#### JOHN PEIRCE v. THE UNITED STATES.

[No. 29902.

Decided May 24, 1915.]

*On the Proofs.*

On the 2d day of October, 1899, the plaintiff entered into a contract with the United States for the construction of a dry dock, together with the machinery to operate the same, at the Portsmouth, N. H., Navy Yard. Civil Engineer Luther E. Gregory, United States Navy, was engineer officer in charge for the *372United States during the entire performance of work under the contract. The contractor proceeded in the performance of the work required, and the Bureau of Yards and Docks from time to time ordered various modifications of the work, for which supplemental agreements were made in the manner provided in the original contract. All of the work required by said original contract and agreements supplemental thereto has been done, and the amount fixed thereby has been paid with the exception of the sum of $8,400 withheld on final payment, and it is to recover this sum and certain additional expense caused by delay on the part of the Government.

I. The release in this case considered in connection with the contemporaneous correspondence in reference to its scope and intent brings the same clearly within the decision of the Supreme Court in the case of *Cramp & Co.*v. *United States,*216 U. S., 494. ■

II. Where the release executed by the plaintiff 'herein reserved in express language any right of action the plaintiff might have for claims not within the jurisdiction of the department, and in addition to this reservation the defendants by their conduct had waived the right to enforce the liquidated damage clause of the contract prior to the execution of the said release, the defendants were without legal authority to withhold any sum from the contractor under this particular clause of the contract.

*The Reporter's*statement of the case:

The facts found to be established are sufficiently stated in the opinion of the court.

*Mr. Geo. A.*King, for the plaintiff." *King <& King*were on the brief.

As to the law of this case, it will hardly be denied that if the Government by making borings at a point near the site of the work admitted the water to the cofferdam constructed by the claimant, resulting in its wreckage and destruction, the Government is liable in damages for so doing. It was a direct interference with the work of the claimant resulting - in damage to him. The Government having caused that damage should pay the resulting loss.

In *Moore*v. *United*States, 46 C. Cis., 139, allowance was made the contractor for the damages caused by two breaks in the cofferdam because *“*the first two breaks in" the cofferdam were chargeable to the fault of the defendants.” In *373that case the fault consisted in forcing upon the contractor an insufficient and unskillful design of cofferdam.

In the present case the fault consisted in performing work near the site of that covered by the claimant’s contract, admitting water thereto and causing the destruction of the claimant’s work. Whatever difference in principle there may be between the two cases is in favor of this case. Here there was an actual physical invasion of the claimant’s work by means of the borings made by the Government.

In *Ohio River Contract Company*v. *United*States, 45 C. Cls., 542, the contractor’s work was hindered by the engineer in charge raising the wickets in the bed of the river, which deflected the current so as to undermine and injure the contractor’s work. The court said, pages 553, 554:

. “ Had the engineer in charge suspended or stopped the work, thereby preventing performance on the part of the contractor, or had he so hindered the contractor in his performance as to increase the cost to him, the Government would clearly be liable. Here, it is true, the work was hindered by the lawful act of the officer of the Government in raising the wickets, and while the raising of the wickets was in no way connected with the claimant’s contract or work, the immediate and proximate result was the damage to the claimant’s cofferdam, the repair of which cost him the sum found.”

It was contended there, as it is here, that the claimant could have protected himself by taking additional precautions against the future act of the Government in interfering with the work, but the court rejected that view.

The case coming the nearest in principle to the present is that of the *United Engineering and Contracting Com*pany, 47 C. Cls., 489. Here the volute of a drain pipe, being a part of the priming system being constructed by the claimant under its contract, burst, as the result of sudden pressure caused by the Government in a water system of its own. The court said:

“ The claimant had not agreed to assume the risks which the Government might impose by acts not contemplated when the contract was entered into, and for these reasons the claimant is entitled to recover on this item the amount so expended, $699.97.”

*374The present case comes directly and precisely within the principle of this decision, the accident having been caused by operations performed by the Government, the risk of which was necessarily taken by the Government, and not by this contractor.

Of the character of the inspection the claimant is not now making any specific complaint. It is not alleged to have been in bad faith. What we are. complaining of is that there was no inspector at all on the work from the time that granite began to come there, and that if these rigid requirements had been known when granite first began to be delivered, November 4, 1900, instead of being delayed until after March 28, 1901, the stone could from the start have been cut to conform to the requirements actually made.

The case is strictly parallel to that on the Boston Dock, in regard to which the court said in the opinion by Judge Barney, *Moore*v. *United*States, 46 0. Cls., 139, 178:

“Aside from the financial embarrassment which would necessarily follow from the failure to receve the partial payments provided in the contract, the chief injury sustained by the contractors was the want of knowledge as to whether the stone which they were supplying would be accepted by the Government. It would have been unwise and jeopardous to finish at the quarries large quantities of stone, under such circumstances, and ordinary prudence forbade such a course. Their contract gave the contractors the right to receive timely knowledge upon this subject.

“As a result of this violation of the contract on the part of the Government, the contractors were compelled to give up some of the contracts which they had made for the supply of stone for the dock. In the meantime the price of labor steadily advanced, and by the time inspection of stone began, and the contractors could renew their contracts for stone, they were compelled to do so at much greater cost.

“We think the claimants clearly entitled to recover for this increase in„the cost of stone caused by the delay of the defendants.” *Kelly*v. *United*States, 31 C. Gis. B., 361; *Snare c& Triest Go.*v. *United States,*43 C. Cls. B., 367; *Owen*v. *United*States, 44 O. Cls. B., 440.

The long pendency of an appeal from the decision of the Gregory board would alone be sufficient not only to excuse the claimant from completing in contract time, but to en*375title him to damages for the delay. The contractor claimed that when material was omitted from the contract the value of the omitted work should be calculated at the market rate prevailing at the time the contract was entered into.

If the contract, for instance, is for the lump sum of $1,000,000, and exactly one-half the work is omitted, it is evident that exactly one-half the contract price ought to be deducted. According to the theory adopted by the board, however, and stated in their report, if the value of the material had risen in the meantime, say, 50 per cent, there should be deducted from the contract price not 50 per cent, but 75 per cent, of the amount for which the contract was originally let, leaving the contractor only one-fourth of the contract price for doing one-half the work.

Yet although' this plain demand of justice was stated in the contractor’s letter of January 7, 1902, to the Secretary of the Navy, and more elaborately in his argument of the same date, it was over a year, and only after what the department in a later communication called “the summary treatment accorded you by Secretary Long,” that the department finally decided this question in the contractor’s favor.

The decision was of such importance as a precedent that the report of the same board on the Boston Dock had to be and was revised upon this basis. The letter of the Bureau of Yards and Docks on this subject in that case is important as showing the far-reaching character of this ruling. Printed record in Moore, Receiver, v. *United States,*No. 27477, p. 405:

“The Assistant Secretary of the Navy, in passing upon an appeal of Mr. John Peirce, contractor for the dry dock at the Portsmouth Navy Yard, has directed that in all contracts of this bureau in which changes are made in the plans or specifications the valuation placed upon work omitted will be the actual or market value at the time the contract was made, and this instruction therefore applies to the contract with O’Brien & Sheehan for the construction of the body and certain accessories of the dry dock at the Boston yard and to that of Farrell & Hopper for machinery.

“2. You are therefore directed to revise the report of the board upon modifications in the Boston Dry Dock, dated *376December 24, 1902, upon the above basis, the memorandum of instructions to the board accompanying the department’s order of September 25, 1902, being hereby amended to the above extent.”

The terms of this ruling were specifically embodied in all subsequent contracts for dry docks. This is shown by the records in *John G. Rodgers dt Go.*v. *United*States, No. 30537, par. 17 of contract, pp. 26, 27, and *William L. Miller*v. *United*States, No. 31520, par. 14, pp. 26, 27, both contracts made subsequently to that ruling.

“ That agreement, after several delays, to which I have referred, on account of changes desired by the General Electric Co., in its switchboard plans, and I think after the completion of still another controversy on the part of the contractor as to signing it, was finally signed on February 11, 1904. Up to that time, in definite answer to all parts of your first question, of course the contractor actually had not made any contract to cover the features which I first described.”

The claimant was therefore not only not under contract to do this work in advance of the report of a board thereon, but he was under no obligation to enter into an agreement for changes. The changes in a dry-dock contract must be changes consistent with that object, and not changes which would introduce new purposes into the contract.

As was said by the Court of Appeals of New York in *National Contracting Gomyany*v. *Hudson River Water Power*Company, 192 N. Y., 209, under a similar provision of an engineering contract for changes:

“Under the contract the plaintiff- did not become obligated to furnish labor and materials for the prosecution of any work or the construction of any structure the defendant might designate. It agreed to furnish such labor and materials as might be necessary for the construction of a particular thing, to wit, a dam. It could not, under the contract, have been required to build an aqueduct, a bridge, a courthouse, or a railroad. Its obligation was not only confined to the construction of a dam, but to the construction of a particular kind of dam, to wit, a masonry dam. The provision that the dam was to be of masonry was as essential an element of the identity of the structure as was the provision that it-was to be a dam. The circumstances attendant *377the preparation and execution of the contract clearly established this. The original specifications, before erasure, contained elaborate provisions applicable, appropriate, and necessary for an earth dam with masonry core. Every one of these provisions was erased in the contract executed by the parties. The contract, however, contained this provision : E. Alterations. It is further agreed that the engineer may make alterations in the line, grade, plans, form, position, dimensions, or material of the work herein contemplated, or of any part thereof, either before or after the commencement of construction. If such alterations diminish the quantity of work to be done, they shall not constitute a claim for damages, or for anticipated profits on the work that may be dispensed with; if they increase the amount of work, such increase shall be paid for according to the quantity actually done, and at the price established for such work under this contract; or in case there is no price established, it will be paid for at its actual reasonable cost as determined by the engineer, plus ten per cent of said cost.’

Doubtless this provision conferred upon the defendant great power to alter and modify the plans of the work and the materials and quantities that might be used in its construction, but the power was not unlimited. The question is one of degree, and necessarily so. Under this provision the defendant could not alter or destroy the essential identity of the thing contracted for.”

See also *McMaster*v. State, 108 N. Y., 542, 551; *Salt Lake Gity*v. *Smith,*104 Fed., 457, 466.

The same principle has been clearly laid down by this court:

“The changes prescribed by this section of the specifications are such as the work may demand as it progresses— that is, the work prescribed by the contract, not a substantially and structurally different work — and they must be reasonable in amount and such as would be naturally incident to the nature of the work.” *Roettinger*v. *United States,*26 C. Cls., 391, 419.

So, too, in *United States*v. *Freel,*92 Fed. Rep., 299, where the contract was for a dry dock and contained a seventh article, pages 303, 304, identical with the corresponding article of the contract now before the court, the court said, page 305:

“Where a building contract contemplates changes in the work which will bind the sureties for the fulfillment of the *378-contract as modified the changes subsequently made must bear in extent and value some reasonable ratio to the original structure. If the plans and specifications call for a house of particular dimensions and quality, a consent to changes anticipated in the contract should be construed to be limited to changes relevant to and consistent with the structure first projected. Changes of such nature, and only such changes, would be anticipated by all the parties to the contract as would be reasonable and cognate to the structure primarily planned and its purpose.”

This judgment was affirmed by the Circuit Court of Appeals, 99 Fed. Rep., 237, and by the Supreme Court of the United States, 186 IT. S., 309.

The law of this case is settled in numerous decisions. Many of these were reviewed in the elaborate opinion of the court by Judge Barney in *Moore*v. *United States,*46 C. Cls. 139. Some other decisions may be referred to as supporting the same conclusion.

In *Sanborn*v. *United*States, 46 C. Cls. 254, the court said, page 260 :

“The findings show that the failure of the Government to have the buildings completed in time to allow the claimant to complete his work within the contract period caused a loss to the claimant of $700, made up of two items — $400 for additional premium on bond during the extended period and $300 expenses in making extra trips from Boston (his place of business) to Washington, made necessary by this delay.”

In the present case the specifications were minute and complete in fixing on the character of the machinery. The claimant was to do the entire work in accordance with the plans and specifications. While the right to make some changes was reserved by paragraph seven, this was subject to the provision of paragraph one of the contract providing for completion within 32 months from the time of the tender of the site.

Substantially it was an agreement that the changes should not be of such radical character as to delay the completion of the dock beyond the time fixed by the contract for completion.

Another reason is that it being admitted that some delay was chargeable to the Government for the excess of time taken in completion, and the Government therefore having *379no right to charge these time penalties from the expiration of the thirty months which the contract allowed for completion, it can not substitute a later date for that named in the contract.

This point was considered by the court in the recent case of *United, Engineering and Gontraeting Company*v. *United*States, 47 C. Cls., 489. There the work was delayed by orders of the Government for changes to a date beyond the contract time for completion. After the date, however, at which the claimant was permitted to proceed, he took an unreasonable time to complete. There was no evidence, however, of any actual damage being sustained by the United States. The court held that there could be no deduction of time penalties or liquidated damages. After the citation of a large number of cases the court concluded as follows, pages 511, 512:

“ Here the delays of the Government prevented the claimant from a strict performance, and thereby it waived the contract time within which to perform, and that waiver operated to eliminate the definite date from which to assess liquidated damages; and though the claimant in continuing the work was thereby obligated to complete the same within a reasonable time the liquidated damage clause was not thereby restored and made applicable to an unreasonable time.

“ It would doubtless be competent for parties to a contract to agree that in case of the waiver of a stipulation as to time, the liquidated damage clause might be continued and made applicable to an unreasonable time. *Mosier Safe Go.*v. *Maiden Lane S. D. Go.,*199 N. Y., 479, 489.

“ Nor can the court look to the liquidated damage clause to determine the actual damages sustained. Sometimes where contracts fail and recovery is sought on *quantum meruit*for work done or articles of merchandise furnished, the consideration or price fixed in such contract may be considered in determining the reasonable value of the work done or articles furnished, *Salomon*v. *United*States, 19 Wall., 17, 20; but can the liquidated damages so agreed upon in this case be considered as the actual loss or damages for nonperformance within a reasonable time when the same were expressed and intended as liquidated damages for the nonperformance of the contract within a designated time? We think not.”

*380And the conclusion was reached, pages 512, 513:

“ Though after September 21,1903, as set forth in Finding VIII, the claimant unreasonably delayed the work, the Government did not avail itself of the provisions of paragraphs 15 and 16 respecting annulment of the contract. On the contrary, the Government recognized, as found, that the delays had, in the first instance, been caused by the additional work made necessary under the first and second supplemental contracts and the use of the dock for docking vessels while the work was in progress. Doubtless for these reasons the Government did not elect to annul the contract; and while the claimant was permitted to continue the work to completion, it was nevertheless bound to do so within a reasonable time.

“Whatever loss the Government may have suffered by reason of the claimant’s breech to perform within a reasonable time must be reduced to actual damages, if any, susceptible of proof. This has not been done and for the reasons stated the claimant is entitled to recover the $6,000 so deducted.”

There can be no defense to a claim of substantial completion arising from the fact that there may be a few slight and inconsiderable additions or alterations still to be made. *Brady*v. *Qity of New*Yorh, 132 N. Y., 415, 427.

In *Swain*v. Seamens, 9 Wall., 254, the Supreme Court said of a building contract, page 263:

“ Substantial performance, it is true, is all that is required to satisfy any such agreement.”

In *City of Elizabeth*v. Fitzgerald, 114 Fed. Sep., 547, 549, the court said:

“ Substantial performance of the entire contract is sufficient.”

See, also, full review of the decisions in *Grouch*v. *Gut-mann,*134 N. Y., 45. There a $6,000 contract was held substantially performed, though there was $650 worth of work lacking, or more than 10 per cent of the contract price.

According to these authorities, when the dock was reported as “ practically complete,” October 1, 1904, there was a substantial completion sufficient to satisfy all the requirements of the law. A claim for liquidated damages beginning November 1, 1904, is an absurdity.

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

Per Curiam :

The court prepared and submitted for oral argument tentative findings in this case. The issues of fact presented no wide difference of opinion and the cause of action is in most particulars conceded by the defendants. A question of law was alone raised as to the effect of the execution of the final release as set forth in Finding Y. We think this question concluded by the decision of this court in *Noel Construction Co.*v. *United States,*No. 29990, 50 C. Cls., —, and *United States*v. *United Engineering c& Contracting Go.,*234 U. S., 236. The release considered in connection with the contemporaneous correspondence in reference to its scope and intent brings the same clearly within the decision of the Supreme Court in *Cramp c& Co.*v. *United States,*216 U. S., 494. The release executed by the claimant herein reserved in express language any right of action the claimant might have for claims not within the jurisdiction of the department, but in addition to this reservation the defendants by their conduct had waived the right to enforce the liquidated damage clause of the contract prior to the execution of the release by the contractor. The defendants were without legal authority to withhold any sum from the contractor in virtue of this particular clause of the contract. As said in the *United Engineering c& Contracting Go. case, supra,*“the rule of the original contract can not be insisted upon, and liquidated damages measured thereby are waived.” It is the same as if the whole provision in reference thereto had been effaced from the agreement, and in the absence of any proof of actual damages the whole consideration mentioned in the contract was due the contractor. The department was clearly without jurisdiction to consider the liquidated damage question, for it was no longer an issue under the contract and, as the findings show, could not be included in the release or intended by the parties in the execution of the same to conclude rights with respect thereto.

Judgment will therefore be entered for the claimant in the sum of $20,741.60. And it is so ordered.