The word "annul," as used in the contract involved in this case,
construed as refusing to perform further, not to rescind or
A government contract which makes the right of the contractor to
continue work under the contract depend upon the approval of the
engineer in charge will not in the absence of express terms be
construed as making the dissatisfaction of such engineer with
progress of the work conclusive of a breach.
Where, except for the prohibition of the United States to allow
the contractor to proceed, the work might have been finished within
the specified period, the United States cannot claim a breach
entitling it to annul the contract and hold the contractor
responsible for difference in cost of completion.
163 F. 1022 affirmed.
The facts are stated in the opinion.
Page 220 U. S. 324
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit brought by the United States to recover the extra
expense incurred to complete some dredging in Rhode Island, by
reason of the failure of the defendants Perkins and O'Brien
diligently and faithfully to prosecute the work. The complaint was
dismissed by the circuit court in accordance with the decision of
the circuit court of appeals upon a previous trial (159 Fed.
Page 220 U. S. 325
671), and the judgment was affirmed by the circuit court of
appeals (163 F. 1022).
Perkins and O'Brien made a contract with the United States to do
the dredging required in improving Providence River and
Narragansett Bay between certain points, to begin work on or before
March 1, 1899, and to complete it on or before July 1, 1902. One
term of the contract was that, if they should fail to begin on
time, or should,
"in the judgment of the engineer in charge, fail to prosecute
faithfully and diligently the work in accordance with the
specifications and requirements of the contract, then, in either
case, the party of the first part, or his successor legally
appointed, shall have power, with the sanction of the chief of
engineers, to annul this contract by giving notice in writing to
that effect, . . . and, upon the giving of such notice, all money
or reserved percentage due or to become due to the party or parties
of the second part by reason of this contract shall be and become
forfeited to the United States, and the party of the first part
shall be thereupon authorized, if an immediate performance of the
work or delivery of the materials be, in his opinion, required by
the public exigency, to proceed to provide for the same by open
purchase or contract, as prescribed in § 3709 of the Revised
Statutes of the United States,"
with a proviso that, if the contractors should be prevented by
violence of the elements from beginning or completing the work as
agreed, such additional time might be allowed them as, in the
judgment of the party of the first part, should be just.
Toward the end of the contract, four paragraphs further on than
the last, was the further agreement:
"In case of failure on the part of the party of the second part
to complete this contract as specified and agreed upon, that all
sums due and percentage retained shall thereby be forfeited to the
United States, and that the said United
Page 220 U. S. 326
States shall also have the right to recover any or all damages
due to such failure in excess of the sums so forfeited, and also to
recover from the party of the second part, as part of said damages,
whatever sums may be expended by the party of the first part in
completing the said contract, in excess of the price herein
stipulated to be paid to the party of the second part for
completing the same."
The work was begun, but did not go on satisfactorily. On
December 4, 1900, the major of engineers in charge wrote from
Newport to the contractors and their surety, now represented by the
"that from present appearances it does not seem to be possible
for the contractors to put on other dredges than the one now
supposed to be at work,"
stating what had been done and what would have to be done before
the time allowed expired, and that to do the work it would need
three dredges upon it continuously. The letter proceeded to give
the authorized warning that,
"unless the contractors have on work by January 1, 1901, a
sufficient plan to dredge at least 100,000 cubic yards per month,
the contract will be annulled."
On December 13, the contractors answered from New York, stating
that they expected to make an arrangement to put on two more
dredges within a few days. On December 29, 1900, the contractors
telegraphed that heir representative would call upon the major in
charge on Tuesday morning, i.e.,
January 1. On December
31, he replied that the representative could accomplish nothing by
coming, and on the same day wrote to the defendants, informing them
that the contract was annulled. The work afterwards was finished by
other parties at much increased cost. There was no substantial
ground in the evidence to attribute the government's course to
anything but the fault of the contractors, which was very plain,
and the only question is what liability they incurred.
Page 220 U. S. 327
The sole material express promise of the contractors was to
complete the work by July 1, 1902. If the work was done at that
date, that promise was performed, no matter how irregularly or with
what delays in the earlier months. Under its terms, the United
States was not concerned with the stages of performance, but only
with the completed result. See Bacon v. Parker,
309, 311. Its interest in the result, however, made it reasonable
to reserve the right to employ someone else if, when time enough
had gone by to show what was likely to happen, it saw that it
probably would not get what it bargained for from the present
hands. But it would be a very severe construction of the contract,
a contract, too, framed by the United States, to real the
reservation of a right to annul for want of a diligence not
otherwise promised, as importing a promise to use such diligence as
should satisfy the judgment of the engineer in charge. It is one
thing to make the right to continue work under the contract depend
upon his approval, another to make his dissatisfaction with
progress conclusive of a breach. In this case, it was admitted that
there was time enough left to finish the work under the contract
when the defendants were turned off. It would be a very harsh
measure to pronounce the contract broken when, but for the
prohibition of the United States, the defendants might have done
the work in time. The right to terminate the employment of the
defendants, coupled with a provision for monthly payments based
upon the amount of material removed, and therefore, of course,
giving little pay for little work, is the protection expressly
stipulated by the United States.
Again, the later paragraph that we have quoted, giving the right
to recover expense of completing the work in excess of the original
price, gives that right only "in case of failure . . . to complete
this contract as specified and agreed upon." On their face, these
words mean failure
Page 220 U. S. 328
to complete by July 1, 1902, not failure to complete because
turned off by the engineer in charge, a year and six months before
that time arrived, when competent persons still might do the job.
The earlier clause under which the so-called annulment took place
provides for no such consequence, but only for a forfeiture of
reserved percentages and money due. It is true that the expression
of the right to proceed to provide for the completion of the
contract and the reference to Rev.Stat. § 3709, hardly belong in
that part of the contract unless the defendants are liable for the
expense, but the contract does not show technical accuracy enough
to give this consideration great weight. If the United States wants
more, it must say so in plainer words.
If the proviso for annulment be not construed to import a
promise on the defendants' part, we are of opinion that there is no
ground to charge them with a breach of contract. There were
suggestions on the government's part of anticipatory breach, etc.,
that do not seem to us to need discussion.
We may add one further observation, although it hardly is
material in the view that we take. The ill-chosen word "annul" in
the contract, repeated in the notice to the contractors and in the
complaint, cannot be taken literally in any of them. It means
"refuse to perform further," not "rescind" or "avoid."
Philadelphia, W. & B.R.
Co. v. Howard,
13 How. 307, 54 U. S. 340
For, if the contract were made naught by the government's election
and notice, all rights under it would be at an end, whereas it
provides in terms that rights shall arise upon annulment, which,
but for this provision in the contract, the government would not
have. The suit is upon the contract, but the United States asks
more than, in our opinion, the contract gives.