Where, after default of the original contractor, the contract is
relet, the original contractor is not bound for difference unless
the contract as relet is the same as the original contract. .
Where a contract for dredging requires the dredged material to
be deposited in a specified location, changes made as to the
location for depositing such materials amount to such an important
variation that the first contractor cannot be held for difference.
United States v. McMullen, 222 U.
S. 460, distinguished.
Change in location for depositing material dredged under a
government contract is not to be regarded as a minor change; it is
clearly an important one.
193 F. 644 affirmed.
The facts, which involve the rights and liabilities of a
contractor and his surety under a contract with the government, are
stated in the opinion.
Page 234 U. S. 38
MR. JUSTICE DAY delivered the opinion of the Court.
Suit was brought by the United States to recover on a contract
between the United States and Axman, with the American Bonding
Company, as surety, for dredging in San Pablo bay, California. The
first trial resulted in a judgment for the United States, which was
reversed by the Circuit Court of Appeals for the Ninth Circuit. 167
Fed.
Page 234 U. S. 39
922. On new trial, judgment directed in favor of the defendants
was affirmed by the circuit court of appeals (193 F. 644), and the
case is brought here.
It appears that, on the twenty-fifth of August, 1902, the United
States called for bids for dredging in San Pablo Bay. On September
30, 1902, Axman submitted his proposal to furnish all the plant,
labor, and materials for the work. On November 21, 1902, a written
contract was entered into between Axman and the United States for
the work. Axman was to do such dredging in the bay as might be
required by the government engineer, in accordance with certain
specifications, for the sum of 11.44 cents per cubic yard. The
specifications, which were made a part of the contract, contained,
among others, the following paragraphs:
"35. The shoal to be dredged is in San Pablo Bay, California, is
about five miles in length, and has a least depth of 19 feet at low
water. It extends from Pinole Point to Lone Tree Point, and is
distant 1 1/4 to 1 1/2 statute miles N.W. of the points referred
to. The average depth of the excavation is about 9 feet."
"36. The work to be done is to excavate a channel through the
shoal, to have a bottom width of 300 feet; a depth of 30 feet at
mean low water, and a length of about 27,000 feet; to deposit the
spoil as near the south shore as practicable, within lines drawn
between Pinole point and Lone Tree point at such places as may be
designated by the engineer officer in charge, and to impound the
material behind bulkheads or dikes of suitable construction,
subject to approval by the engineer officer in charge, which must
be built and maintained by and at the expense of the contractor
during the life of the contract."
"39. All dredging material is to be deposited within the limits
of the area described in paragraph 36. The method of deposit will
be subject to approval by the engineer officer in charge. "
Page 234 U. S. 40
"31. The contractor will be required to commence work under the
contract within sixty days after the date of notification of
approval of the contract by the Chief of Engineers, U.S. Army, to
prosecute the said work with faithfulness and energy, and to
complete it within twenty-eight (28) months after the date of
commencement."
"46. The work must progress at the rate of at least 100,000
cubic yards per month, and to entitle the contractor to the monthly
payments provided for in paragraph 30 of these specifications, an
average of not less than 100,000 cubic yards per month must have
been dredged and deposited; the calculation of averages to be made
from the day on which the contract requires the work to be
commenced."
A place for the building of the bulkhead was designated in
accordance with paragraph 36 of the specifications, and Axman built
a bulkhead 2,400 feet long, consisting of two arms, one of 1,800
feet and one of 600 feet. The outlines of the channel to be dredged
were also indicated. Axman began work and continued intermittently
until December 24, 1903, up to which date he had removed 196,000
cubic yards, but had not in any month removed 100,000 cubic yards.
It appears that the barges in Axman's outfit were of such draft
that they were unable to get behind the bulkhead except at high
tide; that he applied to the engineer officer in charge to be
allowed to dump the spoil on the north side of the channel or down
at "The Sisters," but permission was refused him so to do. This
place is the one where the material was subsequently dumped when
the contract was relet.
Paragraph 4 of the contract provides:
"4. If, in any event, the party of the second part shall delay
or fail to commence with the delivery of the material or the
performance of the work on the day specified herein, or shall, in
the judgment of the engineer in charge, fail to prosecute
faithfully and diligently the
Page 234 U. S. 41
work in accordance with the specifications and requirements of
this contract, then, in either case, the party of the first part,
or his successors 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 to the party (or parties,
or either of them) of the second part, and upon the giving of such
notice all payments to the party or parties of the second part
under this contract shall cease, and all money or reserve
percentage due or to become due the said party or parties of the
second part, by reason of this contract, shall be retained by the
party of the first part until the final completion and acceptance
of the work herein stipulated to be done, and the United States
shall have the right to recover from the party of the second part
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 the party of the second part for completing
the same, and also all costs of inspection and superintendence
incurred by the said United States, in excess of those payable by
the said United States during the period herein allowed for the
completion of the contract by the party of the second part, and the
party of the first part may deduct all the above-mentioned sums out
of or from the money or reserve percentage retained as aforesaid,
and upon the giving of the said notice the party of the first part
shall be authorized to proceed to secure the performance of the
work or delivery of the materials, by contract or otherwise, in
accordance with law."
There are other paragraphs permitting the Chief of Engineers, if
he sees fit, to employ additional plant or purchase materials,
etc., to insure the completion of the work within the time
specified, charging the cost thereof to the contractor; such
provision, however, not to be construed so as to affect the right
of the government to annul the contract. The government, on the
ground that Axman
Page 234 U. S. 42
had failed to comply with the requirements of the
specifications, proceeded under the provisions of paragraph 4,
wherein it will be seen it was stipulated that the United States
might have the right to recover from the party of the second part
whatever sums might be expended by the party of the first part in
completing the contract.
When the contract was relet, it was advertised in the
alternative, giving the contractor the right to deposit spoil where
Axman was required to deposit it within lines drawn between Pinole
point and Lone Tree point at such places as might be designated by
the engineer officer, and to impound the material behind bulkheads
of suitable construction, subject to the approval of the engineer
officer, to be built and maintained at the expense of the
contractor, or to deposit the spoil in water exceeding 50 feet in
depth lying within the area bounded by lines drawn from The Sisters
to Point San Pablo, thence to Marin Islands, and thence back to The
Sisters. The bid accepted and the contract made provided for the
deposit of the spoil in deep water at The Sisters. At the trial,
the government offered evidence of witnesses as to the fairness of
the price paid the North American Dredging Company, the new
contractor, under the relet contract, and as to whether it cost
more to dredge and dump the spoil behind the line drawn between
Pinole point and Lone Tree point than to dredge and dump in deep
water. All of the opinion evidence offered by the government was
received by the court under objection, and at the conclusion of the
case ruled out, and the jury instructed to render a verdict for the
defendants.
It is thus apparent that the real question in the case is
whether the contract relet for the completion of the work under
paragraph 4 of the original contract was a contract for work for
which Axman was bound and which he had failed to carry out, or
whether it was a different contract, and therefore one for which
Axman and his surety cannot
Page 234 U. S. 43
be held, and which cannot be used for the measure of recovery
for breach of the original contract.
The government insists that the main purpose of the original
contract was to secure the dredging of the channel, and that the
place of dumping the spoil was but incidental. The contract,
however, does not so read. It specifically made the place of
dumping the spoil an essential and particular term of the contract.
It is not necessary to inquire into the reason which actuated the
government in making this requirement. It may be that it desired
the spoil to be retained at a place outside of the channel, and
that such retention was a better way of doing the work than to
deposit the spoil in deep water. It is enough to say that the
contract, part of which we have heretofore set forth, specifically
provided for dumping the spoil behind the bulkhead. As we have
said, the engineer refused permission to dump the spoil at a place
other than that designated in the specifications. This position of
the engineer was warranted by the terms of the contract, for, by
paragraph 36 of the specifications, the depositing of material and
impounding it behind bulkheads, as provided in the contract, were
made an essential part of the work to be done, and it is provided
by specification 38 that material deposited otherwise than as
specified will not be paid for, and by paragraph 39 that all
dredged material was to be deposited within the area specified in
paragraph 36, and by paragraph 53 that all material must be
excavated and deposited under the supervision of the engineer
officer in charge. It therefore follows that not only was Axman to
dredge the channel as required by the contract, but he was to
deposit the spoil as therein specified. Dredging the channel would
not be enough to show performance of his contract unless he
complied with the other material requirement as to the deposit of
the spoil. The new contract contained a different stipulation as to
the dumping of the spoil. Upon the showing made in this case, we
think the change in the
Page 234 U. S. 44
place of dumping the spoil was very material, and could not be
made consistently with the terms of the agreement under which Axman
undertook to perform the work or be liable as stipulated in
paragraph 4.
Both sides refer to the case of
United States v.
McMullen, 222 U. S. 460. In
that case, a suit was brought upon a contract and bond, the
contract providing for certain dredging. The contractor asked for
leave to dump the spoil in deep water instead of on shore, which
was at first refused, but afterwards granted. The contractor,
however, failed to do the work and abandoned it. The Navy
Department declared the contract void, and, after advertising,
entered into a new contract. The defense principally made and
treated of in the opinion of the court rested upon the alleged
extension of time, which, it was contended, worked a discharge of
the surety. After disposing of that question in favor of the
government, this Court said (p.
222 U. S.
471):
"The objection that the second contractor does not appear to
have completed the work intended to be accomplished by the first --
that is, to have made a channel of a certain depth -- does not
impress us. The first contract was for certain work for a certain
object, but limited and subject to change as the appropriations
might require. The second was for the same on the same plans and
specifications, the only difference being in the parties, the
price, and the liberty given to the second contractor to dump in
deep water, which diminished the cost. In the first contract, the
government reserved an absolute right of choice in this regard.
Whether the object of the contract was attained is immaterial, so
long as the work done towards it was work that the first contractor
had agreed to perform."
We thus observe that, in the
McMullen case, it was
found that the liberty given to the second contractor to dump in
deep water did not change the contract, because in the
Page 234 U. S. 45
first contract, the government reserved an absolute right of
choice in this regard. In the present case, there was no such right
of choice. The place of dumping spoil was made, as we have said, a
specific requirement of the contract. Under § 6, such changes as
are here involved must be agreed upon in writing by the contracting
parties, the agreement setting forth clearly reasons for the
change, giving quantity and prices, to take effect only upon the
approval of the Secretary of War. Minor changes are provided for in
§ 58 of the specifications, but clearly such an important change as
this one has proven to be is not of that character.
In the
McMullen case, in treating of the right reserved
in the first contract giving the government an absolute choice of
the dumping ground, it was concluded,
"whether the object of the contract was attained is immaterial,
so long as the work done towards it was work that the first
contractor had agreed to perform."
We are clearly of the opinion in this case that the work done
under the second contract was not the work which the first
contractor had agreed to perform. While it is true it accomplished
the dredging of the channel in the same bay, it did this with a
disposition of the spoil not permitted under the first contract,
and in a material matter was different from the contract first
entered upon.
We reach the conclusion that the circuit court of appeals
rightly decided this case, and its judgment is accordingly
Affirmed.