#### NAMQUIT WORSTED COMPANY v. THE UNITED STATES.

[No. 34117.

Decided June 19, 1922.]

*On the Proofs.*

*Contract; rejected articles; compensation.*— Where a contract provides for the final inspection of manufactured articles at the place of delivery and that rejected articles shall be removed from the premises within ten days, there is no liability on the part of the Government to pay for such rejected articles.

*Same; contract quantity; overrun.*— Where a contract calls for the manufacture and delivery of a certain quantity of materials, there is no liability on the part of the Government to accept and pay for a greater quantity.

*The Reporter’s*statement of the case:

*Mr. Charles E. Hendrickson*for the plaintiff.

*Mr. Lisle A.*Smith, with whom was *Mr. Assistant Attorney General Robert H.*Lovett, for the defendant.

The following are the facts of the case as found by the court :

1. The plaintiff is a corporation organized under the laws of the State of Rhode Island. Its plant is equipped with forty looms for weaving cloth, scouring and finishing the same, and equipped to manufacture khaki O. D. shirting flannel and melton cloth. It employed an average of about one hundred employees. The plaintiff has borne true allegiance to the United States. Its mill represented an investment of $250,000, and its weekly administration and maintenance charge was during the period in question $1,333.46.

*461II. During the period of the war with Germany the plaintiff had a number of contracts with the Government for the manufacture of O. D. shirting flannel and melton cloth of divers weights. Its first contract was made on April 24, 1917, and it had a number of other contracts mentioned in its petition.

III. On April 25, 1917, the plaintiff sent the following letter to Mr. Julius Bosenwald, National Defense Board, Washington, D. C.:

“ Dear Sir : We are willing to do all that we possibly can to aid the Government in the delivery of any merchandise that may be purchased from us and, if necessary, will operate our mill on a night and day basis.

“ Very truly yours,

“ Namquit Worstead Company,

“ By John A. Gamewell.”

To the foregoing letter of April 25, 1917, the National Board of Defense replied to the Namquit Worsted Company as follows:

“April 26, 1917.

“ Namquit Worstead Company,

“ *MB Fourth Avenue, New YorJe City.*

*“(Attention Mr. John, A. Gametoell).*

“ GeNtlemen : Answering your letter of April 25th, we will be pleased to have you inform us as to the quantity of goods you are now making for the Government, also your available loom capacity. In the meantime we would suggest that'you kindly confer with the Depot Quartermaster in New York as to printed specifications as to various supplies.

“ Yours very truly,-

“ T. A. Fritchey, Jr.,

“ *Committee on Supplies.”*

IV. The plaintiff entered into a contract with the Government through Col. H. J. Hirsch, Quartermaster Corps, United States Army, for the manufacture and delivery of approximately 100,000 yards of olive-drab melton, 16-ounce, at the price of $2.85 per yard f. o. b. Greenville, B. I. The contract is designated as No. 243-B, and a copy of it is attached to the petition as Schedule A and is made a part of these findings by reference. Thereafter, by supplemental *462contract dated May IB, 1918, the above-mentioned contract was modified so as to provide for the cancellation of the 100,000 yards of 16-ounce melton and the furnishing and delivery in lieu thereof of approximately 75,000 yards of 20-ounce O. D. melton, at $8.56 per yard. The supplemental agreement for modification of the contract was No. 293, and a copy of it is attached to the petition marked Schedule A-l, and is made a part of these findings by reference.

V. The contracts for O. D. shirting and khaki melton cloth entered into between the plaintiff and the Government contained the following clauses:

2. That the United States shall have the right at any time to inspect, in the manner deemed necessary, by duly au-thorzed officer or agent, the articles in process of manufacture and to reject any materials or workmanship not conforming to requirements; the action of such inspector to be in an advisory capacity only, the final inspection to be made at the place where delivery is required.

3. That the articles herein contracted for shall be examined and inspected, without unnecessary delay after being delivered by a person or persons appointed by the United States; and upon such inspection, the articles found to be in all respects as required by this contract shall be received and become the property of the United States. Any and all articles that may, upon such inspection, be condemned or rejected shall be removed from the premises by the contractor within 10 days after the said contractor or his agent shall have been notified of such rejection; otherwise at the risk and expense of the contractor.

VI. During the performance of contract No. 243-B the plaintiff manufactured 155 pieces in part performance. These pieces did not comply with the specifications as to color or shade and were rejected by the Government inspectors. The plaintiff thereafter manufactured 155 additional pieces to complete deliveries under its contract. The said 155 pieces, containing 9,6751 yards, were not in compliance with the specifications and were properly rejected. These pieces were not offered to the Government as “ seconds ” *463under the contract until after the plaintiff had manufactured 155 additional pieces.

VII. Plaintiff manufactured and produced in excess of the requirement of said contract No. 243-B, and the supplement thereto, 153 pieces of melton cloth, containing 9,388 yards, which the Government did not accept, though it did accept the amount specified in the contract. The said 155 pieces and 153 pieces contained a yardage of 19,263-£ yards, which, at the contract price of $3.56 a yard, would amount to $68,576.73. These were sold by the plaintiff for $38,723.12. The plaintiff ordered and purchased khaki yarn in excess of the amount required to comply with its contract with the Government, and after the war it sold the excess quantities at less than it had paid for the same, making a difference of $37,577.29. The Government did not require the plaintiff to purchase this excess amount of yam, who did so on its own account, and to be prepared, if necessary, for further orders.

Whenever the Government needed the “ overruns ” or excess material produced by plaintiff over and above the contract requirements on its several contracts, it purchased the same as a separate transaction by awarding plaintiff a supplemental contract therefor.

VTII. The plaintiff manufactured 101,588 yards under its contract No. 4842-B, which called for 100,000 yards. The Government inspectors rejected or refused to accept 5,792J yards of this amount. Its value at the contract price was $11,874.11. The Government paid the plaintiff $2,269.80, and the plaintiff realized from the sale of the goods $5,599.47.

IX. In addition to the yarn required to manufacture the 155 pieces of melton cloth rejected as not meeting the specifications of the contract, plaintiff had on hand 13,563 pounds of impropexdy dyed yarn purchased from James Doak, Jr., Company.

During the operations of plaintiff under its several contracts the Government inspectors were at the plaintiff’s mills, their duties being to pass upon the quality of goods manufactured. These duties did not extend to the control *464or operation of the mill, nor did the Government take control of the mill. It did insist upon preference being given to Government work upon the goods being manufactured for the Government.

Plaintiff executed on the 22d day of March, 1919, a cancellation agreement or release covering all claim under contract No. 4842-B, a copy of which, marked Schedule F, is attached to the petition and made a part of these findings by reference.

memorandum bx the court.

When the 155 pieces were rejected, as they properly were, it was tlie duty of the plaintiff to replace the same, and there was no obligation upon the defendant to pay for the rejected material.

The 153 pieces in excess of the contract did not impose a liability upon the Government.

Calling for approximately 75,000 yards, the plaintiff could not require the Government to take 9,388 yards additional as “ overrun.” See *Moore*v. *United*States, 196 U. S. 157.

The release executed by the plaintiff is comprehensive so far as the contract therein mentioned is concerned.

The petition should be dismissed, and it is so ordered.