#### F. JACOBSON & SONS v. THE UNITED STATES

[No. D-527.

Decided January 11, 1926]

*On the Proofs*

*Executory contract; supplemental contract for bonus.*— Where, before a contractor can begin to perform under the prime contract, he enters into a supplemental contract whereby the Government agrees to pay a bonus for material saved under the prime contract, the supplemental contract requires no new consideration, and he may recover the agreed bonus. *Endel case,*60 O. Ols. 513, cited.

*The Reporter's*statement of the case:

*Mr. Hoke Smith,*for the plaintiffs.

*Mr. Geortfe TI.*Foster, with whom was *Mr. Assistant Attorney General Herman J.*Galloway, for the defendant *Mr. Dan M. Jackson*was on the brief.

The court made special findings of fact, as follows:

I. Plaintiffs in this suit are copartners conducting business under the firm name and style of F. Jacobson & Sons, having their principal office in New York City, and are citizens of the United States, the copartnership being composed of Ferdinand, Joseph C., Sam, Harry S., Jerome, and Moses Jacobson, and were engaged for many years previous and at the times hereinafter mentioned in the business of manufacturing shirts.

II. The plaintiffs entered into a contract with the United States dated November 23, 1917, for the manufacture of 400,000 flannel, olive-drab shirts, the Government to furnish the material. A copy of this contract, with specifications attached, marked “ Exhibit A,” is attached to the petition herein and is made a part of this finding by reference. Another contract, known as supplementary contract, dated December 10, 1917, was entered into between the plaintiffs and the United States relating to the matters involved in Exhibit A, and a copy of this supplemental contract, marked “ Exhibit B,” is attached to the petition herein and is made a part of this finding by reference.

*421III. Prior to the negotiations which led up to the said contracts, Exhibit A and Exhibit B aforesaid, the plaintiffs had entered into a contract with the United States on the 29th day of June, 1917, to which was added a supplemental contract dated the 10th day of October, 1917. The June contract called for the manufacture of 375,000 shirts, flannel, at 48 cents each. The Government was to furnish the flannel, the buttons, and corset jeans only, the contractor to furnish all other material and perform the work. All remnants and cuttings were to be returned to the United States. The supplemental contract recites that through careless and inefficient cutting a considerable yardage of cloth furnished to contractors had been lost to the Government, and that in order to encourage skillful and painstaking cutting it was to the interest of the Government to modify the contract of June 29, and that contractors should use their best efforts to avoid all possible waste in the cutting of materials, and for the additional work and special care they would be paid a separate bonus or premium in an amount equal to 20 per cent of the net cost price of the materials to the Government of all savings in uncut yardage by comparing the quantities actually used in the cutting with the allowance for the purposes listed in the schedules. The yardage allowed in the June contract was 1.945 yards of flannel and 0.333 of corset jeans per shirt. Before the execution of this supplemental contract of October from 25,000 to 30,000 shirts had been delivered. After the supplemental contract was executed the plaintiffs rented an additional space for the sum of $7,500, employed additional force to separate the material into different shades and sizes, discarded the smaller tables on which the cuttings were made and installed large tables, and provided what was known as a reclamation department, which took the small pieces and remnants of the cuttings and put them together so as to make shirts out of them. As a result of this additional force and care a shirt was made out of 1.768 yards of flannel instead of 1.945 yards.

This contract was fully performed and the Government paid to the plaintiffs the full amount as called for in the *422June contract and also the bonus as called for in the supplemental contract of October.

IY. In October, 1917, the Government advertised for bids for the manufacture of 300,000 shirts, the materials to be furnished by it, as was provided in the June contract mentioned in the preceding finding. The plaintiffs made a bid of 48 cents per shirt. Previous to any acceptance of the bid the number of shirts was increased from 300,000 to 400,000, and the plaintiffs were awarded the contract. The plaintiffs’ proposal for manufacturing 300,000 shirts was made on or about October 20, 1917. On November 19, 1917, the plaintiffs, in answer to a communication from the proper officer in the Quartermaster Corps at Washington, changed the number of shirts in its said bid of October 20 and proposed to manufacture 400,000 shirts at 48 cents per shirt, the Government to furnish flannel, jeans, and buttons f. o. b. New York, the plaintiffs to furnish all other material and deliver the finished shirts, together with all rags, clippings, and ends, to the New York depot, deliveries to be at the rate of 100,000 shirts per month in December, 1917, January, February, and March, 1918. This proposal by plaintiffs further stated: “ It being understood that you will include in our contract paragraph covering compensation and premium for any saving in material that may be effected by us in cutting garments, as per supplementary contract of October 10, which was included in our last contract of June 29, 1917.” The date of the execution of the contract, Exhibit A, is not definitely shown, nor does it definitely appear when the supplemental contract, Exhibit B, was executed. There was delay on the part of the Government in furnishing the necessary materials it had undertaken to furnish, the first delivery of material being in March, 1918. The plaintiff could not and did not commence work under the contract until after the material was delivered in March and the time for performance was duly extended by agreement. Both the contract, Exhibit A, and the supplemental contract, Exhibit B, were duly executed by the parties long prior to the date of the furnishing of materials by the Government or the doing of any work thereunder by the plaintiffs. The plaintiffs manufactured the 400,000 shirts and *423delivered them to the Government. They were duly accepted and were paid for at the price of 48 cents per shirt.

V. The contract specifications, Exhibit A, provided an allowance of 1.945 yards of flannel shirting and 0.333 yard of corset jeans for a single shirt. The methods adopted by plaintiffs resulted in a greater saving in Government materials than would have been made if these methods had not been adopted. They produced 13 shirts out of the material allotted to them for 12 shirts. To accomplish this it was necessary that plaintiffs have and maintain larger tables for cutting and more space for work, besides other economies in doing the work. These were maintained and at large additional expense to themselves arising out of increased rents, light, and heat for the additional space, cost of separating the material into shades and different widths whereby the cutting could be done more economically and less waste occur, and the employment of additional help the plaintiffs made saving of material. None of this additional expense would have been expended if the full allowance of 1.945 yards per shirt and 0.333 for the corset jeans had been used.

VI. By the methods used there was effected a saving of flannel of 64,365 yards and 35,126 yards of corset jeans. The cost of the raw material to the Government was $1.75 per yard for flannel, or $112,638.75, and 25 cents for corset jeans, or $8,781.50, making a total of $121,420.25, 20 per cent of which is $24,284.05.

The court decided that plaintiffs were entitled to recover.

Campbell, *GMef*Justice,

delivered the opinion of the court:

The plaintiffs entered into a contract with the Government to make 400,000 shirts at a stated price, the Government to furnish the flannel, jeans, and buttons. One of the requirements related to the amount of material allowed to the shirt, and this was specified. The finished shirts, together with all ends, remnants, and cuttings, were to be delivered at the New York depot of the Government. Another contract, referred to as supplemental contract, was also *424executed, which provided that the plaintiffs should “use best efforts to avoid all possible waste,” and that for the additional. work and special care so involved they would be paid “ as separate compensation and preminum an amount equal to 20 per cent of the net cost price of the Government-owned materials, to the extent of the savings in uncut yardage on comparing the quantities actually used in the cutting with the allowances fpr] the purpose listed in the accompanying schedules.” The shirts were manufactured, delivered, and paid for. There was a large saving in material effected by the methods and care used by plaintiffs, they having made shirts that met all requirements with much less cloth per shirt than the allowance authorized by the specifications. The 20'per cent of the net cost price of the material saved was not paid by the Government though demanded by the plaintiffs, and it is for this compensation that suit is brought. The Government contends that the supplemental contract is without consideration and against public policy. One of its recitals is that it was believed that considerable yardage in cloths furnished by the Government to contractors had been lost to the Government by careless and inefficient cutting, resulting in a material reduction of the saving in uncut cloth returned to the Government, and that to encourage painstaking cutting from patterns furnished the contractors it was to the interest of the United States to modify the original contract, and it was modified in the particulars mentioned.

We have had occasion to consider the effect of a supplemental contract containing similar provisions to the one in this case, and it was held that the supplemental contract was valid. See Cohen, *Endel & Co.*case, decided April 13, 1925, 60 G. Cls. 513. The benefits accruing to the Government, as well as the additional expense incurred by plaintiffs in effectuating the saving of Government-owned material beyond that contemplated by the contract, furnish sufficient consideration for a supplemental contract. The facts of the instant case furnish an additional reason for our conclusion that did not appear in the case just cited. When plaintiffs proposed to make 400,000 shirts instead of 300,000 *425named in the call for bids, it stated as one of the conditions of its proposal that the contract should include the provisions for compensation for savings that were in a supplemental contract which it was then working under, and wer.e the same as those in the so-called supplemental contract in this case. The first contract in this case bears date November 23, and. the additional contract bears date December 10. The exact dates of their execution do not appear, but one appears to have been executed for the Government in Philadelphia or New York and the latter in Washington. Both of these instruments were, however, in plaintiffs’ possession and duly executed long before the Government had furnished any material or the plaintiffs had begun the work. The contract was, therefore, entirely executory. Surely the parties had the right to make the contract express the agreement between them, and it required no fresh consideration to support an instrument thus designed. See *Savage Arms Corporation*case, 266 U. S. 217, 220. What we have characterized as a contract and a supplemental contract, in order to refer to them, may very well be held to constitute one contract; they should be read together, and when this is done there can be no doubt of plaintiffs’ right to recover. Judgment should be rendered for the 20 per cent allowed by the contract. And it is so ordered.

Graham, *Judge;*Hat, *Judge;*Downet, *Judge;*and Booth, *Judge,*concur.