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ROBERT E. ALEXANDER
portant correspondence by the contractor which has a bearing on the case was not furnished to the Comptroller General." The undersigned further found that "the record before me is incomplete and the evidence appearing in the appeal file is insubstantial to enable me merely on the basis of the record before me to make any finding." It was realized, however, by both parties that the amount in dispute involved did not allow the accumulation of further expenses, and steps were considered to minimize such expenses. Consequently, the parties agreed to explore with the Comptroller General a possible settlement of the matter, and a conference was held to avoid the necessity of the hearing in Los Angeles scheduled for October 19, 1964.
The conference was held at the General Accounting Office on September 8, 1964. Both parties had been invited. The undersigned had been invited to attend by Assistant Comptroller General Weitzel to explain, if necessary, the status of the appeal before the Board. At the conference, which was presided over by Assistant General Counsel Haycock, the General Accounting Office acceded informally to the views expressed by the undersigned in the conference of June 17, 1964, and that the fact that the Change Order No. 3 was declared null and void would not prevent the consideration of payment for additional services in the nature of changes and extras, etc., by the contracting officer or the Board.
On October 12, 1964, Department Counsel notified the undersigned that the parties had agreed that the hearing scheduled for Monday, October 19, 1964, in Los Angeles, California, should be canceled, and that an opportunity should be extended by the Board to the parties to dispose of the claim of $17,000 by agreement. Since it appears that the contracting officer has not, in his decision, passed on all of the claims of the Architects, the following order is hereby issued:
1. The hearing scheduled for October 19, 1964, in Los Angeles, California, is canceled.
2. The matter is remanded to the contracting officer for the prompt taking of appropriate action.13
PAUL H. GANTT, Chairman.
13 Such action may consist of either (1) a legally supportable agreement to dispose of the Architects' claim by payment of legally supportable amount, or (2) if the parties cannot agree on such an agreement, by the issuance of an appropriate decision or findings of fact by the contracting officer, with preservation of appeal rights.
APPEAL OF FEDERAL PACIFIC ELECTRIC COMPANY
Decided October 23, 1964
An interior void in the rotating insulator column of an oil circuit breaker which, at the time of final acceptance of the breaker, was not known to the Government and could not have been discovered by it through reasonable methods of preacceptance inspection is a latent defect within the meaning of the Inspection clause of a standard-form supply contract.
Contracts: Generally-Contracts: Interpretation
The general rules of law stated in the Uniform Sales Act and in the sales provisions of the Uniform Commercial Code form part of the general Federal common law applicable to Government contracts, if not made inappropriate by such controlling factors as Federal statutory law. One such rule is the principle of cumulation of warranties.
Contracts: Breach-Contracts: Interpretation
The inclusion of a Guarantee clause in a standard-form supply contract is not inconsistent with, and does not override, the provision in the Inspection clause which excepts latent defects from the conclusive effect of a final acceptance. Hence, the expiration of the guaranty period does not preclude the Government from exercising the remedies specified in the Inspection clause with respect to latent defects discovered after such expiration.
BOARD OF CONTRACT APPEALS
This is a timely appeal from a decision of the contracting officer asserting that contractor-appellant is indebted to the Government in the amount of $8,486.15. This sum represents the cost of repairing a power circuit breaker, furnished by appellant, which was severely damaged while in operation, subsequent to acceptance, final payment, and expiration of the guaranty period specified in the contract.
The contracting officer determined that the damage resulted from an explosion due to a latent manufacturing defect, consisting of an improperly laminated rotating insulator column within the circuit breaker. This column was manufactured by a subcontractor.
Appellant contends that the total cost incident to restoring the breaker should be borne by the Government, on the ground that the guaranty period specified in the contract had expired prior to the explosion.
The matter is submitted by the parties on the record without an oral hearing.
The contract, dated December 5, 1957, called for the manufacture and installation of 10 circuit breakers for a total contract price of $408,801.
October 23, 1964
It was executed on Standard Form 33 (Revised June 1955) and incorporated the General Provisions of Standard Form 32 (November 1949 edition), which included a standard Inspection clause (Clause 5). Paragraph (d) of that clause reads as follows:
(d) The inspection and test by the Government of any supplies or lots thereof does not relieve the contractor from any responsibility regarding defects or other failures to meet the contract requirements which may be discovered prior to final acceptance. Except as otherwise provided in this contract, final acceptance shall be conclusive except as regards latent defects, fraud, or such gross mistake as amounts to fraud. (Italics supplied.)
The Supplementary General Provisions contained a paragraph relating to responsibility for the equipment following acceptance, which reads as follows:
108. Acceptance does not relieve Contractor of Responsibility. The acceptance of material or equipment or parts thereof or waiving of inspection will in no way relieve the contractor of responsibility for furnishing material or equipment or parts thereof meeting the requirements of these specifications. (Italic supplied.)
The Supplementary General Provisions also included a clause which required, among other things, that all materials should be free from defects. It reads as follows:
109. Material and Workmanship. Material and workmanship shall be of the type and grade most suitable for the application and as far as practicable shall conform, unless otherwise specified, to the latest applicable standards, specifications, recommended practices, and procedures of such standardizing bodies as the Federal Specifications Board, ASTM, AIEE, ASME, NEMA, and ASA. All materials shall be of recent manufacture, unused and free from defects. (Italics supplied.)
The Guarantee Clause of the Supplementary General Provisions provided, in pertinent part, that:
112. Contractor's Guarantee. A. The contractor guarantees that equipment furnished under the contract meets all the requirements of these specifications. B. The contractor hereby agrees to repair or replace any equipment or part thereof which fails in operation during normal and proper use within one year from date of completion of installation due to defects in design, material or workmanship, notwithstanding that final acceptance and payment, may have been consumated; Provided, however, that in each case the contracting officer shall have promptly forwarded written notice of such failure to the Contractor and Provided Further, that in case installation is delayed for more than six (6) months after the date of preliminary acceptance at destination by conditions beyond the control of the contractor, this guarantee shall remain in full force and effect for a period of eighteen (18) months from date of preliminary acceptance at destination regardless of the date of completion of installation. All replacements of equipment or parts thereof as a result of failures after final acceptance
shall be made promptly and free of charge f.o.b. destination. The cost of installing these replacements after final acceptance shall be borne by the Government.
Although the contract called for the manufacture of 10 power circuit breakers, we are concerned here only with one Type RHE-84-L, 230/180 KV, 1600 ampere, floor mounted, oil circuit breaker which was delivered to the Government and preliminarily accepted by it on December 18, 1958. Installation was completed on January 23, 1959. Final acceptance and payment were made on February 9, 1960. The breaker was energized and put into service on March 23, 1960.
The circuit breaker was used intermittently thereafter until June 19, 1961, when a sudden and violent failure accompanied by flash-over, occurred in one of the three tanks. The rotating insulator column which supported the moving contacts, was broken into several pieces and a strip approximately 2 inches wide and 1/8-inch thick was blown out of the column. The resulting explosion bulged and otherwise damaged the tank, stretched or broke foundation lag bolts, cracked insulator porcelain, and caused considerable burning of oil and of metal at the various points of arc termination in the breaker.
Examination of the rotating unit by Government engineers two days later disclosed a void between laminations in the column where the presence of a strip of tape had prevented complete impregnation of the laminations by the glue used to bond them together during manufacture. This strip of tape had been inserted to splice together the two lengths of rolled paper of which the column was formed, and would not have been needed had a continuous strip of paper been used. Corona burns indicated that corona discharge had developed as a result of ionization of the void created by the tape. The current leakage became sufficiently high that the rotating unit exploded and flash-over to the tank resulted therefrom.
By letter of June 23, 1961, the Government advised appellant that the total cost of repair of the damaged circuit breaker should be borne by appellant, since its failure was caused by a latent manufacturing defect which could not have been discovered during pre-acceptance inspection or during normal maintenance and operation.
On December 18, 1961, appellant was advised by the contracting officer that the circuit breaker had been repaired and returned to service and that the total costs attributable to the defect were $8,486.15, of which $3,854 represented parts and labor supplied by the Government and $4,632.15 represented unpaid invoices for parts furnished by appellant.
October 23, 1964
In response to this letter, representatives of appellant, including its vice president and marketing manager, Mr. B. J. Stimpson, subsequently met with the contracting officer for the purpose of discussing the Government's claim. Mr. Stimpson, although denying liability for the breaker's failure, stated that another of appellant's customers had experienced similar trouble approximately one month following the failure of the subject breaker. He admitted that investigation had disclosed that both failures were caused by the fact that the central insulating column had been made by appellant's subcontractor from two strips of paper, instead of being fabricated from one continuous length of paper. This admission confirmed the Government engineers' finding that the rotating insulator tube was not properly laminated. In order to resolve the dispute, it is necessary for the Board to determine whether the appellant or the Government should bear the expense of repairing the circuit breaker, in view of the fact that it failed while in operation subsequent to expiration of the guaranty period specified in the contract. This failure occurred on June 19, 1961, which was more than one year after the completion of installation on January 23, 1959, and more than 18 months after the preliminary acceptance of the breaker at destination on December 18, 1958.
More specifically we must determine (1) whether the Government's remedies under the Inspection clause (Clause 5) survived the final acceptance of the circuit breaker by virtue of the specific exception for latest defects in paragraph (d) of that clause; and (2) whether the express guaranty appearing in the Guarantee clause (paragraph 112) provided an exclusive remedy for defects discovered after final acceptance which—the time limitations of that clause having expired— precludes any recovery by the Government.
Appellant admits that the rotating insulator column was defectively fabricated by splicing strips of paper instead of using one continuous length of paper. Documentary and photographic evidence establishes the fact that the void was an internal defect which could not have been discovered before final acceptance by any customary or reasonable procedures of visual inspection. Nor is it likely that the defect could have been discovered before final acceptance through any customary or reasonable performance tests, particularly since the ionization of the void appears to have been a gradual process. The defect was not actually discovered, by either appellant or the Government, until after the explosion of the column and the concomitant damage to the circuit breaker. We do not hestitate to conclude that the defect in the ro