Source: https://supreme.justia.com/cases/federal/us/338/457/
Timestamp: 2019-04-23 04:05:54+00:00

Document:
Specifications attached to and made a part of a government construction contract on the standard form provided that, "if the contractor considers any work demanded of him to be outside the requirements of the contract," he could appeal to the head of the department, "whose decision or that of his duly authorized representative shall be final and binding upon the parties to the contract."
Held: the Court of Claims may not review an administrative decision made under this provision. Pp. 338 U. S. 458-463.
1. Contractual provisions for the settlement of disputes have long been used by the Government and sustained by this Court, are not forbidden by Congress, and should not be frustrated by judicial "interpretation" of contracts. Pp. 338 U. S. 460-462.
2. Regardless of whether the dispute in this case involved a question of fact or a question of law, it was within the ambit of the clear language of the provision for the final administrative settlement of such disputes. Pp. 338 U. S. 462-463.
113 Ct.Cl. 159, 82 F.Supp. 1010, reversed.
The Court of Claims reviewed a decision of the head of a department as to the scope of the work required of a contractor under a standard form of government construction contract and awarded the contractor a money judgment for additional compensation. 113 Ct.Cl. 159, 82 F.Supp. 1010. This Court granted certiorari. 338 U.S. 810. Reversed, p. 338 U. S. 463.
The questions presented relate to the interpretation and validity of terms in a government construction contract providing that, in contractual disputes, the decisions of the Secretary of War or his authorized representative shall be final and binding.
The respondent partnership entered into a standard form contract with the United States to grade the site of a proposed aircraft assembly plant. Article 1 of the contract provided for payment of 24 cents per cubic yard of grading, satisfactorily completed "in strict accordance with the specifications, schedules, and drawings, all of which are made a part hereof. . . ." A proposed taxiway was shown on the drawings, but was not located within the plant site as described in the specifications. The present controversy concerns the question of whether the contract required respondent to grade this taxiway.
Notwithstanding the foregoing provision that the Secretary of War's decision is final and binding, respondent brought this action in the Court of Claims to recover the extra compensation. He there contended that his right to challenge such administrative findings was measured by Art. 15 of the contract, not by Par. 2-16 of the specifications. Article 15 makes a department head's decision "final and conclusive upon the parties" only when such disputes are over "questions of fact." [Footnote 2] Respondent, alleging that the dispute here was over the proper "interpretation" of the contract, argues that how a contract shall be interpreted is not a "question of fact," but a "question of law." Adding this premise to his assumption that Art. 15 alone governed finality of this administrative decision, respondent contended that the Court of Claims could reconsider the facts, make new findings as a basis for its "interpretation," and then overturn the administrative decision. The Court of Claims did all three. On the basis of its new findings and "interpretation," the court entered a money judgment for respondent computed at 59.3 cents per cubic yard for the taxiway grading. 113 Ct.Cl. 159, 82 F.Supp. 1010.
"weakened and narrowed the effectiveness of the well established policy of the Government to settle, without expensive litigation, disputes arising under its contracts,"
"add further doubt and confusion to the authority of designated officers of the United States to make final decisions under government contracts. [Footnote 3]"
We granted certiorari. 338 U.S. 810.
"determine the quantity of the several kinds of work to be paid for under the contract, . . . decide every question which can or may arise relative to execution of the contract, and 'his estimate shall be final and conclusive.'"
Id. at 114 U. S. 551-552. In upholding the conclusions of the engineer, the Court emphasized the duty of trial courts to recognize the right of parties to make and rely on such mutual agreements. Findings of such a contractually designated agent, even where employed by one of the parties, were held "conclusive, unless impeached on the ground of fraud, or such gross mistake as necessarily implied bad faith." Id. at p. 114 U. S. 555.
Merrill-Ruckgaber Co. v. United States, 241 U. S. 387, 241 U. S. 393.
Similar agreements have been held enforceable in almost every state. See cases collected in Note, 54 A.L.R. 1255 et seq. In one state, Indiana, the courts do seem to hold differently, on the ground that permitting engineers or other persons to make final determinations of contractual disputes would wrongfully deprive the parties of a right to have their controversies decided in courts. See cases collected in Note, 54 A.L.R. 1270-1271. In the McShain case, we rejected a contention that this Court should adopt a rule like Indiana's and we reject it now. It is true that the intention of parties to submit their contractual disputes to final determination outside the courts should be made manifest by plain language. Mercantile Trust Co. v. Hensey, 205 U. S. 298, 205 U. S. 309. But this does not mean that hostility to such provisions can justify blindness to a plain intent of parties to adopt this method for settlement of their disputes. Nor should such an agreement of parties be frustrated by judicial "interpretation" of contracts. If parties competent to decide for themselves are to be deprived of the privilege of making such anticipatory provisions for settlement of disputes, this deprivation should come from the legislative branch of government.
all claims by a contractor who, like respondent here, "considers any work demands of him to be outside the requirements of the contract. . . ." The parties incorporated it into the specifications and made the specifications part of the contract, all of which they had a legal right to do. The section is neither in conflict with nor limited by Art. 15, for the latter expressly excepts from its coverage such special methods of settlement "otherwise specifically provided in this contract."
The oft-repeated conclusion of the Court of Claims that questions of "interpretation" are not questions of fact is ample reason why the parties to the contract should provide for final determination of such disputes by a method wholly separate from the fact-limited provisions of Art. 15. To hold that the parties did not so "intend" would be a distortion of the interpretative process. The language of Par. 2-16 is clear. No ambiguities can be injected into it by supportable reasoning. It states in language as plain as draftsmen could use that findings of the Secretary of War in disputes of the type here involved shall be "final and binding." In reconsidering the questions decided by the designated agent of the parties, the Court of Claims was in error. Its judgment cannot stand.
"If the contractor considers any work demanded of him to be outside the requirements of the contract, or if he considers any action or ruling of the contracting officer or of the inspectors to be unfair, the contractor shall without undue delay, upon such demand, action, or ruling, submit his protest thereto in writing to the contracting officer, stating clearly and in detail the basis of his objections. The contracting officer shall thereupon promptly investigate the complaint and furnish the contractor his decision, in writing, thereon. If the contractor is not satisfied with the decision of the contracting officer, he may, within thirty days, appeal in writing to the Secretary of War, whose decision or that of his duly authorized representative shall be final and binding upon the parties to the contract. . . ."
Paragraph 2-16 of the specifications.
"Disputes. -- Except as otherwise specifically provided in this contract, all disputes concerning questions of fact arising under this contract shall be decided by the contracting officer subject to written appeal by the contractor within 30 days to the head of the department concerned or his duly authorized representative, whose decision shall be final and conclusive upon the parties thereto. In the meantime, the contractor shall diligently proceed with the work as directed."
Article 15 of the contract.
"culmination of a recent tendency in the Court of Claims to whittle away the authority of designated officers of the United States to make final decisions under contracts."
"At least, we submit, the power of the Government to make effective contracts of this character should not be so circumscribed except by decision of this Court."
We granted that petition and reversed the judgment without oral argument in a per curiam opinion. United States v. McShain, Inc., 308 U.S. 512.
United States v. McShain, Inc., 308 U.S. 512.

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