#### HONGKONG AND WHAMPOA DOCK COMPANY, LTD., v. THE UNITED STATES.

[No. 31522.

Decided April 12, 1915.]

*On the proofs.*

The plaintiff had two contracts with the Government for the construction of certain steel and wooden boats to be delivered in Manila Bay. There was delay in the delivery of two of the steel and one of the wooden boats, on account of which there were deductions made by the Government from the contract price, to recover which this suit was brought.

I. In construing a contract the court will examine and consider the whole contract and not only segregated portions of it.

II. Where the language used in a contract is plain and unambiguous no construction is necessary, and in construing contracts the courts should ascertain and effectuate .the intention of the parties, but that intention is sought from the language used, and the words used must be given their ordinary and popular meaning, even though the intention of the party drawing the contract may have been different from that expressed.

*214III. Where the language used in a contract is that of one of the parties thereto it is a rule of law that the words will be construed most strongly against the party who used them.

*The Reporter’s*statement of the case:

*Mr. Walton Hendry*for the plaintiff.

*Messrs. Wm. Hits*and *W. F. Norris,*with whom was *Mr. Assistant Attorney General Huston Thompson,*for the defendants. *Mr. George E. Boren*was on the brief.

In the case of *Boardman*v. *Lessees, etc.,*the Supreme Court, speaking through Mr. Justice McLean, and construing a patent for land, said:

“ The meaning of the parties must be ascertained by the tenor of the writing and not by looking at a part of it.” 6 Pet., 318, 345.

The case of *O’Brien*v. *Miller*was an action on a bottomry bond. In that case one of the parties claimed that one clause of the contract was controlling. The Supreme Court, in discussing the principles for the construction of contracts, and speaking through Mr. Justice White, said:

“ There can be no doubt that, considered in themselves and alone, there is no ambiguity in the words found in the clause of the contract providing that £if during said voyage an utter loss of the said vessel by fire, enemies, pirates, the perils of the sea or navigation, or any other casualty shall inevitably happen, * * ' * this obligation shall be void.’ But the question presented involves not the interpretation of this language apart from the whole agreement, but is, on the contrary, the ascertainment of the meaning of the entire contract. * * * The elementary canon of interpretation is not that particular words may be isolatedly considered, but that the whole contract must be brought into view and interpreted with reference to the nature of the obligations between the parties and the intention which they have manifested in forming them.” *Boardman*v. Reed, 6 Pet., 328: *Canal Co.*v. *Hill,*15 Wall., 94; *O’Brien*v. *Miller,*168 U. S., 28T, 296.

In the recent work of Elliott on Contracts, the rule of construction of contracts is laid down as follows :

“ Seo. 1514. *Rules of construction generally*— Whole *instruments loohed to.*— The actual contract of the parties *215must be deduced from the entire agreement and from all of its provisions considered together, and not from specific provisions or fragmentary parts of the instrument, because the intention of the parties is not expressed by any single part or provision of the agreement but by every part and term so construed, if possible, as to be consistent with every other part and with the entire agreement, since the parties could not have intended apparently conflicting clauses in a contradictory sense. Effect must be given to all the provisions and parts of the contract where possible, and no part should be rejected unless absolutely i'epugnant to the general intent. A single word or sentence should not be construed alone, but should be considered with reference to the context.

“ Sec. 1515. *Rules of construction generally*— Construing *particular clauses.*— In the interpretation of any particular clause of a contract the court is required to examine the entire contract, and may also consider the relations of the parties, their connection with the subject matter of the contract, and the circumstances under which it was made. The construction should make the whole consistent, giving all parts their due weight. Force and effect should be given to all the words employed by the parties where that is possible. And one part of the agreement may be resorted to to explain the meaning of the language or expressions of another part when both relate to the same subject matter.” *8 Elliott on Contracts.'*secs. 1514 and 1515.

It is settled law that:

“ When the language of a contract is ambiguous, the practical interpretation of it by the parties is entitled to great, if not controlling influence.” *TopTAff*v. ToplAff, 122 IJ. S., 121; *Insurance Co.*v. Dutcher, 95 U. S., 273.

As to “ act of God,” Mr. Elliott in his work on contracts laid down the rule as follows:

“ Sec. 1892. *Impossibility by act of God.*— * * * The general rule is that, where an obligation or a duty is imposed upon a person by law, he will be absolved from liability for nonperformance of the obligation if such nonperformance was occasioned by an act of God; but when one undertakes by an express contract to do a given *act, he is not*absolved from liability for nonperformance, even though he is prevented from doing the same *by an act of God.*In the latter class of cases, if a person desires to absolve himself from liability for nonperformance under any circumstances he should so stipulate in his contract.” *3 Elliott on*Contracts, sec. 1892.

*216The same author, discussing the rule of common law which exempts common carriers from liability on contracts when performance is rendered hazardous or impossible by an act of God, says:

“ Sec. 1894. *Events exempting carriers.*— * * * a furious wind which blows a car from the track is ‘ an act of God ’ and the carrier is not liable if the car took fire and burned from a stove or lamp after it has been turned over by the wind. This is also true of an unprecedented storm, or an extraordinary flood, and the flood may be extraordinary without necessarily being unprecedented. And the occurrence of such a flood in each of two preceding years does not deprive a flood of its ‘ extraordinary character ’ ; but precautions must be taken against such rises of high waters as are usual and ordinary, and reasonably to be anticipated at certain seasons of the year.” *S Elliott on*Contracts, sec, 1894.

“ Act of God ” has been defined as follows:

“In the case of the *Gulf Red Cedar Co.*v. *Walker,*132 Ala., 553, 556, it was said:

“ ‘ The term “ act of God,” in its legal sense, applies only to events in nature *so extraordinary that the history of climatic variations and other conditions in the particular locality affords no reasonable warning of them?*”

“And in *Dorman*v. *Ames,*12 Minn., 451, it was decided':

“‘But an “act of God,” in legal phraseology, means an accident against which ordinary skill and foresight is not expected to provide. This applied to water courses would include only floods or extraordinary freshets, and not such rises or high waters *as is usual or ordinary and reasonably anticipated at particular periods of the*yearSee also *Ryan*v. *Rogers,*96 Cal., 349.

Thus the rule is that the promissor must be exempt by the terms of the contract from accidents or hardships arising from normal weather conditions, however severe and hazardous, or he is bound to perform the contract or pay the damages.

In the case of the *Chicago, Milwaukee, etc., Railway*v. *Hoyt*the Supreme Court, speaking through Mr. Justice Jackson, said:

“There can be no question that a party may, by an absolute contract, bind himself or itself to perform things which subsequently become impossible, or pay damages for *217the nonperformance, and such construction is to be put upon an unqualified undertaking, where the event which causes the impossibility might have been, anticipated and guarded against in the contract, or where the impossibility arises from the act or default of the promissor.” *Chicago, Milwaukee, etc., Railway*v. Hoyt, 149 U. S., 1, 14.

In the case of *Dermott*v. *Jones,*the Supreme Court in speaking of the covenants of contracts made by the promis-sor, speaking through Mr. Justice Swayne, said:

“ In that instrument the defendant in error (the promis-sor) made a covenant. That covenant it was his duty to fulfill, and he was bound to do whatever was necessary to its performance. Against the hardship of the case he might have guarded by a provision in the contract. Not having done so, it is not in the power of this court to relieve him.” *Dermott*v. Jones, 2 Wall., 7.

In the Whiteside case, the leading case on this subject, the Supreme Court, in speaking with reference to the powers of a special agent of the Government, held:

“ The Government is not bound by the act or declaration of its agent, unless it manifestly appears that he acted within the scope of his authority, or was employed in his capacity as a public agent to do the act or make the declaration for it.” *Whiteside*v. *United*States, 93 U. S., 247.

In the case of *Camp*v. *The United States*the Supreme Court held:

“ When an executive regulation directs officers of one class to make a contract on behalf of the United States, it confers no authority to make it upon officers of a different class, although employed about the same Government business.” *Camp*v. *United States,*113 U. S., 649.

In the case of Hume the Supreme Court held:

*“*Persons dealing with public officers are bound to inquire about their authority to bind the Government, and are held to a recognition of the fact that Government agents are bound to a fairness and good faith as between themselves and their principals.” *Hume*v. *United States,*132 U. S., 406.

In the Wisconsin Central Eailroad Company case the Supreme Court held:

“ The Government is not bound by the act of its officers, making an unauthorized payment, under misconstruction *218of the law.” *Wisconsin Central Railroad*v. *United*States, 164 U. S., 190.

In the Pine River Logging Company case the Supreme Court held:

“ With the contracts before them, the agents of the Government had but one duty, and that was to see that they were honestly and faithfully carried out according to their spirit and letter.” *Pine River Logging Company*v. *The United*States, 186 TJ. S., 280.

In the case of *Kirwan*v. *Murphy*the Supreme Court held:

“The administration of the public lands is vested in the Land Department, and its power in that regard can not be divested by the fraudulent action of a subordinate officer outside of his authority and in violation of the statute.” *Kirwan*v. Murphy, 189 IT. S., 54.

In the case of *Plumley*v. *United*States, the latest pronouncement of the Supreme Court upon the principle invoked, that court held:

“ Where a contract for Government work provides that in every instance changes must be made by a prescribed method and approved by the Secretary, the contractor can not recover for extras not ordered in the maimer prescribed; and this rule holds even in a hard case where, as in this instance, the work was extra and of value.

“ Where the contractor fails to notify the Secretary of the cause of delay on the part of the Government in the manner prescribed by the contract and thus enable the Secretary to remove the cause of delay, the contractor can not recover for the delay caused.” *Plumley*v. *United*States, 226 IT. S., 545.

In the case of *Richtman*v. *The United*States, decided May 13, 1912, this court, speaking through Chief Justice Peelle, says:

“ No statement made by the engineer in charge conflicting with the provisions of the contract can be held as binding on the Government.” *Richtman*v. *The United*States, 47 C. Cls., 483, 487.

Campbell, *Chief*Justice,

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

The plaintiff had two contracts with the defendants, one dated June 24, 1909, and the other dated June 30, 1909, and *219both of them providing for the construction and delivery of boats known as lorchas. The first contract was for six steel lorchas and the second contract was for four wooden lorchas. The deliveries were to be made to the chief quartermaster, Philippine Division, in Manila Bay, and the dates of the contemplated deliveries were mentioned in tbe contracts. One of the steel lorchas was delivered ahead of time and three of the wooden lorchas were delivered ahead of time. Two of the lorchas, one of steel due to be delivered December 4 and one of wood due to be delivered November 19, were started from Hongkong in time to have reached their destination within the period fixed for their delivery, but were lost at sea and were subsequently replaced by the claimant. All the others were delayed beyond the contract time. The delay in the delivery of three of them was excused in the auditing department upon the ground that the delay was occasioned by the act of God, which, under the provisions of the contract, was made an exception to the plaintiff’s obligation to deliver within the stipulated time.

For the delay in making delivery of two of the steel and one of the wooden lorchas there was deducted from the amount due the plaintiff the sum of $5,480 under the provisions of the second paragraph of the contracts, and to recover said sum this suit was brought. These three lorchas, numbered, respectively, 460, 461, and 468, were deliverable under paragraph 4 of the contracts as follows: No. 460 on or before December 18, 1909; 461 on or before January 1, 1910; and 468 on or before December 14, 1909. No. 460 was 72 days late in delivery, 481 was 77 days late, and 468 was 125 days late in delivery, making an aggregate of 274 days delay, for which plaintiff was charged $20 per day as liquidated damages.

The proof shows that all of these boats were completed in time to have been delivered sooner than the dates fixed for their delivery, two of them having been completed early in November, and the third, finished on December 3, 1909, was practically completed sooner.

The evidence shows that generally during the months of October and November small craft can be towed across the *220China Sea safely, but that during said months in 1909 the conditions prevailing on that sea were abnormal and typhoons occurred with unusual frequency. As above stated, two of the lorchas were lost in the effort to cross in November. It was because of this abnormal and dangerous condition that plaintiff was excused for its failure to deliver the lorchas due in November.

According to the record in this case the northeast monsoon generally sets in over the China Sea about December 1 and lasts until April or May, when the southwest monsoon begins; the latter does not bring wind or produce stormy weather on said sea, but during the northeast monsoon light-erage or towages can only be done at great risk and danger to the craft being towed. Safe towage can usually be relied upon during typhoon weather — from April to December— because, as we are told, while there are occasional bursts of very stormy weather during that period they are succeeded by long intervals of fine weather, with calm sea, which makes towage safe.

The plaintiff insists that the contracts do not authorize the deduction of liquidated damages for delay in delivering the said lorchas, but confine the liquidated damages to delay in their completion, and refers to the several paragraphs of each of the contracts as sustaining this contention because, it is insisted, that while article 2 mentions a failure “ to complete in all respects the lorchas called for under this agreement on or before the dates stipulated for such completion ” and fixes the damages at $20 per day for each day that “ each lorcha remains uncompleted after such dates,” there is no mention in specific terms of delay in delivery.

Unquestionably the' whole contract, and not segregated portions of it, must be examined when construction of it is resorted to. “ The elementary canon of interpretation is not that particular words may be isolatedly considered, but that the whole contract must be brought into view' and interpreted with reference to the nature of the obligations between the parties and the intention which they may have manifested in forming them.” *O'Brien*v. Miller, 168 U. S., 287, 296; *Boardman*v. *Lessees,*6 Pet., 318, 345. The under*221taking of the plaintiff was to furnish the labor and material necessary to construct and to “ construct and deliver complete in every detail” certain lorchas to the chief quartermaster at Manila for a specified consideration. These things were to be done in accordance with the plans and specification and “ Instructions to bidders ” attached to and made a part of the contract. Among others, said instructions required the bidders to state when the work would begin and when it would be completed. The contracts (par. 4) refer to the dates on or before which the lorchas are severally to be delivered and the final delivery made, and do not mention “ the dates stipulated for such completion,” if completion is to be confined to something short of actual delivery. It is hence argued for defendants that the failure “ to complete in all respects the lorchas ” for which liquidated damages are agreed upon means a failure *to deliver*complete in all respects the said lorchas, and further that the defendants were not concerned with the times of completion of construction, but were interested in the completion of delivery. The latter phase of this contention can not be supported under the facts of the case. The instructions to bidders, made part of the contract, required them- to “ state the time in which they will complete each vessel from the date of commencement of work,” and we think it is a fair assumption that the purpose of this requirement was to inform defendants’ representatives of the times which the several bidders would take to complete the work so that some regard could be had to the .times of delivery; that is, whether the lorchas would be completed so as to be deliverable within the period of the year when the China Sea would admit of delivery without too great risk of loss. It may reasonably be presumed that the Government’s agents had notice of the conditions which usually prevailed during the monsoons and their general effect upon towages over the China Sea. It was, we think, because of these well-known conditions that the Government’s representatives in their instructions spoke of the times of completion, and provided in their draft of the contracts for delivery “on or before” the several dates fixed therefor. They probably considered that if the *222lorchas were completed in construction the certainty of delivery during October or November would be enhanced and that if the lorchas were not completed until after November there would be uncertainty as to when, in the usual conditions prevailing over the China Sea, delivery could be had.

The other phase of the contention is more difficult of solution. There is much force in the defendants’ argument that the provisions of paragraph 2 are to be interpreted in the light of the remainder of the contract and the intention shown thereby of the parties. The instructions to bidders informed them that in case of the failure of the contractor “ to complete the work and deliver same ” within the stipulated time the right was reserved by the United States to deduct $20 per day for each and every day “ required for completion of each lorcha ” in excess of the number of days stated in the contracts. The contracts were for the construction and delivery “ complete in every detail ” of the specified lorchas; the consideration to be paid was for the six lorchas in each contract “completed, delivered, and accepted,” as specified in article 1 of the contract. Dates on or before which deliveries were to be made are mentioned; provision is made by article 9 that in case of the contractor’s failure to comply with the contract the defendants can “complete the work” at the contractor’s expense; and article 2, while providing in terms for liquidated damages upon a failure “to complete in all respects the lorchas” on or before the dates stipulated “for such completion,” does not fix any dates for completion unless comprised within the meaning of “ deliveries ” mentioned in article 4.

These considerations may tend to the conclusion that if the said clause is to be given effect the completion in all respects of the lorchas includes their delivery. “A rigid adherence to the letter often leads to erroneous results and misinterprets the meaning of the parties.” *Reed*v. *Insurance Co.,*95 U. S., 23, 30. But where the language used is plain and unambiguous no construction is necessary, and in construing contracts words are to receive their ordinary and popular meaning. *Moran*v. *Prather,*23 Wall., 492, 499. What the court should do is to ascertain and effectuate the *223intention of the parties, but that intention is sought from the language used, and the words, not being words of art, must be given their usual and popular sense, “ even though the intention of the party drawing the contract may have been different from that expressed.” *Calderon*v. *Atlas*Co., 170 U. S., 272, 280. It is not allowable for the court, by construction, to import words into a written contract which materially change its meaning as expressed by the parties. *Gavinzel*v. *Crump,*22 Wall., 308, 319. In other words, the intention which must be sought and which prevails is that which is ascertained from a proper consideration of the language of the contract.

It being competent for the parties to agree upon liquidated damages, the terms in which they saw fit to express that agreement are not necessarily to be interpreted by what the court may think the parties had in mind, if, in fact, they expressed something different.

The Government insists that article 2 authorized the deduction made by it from the compensation of the plaintiff because the latter failed to deliver the lorchas within the stipulated times, and the plaintiff replies that it completed the lorchas in time for their delivery, and failed to make deliveries because of the conditions prevailing on the China Sea and its inability to secure towage, and, further, that its contracts do not provide for liquidated damages upon a failure to deliver, but refer to a failure to complete. Claiming the right of deduction it is for the Government to show that the contracts authorize it.

The language used is that of the defendants, whose agents drew the contracts, and it is a rule of law that words will be construed most strongly against the party who used them. *American Security Co.*v. *Pauly,*170 U. S., 160, 168. It seems to us that it was the original intention of the parties, evidenced by the clause of the instructions to bidders where the matter of liquidated damages is mentioned, to provide for the same upon failure to complete and deliver the several lorchas, the question here being whether that intention is expressed in the contract. In *Germann & Co.'s case,*50 C. Cls., —, Judge Barney said that the rule allow*224ing parties to agree upon the amount of damages to be paid in case of default sometimes operates with great severity, and “ there is generally no reason for its extension beyond the letter of the bond.”

Whatever of doubt there may be on the above phase of the case, we are satisfied the plaintiff should recover. Before the period for delivery under the first contract had expired, and similarly as to the second contract, the deputy quartermaster general, being the chief quartermaster, under the official seal of that office, notified the plaintiff’s agent at Manila that the plaintiff would be permitted “to proceed and complete the work, same to be done with utmost des-patch,” and that all expense incurred by the United States after December 14 (in the first contract and January 1 in the second) would be charged against the plaintiff and deducted when final payment was made. The reason for this action of the chief quartermaster (he being the person to whom by the provisions of the contracts delivery was to be made) seems apparent. The storms during October and November had prevented deliveries, and two lorchas had recently been lost. The dangers of loss if deliveries were attempted in December were great, and though the contract provided for delivery at stated times, and, let us assume, provided for liquidated damages, said officer was probably informed by the plaintiff’s agents, to whom said letters were addressed, that the lorchas were ready for shipment, and if he was not cognizant of the condition generally prevailing over the China Sea during that period of the year he did'know that two lorchas had a short time before been lost in the attempt to tow them to Manila. It seems prudent and reasonable that he should, under such circumstances, authorize the plaintiff to complete the work of delivery as soon as practicable. We must assume that he had authority to act as he did while he was at Manila. The letters show that the plaintiff had not asked for an extension of time, and the quartermaster may have desired to forestall attempts at further delivery during said period because of the risks attending them.

*225The letters were accepted, and acted upon by the plaintiff, who made no further deliveries for some time thereafter although there was no delay in the completion of the lorchas within the contract period. The effect of said communications when accepted and acted upon by the plaintiff was to waive the liquidated damages, if article 2 provided for such damages. *United Engineering Co.'s*case, 234 U. S., 236, 242; *Maryland Steel*Co., 235 U. S., 451.

A judgment will accordingly be awarded the plaintiff for said sum of $5,480. And it is so ordered.

Booth, Judge, concurs in the above.

Barney, Judge,

concurring:

I fully concur in the conclusion reached in this case and all that is said in the opinion of the Chief Justice, except the implied doubt expressed upon the question of the construction to be given to the paragraph of the contracts relating to liquidated damages. Upon that question I do not believe the plaintiff was chargeable with liquidated damages even if there had been no extension of the contract period.

Atkinson, Judge,

dissenting:

I can not agree with the majority decision of the court, for the reason that section 1 of the two contracts in the case provides for the “completion and delivery” of the lorchas at Manila, P. I., at certain specific dates; and section 2 provides, further, that liquidated damages at $20 per day (which is not unreasonable in a contract of the magnitude of the instant case) may be assessed against the contractor for each and every day for failure to comply therewith. Were it not for this latter provision in the contracts the claimant company could use its own pleasure in the delivery of the barges, and thus force the Government to prove actual damages caused by such failure. The petition therefore should be dismissed, and judgment should be entered for the United States.

Other reasons for nonconcurrence could be given, but X deem this one sufficient.