MAY 28, 1924, 3 COMP. GEN. 901

MAY 28, 1924, 3 COMP. GEN. 901

CONTRACTS - RELEASE (QUALIFIED) AGREEMENT WHERE A CONTRACT PROVIDED FOR THE EXECUTION OF A FINAL RELEASE IN FULL BEFORE FINAL PAYMENT COULD BE MADE AND THE CONTRACTOR CONSENTED TO A DEDUCTION FROM THE AMOUNT DUE IN CONSIDERATION OF PAYMENT BEING MADE WITHOUT THE EXECUTION OF THE FINAL RELEASE AS PROVIDED IN THE CONTRACT, THE PAYMENT TO IT OF THE AMOUNT AS PAYMENT IN FULL AND FINAL SETTLEMENT OF ALL CLAIMS AND DEMANDS BOTH IN LAW AND EQUITY UNDER THE CONTRACT, WITH THE EXCEPTION OF A CLAIM SPECIFICALLY RESERVED, IS NOT AUTHORIZED, AS THE CONTRACT ONLY PROVIDED FOR AN UNQUALIFIED FINAL RELEASE.

DECISION BY COMPTROLLER GENERAL MCCARL, MAY 28, 1924:

THERE IS BEFORE THIS OFFICE FOR CONSIDERATION THE CLAIM OF THEE. KEELER CO. FOR $32.89, THE AMOUNT DEDUCTED BY THE NAVY DEPARTMENT FROM FINAL PAYMENT UNDER CONTRACT NO. 4025, DATED OCTOBER 16, 1919.

BY THE CONTRACT REFERRED TO THE CLAIMANT AGREED TO FURNISH, DELIVER, AND INSTALL THREE HORIZONTAL WATER-TUBE BOILERS IN ACCORDANCE WITH CERTAIN SPECIFICATIONS NOT HERE MATERIAL. THE WORK WAS TO BE COMPLETED WITHIN 120 DAYS FROM THE DATE A COPY OF THE CONTRACT WAS DELIVERED TO THE CONTRACTOR, AND IN ACCORDANCE WITH THIS PROVISION THE FINAL DATE FOR COMPLETION WAS FIXED AS FEBRUARY 17, 1920. IT WAS FURTHER PROVIDED IN THE CONTRACT THAT SHOULD THE CONTRACTOR DELAY DELIVERY BEYOND THAT DATE, OR SUCH EXTENSION THEREFROM AS MIGHT BE GRANTED BY THE GOVERNMENT, IT WOULD BE LIABLE IN DAMAGES AT THE RATE OF $40 PER DAY FOR THE PERIOD OF DELAY. THE NAVY DEPARTMENT WAS ADVISED BY THE CONTRACTOR PRIOR TO THE EXPIRATION OF THE 120 DAYS ALLOWED THAT THE BOILERS WERE COMPLETED AND READY FOR SHIPMENT. AS THE FOUNDATIONS WERE NOT READY FOR THE INSTALLATION, SHIPMENT WAS DELAYED AT THE REQUEST OF THE GOVERNMENT UNTIL AUGUST 28, 1920, AFTER WHICH THEY WERE SHIPPED AND INSTALLED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT. THE CONTRACT PROVIDED THAT THE CONTRACTOR SHOULD BE PAID 50 PERCENT OF THE CONTRACT PRICE WHEN THE THREE BOILERS HAD BEEN PLACED ON BOARD CARS AT THE WORKS OF THE CONTRACTOR READY FOR SHIPMENT, AND THAT THE BALANCE SHOULD BE PAID IN ACCORDANCE WITH PARAGRAPH 29 OF THE GENERAL PROVISIONS, WHICH IS AS FOLLOWS:

PAYMENTS AND RESERVATIONS: VOUCHERS WILL BE PREPARED BY THE OFFICER IN CHARGE OF THE WORK AS SOON AS PRACTICABLE AFTER THE END OF EACH MONTH, COVERING HIS ESTIMATE, ACCORDING TO THE SCHEDULE OF PRICES, OF ALL MATERIAL DELIVERED, MATERIAL WORKED INTO PLACE, AND WORK DONE TO DATE. FROM SUCH GROSS ESTIMATE WILL BE DEDUCTED THE NEXT PREVIOUS GROSS ESTIMATE, IF ANY, AND 10 PERCENT OF THE DIFFERENCE UNLESS OTHERWISE SPECIFIED. THE CONTRACTOR SHALL CERTIFY TO THE CORRECTNESS, JUSTNESS, AND NONPAYMENT OF SAID VOUCHERS, AFTER WHICH THEY WILL BE FORWARDED TO THE BUREAU OF YARDS AND DOCKS FOR APPROVAL AND FOR REFERENCE TO THE PAYMASTER GENERAL OF THE NAVY FOR PAYMENT BY CHECK. UPON THE COMPLETION OF THE CONTRACT THE BALANCE DUE ON ACCOUNT THEREOF WILL BE COVERED BY SIMILAR VOUCHERS, SUBJECT TO ANY CREDITS IN FAVOR OF THE GOVERNMENT: PROVIDED, THAT THE CONTRACTOR SHALL FIRST EXECUTE AND DELIVER A FINAL RELEASE TO THE GOVERNMENT, IN SUCH FORM AND CONTAINING SUCH PROVISIONS AS SHALL BE APPROVED BY THE NAVY DEPARTMENT, OF CLAIMS AGAINST THE GOVERNMENT ARISING UNDER OR BY VIRTUE OF THE CONTRACT.

THE TOTAL AMOUNT DUE UNDER THE CONTRACT WAS $37,249 AND PAYMENT WAS MADE OF $37,049, THE SUM OF $200 BEING WITHHELD TO COVER CERTAIN WORK NOT COMPLETED. UPON COMPLETION OF THE WORK APPLICATION WAS MADE FOR PAYMENT OF THE BALANCE OF $200, BUT INASMUCH AS THE CONTRACTOR ASSERTED THAT THERE WAS DUE IT THE ADDITIONAL SUM OF $1,644.26 FOR EXTRA COMPENSATION ON ACCOUNT OF LOSSES DUE TO INCREASE INFREIGHT RATES, INCREASE IN WAGES, AND FOR STORAGE, IT DECLINED TO EXECUTE THE FINAL RELEASE PROVIDED FOR IN PARAGRAPH 29 OF THE GENERAL PROVISIONS, SUPRA.

THE PROPER PROCEDURE WOULD HAVE BEEN TO HAVE WITHHELD PAYMENT OF THE $200 DUE UNTIL SUCH TIME AS THE FINAL RELEASE WAS EXECUTED, AND PAYMENT OF THIS AMOUNT WOULD HAVE BEEN A MATTER FOR CONSIDERATION IN THE GENERAL ACCOUNTING OFFICE WHERE THE CLAIM FOR $1,644.26 WAS PRESENTED. INSTEAD OF THIS A QUALIFIED FORM OF RELEASE WAS DRAWN UP PROVIDING FOR THE PAYMENT OF THE $200 BALANCE OF THE CONTRACT PRICE WITH A DEDUCTION THEREFROM OF 2 PERCENT OF THE AMOUNT OF THE CLAIM FOR $1,644.26, OR $32.89, AND PAYMENT WAS MADE OF THE SUM OF $167.11. THE QUALIFIED RELEASE IN SO FAR AS HERE MATERIAL IS AS FOLLOWS:

WHEREAS THE CONTRACT DATED OCTOBER 6, 1919, BY AND BETWEEN THE E. KEELER COMPANY OF WILLIAMSPORT, PENNSYLVANIA, PARTY OF THE FIRST PART, HEREINAFTER CALLED THE CONTRACTOR, AND THE UNITED STATES, PARTY OF THE SECOND PART, HEREINAFTER CALLED THE GOVERNMENT, FOR THE FURNISHING, DELIVERING AND INSTALLING OF THREE 400 H.P. BOILERS, TOGETHER WITH NECESSARY FOUNDATIONS, ETC., AT THE U.S. NAVAL ACADEMY, ANNAPOLIS, MARYLAND, CONTEMPLATES THAT FINAL PAYMENT THEREUNDER SHALL NOT BE MADE UNTIL THE CONTRACTOR SHALL HAVE EXECUTED AND DELIVERED A FINAL RELEASE IN SUCH FORM AND CONTAINING SUCH PROVISIONS AS SHALL BE APPROVED BY THE NAVY DEPARTMENT OF CLAIMS AGAINST THE GOVERNMENT ARISING UNDER OR BY VIRTUE OF SAID CONTRACT; AND

WHEREAS THE WORK UNDER SAID CONTRACT HAS BEEN COMPLETED; AND

WHEREAS THE CONTRACTOR DESIRES TO BE PAID THE BALANCE ADMITTED BY THE GOVERNMENT TO BE PAYABLE FOR SAID WORK AND AT THE SAME TIME TO RESERVE ITS CLAIMS FOR PAYMENT IN THE SUM OF $1,644.26, SAME BEING ON ACCOUNT OF INCREASE OF FREIGHT RATES, STORING OF BOILERS AT MANUFACTURER'S PLANT, AND INCREASE IN LABOR COSTS DUE TO THE DELAY OF THE GOVERNMENT IN NOT HAVING THE ADDITION TO THE POWER PLANT COMPLETED, AND THE GOVERNMENT IS WILLING TO PAY SAID BALANCE AND PERMIT THE EXCEPTING OF SAID CLAIM FROM THE OPERATION OF THE RELEASE OF CLAIMS CONTEMPLATED BY SAID CONTRACT PROVIDED IT RECEIVES ADEQUATE CONSIDERATION THEREFOR, WHICH CONSIDERATION IT HAS FIXED AT TWO PERCENTUM OF THE AMOUNT OF SAID CLAIM, OR $32.89:

NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND FOR AND IN CONSIDERATION OF THE SUM OF ONE HUNDRED SIXTY-SEVEN DOLLARS AND ELEVEN CENTS ($167.11), LAWFUL MONEY OF THE UNITED STATES (SAID SUM BEING THE BALANCE ADMITTED BY THE GOVERNMENT TO BE PAYABLE FOR SAID WORK, NAMELY $200, LESS THE SUM OF $32.89 DEDUCTED WITH THE CONSENT, HEREBY GIVEN, OF THE CONTRACTOR AS CONSIDERATION MOVING TO THE GOVERNMENT FOR THE PRESENT PAYMENT OF SAID SUM OF $167.11 COUPLED WITH THE EXCEPTION FROM THE OPERATION OF THIS RELEASE OF CLAIMS FOR COMPENSATION IN THE SUM OF $1,644.26), TO THE CONTRACTOR IN HAND PAID BY THE GOVERNMENT, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, THE CONTRACTOR DOES HEREBY, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS AND ITS LEGAL REPRESENTATIVES, REMISE, RELEASE, AND FOREVER DISCHARGE THE GOVERNMENT OF AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER, IN LAW AND IN EQUITY, THAT THE CONTRACTOR HAS OR MAY HAVE UNDER OR BY VIRTUE OF SAID CONTRACT, INCLUDING ALL MODIFICATIONS THEREOF; EXPRESSLY EXCEPTING AND EXCEPTING ONLY, ITS SAID CLAIM FOR COMPENSATION IN THE SUM OF $1,644.26, WHICH SAID CLAIM THE CONTRACTOR EXPRESSLY RESERVES. IT IS, HOWEVER, DISTINCTLY UNDERSTOOD THAT NOTHING IN THIS RELEASE SHALL OPERATE AS, OR BE CONSTRUED TO BE, A RECOGNITION OR ADMISSION BY THE GOVERNMENT OF THE VALIDITY OF SAID RESERVED CLAIM OR ANY PART THEREOF.

THE CLAIM FOR LOSSES DUE FOR INCREASED FREIGHT RATES, INCREASE IN WAGES, AND STORAGE WAS FILED IN THE GENERAL ACCOUNTING OFFICE, AND BY DECISION DATED MARCH 15, 1924, THE SUM OF $465.87 WAS ALLOWED THEREON, WITH THE PROVISION THAT PAYMENT THEREOF SHOULD BE WITHHELD UNTIL A FINAL RELEASE IS FILED, AS REQUIRED BY THE CONTRACT, ACCEPTING SAID SUM IN FULL SATISFACTION OF ALL CLAIMS ARISING UNDER THE CONTRACT.

ON APRIL 25, 1924, THE ATTORNEYS FOR THE CLAIMANT ADDRESSED THE FOLLOWING LETTER TO THIS FFICE:

REFERRING TO YOUR LETTER OF APRIL 1ST REGARDING CLAIM OF THE E. KEELER COMPANY, OF WILLIAMSPORT, PENNSYLVANIA, UNDER Y. AND D. CONTRACT NO. 4025, YOU ARE ADVISED THAT WE NOW HAVE READY FOR DELIVERY EXECUTED RELEASES ACKNOWLEDGING RECEIPT OF $665.87. THIS REPRESENTS $200 FINAL PAYMENT DUE UNDER THE CONTRACT, OF WHICH $167.11 WAS PAID ON AUGUST 24, 1922. THE BALANCE, $32.89, REPRESENTING 2 PERCENT OF THE CLAIM WITHHELD IN CONSIDERATION OF THE EXECUTION OF A QUALIFIED RELEASE, TOGETHER WITH THE AMOUNT ALLOWED IN COMPTROLLER'S DECISION, REVIEW NO. 5366, OF $465.87, IS NOW PAYABLE.

WE ASSUME THAT THE 2 PERCENT WITHHELD WILL NOW BE PAID THE CONTRACTOR, IN VIEW OF THE HOLDING OF THE COMPTROLLER THAT THE QUALIFIED RELEASE IS NOT AUTHORIZED BY THE CONTRACT AND VOID. IF THIS IS CORRECT, WE SHALL FORWARD THE RELEASE WITH THE UNDERSTANDING THAT WARRANT WILL BE ISSUED AT ONCE.

THE QUESTION OF THE DEDUCTION OF $32.89 MADE BY THE NAVY DEPARTMENT WAS NOT CONSIDERED IN THE DECISION OF MARCH 15, 1924, SINCE THE CLAIM PRESENTED DID NOT INCLUDE THIS ITEM, NEITHER WAS THE EFFECT OF THE QUALIFIED RELEASE DETERMINED BY THE ALLOWANCE MADE IN SAID DECISION.

THE CONTRACTOR ASSENTED TO THE DEDUCTION OF THE SUM OF $32.89 FROM THE AMOUNT OF $200 WHICH WAS ADMITTED TO BE DUE BUT NOT PAYABLE UNTIL A FINAL RELEASE HAD BEEN EXECUTED, AND ACCEPTED THE SUM OF $167.11, WHICH WAS PAID IN FULL, AND FINAL SETTLEMENT OF ALL CLAIMS ARISING UNDER THE CONTRACT, EXCEPT THE CLAIM FOR $1,644.26 FOR LOSSES DUE TO INCREASED FREIGHT RATES, INCREASED WAGES, AND FOR STORAGE.

THE GOVERNMENT UNDER THE CONTRACT HAD A RIGHT TO WITHHOLD FINAL PAYMENT UNTIL THE CLAIM FOR INCREASED WAGES, FREIGHT CHARGES, AND STORAGE HAD BEEN ADJUDICATED. THE RELEASE EXECUTED RESERVED TO THE CLAIMANT CONTRACTOR THE RIGHT TO FILE A CLAIM FOR THESE ITEMS BUT MADE NO RESERVATION WITH REFERENCE TO THE ITEM OF $32.89. ON THE CONTRARY, IT EXPRESSLY STIPULATED THAT UPON THE PAYMENT OF THE $167.11 THE UNITED STATES SHOULD BE RELEASED FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER, BOTH IN LAW AND EQUITY, THAT THE CONTRACTOR HAS OR MAY HAVE UNDER OR BY VIRTUE OF THE CONTRACT, EXCEPT THE CLAIM FOR LOSSES DUE TO INCREASED FREIGHT CHARGES, WAGES, AND FOR STORAGE. IN VIEW OF THIS RELEASE NO ALLOWANCE CAN BE MADE ON THE CLAIM FOR $32.89. SEE DECISION OF AUGUST 24, 1921, 1 MS. COMP. GEN. 568.