Case: BETHLEHEM STEEL COMPANY v. THE UNITED STATES
Abbreviation: Bethlehem Steel Co. v. United States
Decision Date: 1905-12-04
Docket Number: No. 2628
Citation: 41 Ct. Cl. 19
Volume: 41
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: BETHLEHEM STEEL COMPANY v. THE UNITED STATES.
Judges: 
Pages: 19–27

Head Matter:
BETHLEHEM STEEL COMPANY v. THE UNITED STATES.
[No. 2628.
Decided December 4, 1905.]
On the Proofs.
The contract is for the construction of disappearing gun carriages, to be delivered at the times sx^eeified. $35 a day is to be deducted from the contract price on each gun Carriage for every day’s delay. In the correspondence, which makes the contract, the parties uniformly speak of this as “penalty,” and never as liquidated damages. The sum to be withheld would amount in a year to 35 per cent of the cost of each gun carriage. It does not appear that the defendants’ fortifications were ready for the gun carriages prior to their delivery or that -they were delayed in the construction of their work or that they suffered any damages whatever by the delay.
Where the parties in the correspondence which makes the contract uniformly speak of a per diem amount to be withheld in case of delay as “ penalty," and where the per diem would amount in a year to 35 per cent .of the cost of the article, the court is not at liberty to say that the per diem designated as penalty .was mutually intended to be liquidated damages.
The Reporters’’ statement of the case:
The following are the facts of the case as found by the court: .
I. The claimant, the Bethlehem Steel Company, is a corporation incorporated and existing under the laws of the State of Pennsylvania. On April 27, 1903, the claimant, being the successor of the said Bethlehem Iron Company, and having complied with the conditions prescribed by the act of Congress entitled uAn act making appropriations for fortifications and other works of defense, for the armament thereof, for the procurement of heavy ordnance for trial and service, and for other purposes,” approved June 6, 1902 (32 Stat. L., 305, 308), was, pursuant .to the provisions of the said act, substituted for the said Bethlehem Iron Company as claimant in this cause.
II. On or about March. 8, 1898, the defendants, through the War Department, advertised, as required by law, for sealed proposals for the construction of six disappearing gun carriage for 12-inch breech-loading rifles, model of 1896, the specifications accompanying this advertisement setting forth the character and extent of the work to be done.
III. In response to said advertisement the claimant company, among others, submitted sealed proposals as follows:
“Proposal No. 1. — We propose to furnish five or more 12-inch disappearing gun carriages, model 1896, for the sum of $31,000.00 each, and to deliver the first carriage within six months of date of contract, to be followed by two carriages every three months thereafter; or
“Proposal No. %. — We propose to furnish five or more 12-inch disappearing gun carriages, model 1896., for the sum of $33,000.00 each, and to deliver the first carriage within five months from date of contract, to be followed at the rate of one carriage every month thereafter; or
“Proposal No. 3. — We propose to furnish five or more 12-inch disappearing gun carriages, model 1896, for the sum of $35,000.00 each, delivering the first carriage within four months and the second within five months of date of contract ; the remaining carriages to follow at the rate of three carriages every two months thereafter; or
“Proposal No. If.. — We propose to furnish five or more 12-inch disappearing gun carriages, model 1896, for the sum of $36,000.00 each, delivering the first carriage in four months, the second in five months, and the remaining carriages to follow at the rate of two carriages every month thereafter.”
The foregoing alternative proposals were made in consequence of a letter written the claimant company by the Chief of Ordnance, dated March 11,1898, which letter is as follows:
“ Oeeice oe the Chief of Oednanoe,
“ United States Mmy,
“IFaslwiffton, March 11,1898.
“ Gentlemen : It is suggested that in making bids for car- ' riages you estimate, first, on the price of carriages under the supposition that the works will run for twenty-four hours; second, that later, if it be found advantageous, the ordinary working hours may be observed. It is considered best that bids should be made for carriages by numbers, as, for instance, so much for five 8-inch carriages, for six, eight, etc. Therefore it is considered judicious that bids should be made for rapid deliverey of a certain number of carriages or for less rapid delivery of the same. It should be understood, however, that time will be considered very important.
“ Respectfully,
“ D. W. Flagler,
“Brig. Gen., Chief of Ordnance."
IV. The defendants, through the War Department, accepted proposal No. 4 of the claimant company.
V. In drawing up the contract between the United States and. the claimant company a slight modification of proposal No. 4 was decided upon, -which was as follows:
“ Whereas in proposal No. 4 claimant company was-to deliver five or more carriages, the first in four months, the second in five months, and the remaining ones to follow at the rate of two carriages per month. In drawing up the contract this was changed so as to provide for the delivery of one carriage in four months (as proposed) and five carriages in six months from the date of contract, thus reducing the time of the delivery of all the carriages from seven to six months, this reduction of the total delivery being offset by the increased latitude given claimant company as to intermediate deliveries.”
VI.On April 4, 1898, the Ordnance Department transmitted a form of contract of even date to the claimant com-
pany for execution and return by letter, as follows:
“ Office of the Chief of OedhaNce,
“ UNited States Army,
“'Washington, April 1¡., 1898.
‘•‘The Bethlehem Tron Co., South Bethlehem, Pa.
“ Gentlemen : I am instructed by the Chief of Ordnance to transmit herewith contract, in quintuplícate, dated the 4th instant, for six 12-inch disappearing gun carriages, model 1896, for execution and return to this Office.
“ Kespectfully,
“ R. BiRnie,
“Oapt., Ord. Dept., U. S. A.”
To this letter the claimant company made reply on April 5, 1898:
“ The Bethlehem IRON Company,
“South Bethlehem, Pa., April 5,1898.
“ Chief of Okdnance, U. S. A.
“War Department, Washington, D. G.
“ Sir : We have examined the contract forms, covering six disappearing gun carriages, model 1896,. for 12-inch B. L. rifles, for which we submitted proposals under date of the 19th ultimo, and write to call your attention to the third clause, relating to our liability on account of any patent rights granted by the United States, is not struck out as has been done in the case of previous contracts for carriages.
“ We also note that the penalty mentioned in the contract for.each day of delay in deliver of each carriage is $75 instead of $10, as is stipulated in the instructions to bidders and specifications.
“ We made our bid under the understanding that the .penalty for nondelivery was to be $10 per day, and we respectfully request that the contract forms may be modified in accordance with this understanding.
“ We return herewith the contract forms, and remain,
“ Respectfully,
“ The Bethlehem IRON Company.
“ R. W. DavbNPORt,
“Second Vice-President"
Whereupon the claimant company was informed by the Chief of Ordnance, by letter of April 9, 1898, as follows:
“ Office of ti-ie Chief of ORDNANCE,
“ UNITED States Army,
“ Washington, Afrit 9, 1898.
“ Ti-ie Beti-ilei-iem Iron Company,
South Bethlehem, Pa.
“ Gentlemen : In reply to your letter of April- 5, 1898, returning contract forms, I have the honor to inform you that your request in regard to your liability on account of patent rights has been complied with and the third paragraph has been stricken out.
“ In regard to the penalty for delay in delivery being $75 per day instead of $10 per day, I have to state that the former amount is the average difference in time of delivery between your price recently bid for slow delivery of these carriages and the price under the accepted bid. The Department feels it to be just that this average difference should bo the prescribed penalty; but if you -should prefer, instead- of taking the average difference, that the exact difference per day for each particular carriage should be prescribed, the forms will be altered accordingly.
“ The contracts are returned, hoping this explanation will be satisfactory.
“ Respectfully, D. W. Flagler,
“ Brigadier-General, Chief of Ordnance."
Thereafter it was found that an error had been made in the above computation, in that the $75 per day deduction provided for should have been $35 instead, and the claimant company was duly informed of this by letter dated April 16, 1898,'which is as follows:
“ Office of the Chief of OedNANCe,
“ Uhited States Army,
“'Washington, April 16,1898.
“ The Bethlehem Iron Company,
“South Bethlehem, Pa.
“(Through the Inspector of Ordnance, U. S. A.)
“ Gentlemen : Referring to my letter No. 21985, of the 9th instant, I would invite your attention to the fact that an error was "made in the computation in the amount of the deduction in price per day of delay in delivery of 12-inch disappearing carriages, L. F., model of 1896, recently ordered from you, and to inform you that the contract- should read that such deduction in price should be $35 per day of delay in delivery, in accordance with principle stated in my above-mentioned letter.
“ Respectfully, D. W. Flagler,
“Brigadier-General, Chief of Ordnance.”
Before signing the contract in its present form the claimant company, by communication of April 20, 1898, requested that the same should be modified in some respects, which request is contained in the following communication:
. “ The Bethlehem Iron Company,
“ South Bethlehem, Pa., April *B0, 1898.
“ Chief of Ordnance, U. S. A.,
“ War Department, Washington, D. 0.
“ Sir : Referring to the forms of contract for six 12-inch disappearing gun carriages, carrying the date of April 4, 1898, which have recently been received, but not yet executed, and to the conversation which the writer had with .you on Thursday last, we beg to state that on further carefully considering the possibilities of the case we do not believe that we will be able to deliver the six carriages within six months, as called for by the proposed contract. We will, however, undertake to complete, in accordance with our bid, the delivery of the first carriage in four months, the second within five months, and the remaining four at the rate of two per month, thus making the total time of delivery of the six carriages seven instead of six months, it being understood that no penalty will be charged against us foi~ the one month of delay which will thus accrue on the fiftl~ and sixth carriages.
" By agreeing to this proposition the Department will be the gainer, in that the second carriage will be due at the end of the fifth month, while, as the contract now reads, it would not he due until the end of the sixth month.
" With the above understanding confirmed, we will execute the contract as it now stands, except `as to the amount Of penalty for delay in delivery, which, in accordance with your letter of April 16, v~rffl be $35 instead of $75 per day.
"We return the contract forms in order that the change as regards penalty may be made.
We ~einaifl, respectfully,
"Tiii~ BEviIr~HEM IRON CoMPANY.
"R. W. l)AvEin'oRT, "iS'eccnd Vice-President."
To which letter the following reply was made:
“ OlT'TCE OP TIIE ClIIEE OP ORDNANCE,
“ United States Army,
“ Washington, April 25,1898.
“ The Bethlehem Iron Company,
“South Bethlehem, Pa.
“(Through Inspector of Ordnance, U. S. A.)
“ Gentlemen : In reply to your letter of the 20th instant, I have the honor to inform you that the schedule of deliveries of 12-inch disappearing carriages contained therein will, in view of the earlier resulting delivery of the. second carriage, be accepted in lieu of the schedule in the contract, without enforcement of penalties which would result from the change of schedule.
“.The amount of the penalty for delay in delivery is changed from $75 to $35 per day in accordance with my letter of the 16th instant, and the contract forms are returned herewith for execution.
“ Bespectfully, '“ D. W. Flagler,
“Brigadier-General, Chief of Ord/nanceP '
The above correction was' therefore made in the said contract, and the same was duly signed and executed by the claimant company and immediately transmitted to the War Department. A copy of said contract is annexed to and made part of the petition.
VII. Thereupon the Bethlehem Iron Company proceeded to manufacture the said gun carriages, and ultimately delivered them to the United States, and they were accepted by the latter. The following table gives, first, the date fixed by the said contract for the delivery of each one of said carriages ; second, the date of its delivery, and third, the extent of the delay in its delivery.
Of the above days of delay, which amounted in the aggregate to 1,096 days, the United States, through the Chief of its Bureau of Ordnance, decided that the Bethlehem Iron Company .was responsible for delays to the extent of 100 days upon each of the six disappearing gun carriages, or 600 days in all, but did not charge said company with the balance of said days, or 496 days in all, which, at the stipulated sum of deduction at $35 per day for each day of delay in the delivery of each gun carriage, amounted to the sum of $21,000, which sum was deducted from the payments made the claimant company, and the balance, or the sum of $195,000, was paid over to the claimant company, who receipted for said payment under the following protest:
“Bethlehem IRON CompaNY,
“ Soioth Bethlehem, Pa., June &S, 1901.
■ “ Sie : Under our contract of April 4, 1898, there remains, according to our construction of its clauses, to be paid us the sum of $54,000. A voucher is presented to us by the Ordnance Department, dated September 7, 1899, for final payments on six 12-inch disappearing gun carriages (being Nos. 16 to 21, both inclusive), amounting to $54,000, less $21,000 deducted for delays in delivery, making the net amount to be paid $33,000.
“As we do not think all these penalties should have been collected by the Ordnance Department, but think that we are entitled to the sum of $54,000 without deductions, we respectfully notify the Department that we intend to make application to the projier Executive Department or to Congress and shall pursue any remedy in this matter warranted by law, so that our action in receiving the sum will not be considered to operate as a waiver of our rights hereafter to demand the remainder of the amount claimed by us as due under our contract of April 4, 1898.
“ Respectfully,
“Ti-ie Bethlehem Ieon Company.
• “Robt. T. LiNdeeman, President.
“To the Chiee oe Oednance,
“ United States Army, Washington, D. OP
VIII. The court finds as the. ultimate fact that the defendants’ officers hindered and delayed the claimant in the performance of the work by changes, in the plans of construction, as alleged in the xoetition, and in various other ways; but the court also finds that the claimant contributed to the delay in the completion of the work by being insufficiently equipped and prepared to complete it within the time prescribed in the contract and by taking other work to the exclusion of that referred to in these findings; and the court further finds that the transactions in the process of manufacture were so involved and intermerged that it is impossible, on the evidence produced, for the court to ascertain and determine whether the defendants should be charged with a greater proportion of the delays set forth in the foregoing table in finding vii than those assumed by the defendants’ officers, to wit, 496 days out of the total amount of delays, to wit, 1,096 days.
It does not appear that the defendants were ready to use the gun carriages hereinbefore described at the time when they were finally delivered by the claimant; nor does it appear that they could have used them on their fortifications if they had been delivered at an earlier day. Nor does it appear that the defendants suffered any injury or damage whatever by the delay of the claimant in delivering the said gun carriages hereinbefore set forth.
Mr. J ames H. Hayden for claimants.
Mr. Franklin W. Oollins (witli whom was Mr. Assistant Attorney-General Pradt) for defendants.

Opinion:
Per Curiam:
In view of the fact that the gun carriages to be manufactured by the claimant were not articles from which the defendants could obtain on their completion a valuable use or profit, such as might be derived from a house or a vessel; and in view of the fact that the deduction of $35 a day on each gun carriage during the period of delay would amount in a year to $12,775, or 35.48 per cent on the cost of each gun carriage; and in view of the fact that the parties in their correspondence and contract designated the above per diem as a penalty, the court does not feel justified in holding that it was mutually intended to be liquidated damages.
Under thé decision in The Phoenix Iron Company v. United States (39 C. Cls. R., 526) and the decisions therein cited, the judgment of the court is that the claimant recover $21,000.