« PreviousContinue »
CONTRACTS—WAIVER OF PERFORMANCE-INCREASED TAR
The Secretary of War has authority to refrain from compelling full per
formance of a contract for the delivery of 300,000 pairs of men's gloves, to be made in Germany, where, after a partial performance of the con
tract, an act of Congress increased the duty on the gloves 120 per cent. He should not, however, relieve the contractor with regard to gloves
delivered or which should have been delivered prior to the taking
effect of that act. The Attorney-General does not concur in the view that executive officers
are limited in matters of this kind wholly to considerations affecting the pecuniary interests of the Government.
DEPARTMENT OF JUSTICE,
December 22, 1909. Sir: Under date of the 9th instant you transmitted certain correspondence with the Secretary of War, presenting the question whether it is within the power of the Secretary to waive the performance of a contract made under the following conditions, as disclosed by said correspondence:
On July 30 last, the War Department entered into a contract with Mr. Robert W. Hilliard for the delivery by him of 300,000 pairs of men's cotton gloves, to be made in Germany. Previous to this contract cotton gloves had never been specifically named in the tariff, and at the time of its execution such articles were dutiable under the provisions of the Dingley act relating to cotton wearing apparel. The department refused to allow a clause in the contract providing for a change in tariff rates, evidently sought in view of the fact that the tariff was then in process of revision by Congress. The bidder, it is said, thought he could safely assume that there would be no serious change in the existing law, or, if there was a change, that the duty would be lower, if anything. The new tariff act, however, which was approved August 5 last, imposed a duty specifically upon men's cotton gloves which increased the former rate 120 per cent, and, it is claimed, converted an estimated profit of 21 cents per dozen pairs into an actual loss of that amount.
Under the contract 34,666 pairs of gloves should have been delivered when the tariff act became effective, but not all of that amount was so delivered. The contract also
gave the Government the right to increase the amount of gloves ordered 50 per cent, and, on October 25, 1909, after the tariff act had gone into effect, notice was given to the contractor by the War Department that it desired 150,000 additional pairs of gloves as per this agreement.
It is stated by the Secretary of War that, if the contractor shall be compelled to complete his contract as stipulated, the increased cost to the latter on account of the change in tariff will be $4,739.64 on the 265,334 pairs due on the original contract, and $2,679.44 on the 150,000 pairs subsequently ordered.
The equitable considerations suggested by the above facts are, I am advised, fully appreciated by yourself and
, the Secretary of War, the only question being as to the authority of the Secretary to grant relief, either in respect to the delivery of the remainder of the 300,000 pairs of gloves originally ordered, or as to the 150,000 subsequently ordered.
It seems that the mere fact that the Government, by general law, has so changed the conditions under which a contract with it was to be performed as to injuriously affect the contractor would not invalidate the contract. Thus, in Deming's case (1 Ct. Cl. 190), the Court of Claims, in holding that a contractor could not recover for losses sustained by him through the performance of a contract which had been affected by a general law increasing duties, as in this case, said (p. 191):
“This statement of his case is plausible, but is not sound. And herein is its fallacy: that it supposes general enactments of Congress are to be construed as evasions of his particular contract. This is a grave error. A contract between the Government and a private party can not be specially affected by the enactment of a general law. The statute bears upon it as it bears upon all similar contracts between citizens, and affects it in no other way. In form the claimant brings this action against the United States for imposing new conditions upon his contract; in fact he brings it for exercising their sovereign right of enacting laws. But the Government entering into a contract stands not in the attitude of the Government exercising
its sovereign power of providing laws for the welfare of the State. The United States as a contractor are not responsible for the United States as a lawgiver.”'
The rule thus stated was extended to cases involving executive instead of legislative acts in Jones and Brown's case (1 Ct. Cl. 383, 384), it being held in that case that "whatever acts the Government may do, be they legislative or executive, so long as they be public and general, can not be deemed specially to alter, modify obstruct, or violate the particular contracts into which it enters with private persons." This view was followed in Wilson's case. (11 Ct. Cl. 513.)
Assuming this to be a correct exposition of the law on the subject, it is manifest that such a rule operates to place the individual at the mercy of the Government, and, illustrated by the present case, in effect enables the Government to take private property for public use without just compensation. While, therefore, the general acts of the Government in its sovereign capacity may not affect government contracts specially, and, if the contract be performed, the contractor has no legal claim for recovery which the courts can recognize, but must look to Congress for relief, still this is far from saying that a contract so affected should be rigidly enforced by the officers of the Government charged with the making and execution thereof. However necessary the fiction may be as to the dual nature of the Government in matters of this kind, the fact remains that it profits by the entire transaction as a single entity at the expense of the contractor, and justice and fair dealing seem to require that the application of the rule be avoided if possible.
It has been said that, as a general rule, when a contract with the Government is fully consummated it must be executed according to its terms, and the officers of the Government representing it in the transaction have no authority to consent to a change or a modification thereof. (9 Op. 80; id. 103; 10 id. 476.) The later authorities, however, are conclusive upon the proposition that such a contract can be altered, modified, or suspended by such officers wherever such action is not prejudicial to the interests of the United States, or is for its benefit, and not in contravention of law. (United States v. Corliss SteamEngine Company, 91 U. S. 321; Satterlee v. United States, 30 Ct. Cl. 31; 15 Op. 481; 18 id. 101; 21 id. 207; 2 Comp. Dec. 182; 3 id. 54; 4 id. 38; 5 id. 83; 7 id. 92.)
In the Corliss case the Supreme Court said (91 U. S.
“It would be of serious detriment to the public service if the power of the head of the Navy Department did not extend to providing for all such possible contingencies by modification or suspension of the contracts and settlement with the contractors.”'
The later decisions rest upon the principle that express authority of law is not necessary for every administrative act, but the officers of the Government, and especially the heads of departments, although limited by law in the exercise of their powers, necessarily have a large discretion in the performance of their duties. (United States v. Macdaniel, 7 Pet. 1, 15; In re Neagle, 39 Fed. 833, 860.)
None of the authorities cited, however, present a situation precisely similar to the one we are considering. Those which deny the right of the executive officers to alter or rescind a contract, referred to cases where the enforcement of a contract had become more onerous than was anticipated by reason of occurrences for which the Government was in no wise responsible. Those in which the power to
. modify or suspend was sustained either involved considerations which made it for the pecuniary or material interests of the Government that such course be taken, or else the modification or suspension did not prejudice such interests.
The present case is anomalous in that it presents the question whether an executive officer has authority to waive the further execution of a contract because the action of the Government itself in its sovereign capacity makes it inequitable to enforce it and where the waiver would be prejudicial to the pecuniary interests of the United States, since, if the contract in question were suspended, the Government would have to pay more for the articles contracted for, although no more than it really ought to pay in view of the altered circumstances. While the question is not free from doubt, I feel constrained to hold that the Secretary has such authority and that the equity which has been created by the action of the Government itself forms a sufficient justification for the suspension of the contract. I am unable to concur in the view that executive officers are limited in matters of this kind wholly to considerations affecting the pecuniary interests of the Government. In my opinion the honor of the nation is of greater importance. As stated by Judge Taney when Attorney-General, there is nothing in the nature of our institutions which requires officers of the Government to perpetrate an act of injustice in the name of the United States. (2 Op. 482.) On the contrary, I think the principles of morality underlying our republican form of government are such as to make it the duty of executive officers, so far as possible, to avoid working wrong or injustice to the people. In the present case it is manifest that the enforcement of the contract in question would simply cause a wrong which Congress would have to be called upon to right. Such enforcement would, therefore, expose the Government to merited reproach.
As bearing upon the right and duty of Congress to reimburse the contractor in the exigency suggested the opinion of the Supreme Court in United States v. Realty Company (163 U. S. 427) is instructive. In that case the court affirmed the constitutionality of an appropriation made by Congress to reimburse certain manufacturers and producers of sugar who had complied with the provisions of the sugar-bounty law of 1890, which was repealed before they had received its benefits and which was alleged to be unconstitutional. Referring to the grant of power to Congress to lay and collect taxes, etc., “to pay the debts” of the United States, the court, speaking by Mr. Justice Peckham, said (p. 440):
“What are the debts of the United States within the meaning of this constitutional provision? It is conceded and indeed it can not be questioned that the debts are not limited to those which are evidenced by some written obligation or to those which are otherwise of a strictly