Case Name: SAVAGE ARMS CORPORATION v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1922-01-16
Citations: 57 Ct. Cl. 71
Docket Number: No. 34234
Parties: SAVAGE ARMS CORPORATION v. THE UNITED STATES.
Judges: Graham, Judge; Hat, Judge; DowNet, Judge, and Campbell, Chief Justice, concur.
Reporter: United States Court of Claims Reports
Volume: 57
Pages: 71–88

Head Matter:
SAVAGE ARMS CORPORATION v. THE UNITED STATES.
[No. 34234.
Decided January 16, 1922.]
On the Proofs.
Contract; suspension; prospective profits. — Plaintiff entered into a contract with the Government to manufacture and deliver 440,000 magazines for Lewis machine guns, and after having delivered a certain number, the plaintiff was notified by the Chief of Ordnance to suspend operation as to 298,000 magazines and to acknowledge receipt of the notice immediately, as it was intended to negotiate a supplemental contract for modification, settlement, and adjustment of the one existing. Plaintiff never acknowledged the receipt of said notice, but took the matter up with local officials of the Ordnance Office, who had no authority to deal with the same, and was allowed by them to manufacture and deliver the 298,000 magazines suspended by the notice instead of the 142,000 which it was authorized to deliver. The 298,000 magazines so delivered were paid for in full and plaintiff then stopped work on its contract. Several months thereafter plaintiff entered into an oral agreement with the Government that if the Government would issue a substitute notice authorizing the manufacture and delivery of 298,000 magazines and cancellation of 142,000 it would abandon any claim it might have for the refusal of the Government to allow it to manufacture and deliver the remaining 142,000 magazines. The notice was issued by the Chief of Ordnance in accordance with said agreement. Held, that the plaintiff can not recover prospective profits on the 142,000 magazines it did not manufacture and deliver.
The Reporter's statement of the case:
Mr. Jesse G. Adkins for the plaintiff. Messrs. John H. 1selin and Frank F. Nesbit were on the briefs.
Mr. W. F. Norris, 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:
I. The plaintiff is, and was during the different transactions set forth in these findings, a corporation duly incorporated under the laws of the State of Delaware, with its principal place of business in New York City, and a factory located at Utica, New York, devoted, during the war with ¡Germany, exclusively to the manufacture of Lewis machine guns and spare parts therefor, including magazines.
The plaintiff had with the United States, including the contract in this case, 18 contracts for the manufacture and delivery of magazines for Lewis machine guns for the Army, Navy, and Marine Corps, under which it had actually delivered, up to and including June 20,1919,2,201,568 such magazines, the profits on which were $4,417,546.98. The Government taxes paid on plaintiff’s net profits during the year 1918 amounted to 66.3 per cent. There were also other large contracts for the manufacture and delivery of machine guns, small arms, and munitions of different kinds. The Government also expended, under a contract for increasing plaintiff’s facilities, the sum of $2,850,000 for the erection of buildings and machinery, the title to which remained in the Government.
The numerous accounts relating to the various activities of the plaintiff in carrying out Government contracts were pending during the performance of the contract upon which this suit was brought.
II. The plaintiff and the United States entered into a contract dated April 30,1918, known as War Ordnance C. M. G. 48-A, a copy of which was filed as Exhibit A to the plaintiff’s petition and is made a part of this finding of fact by reference thereto. There was another contract with the Savage Arms Corporation for 22,000 Lewis aircraft machine guns, dated June 6,1918, known as War Ordnance C. M. G. 48. The two had originally been one contract, but were finally separated.
The Savage Arms Corporation signed said contract, by W. L. Wright, vice president, and the United States by Samuel McEoberts, colonel, Ordnance Department, National Army, contracting officer, and Charles N. Black, lieutenant colonel, Ordnance Department, National Army. The name of Samuel McEoberts was signed in print and the names of W. L. Wright and Charles N. Black in their handwriting. At the time said contract was executed all such contracts were required to be signed by Samuel McEoberts, or in his name by Charles N. Black, or any one of four other designated officers of the Ordnance Department.
The oath required by section 3745 of the Eevised Statutes was taken by Colonel Black on July 23, 1918.
By said contract, C. M. G. 48-A, the plaintiff agreed to manufacture and deliver to the United States, and the United States agreed to pay for certain spare parts for 22,000 Lewis machine guns. The only item of said contract involved in this suit is the one for 440,000 magazines for said Lewis machine guns, aviation type, for which $4.24 each was agreed to be paid by the defendant.
III. The plaintiff promptly entered upon the performance of its contract, and while so engaged, entered into a supplemental contract with the United States, dated January 13, 1918, regular in every particular, by which the requirement for the manufacture and delivery of 22,000 shell deflectors contained in the contract of April 30, 1918, was canceled because it was a duplication of the same requirement in the contract of June 6,1918, and the United States was released from all claims and demands arising out of or in connection with such cancellation. The said supplemental contract also contained the following provision:
“ Except as herein modified, all the terms and conditions of the said contract dated April 30,1918, shall remain in full force and effect.”
Attached to the said supplemental contract was a circular headed “ Additional terms and conditions,” without address or signature, and to which no reference was made in said contract. Such circulars, beginning with October 20, 1918, were frequently attached to procurement orders, purchase orders, and contracts, which sometimes referred to said circulars and sometimes did not.
Paragraph (g) of these circulars reads :
“ If in the opinion of the Chief of Ordnance the public interest shall so require, this order may be terminated by the United States at any time by notice in writing to the contractor from the contracting officer of the United States, and such termination shall be deemed to be effective immediately upon the giving of such notice, or the contracting officer may notify the contractor that any part or parts of the articles, material, or work then remaining undelivered or unperformed shall not be manufactured, delivered, or performed.”
IY. Deliveries of magazines under contract C. M. G. 48-A, calling for 440,000 magazines, began on September 28,1918, and during the months of September, October,.and December 24,347 such magazines were delivered.
Thereafter, on January 29, 1919, a notice was issued from the office of the Chief of Ordnance (Procuration Division) at Washington, signed by the contracting officer thereof and addressed to plaintiff at Utica, N. Y., as follows:
“ 1. By direction of the Chief of Ordnance you are requested in the public interest immediately to suspend operations under your contract, or order, with the United States, War-Ord. No. C. M. G. 48, to the extent of 298,000 magazines, together with their spare parts.
“ You are also requested, except for the purpose of completing deliveries or in cases of proved necessity, to order no further materials or facilities, enter into no further subcontracts, make no further commitments, and incur no further expenses in connection with the performance of said contract, or order.
“ 2. This request is made with a-view to the negotiation of a supplemental contract providing for the modification, settlement, and adjustment of your existing contract or order, in a manner which will permit of a prompt settlement.
“ 3. Please acknowledge receipt of this notice immediately and indicate your decision as to compliance with or rejection of this request. Upon notice of your compliance, a representative of the Ordnance Department will forthwith take up with you the proposed negotiation.”
This notice was forwarded to the Kochester District Claims Board for delivery to plaintiff, and its purport having been communicated to plaintiff, an agent of the latter entered into verbal negotiations with an official of the claims board relative to the same. An understanding was arrived at between this agent and official to the effect that the order of suspension should operate to the extent of 142,000 magazines instead of the 298,000 stated in the notice. Thereupon plaintiff wrote under date of February 13, 1919, to the secretary of the said District Claims Board as follows:
“ We have your letter of January 31st, inclosing suspension notice dated January 29th from Washington, covering the suspension of work on a certain quantity of magazines on War-Ord. C. M. G. 48. Our Mr. Phillips, from Utica, has discussed this matter with you, and it is understood that the suspension notice as received is not correct. We therefore await a change in the wording of this notice to correspond with the later instructions received at our Utica plant.”
The plaintiff knew that the said notice of January 29, 1919, related to the contract for furnishing 440,000 magazines, designated in Finding II as C. M. G. 48-A. It was the only contract that called for the specific number 440,000. The contract designated as C. M. G. 48 for the manufacture of 22,000 Lewis aircraft machine guns had been completed on December 31, 1918.
It does not appear from the evidence what member of the District Claims Board informed plaintiff that the suspension notice of January 29,-1919, was incorrect and allowed it to manufacture and deliver 298,000 magazines instead of 142,000. It does appear from the evidence, however, that the Rochester District Claims Board had no authority to change the suspension order of January 29, 1919.
The plaintiff never replied to the notice of the contracting officer at Washington of January 29, 1919, but took the suspension order up with the District Claims Board, or some member thereof, instead. On August 1, 1919, the Chief of the Contract Section of the Ordnance Department did not know that the suspension of the delivery of 298,000 magazines had been changed to 142,000. The District Claims Board, on July 18, 1919, requested the Chief of the Contract Section to issue an order of suspension against contract C. M. G.'48-A, but did not mention the change that had been made in the notice. In reply to this letter, the Chief of Ordnance, on August 1, 1919, notified the District Claims Board that he was willing to relieve the plaintiff from the manufacture and delivery of 298,000 magazines. There is nothing in the evidence to show that the Ordnance Office at Washington was ever informed of the change made in the suspension notice of January 29, 1919, until after the substitute suspension notice of September 12,1919, was issued.
Before its letter of February 13, 1919 was written the plaintiff had stopped work on the 142,000 magazines, having received verbal instructions above mentioned to discontinue the manufacture of that number, although the written instructions stated 298,000.
The plaintiff, following its letter of February 13, 1919, proceeded to make further deliveries of magazines during the year 1919, as follows:
Feb. 15. Feb. 17. Feb. 20. Mar. 5_. Mar. 8_ Mar. 13-Mar. 15. Mar. 19. Mar. 21. Mar. 24. Mar. 24. Mar. 26. 9, 600 14, 092 13,146 13, 344 12, 432 14, 400 14,400 14,400 14, 400 14, 400 4,000 14, 400 Mar. 31. Apr. 4_. Apr. 8__ Apr. 10. Apr. 11-Apr. 16-Apr. 18-Apr. 24. Apr. 30-Apr. 30-May 7— 4,800 18, 672 12, 096 1,872 12, 672 12, 672 8,470 18, 624 18,816 6, 960 4,485
until it had delivered 273,653, which, added to the number delivered prior to the suspension notice, 24,347, makes the 298,000 magazines which were delivered and paid for, the last payment having been made on May 21,1919.
After completing said deliveries the plaintiff made no request to be allowed to furnish the 142,000 remaining of the whole number named in the contract. Thereafter some of the orders for materials were canceled, and some of the machinery for manufacturing said magazines was removed and the space occupied for other purposes.
At the time contract 48-A was pending the plaintiff had a large number of contracts with the Government, 18 for furnishing magazines, besides contracts for furnishing machine guns, small arms, and other munitions, and numerous accounts relating to such contracts. The plaintiff was therefore anxious to close this contract on its books, particularly so as there was some discussion going on among the ordnance officials in Washington about what had become of the suspension order of January 29, 1919, and.a possibility, when the unauthorized changes became known, of charging back 156,000 magazines (the difference between 142,000 and 298,000) against the plaintiff as having been improvidently accepted and paid for.
The plaintiff, with this end in view, wrote a letter dated July 8,1919, to the secretary of the Eochester District Claims Board, which reads:
“ Eeference: (a) Unfilled portion represents 142,000 extra magazines for Lewis machine guns.
“ Dear Sir : Eeferring to the writer’s conversation with you over the long-distance telephone this afternoon, if you have not already done so we will thank you to make immediate arrangements to make application to Col. E. H. Hawkins, chief of the contract section, Administration Bureau, Washington, for suspension request to be sent to us through your office, terminating the above-mentioned C. M. G. 48-A contract, on which there are now due to the Government the quantity of 142,000 extra magazines for Lewis machine guns.
“ Upon receipt of this suspension request we hereby agree to immediately accept it without making claim for any portion of the 142,000 magazines so suspended.
“ By reason of change in design in the magazine furnished under this contract, we, the contractor, sustained a substantial loss of profit by reason of lost production, and inasmuch as this contract will have been suspended upon acceptance of the above-mentioned suspension request, we will then accordingly file our claim for recovery of this lost profit.”
The change in design referred to in the above letter was made in June, 1918, under article 2 of the contract, and provided Veeder counter indicators and dust covers for the magazines for Lewis machine guns.
On July 10,1919, without awaiting a reply to its said letter of July 8, 1919, the contractor filed with the Rochester District Claims Board a claim in entire accordance with the statement of said letter of July 8, stating its claim at the sum of $181,213.27, alleged to be on account of lost production of magazines under contract C. M. G. 48 and C. M. G. 48-A, due to change in design of same. This claim was disallowed by the board, the grounds of disallowance not being shown by the record.
The plaintiff also presented another claim growing out of said change in design of the magazines. It was the cost of making and attaching the Veeder counter indicators and dust covers and the prices were agreed upon by the Government and the plaintiff at 9 cents each for the counters and 8 cents each for the dust covers, aggregating $26,711.03, which was paid on November 12, 1919.
After writing the letter of July 8, 1919, the plaintiff persistently and repeatedly urged the officials of the ordnance office to revise the suspension order of January 29, 1919, by an order authorizing the delivery of 298,000 magazines.
A letter from the plaintiff, signed by Mr. Barker, and addressed to Mr. Horton, dated August 20, 1919, reads:
“Dear Mr. HortoN: Referring to the writer’s conversation with you under date of August 14, 1919, this will confirm the fact that there remain undelivered on the above-mentioned contract 142,000 magazines for Lewis machine guns.
“ As we have received and accepted no suspension request for this number, it will be appreciated if you will have1 forthcoming suspension request for our acceptance in termination of this contract.
“ Some time ago we received verbal instruction of the Rochester district office to discontinue the manufacture of these magazines, as they were not wanted. So that there will be no misunderstanding, we are anxious to receive and accept suspension request, otherwise the contract will remain open on our books.”
Finally, a verbal agreement was arrived at between Mr. Barker, representing the plaintiff, and Mr. Horton, representing the defendant, by which the plaintiff agreed to abandon and settle all claims, controversies, and disputed points, growing out of contract 48-A if Mr. Horton would secure a revision of the suspension order of January 29, 1919, so as to allow the delivery of 298,000 magazines instead of 142,000.
Mr. Horton performed his part of the agreement, and as the result of his efforts the suspension order dated September 12, 1919, was issued, addressed to plaintiff by direction of the Chief of Ordnance, and signed by Lieutenant Colonel Hawkins, of the Ordnance Office. The order reads:
“ 1. By direction of the Chief of Ordnance you are requested in the public interest immediately to suspend further operations upon your contract, or order, with the United States, War-Ord. No. C. M. G. 48-A, except such operations as may be necessary to complete delivery thereunder of a total (including all deliveries heretofore made) of 298,000 magazines together with their spare parts.
“ You are also requested, except for the purpose of completing such deliveries or in cases of proved necessity, to order no further materials or facilities, enter into no further subcontracts, make no further commitments, and incur no further expenses in connection with the performance of said contract or order.
“ 2. This request is made with a view to the negotiations of a supplemental contract providing for the modification, settlement, and adjustment of your existing contract or order in a manner which will permit of a prompt settlement.
“ 3. Please acknowledge receipt of this notice immediately and indicate your decision as to compliance with or rejection of this request. Upon notice of your compliance a representative of the Ordnance Department will forthwith take up with you the proposed negotiation.
“4. This supersedes all previous letters of suspension.”
All questions of the deduction of payments for the 156,000-magazines delivered in excess of the order of January 29, 1919, having been settled, the plaintiff, by letter dated September 24, 1919, acknowledged the receipt of the order of September 12, as follows:
“ 1. Acknowledgment is hereby made of ‘ suspension request’ above referred to, bearing date September 12, 1919, substituted for incorrect suspension request dated January 29, 1919.
“2. This corporation has suspended work in accordance . with said request, reserving, however, all its rights against the United States Government, or any department or officer thereof, for failure of the Government fully to perform all the provisions of the contract known as No. O. M. G. 48-A and especially its rights to recover all the profits which it would have made had it been permitted to complete said contract.”
Thereafter the plaintiff wrote several letters to the office of the Chief of Ordnance, making inquiry as to the intention of the Government regarding the delivery of the remaining 142,000 magazines, or the payment of prospective profits on its refusal to receive such magazines, to which the Chief of Ordnance finally, on November 17, 1919, replied that the Government could not use and would not accept delivery of the remaining 142,000 magazines, and that he was not authorized to pay anticipated profits on such magazines.
Y. When the notice of suspension- of January 29, 1919, was received in February, the plaintiff was in the midst of the performance of its contract, and was at the height of its production, making 5,000 magazines a day, and was in a condition to have performed its entire contract without difficulty.
VI. On the 298,000 magazines manufactured and delivered under the contract of April 30, 1918, the plaintiff made an average profit of $2,007 each, or a total profit of $598,086. If the plaintiff had completed its contract it would have made a profit of $284,994 on the remaining 142,000 magazines.
Appealed.

Opinion:
Booth, Judge,
delivered the opinion of the court:
The plaintiff company on April 30, 1918, entered into a written agreement with the defendant to supply, among other things, 440,000 magazines, to be used by the defendant in connection with Lewis machine guns. The contract was made during the war with Germany, and was one among several others obligating the plaintiff to furnish the defendant with arms and munitions of war.
On January 29, 1919, following the armistice, the defendant notified the plaintiff in writing that it would suspend the contract to the extent of 298,000 magazines, and invited negotiations for a supplemental contract looking toward a prompt adjustment and settlement of contract rights. The plaintiff company, for some reason, contended that the suspension notice was erroneous and should not have been for the total number of 298,000 magazines. An alleged verbal conversation, and one or more over the telephone with the officers of the defendant, members of the Rochester District Claims Board, located at Rochester, N. Y., according to its version of the affair, resulted in a verbal statement that the suspension order was construed by them as not intended to extend further than 142,000 magazines. The plaintiff wrote the Rochester District Claims Board on February 13, 1919, stating that the suspension order was erroneous, and asking for a corrected suspension in accord with its verbal understanding, a matter over which it had no jurisdiction. As a result of this misunderstanding a considerable correspondence ensued and considerable time elapsed before the negotiations culminated in a settlement. In the meantime the plaintiff proceeded with the manufacture of magazines and did not suspend until May 7, 1919, when it had completed and delivered, and on May 21, 1919 received payment for, 298,000 magazines, notwithstanding the fact that its letter of February 13, 1919 had not been answered, and that no correction of the suspension order of January 29, 1919 had been obtained. No competent evidence discloses any authorized amendment or correction of the suspension order of January 29, 1919, nor can we find in the record who gave it or what its exact terms were, other than-that 142,000 was the number to be substituted for 298,000 magazines. Thus we find the plaintiff acting upon a verbal modification of a written order of suspension extending expressly to 298,000 magazines, manufacturing, delivering, and receiving payment for the identical number it had been notified to suspend, and making but one feeble effort to have the verbal modification put in writing, until a date subsequent to the time when said magazines had been delivered and paid for. The plaintiff's attitude then, at this stage of the proceedings, as shown by the record, was simply this: We received a written order to suspend the manufacture of 298,000 magazines. We communicated with the defendant and it was verbally agreed that we might furnish 298,000 magazines and suspend 142,000. We furnished the 298,000; the defendant paid for them. We then in January did suspend the 142,000. We made no effort to manufacture or deliver the same, but on the contrary specifically asked for and agreed to accept a suspension order for the 142,000.
Why do we say this ? Because the inference is irresistible. After the plaintiff had completed the manufacture and delivery of the 298,000 magazines and been paid therefor, its officers realized that this transaction had been closed upon the bare, uncertain authority of a verbal order, and therefore it was persistent and energetic in its efforts to have this past transaction officially and expressly closed by the proper authority, so that in no event could the large sums of money it had received thereunder be checked against other sums due the plaintiff under other contracts, aggregating millions of dollars.
This view of the situation is expressly confirmed and substantially put at rest by the letter of July 8, 1919, written by the plaintiff to the Rochester District Claims Board, wherein the plaintiff in positive terms expressly agrees to waive all claims for any portion of alleged damages due to the suspension of 142,000 magazines, if the officer addressed will " make immediate arrangements for suspension request to be sent to us through your office terminating the above-mentioned C. M. G. 48-A contract." This letter of July 8, 1919, was the result of a verbal agreement between the plaintiff and the officers of the Rochester District Claims Board, subsequently ratified and confirmed by the Chief of Ordnance of the War Department at Washington. The history of this transaction alone is sufficient to determine the case adversely to plaintiff's contention. The plaintiff had suspended the manufacture of 142,000 magazines, a conference as to its claims had taken place between its representatives and the officers of the Rochester District Claims Board, where the plaintiff's representatives talked over the possibility of a claim for profits on the 142,000 magazines suspended, and at the same time a claim for a large sum of money due to a change in design of the magazines made during the course of manufacture. This claim embraced a charge for an alleged "lost production," a damage due to a slowing down of production caused by the addition to the magazines of Yeeder counter indicators and dust covers. It was not confined alone to the number of magazines manufactured under contract C. M. G. 48-A, but by its own terms included 16,661 magazines delivered under contract C. M. G. 48. The total amount claimed is $181,213.27, arrived at by charging a certain percentage of overhead expenses against the manufacture of 314,661 magazines, or 16,661 in excess of those delivered under contract C. M. G. 48-A. The officers of the Rochester District Claims Board declined to consider any claim for lost profits, at the same time representing to the plaintiff that pursuit of a claim for profits in the United States Court of Claims involved a period of time extending for at least half a century, an interminable controversy, with no hope of immediate redress, and the plaintiff, without investigation, however preposterous the statements were, accepted the same, and expressly agreed that the allowance of the claim for lost production would be accepted by it in full of all claims and demands whatsoever growing out of the suspension of the manufacture and delivery of the 142,000 magazines then undelivered. The above claim was mailed to the Rochester District Claims Board July 10, 1919, and received July 12, 1919. This 'most remarkable transaction, though finally culminating in the dis-allowance of the claim as presented, remains a most potent factor in depicting the attitude of the plaintiff toward a settlement of differences with the defendant, another step toward the procurement of an authenticated suspension order for 142,000 magazines, and an express approval of what had been done under its contract. The transaction itself was quite unique, the plaintiff agreeing to balance one claim against another, both of substantially the same character, inasmuch as both involved anticipated profits. The contract in express terms authorized changes in the specifications and design of the articles to be furnished, and provided a method of payment therefor. There was little or no room for dispute, yet we find the plaintiff company presenting a disputatious claim under this very article of the contract, totaling a sum far in excess of the compensation afterwards agreed upon, and making it the basis of a composition, which would in the end reimburse it for very close to the amount it now claims as anticipated profits on the undelivered 142,-000 magazines. Stranger still, while this very claim is pending and undisposed of, negotiations are going forward looking toward an agreement for the payment of the cost of the change in specifications and design — the change involved in the large claim presented, and the only one made in the contract — which finally results in the allowance to plaintiff of the sum of $26,711.03, which amount the plaintiff accepted, after the formal disallowance of its item for lost production or increased overhead expenses, to wit, November 12, 1919. What reason there was for a division of this particular claim is explainable only upon the hypothesis that the plaintiff anticipated thereby the securement of the suspension agreement, the approval of its course in manufacturing the 298,000 magazines in the face of an express suspension order for that number, and effectually closing the transaction against the possibility of a checkage against the 156,000 magazines manufactured and delivered in excess of those suspended, as well as a means of invoking the jurisdiction of the Eochester District Claims Board upon a claim which it considered within its jurisdiction, and facilitating its allowance by a proposition to forego all other claims— of which the board had no jurisdiction — if the exact amount claimed would be allowed. Having failed to reach a final adjustment in the method described above, the plaintiff, still extremely anxious to close the transaction, approached Mr. Horton, and on August 20, 1919, wrote the letter set forth in Finding IV. In this letter the failure to receive the corrected suspension order is again stressed, and the language of the same clearly and unmistakably indicates its acceptance is to be treated as a termination of the contract. Negotiations follow, and the course of the negotiations, together with the final result, and the acceptance of the $26,711.03, disclose an agreement, express and beyond doubt, to close the differences between the parties upon the basis agreed upon. The confirmation of this final agreement does not rest wholly on parol evidence, for in accord with what was admittedly said by the respective parties, appears the written suspension order of September 12, 1919, from the Chief of Ordnance in Washington, wherein the number suspended is given as 142,000 magazines instead of, as in the original order of January 29, 1919, 298,000 magazines. The effect of this was an authenticated acceptance of the 298,000 magazines theretofore delivered, and for which the defendant had no use whatever. The fact that for a period of nine months negotiations had been pending; that during all this time . the defendant did not alter, modify, or change the original suspension order, notwithstanding the insistence of the plaintiff that it was erroneous, and especially in view of the fact that the Ordnance Office at Washington did not concur in this contention, coupled with the final change, corroborates with indisputable force the fact that there was an express agreement to close the transaction on the basis of the acceptance without question of the 298,000 magazines, the payment for the change in design, in consideration of which the plaintiff agreed to waive all claims for prospective profits, and close the transaction on its books.
This change in the order, whereby the plantiff proceeded to make and deliver 298,000 magazines instead of 142,000, was acted upon by the plaintiff without any kind of objection on its part. It not only suspended any manufacture of any part of the 142,000 magazines prior to its letter of February, but after completing the 298,000, and being paid therefor in full, the plaintiff did not at any time ask to be allowed to make or deliver the balance of the magazines. It desired, for manifest reasons, to close the matter on its books, and it asked for a corrected suspension order looking to that end. Its entire action showed not only a willingness, but a purpose, to accept the modified order and to acquiesce therein. It must be held to have agreed to the modification of the contract to the extent, at least, that it would not expect to manufacture or insist upon a right to manufacture and deliver the 142,000 magazines. Having thus accepted the modification of the contract, it can not recover the prospective profits now claimed. The right to recover prospective profits involves a breach by one party of the contract, while there is a readiness and willingness of the other party to perform; but where it is agreed that there shall be a partial performance, manifestly there can be no recovery of the profits that would have been earned if the performance had been complete.
It is elementary and we need not cite authorities to sustain the proposition, that where a contractor under obligation to furnish a stated quantity of article finds his contract canceled and subsequently negotiates for the delivery and acceptance of a less quantity than originally intended, accepts payment therefor and a modification order in accord with the agreement he can not then assert a claim for the undelivered balance. The position of the parties has been materially changed. The contractor must stand upon his legal rights under the original cancellation order; he can not abandon them and enter upon the performance of the agreement in accord with the accepted changes, and at the same time assert the binding force of the original contract. Two avenues of redress were open to the contractor'in the first instance, and the right of election was his. He might choose the course which in the end entailed the least loss, and induce the'other party to accept a part performance in lieu of a total or partial breach, or he might treat the contract as at an end and sue for damages. He can not accept one remedy without losing the other.
On September 24, 1919, for the first time, we find a written reservation of the plaintiff's alleged claim for prospective profits on the 142,000 magazines undelivered. It at once arouses an extremely pertinent inquiry. Why this belated assertion of a claim which in all the correspondence between the parties — set forth in the findings — is not once reserved or treated in any other fashion than an unconditional surrender? We would dislike to indulge the inference that during this long period of time this particular claim was employed as a potent instrumentality to extract from the defendant a settlement advantageous to the plaintiff's securing a final and complete adjustment of its business transactions with the defendant under its contract, and after having served its purpose in this respect appear again as an assertion of a separate and distinct liability. The officers of the defendant, beyond the peradventure of a doubt, believed and treated it as settled in the agreement made. The correspondence of the plaintiff, in every letter and in every request, expressly mentioned its existence and agreed expressly to accept the suspension notice for 142,000 magazines without qualification or reservation. As late as August 20, 1919, the plaintiff wrote the defendant to this effect, as set forth in Finding IV.
Language so exact and often repeated is not susceptible to doubt and misunderstanding. The plaintiff had many and very extensive contracts with the defendant. It must have known the effect of its correspondence and the words it used.
The president of the plaintiff company was evidently not familiar with the negotiations between the company and the defendant, prior to September 12, 1919. On September 24 he acknowledged in writing the receipt of the modified suspension order and very innocently inquired as to whether the Eochester District Claims Board had jurisdiction to settle and pay a claim for prospective profits, a question which had long since been answered by the board to the company's accredited representative and about which no one actively connected with the transaction had the slightest doubt. The board on September 26, 1919, promptly notified the plaintiff that it had no jurisdiction of a claim for prospective profits^ in answer to which the president of the company manifested an entire unfamiliarity with the transaction, for he therein stated that the plaintiff had offered verbally to accept the notice of cancellation of the contract C. M. Q-. 48-A. on the basis of payment of anticipated profits thereon. The record is directly contrary to this assertion. No claim for anticipated profits on the 142,000 magazines was ever filed with any department of the Government, at any time, by any person, and the only verbal conversations shown by the record with reference thereto, except the talk with Colonel Crane, was the inclusion of all outstanding claims in the agreement made between the plaintiff and Colonel Horton,, The only reason we can ascribe for the three last inquiries addréssed to the board is an utter lack of knowledge of what had taken place. The plaintiff never attempted to deliver the 142,000 magazines; on the contrary, it is expressly as serted that their manufacture was suspended prior to February 13, 1919. The contract had already been formally canceled, and many months before formally suspended. The plaintiff's dealings with the Eochester District Claims Board had but recently been formally closed; it knew from a long course of daily contact with the board the extent of its authority and the detail of procedure, and the utter absurdity of repeating a situation which had been the subject of controversy for nearly ten months may be explained on the basis that the official of the plaintiff indulging the same was not fully informed with respect thereto. Otherwise we would be forced into the conclusion that the whole subject matter of the correspondence was intentionally delayed until the plaintiff had escaped all danger of controversy and trouble over its prior transactions, or was an afterthought upon which the company might hazard a claim for a large sum of money.
The petition will be dismissed. It is so ordered.
Graham, Judge; Hat, Judge; DowNet, Judge, and Campbell, Chief Justice, concur.