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tating insulator column was “atent” within the meaning of that word as used in the Inspection clause.
Appellant contends, however, that the effect of the Guarantee clause precludes recovery by the Government, since the period of time set forth in that clause expired prior to failure of the equipment. It further avers that the language in the Inspection clause pertaining to latent defects has no application here, and may be applied only where the contract fails to contain a guaranty clause. Appellant also maintains that the Government could not possibly have intended that the rotating insulator column would be guaranteed to last forever.
The Government contends, on the other hand, that the Guarantee clause does not eliminate or limit the Inspection clause, and that the Government is entitled to rely here not only on the remedies specifically enumerated in the Inspection clause, but also on the remedies prescribed by the general law of sales for breach of warranty. It maintains that the Guarantee clause should not be construed as disturbing a subsisting obligation as to latent defects, that this clause provides a cumulative remedy in addition to the ones contained in the Inspection clause, and that the two clauses are consistent.
Paragraph (d) of the Inspection clause states that "final acceptance shall be conclusive except as regards latent defects." By prefacing this language with the words “Except as otherwise provided in this contract,” the paragraph recognizes that other provisions of the contract may either narrow or widen the area of conclusiveness resulting from final acceptance. The Guarantee clause expressly narrows that area by excepting from it any defect, whether latent or patent, which results in the occurrence of an operating failure during the guaranty period. On the other hand, the Guarantee clause contains no intimation of an intention to widen the area of conclusiveness by excluding or modifying the exception for latent defects. No intimation of such an intention is to be found in other provisions of the contract. To the contrary, paragraph 108, which amplifies the Inspection clause, and
1 Compare F. W. Lang Co., ASBCA No. 2677 (June 28, 1957), 57-1 BCA par. 1334 (holding a defect to be “latent" in circumstances comparable to those in the instant case) with Hercules Engineering & Mfg. Co., ASBCA No. 4979 (December 9, 1959), 59-2 BCA par. 2426, 2 Gov. Contr. par. 68 (holding a defect not to be “latent" in circumstances where a painstaking visual inspection would have disclosed its presence). For a further discussion of "latent defects" see Whelan, Warranties under the General Law of SalesSome Relationships to Government Contract Law in George Washington University, Government Contract Warranties (Government Contracts Monograph No. 2) pp. 3, 16 (1961) ; Sass, Government Contract Warranties, id, at pp. 22, 24 : Borden, Effect of the Warranty Clause in Government Supply Contracts, 20 Fel, B, J, 151, 152 (1960).
October 23, 1964
paragraph 109, which includes a warranty that all materials shall be "free from defects,” are indicative of a purpose to enlarge rather than limit the rights of the Government under the Inspection clause.
The rule that warranties are to be construed as cumulative, wherever reasonable, is a well established principle of the law of sales. Section 15(b) of the Uniform Sales Act 2 states that:
An express warranty or condition does not negative a warranty or condition implied under this act unless inconsistent therewith.
Section 2–317 of the Uniform Commercial Code : states, in pertinent part, that:
Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant.
Numerous decisions recognize and apply the rule of cumulation of remedies to which these provisions give expression.*
It is, of course, accepted that the law governing the meaning and effect of Government contracts, except in particulars controlled by Federal statutory law, is the general Federal common law as fashioned by the decision of the Federal courts, rather than the law of any State. In the practical application of this principle, rules of law that have received wide recognition among the States have frequently been adopted as persuasive guides to what the Federal law should be. Notably, the Uniform Sales Act has been regarded as an appropriate source of general rules of law for use in connection with Government
2 This act has been adopted by 35 States and the District of Columbia, since its promulgation by the National Conference of Commissioners on Uniform State Laws in 1906. 1 U.S.A., Sales, Table III (Supr. 1963).
3 The Code has been adopted by 29 States and the District of Columbia, since its promulgation by the American Law Institute and the National Conference of Commissioners on Uniform State Laws in 1952. Freedman, Products Liability under the Uniform Conmercial Code, 10 Prac. Law. 49, 63 (1964). The 29 States that have adopted the Code include 22 that had previously adopted the Uniform Sales Act. Only seven States have failed to adopt either the Code or the Act.
* E.g., John A. Roebling's Sons Co. v. Southern Power Co., 142 Ga. 464, 83 S.E. 138 (1914) ; Appleman v. Fabert Motors, Inc., 30 Ill. App. 2d 424, 174 N.E. 20 892 (1961) ; Inland Products Corp. v. Donovan, Inc., 240 Minn. 365, 62 N.W. 20 211 (1953); Feeney & Bremer Co. v. Stone, 89 Ore. 360, 171 Pac. 569, 174 Pac. 152 (1918) ; General Motors Corp. v. Dodson, 47 Tenn. App. 438, 338 S.W. 2d 655 (1960); Greenland Development Corp. V. Allied Heating Products Co., 184 Va. 385, 35 S.E. 2d 801 (1945); Ford Motor Co. v. Callum, 96 F. 2d) 1 (5th Cir. 1938), cert. denied 305 U.S. 627 (1938) (dictum) ; Annot., 164 A.L.R. 1321, 1325. 1334 (1946).
5 Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947); United States ex rel. Mesta Machine Co. v. Allegheny County, 322 U.S. 174 (1944) ; Clearfield Trust Co. et al v. United States, 318 U.S. 363 (1943).
supply contracts. The sales provisions of the Uniform Commercial Code, which supersede the Uniform Sales Act in these jurisdictions where both have been adopted, have also been viewed as an appropriate source of such rules.?
In the present case, both the language of the contract and the general principles of the law of sales thus lead to a conclusion that the Guarantee clause does not supersede that portion of the Inspection clause which entitles the Government, notwithstanding final acceptance, to avail itself of the remedies specified in that clause whenever a latent defect is uncovered.
The pertinent remedies are set forth in paragraph (b) of the Inspection clause (Clause 5), which reads as follows:
(b) In case any supplies or lots of supplies are defective in material or workmanship or otherwise not in conformity with the requirements of this contract, the Government shall have the right either to reject them (with or without instructions as to their disposition) or to required their correction. Supplies or lots of supplies which have been rejected or required to be corrected shall be removed or corrected in place, as requested by the Contracting Officer, by and at the expense of the Contractor promptly after notice, and shall not again be tendered for acceptance unless the former tender and either the rejection or requirement of correction is disclosed. If the Contractor fails promptly to remove such supplies or lots of supplies, when requested by the Contracting Officer, and to proceed promptly with the replacement or correction thereof, the Government either (i) may by contract or otherwise replace or correct such supplies and charge to the Contractor the cost occasioned the Government thereby, or (ii) may terminate this contract for default as provided in the clause of this contract entitled “Default.” Unless the Contractor elects to correct or replace the supplies which the Government has a right to reject and is able to make such correction or replacement within the required delivery schedule, the Contracting Officer may require the delivery of such supplies at a reduction in price which is equitable under the circumstances. Failure to agree to such a reduction of price shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled “Disputes."
Under this paragraph the Government is clearly entitled to charge appellant the costs reasonably incurred in repairing the damaged or destroyed portions of the circuit breaker. The charge of $4,632.15 for replacement parts could hardly be considered unreasonable, since the parts were furnished by appellant and the charge represents the price
Soundcraft Corp., ASBCA Nos. 9030 and 9130 (June 30, 1964), 1964 BCA par. 4317; J. R. Simplot Co., ASBCA No. 3952 (January 30, 1959), 59–1 BCA par. 2112, modified (August 11, 1959), 59-2 BCA par. 2306; F. W. Lang Co., supra note I; see Whitin Ma. chine Works v. United States, 175 F. 2d 504 (1st Cir. 1949); cf, Cudahy Packing Co. v. United States, 109 Ct. Cl. 833 (1943).
7 Reeves Soundcraft Corp., supra note 6.
October 23, 1964
set upon them by appellant. The charge of $3,854 for parts and labor furnished by the Government is contested by appellant on the ground that under the Guarantee clause the cost of "installing” replacements for equipment or parts, that fail after final acceptance, is to be borne by the Government. The Inspection clause, however, contains no comparable exclusion of installation costs. Moreover, the mere fact that the parties have agreed to share the expense of repair work performed under a provision which extends to all defects existing at the time of final acceptance, including defects that could reasonably have been discovered by the Government, affords no convincing basis for an inference that they also intend to share the expense of repair work performed under a provision which is limited to those defects existing at the time of final acceptance that were neither known to, nor reasonably discoverable by, the Government.
We find this construction of the contract to be both reasonable and applicable to the circumstances of the instant case. The defect in question was one which existed at the time when the circuit breaker was delivered to the Government, not one that came into being subsequently. The liability imposed is for a defect which appellant could have prevented, through the exercise of better control over its subcontractor, and which it was duty-bound to prevent under such provisions of the contract as paragraph 109.
The construction here adopted does not proceed upon the assumption that the circuit breaker would endlessly perform its functions or that the rotating insulator column would last forever. Certainly, neither appellant nor the contracting authority, the Bonneville Power Administration, were prescient to the extent that the duration of the useful life of the circuit breaker could be foretold with absolute certainty. If, prior to a failure due to a latent defect, the value of the breaker had been materially diminished by normal wear and tear, technical obsolescence or other forms of depreciation, this reduction in value would be a factor to be considered in determining the amount of the repair costs properly chargeable to appellant. Here, however, the failure of the circuit breaker was proximately caused by the defective manner in which the rotating insulator column had been fabricated, and occurred at a time when the equipment was relatively new.
We find therefore:
1. That the failure of the circuit breaker was caused by defective fabrication of the rotating insulator column, which was an integral component thereof.
2. That this defect was not discernable by the Government through reasonable methods of pre-acceptance inspection, and was a latent defect within the meaning of the Inspection clause (Clause 5) of the contract;
3. That the provisions of the Guarantee clause (paragraph 112) of the contract are not inconsistent with, and do not override the portion of the Inspection clause that pertains to latest defects; and
4. That the failure of the circuit breaker after its final acceptance entitles the Government to the remedies specified in the Inspection clause.
For the reasons set forth above, the appeal is denied.
School Lands: Indemnity Selections School Lands: Mineral Lands
is eligible for selection as school land indemnity is the date on which the State has complied with all the requirements of the statute and regulations,
including publication, and not the date when the State selection is filed. School Lands: Indemnity Selections—School Lands: Mineral Lands—Taylor
Grazing Act: Classification—Withdrawals and Reservations: Executive
Order 6910— Withdrawals and Reservations: Executive Order 6964 As a result of the general withdrawals accomplished by Executive Orders
Nos. 6910 and 6964 and the provisions of section 7 of the Taylor Grazing Act, a State's application for indemnity school lands is a petition to classify the lands as suitable for State selection and until classification the lands are not available for selection.