Whether this clause is fair to the Contractor is doubtful. There is an apparent intent to treat him fairly. Some Contractors, not without reason, think that anticipated profits should be included. The Contractor may have had, at the time he bid, opportunity for another profitable Contract, which he turned down. Anticipated profits, however, are difficult to estimate, and if allowed and paid, the Contractor may promptly secure another equally favorable Contract and so double his profits.

In case of annulment without fault of the Contractor, there may be some doubt whether, after the transaction is closed, the decision of the Chief Engineer ought to be made final as to the allowance to be made to the Contractor. Any question as to maintaining control of the work is now eliminated. It is possible that arbitration may be appropriate in this case if agreement is not reached. Engineers who incline to look favorably on arbitration may find it desirable here, even if undesirable in general. The expense and other unsatisfactory features of arbitration will lead other Engineers to reject arbitration even here. Most Companies and their Chief Engineers would probably insist on restricting any award so that anticipated profits should not be allowed. Cases of annulment are probably rare except in railroad work where the Contractor has knowledge, at the time of making his bid, of the possibility or probability of such action, so that the risk in its occurrence, as a practical matter, would usually be slight.

The difficulty of determining the reimbursement proper in any case is due in considerable part to a faulty system of bidding. In many Contracts there is a large expense for establishment, temporary structures, depreciation on plant, and other overhead charges. The direct unit cost of the various items in the Proposal can be closely computed in advance. Upon each of the items, however, must be saddled a part of these overhead charges. The Contractor, probably wisely, often puts a larger proportion on those items on which monthly payments will be made earliest or upon those which are likely to be increased in amount. A system of bidding is desirable which will allow a direct bid on establishment, etc.; this will tend to cure the difficulties due to annulments, and the somewhat similar troubles due to increase or decrease of quantities from those forming the basis of the Proposal. It will also give better control over unbalanced bids.

Section 34 (b) seems not appropriate as a part of a section on annulment. It is general in character, applying to all notices to the Contractor.

It seems questionable whether notice "to the man in charge of any office used by the Contractor" is notice to a man of sufficient responsibility, in the important case of the annulment of a Contract, and the same is true of "his foreman." Either the notice should be mailed to the Contractor's

address, or the Contract should require him to specify an agent, manager, or foreman upon whom notice should be served.

Whatever be the requirements as to notice or the like, they should be scrupulously followed. The annulment is for the benefit of the Company, and the courts would be likely to insist upon thorough compliance with the terms not only as to notice, but also as to the report of the Chief Engineer with relation to reimbursement, which should be a formal written report. The following reading applies to notices:

A. The address given in the bid or proposal upon which this contract is founded is hereby designated as the place where all notices, letters and other communications to the Contractor shall be mailed and delivered. The delivering at the above named place or depositing in a post-paid wrapper directed to the above place, in any post-office box regularly maintained by the post-office, of any notice, letter, or other communication to the Contractor, shall be deemed sufficient service thereof upon the Contractor, and the date of such service shall be the date of such delivery or mailing. Such address may be changed at any time by an instrument in writing executed and acknowledged by the Contractor and delivered to the Board. Nothing herein contained shall be deemed to preclude or render imperative the service of any notice, letter or other communication upon the Contractor personally.

A somewhat more condensed clause is suggested for consideration:

B. Notice may be given either by delivery to some agent or person who has been designated in writing by the Contractor for that purpose; or by mailing the notice to the address given by the Contractor in his bid, or to a later address in writing delivered to the Board for that purpose. The date of notice shall be the date of delivery or of mailing. Delivery or mailing of notice to any partner shall be notice to the partnership. If the Contractor is a corporation it shall specify in writing the officer or person upon whom notice shall be served.

There is a difference between notice and instructions, and a clause similar to that below should be added to the clause as to notice:

C. The Contractor shall employ suitable superintendents and foremen to represent him at different parts of the work, and they shall receive and obey orders from the Engineer.

Another more elaborate reading follows:

D. Orders and directions may be given orally by the Engineer to, and shall be received and promptly obeyed by, the Contractor or his representative or any superintendent, overseer or foreman of the Contractor who may have charge of the particular work in relation to which the orders or directions are given, and a confirmation in writing of such orders or directions will be given to the Contractor by the Engineer if so requested. The Contractor or his duly authorized representative shall be present at all times on the work to receive orders and directions from the Engineer.

This seems to have no special advantage unless it be the written order if requested. In the case of a written order it should be made clear whether "extra work " is intended.

35. FAILURE TO MAKE PAYMENTS. Failure by the Company to make payments at the times provided in this agreement shall give the Contractor the right to suspend work until payment is made, or at his option, after thirty (30) days' notice in writing, should the Company continue to default, to terminate this contract and recover the price of all work done and materials provided and all damages sustained, and such failure to make payments at the times provided shall be a bar to any claim by the Company against the Contractor for delay in completion of the work due to such suspension or failure to pay.

36. MONTHLY ESTIMATE. So long as the work herein contracted for is prosecuted in accordance with the provisions of this contract, and with such progress as may be satisfactory to the Chief Engineer, the said Chief Engineer will on or about the first day of each month, make an approximate estimate of the proportionate value of the work done and of material furnished or delivered upon the Company's property at the site of the work, up to and including the last day of the previous month. The amount of said estimate, after deducting per cent. and all previous payments, shall be due and payable to the Contractor at the office of the Treasurer of the Company on or about the day of the current month.

These two sections may be considered together. The provision for monthly estimates may properly precede the provision as to the failure to pay.

Considering Section 36, it seems that a definite date for payment should be stated if the Contractor is to have a right to suspend work for non-payment. The estimate made "on or about " the first of the month is reasonable although indefinite, but the payment should be due at some specific time.

In the third line there should be added, after "make," the words " and approve," so that the reading will be:

A. The Chief Engineer will . . . make and approve an approximate estimate.

The moneys will not then be due without such approval. Under the reading of Section 36, such approval will depend upon prosecution "in accordance with the terms of this Contract" combined with "satisfactory progress." Before commenting upon this feature other readings may be cited:

B. In order to assist the Contractor to prosecute the work advantageously the Engineer shall, from time to time as the work progresses, but not more often than once a month, make in writing an estimate, such as in his opinion shall be just and fair, of the amount and value of the work done and materials incorporated in the

work by the Contractor according to the terms of this contract (but it is understood that in making such estimates the Engineer shall not necessarily be governed by the prices contained in the Schedule), provided, however, that estimates may at any time be withheld or reduced if, in the opinion of the Engineer, the work is not proceeding in accordance with this contract.

Such estimates shall not be required to be made by strict measurement, but they may be made by measurement or by estimation or partly by one method and partly by the other, and it shall be sufficient if they are approximate only.

Upon each such estimate being made and certified in writing to the Commission, the Commission shall prepare and certify a voucher for ninety per centum (90%) of the amount stated in such estimate.

It is common to specify either 85 per cent or 90 per cent; 87 per cent is used in one case.

Another reading covering monthly estimates is this:

C. The Engineer shall once a month make an approximate estimate in writing of the amount of work done and of the relative value thereof, according to the terms of this contract, and he may make allowance in said monthly estimates on account of the work covered thereby being more or less difficult than the average. And it is agreed that said estimates may be withheld or diminished when the work is not carried on in accordance with the provisions of this contract.

And the following is similar:

D. Estimates may at any time be withheld or reduced if, in the opinion of the Engineer, the work is not proceeding in accordance with this contract.

The provision for reducing or withholding estimates is not unusual. Nevertheless it seems somewhat drastic and illogical. It looks like a club held over the Contractor, and is, in essence, a penalty, although, as a regulation of times of payment, a court probably would not so regard it. The logical remedy for failure to properly carry on the work is to take the work away as provided in Section 33.

In one of the readings above the partial payments are " to assist the Contractor to prosecute the work advantageously." A withholding has a contrary effect.

If the Contractor's failure to carry on the work satisfactorily is due in any part to financial weakness, withholding or reducing the estimate may bankrupt him, and this will not be to the advantage of the railroad or City. There should be no reduction unless to cover work performed unacceptably or to protect workmen. A provision to the following effect may be introduced if it seems desirable:

E. Work not performed acceptably may be excluded in whole or in part from monthly estimates. All monthly estimates are provisional and shall not be construed as an acceptance of any part of the work.

Another reading of the latter part is:

F. The payment of monthly estimates shall not in any respect be taken as an admission that the work is done or that its quantity or quality is satisfactory, nor as a release of the Contractor from responsibility in respect thereof, but the whole work and all particulars relating thereto shall be subject to revision and adjustment by the City at the time of final acceptance and the payment of the final estimate.

G. Monthly payments shall not be an acceptance of the work done, and no work shall be accepted until the work contracted for is fully completed, or as provided otherwise in these specifications.

H. But if at any time after such monthly payments have been made it shall be found that any of the work included in the estimates on which such payments have been made has been performed in an unworkmanlike manner or contrary to these specifications, the Engineer shall direct the Contractor to take down and rebuild such work in the manner required by the specifications, and no further payment on this Contract shall be made until such directions have been in all respects complied with.

Section 35 is unusual in Contracts, but shows some recognition of the rights of the Contractor. He is entitled to his pay, and properly to the pay for 85 per cent of all work acceptably performed. A reduction for any part of the work wholly or in part not acceptable is, however, proper. The first line of Section 35 should read:

I. If the Company shall fail to make payments of moneys due at the times provided in this agreement, unless on account of restraint by legal process, the Contractor shall have the right to suspend work, etc.

The moneys should be "due " and they will not be due until the estimates are approved by the Engineer. The Contractor certainly should not have the right to withdraw from the Contract for non-payment of moneys on perhaps the tenth of every month unless the moneys are " due," for which the Chief Engineer's approval is necessary. Withholding the money for adequate cause should not give the right to withdraw to the Contractor. Neither should a failure to make satisfactory progress prevent the Contractor from receiving any payment properly due and from exercising his rights as to withdrawal in consequence of a failure to pay. A fair balance of rights should exist.

Another form in use provides for payment of interest in case of any delay in payment:

J. Such payment of interest, if any, to be in lieu of any claim by the Contractor for alleged damages for breach of contract or otherwise in case of delayed payments.

This provision is regarded unfavorably by Contractors. When the Contractor has arranged his finances in the expectation of receiving his