#### THE UNITED STATES v. CALIFORNIA BRIDGE & CONSTRUCTION COMPANY; and CALIFORNIA BRIDGE & CONSTRUCTION COMPANY v. THE UNITED STATES.

[50 C. Cls., 40; 245 U. S., 337.]

This suit grows out of a contract made to erect a sawmill, boiler house, and steel chimney at the Mare Island Navy Yard, San Francisco, on the 21st day of December, 1898. The contract did not fix the exact location of the structures to be erected, but simply provided for their construction, and the definite location was left to the officers of the navy yard in charge of the work to recommend a site to the department officials, which was not approved. Subsequently another site recommended was approved, and on March 1, 1899, plaintiff was so advised. In May following an officer of the plaintiff inspected said site and protested against being required to erect the structures there without additional compensation. In June following the Navy Department refused to allow the plaintiff’s said claims for additional compensation, and the plaintiff thereupon refused to proceed with the work. Later plaintiff was allowed six months’ additional time to complete the work, but on March 16, 1900, the plaintiff declined to proceed; and on April 26 a supplemental contract was prepared and presented to the plaintiff, which it also declined to execute; and on January 2, 1901, the defendants declared the contract null and void, with the result that this suit was instituted to recover from the United States alleged losses.

The court below decides:

The general rule is, where an action is brought in a court of competent jurisdiction and judgment rendered thereon, it is conclusive in a subsequent action between the same parties or their *621privies upon the same subject matter in the same court or another court of concurrent jurisdiction.

When it is said that a judgment binds parties and privies, the reference is, generally speaking, to privies in law, and not to a privity by contract or deed.

The rule is elementary that all prior negotiations are merged in the written contract, and that such contract is presumed in law to express the final understanding of the parties signing it, and that prior understandings can only be referred to for the purpose of explaining and construing uncertain terms of the contract.

Where the record shows statements which are utterly inconsistent with the claim that the plaintiff did not understand in the beginning of the negotiations that the site for the buildings had been definitely selected, and where the record further shows that the plaintiff proceeded with arrangements for doing the work after the site had been selected, and without complaint, the plaintiff is not justified in refusing to proceed under the contract.

Where the contractor incurs expenses for labor and materials in connection with the execution of the contract prior to its annulment, he is entitled to recover therefor.

Where the Government after notifying the contractor of its pur- ' pose to have the work done and hold the contractor for the cost in excess of the original contract price did not complete the work in substantial compliance with the original plans, but changed them in material features, the Government is not entitled to recover therefor.

Where the Government elects to complete the contract work and charge the contractor for the cost in excess of the original contract price, the Government must show that the work of completion did not materially or substantially depart from the plans and specifications of the original contract.

The decision of the court below is affirmed.

Mr. Justice Clarke

delivered the opinion of the Supreme Court December 10, 1917.