#### THE CAMDEN IRON WORKS v. THE UNITED STATES.

[No. 30307.

Decided March 15, 1915.]

*On the Proofs.*

On the 16th day of June, 1905, plaintiff entered into a contract with the Ishthmian Canal Comission for and on behalf of the United States, by the terms of which it undertook at prices stipulated to furnish and deliver to said commission at Colon, Isthmus of Panama, certain specified material. Said materials were to be delivered on or before the 30th day of September, 1905, but there was delay, the last delivery being made on the 9th day of February, 1906. On April 5, 1906, the said commission, without making any claim or deduction -on account of said delay, paid the balance due for the materials, including the 10 per cent retention provided for in the contract, and no claim for damages was ever asserted by said commission until on or about April 1,1907, when said commission in making settlement with the plaintiff for balance due under a second and *192different contract, deducted $1,000 as and for damages due under the first contract.

I. The payment of the whole amount due under the first contract was a final settlement of all matters connected with that contract and can not be later questioned, except for fraud or mistake of fact.

II. Where there is no liquidated-damage clause in a contract and no provision for a penalty, except a provision authorizing the Government to take the *contract away from the*contractor in case of default, under which no action was taken, the only claim for damages on account of delay is that provided by the common law.

*The Reporter’s*statement of the case:

*Messrs. Barry Mohwi*and *Preston Gatley*for the plaintiff. *Maddox c& Gatley*were on the briefs.

A time limitation in a contract may, and often is, in cases with the Government, waived with the assent of both parties, but each and all of the other provisions of the contract remain in full force. *Gleason*v. *United*States, 33 Ct. Cls., 65-86; *Pigeords case,*27 Ct. Cls., 167, 175.

In *Paddoeh et al.*v. *Stout et al.,*121 Ill., 571, the owner of a mill allowed a contractor who had engaged to remodel and repair the same to proceed with the work after the time expressed in the contract fixed for its completion, and, on its completion, accepted the work, made partial payment, and gave his notes for the balance due on the contract. It was held that such action on the part of the owner constituted a waiver *of the time of performance as provided in the contract. At page 577 the court say:

“Sower Bros, permitted appellees to proceed with the work after September 15, 1883, and accepted the work when it was finished a month later, on October 15, 1883. They also made partial payments of the $5,000 after September 15, 1883. A payment of $521.06 was made on December 17, 1883, and another of $521.07 on January 16, 1884. After the default, they also gave their notes for the $1,600. Under the decisions of this court, these circumstances amounted to a waiver of the time of performance fixed by the contract.”

See also *Pinclcney*v. *Dambmann,*72 Md., 173; *Manufactures Go,*v. *U. S.,*17 Wall., 592,

*193As long as tbe Government accepted tbe material, claimant was entitled to compensation, because in tbe event of anj deficiency the Government was given tbe right to immediately supply tbe deficiency by purchase in tbe open market. In other words, the measure of damages was a part of tbe contract; it was valid and binding and was exclusive. Authorities in support of this are numerous and cover tbe period of our Nation’s existence. For example *see American Surety Go.*v. Woods, 105 Fed. Kep., 741. The opinion of tbe Circuit Court of Appeals in that case is directly in point. The following from the syllabus discloses tbe facts and tbe ruling of tbe court thereon:

“A contract for the doing of certain work, which provides that in case of delay in doing the work the employer may take charge thereof and complete it at the cost of the contractor, not only provides the measure of damages for the breach of the contract by the contractor if he shall fail to complete the work, but also the manner in which, the amount of such damages shall be ascertained; and under the provision of Bev. Civ. Code La., art. 1934, that ‘ when the debtor has been guilty of no fraud or bad faith he is liable for only such damages as were contemplated, or may reasonably.be supposed to have entered into the contemplation of the parties at the time of the contract,’ on the failure of the contractor to complete the work, without fraud or bad faith, the employer can not recover as damages for breach of the contract the difference between the contract price and the cost of completing the work, as estimated by experts, where it abandoned the work, and in fact expended no money in its completion.”

The reference to the provision of the Code of Louisiana does not affect the matter, because it is only the expression of the rule of law on the subject of damages as laid down by the Supreme Court of the United States. *Globe Refining Go.*v. *Landa Cotton Oil*Go., 190 U. S., 540.

The opinion in the case of *American Surety Go.*v. Woods, *supra,*concludes as follows:

“ This provision of the contract can not be ignored in deciding this question. The provision seems to have been made for the benefit of both parties. It gave to the sewerage company the right and power to take charge of the sewers and finish them on account of the delay of failure of the contraq-*194tors. On the other hand, it secured to the contractors any sum that might be left of the unpaid contract price after the sewerage company had paid for the completed work. It also fixed and limited their liability for damages on account of their failure to finish the work, so far as this item of damages is concerned, to such excess as the sewerage company would have to pay over the contract price. This clause of the contract, conceding a different rule to prevail in its absence, rescued the case from the uncertain and speculative control of expert witnesses, and applied to it the practical test of actual cost. This secured to the contractors and their surety a valuable right. They should not be deprived of it. From the contract in this case, having due regard to section 19 of it, we do not think it can ‘ reasonably be supposed ’ that the parties contemplated that for a failure by the contractors to finish the work they, were to be held liable for any outlay which might be required to complete it, before the sewerage company was at any expense on that account.”

The court refers to and quotes from the opinion in the case of *Hunt*v. *Railroad Go.,*86 Fed. Kep., 481, which is in entire accord.

See also *MoMoran*v. *Hall,*126 Mich., 515; *Anglo-Wyoming Oil F. Go.*v. *Miller,*117 Ill. App., 552, aff. 216 Ill., 272; *Hax*v. *Hax,*84 Mo. App'., 306; *Jadkson*v. *Hunt,*76 Yt., 284; *Childs Lumber <& Mfg. Go.*v. *Page,*32 Wash., 250; *Zachary*v. *Swanger,*1 Ore., 92; *Tyler*v. *Marsh,*1 Day (Conn.), 1; *Dunham*v. *Haggerty,*110 Pa. St., 560.

*Mr. P-. M, Gox,*with whom was *Mr. Assistant Attorney General Huston Thompson,*for the defendants.

In the case of *Florida Central <& Peninsular Railroad Gompo/ny*v. *The United States,*43 C. Cls., 573, the accounting officers deducted from balance due under a subsequent contract, damages which had accrued under a prior one because of personal injuries sustained by soldiers and the loss of arms and accouterment consequent upon the wrecking of claimant’s train. The court, citing *Wisconsin Central Railroad Company*v. *United States,*164 U. S., 190, held that loss suffered by the Government may be set up by way of counterclaim in a suit brought by the same railroad on a distinct transaction.

In *WeeWs case,*45 Ct. Cls., 409, the contract provided that in case of failure of the contractor to comply with his con*195tract the Government shall “have the power to complete the work at the expense of the” claimant. The court held that “this provision of the contract did not obligate the Government, in case of such failure, to complete the work even at the expense of the claimant, but gave it the power to do so if deemed best for the public service.”

In *Rosser's*case, 46 Ct. CIs., 193, Mr. Justice Booth said-:

“ The waiver of the time limit fixed in the contract was a waiver of the right of forfeiture. Defendants had a right to grant or to refuse to grant an extension of time, irrespective of damages resulting therefrom. *Page on*Contracts, vol. 3, p. 2317 et seq.; *Phillips*v. *Seymour,*91 U. S., 646.”

In *Williston et al.*v. *Mathews et al.,*55 Minn., 422, it was provided in the contract that if a material man did not furnish timber according to contract, the contractor might buy it in the open market and charge the necessary expense to the subcontractor’s account. This provision was held to be merely optional with the contractor and not a stipulation for an exclusive measure of damages.

Page in his work on Contracts lays down the rule as follows :

“ Permitting or requiring contractors to complete a building after the time limited for performance, or accepting goods delivered after the time fixed for performance, does not waive damages for such delay. *Page, Cont.,*sec. 1509.”

See also numerous cases to same effect collected in 54 L. B. A., 718.

In *Sedgwick on Damages,*sec. 656, 9th ed., the author says:

“ Where work is to be done within a certain time, the employer, by allowing it to go on after the time has expired, waives his right to rescind on that account and can only claim such damages from the employee as he may have sustained by the delay. But other objections are not thereby waived. Where the work accepted was in an incomplete state, the contract price is to be reduced by the sum required to complete it. But where it was completed, but lacking in quality, the contract price is to be reduced by the difference in value of the work as it should have been by the contract and as it actually was.”

*196In *J. & A. R. R.*v. *Woodworth,*26 Fla., 368, 379, which involved a contract for the construction of a pavilion at Pablo Beach by a day certain, the court said:

“ By the terms of the contract the pavilion at Pablo Beach was to have been completed on the first day of October. The plaintiff, Woodworth, continued subsequently to prosecute the work. From his doing so, and the mere assent thereto (whether express or implied) by the railroad company, no modification, waiver, or abandonment of the contract as to any other of its features than that of the time for completing the building was to be inferred. *Benjamin's Principles of Contract,*139; *Phillips*v. *Seymour,*91 U. S., 646; *Stewart*v. *Keteltas,*36 N. Y., 388; *Cooke*v. *Murphy,*70 Ill., 96. See also *Jeffrey Mfg. Co.*v. *Cent. C. <& I. Co.,*93 Fed., 408; *Schweichhart*v. *Stuewe,*71 Wis., 1; *Fish*v. *Tanh,*12 Wis., 306.”

In *Phillips, etc., Const,*v. *Seymour et al.,*91 TJ. S., 646, 651, it was said:

“ If the builder has done a large and valuable part of the work, but yet has failed to complete the whole or any specific part of the building or structure within the time limited by his covenant, the other party, when that time arrives, has the option of abandoning the contract for such failure or of permitting the party in default to go on. If he abandons the contract and notifies the other party, the failing contractor can not recover on the covenant, because he can not make or prove the necessary allegation of performance on his own part. See also *Dermott*v. *J ones,*23 How., 220, 235.”

In *Clark*v. *The United States,*6 Wall., 543, 545-546, appealed from this court, it was said:

“ The contract declares no penalty for not completing the work by the 15th of July. It does not. even authorize the Government to forfeit the contract or to terminate it. The utmost that can be claimed for this failure is such damages as it may have sustained because the work was not finished in time.”

In the departmental case of *Satterlee, Admx., et al.*v. *The United States,*30 C. Cls., 31, 48-49, the Secretary of the Treasury propounded the question whether the claimants are indebted to the United States on account of additional expenses incurred by it for engineering and inspection dur*197ing the period covered by the several extensions of the contract. That question was answered as follows:

“ The court finds that in consequence of the extension of the time within which the work was completed, made at the instance of the contractor, the increased cost to the United States by the additional expense of engineering and inspection is the sum of $3,380.83, for which the claimants are liable, and is a proper claim for recoupment from money otherwise due the claimants under said agreements. See also *N. J. Foundry*cfi *Machine Go.*v. Z7. *S.,*44 C. Cls., 570, 580.

Sedgwick on Damages, 7th ed., Yol. I, p. 461, quotes the following from the case of *Bragg et ad.*v. *Town of*Bradford., 33 Vt., 35, on the measure of damages in case of failure to perform in accordance with the contract stipulations:

“The party failing to perform can only recover such a sum as his labor has benefited the other party. Had he strictly and literally kept his agreement, he would have been entitled to the contract price.”

Barney, Judge,

reviewing the facts found to be established, delivered the opinion of the court:

On the 16th day of June, 1905, the claimant entered into a contract with the Panama Canal Commission to deliver at Colon, in the Canal Zone, certain steel pipes, valves, etc., of different sizes, such delivery to be completed on or before September 30 of the same year. The claimant delayed in the performance of this contract, making its deliveries of such material in the following months of October, November, December, and January, the last delivery being made the 9th day of February, 1906. On the 5th day of April, 1906, the disbursing officer of the Panama Canal Commission paid the claimant the full contract price agreed to be paid by the terms of said contract. It appears by the findings that the material provided for in said contract was used by the Panama Canal Commission in the installation of water systems at different points in the Canal Zone, although there is nothing in the record to show that the claimant had any knowledge of such purpose at the time of the execution of the contract. During said period of delay the agents of the Panama Canal Commission, both by telegram *198and mail, were repeatedly urging tibe claimant to hurry along said material and calling attention to the urgent necessity for the same.

On account of such delay said water systems were installed three months later than they otherwise would have been. In consequence said commission brought water in tank cars from a distance at considerable expense in order to supply the inhabitants of said cities with suitable drinking water. The findings show that said delay was the occasion of additional expense in other ways not necessary here to mention.

On the 18th day of December, 1906, the claimant entered into another contract with said commission to deliver the same character of material, which latter contract was fully and satisfactorily performed. April 1, 1907, said commission, in making settlement with the claimant for the balance due under said last contract, deducted from said balance the sum of $1,000 as damages, claimed to have been sustained by the United States growing out of the delay in the performance of said first contract.

By their answer in this case the defendants set up a counterclaim for $8,182.34, the same being the damages for delay which it is claimed is due under the first contract over and above the $1,000 deducted from the amount due under the last contract, as before stated. We do not think the counterclaim of the defendants can be sustained for two reasons:

I. The payment of the whole amount due under the first contract was a final settlement of all the matters connected with that contract and can not now be questioned, except for fraud or mistake of fact, and there is no evidence in the case indicating either. In fact, all of the material called for by the first contract was delivered two months before the final payment was made, when the Panama Canal Commission must have been fully informed as to what damages had then been sustained by reason of delay in the delivery of the material and as to what further damage was likely to occur. If the commission made any mistake as to the latter item, it was its own fault and the claimant is not to be made responsible for it.

*199This payment by the defendants was a voluntary payment and, as before stated, can not now be questioned except for fraud or mistake of fact. The books are full of authorities to the point that when such adjustments are made they will not be disturbed by the courts unless for fraud or mistake. *Brown’s Legal*Maxims, 222; *Elliott*v. *Swartout,*10 Pet., 137; *United States*v. *Corliss Steam Engine Co.,*91 U. S., 321; *Griffith*v. *United States,*22 C. Cls., 165; *United States*v. *Freeman,*3 How., 564; *Arthur*v. *United States,*16 C. Cls., 422; *Wunsch*v. *Boldt,*15 S. W. (Texas), 193.

The instant case is clearly distinguishable from the case of *Peabody*v. *United States,*45 C. Cls., 532, where before the coal was delivered under the first contract the quartermaster reserved the right to submit a sample to the Quartermaster General for tests, and in case it fell below the test provided by the contract to charge the difference against the claimants. Also the case of *Maryland Steel Co.*v. *United States,*48 C. Cls., 50, where the deduction under the first contract had been made contrary to law. It might be well here to remark that the judgment in the latter case was reversed by the Supreme Court upon another point, so that the correctness of the ruling of this court upon the question stated was not passed upon in that court.

There was no liquidated damage clause in the contract involved in the case at bar, and no provision for a penalty except a clause authorizing the Government to take the contract away from the claimant in case of default. As this clause was not taken advantage of by the Government, its only claim for damages on account of delay was that provided by the common law. It follows from this fact that there could have been no inadvertence on the part of the Isthmian Canal Commission in the enforcement of any of the provisions of the first contract when the settlement and payment were made under the same.

II. We think the deduction from the agreed price under the last contract was illegally made for another reason. The findings show that the damages arising out of the delay in the performance of the first contract which were deducted were (1) extra expense to the commission in providing some of the cities in Panama with drinking water, which other*200wise would have been conveyed to these cities through these pipes if they had been delivered within the contract period; (2) higher wages which were paid for night labor made necessary by the expedition required on account of such delay; (3) extra expense incurred in the redigging of ditches which had previously been, prepared but the sides of which had fallen in during such period of delay.

There are few questions arising under the common law which have given rise to more discussion than what damages are to be considered natural and proximate and what remote, uncertain, and contingent. As was said by the court in *Westfield*v. Mayo, 122 Mass., 100:

“ The difficulty is not in stating the rule of damages, but in the determining whether, in the particular case, the damages are within the rule. Natural and necessary consequences are subjects of damages; remote, uncertain, and contingent are not.”

Probably as enlightening a statement of the rule as can be found in the boobs is that given in the famouse case of *Hadley*v. Baxendale, 9 Exch., 345, and which is quoted with approval in *Primrose*v. *Western Union Tel. Co.,*154 U. S., 1, 29-30:

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably.be considered either arising naturally, *i. e.,*according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.”

*201See also *Globe Co.*v. *Landa Co.,*190 U. S., 540. Any number of cases might be cited touching the application of this rule, but no good purpose would be served by so doing.

Attention should be called to the fact that there is nothing in the record showing that the claimant had been informed or had any knowledge of the use to be made of the material which it had contracted to deliver. If an epidemic of typhoid fever had resulted from the insanitary water which the inhabitants of these cities in Panama had been compelled to use because of the want of these pipes, no one would contend that the damages arising from such epidemic could be assessed against the claimant, and we do not see how expense incurred in providing sanitary water stands upon any better footing.

This seems to us to have been a case where the Government should have provided for damages which might arise from delay by the liquidated damages clause; but this was not done, and we do not think the damages as stated in the findings were properly assessable against the claimant under the contract within the rule applicable to such cases.

It follows from the foregoing that judgment will be entered for the claimant in the sum of $1,000.

All concurring, Judge Howry not sitting.