained in Circular No. 922 or were ever submitted to this contractor. It is found as a fact that the parties treated the contract as a.contract to furnish goods according to bid sample and we are of the opinion that it must be so construed.

The inference from the record is that in all these transactions some sort of specifications were probably sent to the bidders for their guidance, but it appears that in every instance with which we have to do in this case the bidders were requested to furnish samples with their bids, and the bids were predicated upon samples furnished by the bidders in every case except one in which the bidder, being then engaged in furnishing waste under a contract, thought it unnecessary to submit another sample. This procedure was the natural one in view of the fact that different grades of waste are not “ standard,” and the best method of determining the quality of the article which the bidder was proposing to furnish was to require him to submit a sample with his bid. The language of the contract in its reference to specifications is not the only respect in which inappropriate phraseology is used, and there is ample ground for the inference that in this case, as in many other instances coming to our attention in connection with governmental contracts, the unfortunate practice prevailed of using a form prescribed for the general purpose without modifications to suit the particular case. There is no question as to the fact that the contract was treated by the parties as a contract to furnish waste in accordance with a bid sample, and it must be so construed.

Several of the transactions under this contract are not for consideration because the goods were delivered, accepted, and paid for. The first item as to which there was any controversy was as to a shipment under order No. 62743 in connection with which the plaintiff was charged with liquidated damages in the sum of $32.42 because of 19 days’ delay in delivery which, out of a total delay of 36 days, it was determined by authorized officials of the Panama Canal was chargeable to the plaintiff. Plaintiff returned the voucher because of said deduction, protesting that it was not responsible for the delay, and the amount conceded to be due, namely, $1,673.83, was never paid.

The matter of deductions by way of liquidated damages because of delays in delivery is involved to a greater or less extent in all of these transactions, and the conclusion as to one will suffice as to all. The contract provided that one-tenth of 1 per cent of the contract price of each article should be deducted as liquidated damages for each day’s delay in delivery but that for delays not the fault of the contractor but caused by the Panama Canal or because of other specified causes, the contractor should be allowed an extension of time equivalent to the delays so occasioned, the extent of such delays for which the contractor was to be granted an extension of time to be determined by the governor of the Panama Canal or his authorized representative. The principle applicable has been thoroughly settled in many cases. The parties created a tribunal to determine the responsibility for delays, and in the absence of bad faith or such gross error as justified the inference of bad faith, they were bound by the determination of that tribunal. The principle is so well established that it is not necessary to attempt to cite all the authorities sustaining it. We refer to United States v. Gleason, 175 U. S., 588; Carstens Packing Co. v. United States, 52 C. Cls., 430; Fitzgibbon v. United States, 52 C. Cls., 164; Plumley v. United States, 43 C. Cls., 266; 226 U. S., 545; and cases cited.

Order No. 63475 for 25,000 pounds of waste, on which there was a delivery of 25,922 pounds net, amo.unting at contract price to $1,814.54, and a deduction of $7.26 on account of four days’ delay found to be chargeable to the contractor, is another case in which the deduction because of delay was the only question involved. On account of that shipment there was conceded to be due the plaintiff $1,807.28 which was not paid.

The first rejection occurred in connection with order No. 64226, upon which there was a delivery of 25,173 pounds net, the order having been for 25,000 pounds. It was very shortly after the rejection of this shipment that plaintiff received from J. E. Lawton, theretofore connected with the Washington office of the Panama Canal and then associated with Ward & Co., of Washington, the latter set out in Finding VI. This letter probably caused much of the trouble between the parties as to the further performance of this contract, for it reached the plaintiff at about the time they were first informed of the rejection of this shipment, and they were suspicious, probably not without apparent reason, that there was some connection between the rejection of their goods on the Isthmus and the writing of this letter. The writing of such a letter under the circumstances was unquestionably reprehensible for the use against the United States, as too frequently happens, by one formerly connected with the public service, of information acquired therein is certainly .to be condemned. But to the credit of the Washington office of the Panama Canal and the War Department it is to be said, as shown 'in the findings, that when attention was called to this letter a careful investigation was made not only in Washington, under direction of the Secretary of War, but on the Isthmus, under direction of the governor, and the conclusion was reached that there was no possible connection between the writing of that letter and the rejection of goods on the Isthmus. The record outside of the letter itself fails to show any relationship whatever between the two transactions, and it can not justify a conclusion of bad faith in connection with the rejections.

Under order No. 64690, directing the shipment of 50,000 pounds of waste, shipment was made of 80 bales of the net weight of 50,076 pounds, which upon receipt and inspection on the Isthmus were rejected as inferior to requirements. What has been said with reference to rejection of the former order applies equally to this one, and it may be added that there is nothing in the record as to either rejection justifying a review by tliis court of the action of the officials of the Panama Canal in that respect.

On No. 65090 directing the furnishing of 25,000 pounds of waste, shipment was made of 39 bales of a net weight of 24,932 pounds, which were accepted. There •was a charge against the contractor on account of liquidated damages, for 26 days of delay, of $45.38" and also a charge against the contractor of $13.50 on account of expense of an unnecessary inspection trip made by an inspector of the Panama Canal to the plaintiff’s plant. The deduction on account of liquidated damages is not for review, and that amount is. to be deemed as properly chargeable against the contractor. We find no provision in the contract which justified the charge for an unnecessary inspection trip. Deducting from the amount of this shipment at contract price the amount charged as liquidated damages there was due the contractor $1,699.86, which was not paid.

The shipments thus far discussed covered the 300,000 pounds specified in the contract, and it may be well to consider the further procedure with reference to these transactions before taking up subsequent matters. Out of Order No. 64226 the Panama Canal used 1,267 pounds after rejection of the order, and out of Order No. 64690 after rejection it used 23,911 pounds, a total of 25,178 pounds. After these rejections the Panama Canal had proposed to the contractor to accept the shipments at 75 per cent of the contract price, which proposition was rejected by the contractor, and in its stated account the defendant credits the contractor with this amount of waste at 75 per cent of the contract price. There can scarcely be any justification for this adjustment as to the waste used, and indeed counsel for the defendant upon argument of the case admits that that basis 'is not tenable and that the contractor should be credited with the amount of waste used at the contract price. We do not agree with this view of the situation. The defendant might have accepted the waste and paid for it at the contract price, but it saw fit to reject it and after rejection to appropriate it to its own use. It became bound, therefore, to pay not the contract price but the value of the goods. It appears in the findings, a matter hereinafter to be mentioned, that the remainder of these two shipments was sent to New York and sold in the open market for the account of the contractor and was sold at 9 cents per pound. We think this fairly establishes the market value of this waste and that the plaintiff is entitled to recover the value of said 25,178 pounds at 9 cents per pound, being $2,266.02. Of the remainder of said two shipments the defendant sold in New York 51,711 net pounds at 9 cents per pound, amounting to $4,653.99, as against which it charged expenses of transportation, advertising, handling, etc., amounting to $267.57, and it goes without argument that the plaintiff is entitled to credit in the net amount of $4,386.42.

The plaintiff not having furnished other goods in replacement of that rejected under orders No. 64226 and No. 64690 dated April 25, 1916, the Panama Canal by order No. 67043 dated April 25, 1916, purchased of Dexter P. Lillie Co. “75,000 pounds colored cotton waste, per our specification No. 704 and sample submitted by you ” at 10.4 cents per pound, which it treated as a replacement of orders No. 64226 and No. 64690, and charged against the contractor the additional cost of 3.4 cents per pound. It also charged against the contractor $161 as liquidated damages for 92 days’ delay on account of order No. 64226 and $248.50 as liquidated damages for 71 days’ delay on account of order No. 64690. If these purchases were authorized against the account of the contractor and justified a charge back under the facts found, it may be said that there is no room for afiy question as to the charges for liquidated damages for delays. Because of the unsatisfactory condition of the record as to this purchase from the Lillie Co., there is perhaps some room for question as to the right to charge back the excess cost against this contractor. It might be inferred from the record that before this order was placed with the Lillie Co. bids had been solicited, so that there was competition, and that the goods purchased from the Lillie Co. were substantially the same goods which the contractor had failed to furnish, and that the whole procedure was such as justified a charge back. However, the record does not show that the Lillie Co.’s bid. was submitted in competition by virtue of any advertisement or request to bidders, and it is not very satisfactorily shown that the sample upon which the Lillie _ Co. predicated its bid was substantially of the same quality as plaintiff’s bid sample. The findings set out a communication addressed by the Panama Canal to the Bureau of Standards and the reply of the Bureau of Standards from which the conclusion is probably justified that bids other than that of the Lillie Co. were received and that there was a comparison by the Bureau of Standards of the Lillie sample with plaintiff’s bid sample and that the Lillie Co.’s sample was substantially of the same quality or at least superior to plaintiff’s bid sample.

In this connection it is perhaps desirable to consider the use of a particular word in the contract and the meaning to be given it, since there are also other transactions to be hereafter mentioned whose status must be somewhat affected by the interpretation to be placed upon the contract in this respect. We take it to be the well-established rule that in transactions such as those involved in the instant case purchases in the open market as against the account of the defaulting contractor must be purchases of substantially the same articles, so made as reasonably to conserve and not be unnecessarily prejudicial to the contractor and that the purchase of an article substantially different in quality, if in connection therewith a higher price is paid therefor, does not justify a charge back against the defaulting contractor. The principle is well recognized, although the case is different in its nature, by the rather recent case of the California Bridge & Construction Co., decided first by this court, 50 C. Cls., 40, and affirmed by the Supreme Court in 245 U. S., 387. It is in this connection that we must consider the effect, if any, of the use in the contract of the word “similar.” The contract does not contain any such specific provision as is frequently found with reference to open-market purchases as against the account of the contractor, but it recognizes such a right and the question is whether or not the use of the word “ similar ” requires, in determining the rights of the parties, any departure from the ordinary legal rule. We take it that in dealing with contracts for the furnishing of articles such as are here involved the purchase of a “similar” article would not necessarily be sufficient to justify a charge back against the contractor.

The contract, in its provision with reference to liquidated damages for delays, contains the language “ or until such time as the Panama Canal may reasonably procure a similar article elsewhere ” and in its further provision with reference to a charge back against the defaulting contractor uses the language “ by reason of any default on the part of the contractor, purchases similar articles elsewhere.” The conditions which would result if we were to give force to the broad meaning of the word similar in a case like this is sufficient to at least raise a serious question about whether such a use of the word was intended. It appears that different grades of waste are in no sense “ standard ” grades, and if the purchase as against the account of the defaulting contractor of a similar article was sufficient to justify a charge back, the contractor in default under his contract requiring the furnishing of a very low grade of waste might be charged with the excess cost of a much superior grade purchased in the open market because it could scarcely be disputed that any grade of colored cotton waste is similar to any other grade thereof. Notwithstanding this condition we might be required to give force to the use of the word in its broadest interpretation if no other explanation thereof could be found. But we have already, in connection with another question calling for an interpretation of the contract, suggested the apparent use in this case of a form contract prepared for general purposes without modifications to suit the particular case. The contract repeatedly uses the word “ articles ” and also the words “ articles or materials to be furnished hereunder,” so that it is apparent the contract was not written with specific reference to the goods to be furnished in this instance. If, for example, the contract had been for a manufactured article which, as is frequently the case, was made by but one manufacturer and there was default in the performance of the contract, it would be plainly apparent that purchase of the same article in the open market against the account of the defaulting contractor could not be made, but if there could be found other articles made by other manufacturers for the accomplishment of the same purpose and substantially the same in their construction and value it is quite apparent that there would be reason and necessity for a recognition of the right to purchase as against the defaulting contractor not the same but a similar article. We are of the opinion that the use of the word “ similar ” in this contract is of no particular significance and does not change the legal rule with reference to open market purchases as against the account of defaulting contractors.

Under the facts found with reference to this repurchase of the Lillie Co. it is to be admitted that the conclusion to be reached may not be free from doubt, but it is our judgment that the purchase was so made and of such a quality of goods as to justify a charge back against the contractor of the excess cost.

It appears that after the completion of the transaction, so far as the estimated quantity of waste to be furnished was concerned, the defendant elected further to order under its option to purchase such additional quantities as might be needed not in excess of 50 per cent of the estimated quantity, and we conclude that there was no doubt of the right of the defendant so to do. Pursuant thereto it placed with the plaintiff company three orders numbered 65822, 66441, and 67178 for 25,000 pounds each, as to all of which, without discussing in detail the facts found with reference thereto, it is sufficient to say the plaintiff, was in default. The right of the plaintiff to furnish under these orders was duly terminated by the Panama Canal as provided by the contract, and a purchase of 75,000 pounds of waste was made from O’Neil Bros, at 11 cents per pound and a charge of excess cost and of liquidated damages for delays in deliver}'- made against the plaintiff. It appears from the record as to this transaction that a bulletin was issued by the Washington office of the Panama Canal, addressed to nine concerns engaged in the waste business, requesting quotation of prices, that there were several bids with which samples were submitted, a submission of samples to the Bureau of Standards with the specific statement that an open-market purchase was to be made against the account of the contractor, and that it was especially desired that purchase should not be made superior in quality to the plaintiff’s bid sample and a report by the Bureau of Standards that two samples submitted, one of which was that of O’Neil Bros., “ are equal in every way to the standard sample.” There was particular care used in this transaction to procure competition and to limit the purchase to the quality of goods the plaintiff was required to furnish, and we find nothing in the record which could raise any question about this transaction and its effect, unless it were to be said that the finding of the Bureau of Standards that the O’Neil Bros, sample was “ equal in every way ” to the plaintiff’s bid sample gave room for the assumption that it did not refute the idea that the repurchase was of superior quality. But upon all the facts found we have no doubt that as to this purchase there was authority to charge back against the contractor the excess cost and also liquidated damages for delays in delivery as indicated in the findings.

Another order, numbered 67696 and dated May 22, 1916, for 75,000 pounds of waste was addressed to the plaintiff, and the. plaintiff declined delivery thereunder. Thereupon the Panama Canal purchased from the Boyal Manufacturing Co., by order No. 71126, dated October 14, 1916, 75,000 pounds of waste at ll-J- cents per pound, as a replacement order against plaintiff’s order No. "67696. As to this transaction it is not shown that there was any notice requesting the submission of bids, but it appears that the Boyal Manufacturing Co. was then engaged in furnishing waste to the Panama Canal under an annual contract which had been let to it providing for the furnishing of 300,000 pounds of waste during the fiscal year 1917, and it submitted its bid upon the basis of the waste it was then furnishing under its annual contract, stating that its goods had already been passed upon favorably by the “ test department,” and it therefore deemed it unnecessary to forward a sample. We think it satisfactorily appears that the waste which the Boyal Manufacturing Co. was furnishing under its annual contract for 1917, and which was the basis of this repurchase order, although a sample was submitted subsequent to the bid, was of a superior quality to that which the plaintiff was required to furnish under its contract. The report of the Bureau of Standards was to the effect that the Royal Manufacturing Co.’s waste was “ slightly superior ” to the bid sample. The testimony shows that the waste it was furnishing contained 65 per cent of white threads. The standard specification of the Panama Canal, which it is to be presumed was submitted to bidders for their guidance in furnishing samples and bids, provided for 50 per cent of white and colored threads, and the testimony shows, as indicated in the findings, that a greater percentage of white threads made a superior grade of waste. It seems thus the conclusion must be with reference to this transaction that there was no proper basis for a charge against the contractor of the exaess cost of this waste, and that conclusion must carry with it also the attempted charge of liquidated damages because of delay. The conclusion with reference to this matter upon this basis renders it unnecessary to give any consideration to the fact that this order was placed in October, 1916, long after the commencement of this action. The conclusions of law have stated in detail the result necessarily following in the adjustment of the accounts as between the parties, and there need not be repetition here.

The plaintiff is entitled to judgment in the sum of $5,424.16.

Graham, Judge, Hay, Judge, Booth, Judge, and Campbell, Chief Justice, concur.