Specifications attached to and made a part of a government
construction contract on the standard form provided that, "if the
contractor considers any work demanded of him to be outside the
requirements of the contract," he could appeal to the head of the
department, "whose decision or that of his duly authorized
representative shall be final and binding upon the parties to the
contract."
Held: the Court of Claims may not review an
administrative decision made under this provision. Pp.
338 U. S.
458-463.
1. Contractual provisions for the settlement of disputes have
long been used by the Government and sustained by this Court, are
not forbidden by Congress, and should not be frustrated by judicial
"interpretation" of contracts. Pp.
338 U. S.
460-462.
2. Regardless of whether the dispute in this case involved a
question of fact or a question of law, it was within the ambit of
the clear language of the provision for the final administrative
settlement of such disputes. Pp.
338 U. S.
462-463.
113 Ct.Cl. 159, 82 F. Supp. 1010, reversed.
The Court of Claims reviewed a decision of the head of a
department as to the scope of the work required of a contractor
under a standard form of government construction contract and
awarded the contractor a money judgment for additional
compensation. 113 Ct.Cl. 159, 82 F. Supp. 1010. This Court granted
certiorari. 338 U.S. 810.
Reversed, p.
338 U. S.
463.
Page 338 U. S. 458
MR. JUSTICE BLACK delivered the opinion of the Court.
The questions presented relate to the interpretation and
validity of terms in a government construction contract providing
that, in contractual disputes, the decisions of the Secretary of
War or his authorized representative shall be final and
binding.
The respondent partnership entered into a standard form contract
with the United States to grade the site of a proposed aircraft
assembly plant. Article 1 of the contract provided for payment of
24 cents per cubic yard of grading, satisfactorily completed "in
strict accordance with the specifications, schedules, and drawings,
all of which are made a part hereof. . . ." A proposed taxiway was
shown on the drawings, but was not located within the plant site as
described in the specifications. The present controversy concerns
the question of whether the contract required respondent to grade
this taxiway.
On demand of the Government, respondent graded for the taxiway
at the point shown on the drawings. It then filed a claim with the
contracting officer asking extra compensation, 84 cents per cubic
yard instead of the 24 cents specified in the contract. Upon
investigation, the contracting officer made findings of fact which
led him to reject respondent's claim. Appeal was taken to the
Secretary of War, whose authorized representative also considered
the facts and denied the claim. According to Par. 2-16(a) of the
specifications, such a denial is "final and binding upon the
parties" when a contractor claims as here that work demanded is
"outside the requirements of the contract." [
Footnote 1]
Page 338 U. S. 459
Notwithstanding the foregoing provision that the Secretary of
War's decision is final and binding, respondent brought this action
in the Court of Claims to recover the extra compensation. He there
contended that his right to challenge such administrative findings
was measured by Art. 15 of the contract, not by Par. 2-16 of the
specifications. Article 15 makes a department head's decision
"final and conclusive upon the parties" only when such disputes are
over "questions of fact." [
Footnote
2] Respondent, alleging that the dispute here was over the
proper "interpretation" of the contract, argues that how a contract
shall be interpreted is not a "question of fact," but a "question
of law." Adding this premise to his assumption that Art. 15 alone
governed finality of this administrative decision, respondent
contended that the Court of Claims could reconsider the facts, make
new findings as a basis for its "interpretation," and then overturn
the administrative decision. The Court of Claims did all three. On
the basis of its new findings and "interpretation," the court
entered a money judgment for respondent computed at 59.3 cents per
cubic yard for the taxiway grading. 113 Ct.Cl. 159, 82 F. Supp.
1010.
Page 338 U. S. 460
In petitioning for certiorari, the Solicitor General represented
that this decision plus previous ones of the Court of Claims
had
"weakened and narrowed the effectiveness of the well established
policy of the Government to settle, without expensive litigation,
disputes arising under its contracts,"
and that the total effect of the decisions was to
"add further doubt and confusion to the authority of designated
officers of the United States to make final decisions under
government contracts. [
Footnote
3]"
We granted certiorari. 338 U.S. 810.
First. Contractual provisions such as these have long
been used by the Government. No congressional enactment condemns
their creation or enforcement. As early as 1878, this Court
emphatically authorized enforcement of contractual provisions
vesting final power in a District Quartermaster to fix distances,
not clearly defined in the contract, on which payment for
transportation was based.
Kihlberg v. United States,
97 U. S. 398. Five
years later,
Sweeney v. United States, 109 U.
S. 618, upheld a government contract providing that
payment for construction of a wall should not be made until an Army
officer or other agent designated by the United States had
certified after inspection that "it was in all respects as
contracted for." And, in
Martinsburg & Potomac R. Co. v.
March, 114 U. S. 549,
this Court enforced a contract
Page 338 U. S. 461
for railroad grading which broadly provided that the railroad's
chief engineer should in all cases
"determine the quantity of the several kinds of work to be paid
for under the contract, . . . decide every question which can or
may arise relative to execution of the contract, and 'his estimate
shall be final and conclusive.'"
Id. at
114 U. S.
551-552. In upholding the conclusions of the engineer,
the Court emphasized the duty of trial courts to recognize the
right of parties to make and rely on such mutual agreements.
Findings of such a contractually designated agent, even where
employed by one of the parties, were held "conclusive, unless
impeached on the ground of fraud, or such gross mistake as
necessarily implied bad faith."
Id. at p.
114 U. S. 555.
The holdings of the foregoing cases have never been departed
from by this Court. They stand for the principle that parties
competent to make contracts are also competent to make such
agreements. The Court of Claims departed from this established
principle in
McShain, Inc. v. United States, 88 Ct.Cl.
284, where it refused to recognize as final the decision of a
contracting officer, even though the Government and contractor had
agreed that his decision should be final. The Court of Claims'
holding was based on its conclusion that the contracting officer's
decision had been reached by "interpretation of the contract,
drawing, and specifications," and that parties were incompetent to
make such decisions binding except as to questions of fact. Its
holding was considered such a departure from established contract
law that this Court summarily reversed in a per curiam opinion
[
Footnote 4] citing only two of
the many prior cases on the subject. One of the cited cases had
enforced a contract provision that
"the decision of the supervising architect as to the proper
interpretation of the drawings and
Page 338 U. S. 462
specifications shall be final."
Merrill-Ruckgaber Co. v. United States, 241 U.
S. 387,
241 U. S.
393.
Similar agreements have been held enforceable in almost every
state.
See cases collected in Note, 54 A.L.R. 1255
et
seq. In one state, Indiana, the courts do seem to hold
differently, on the ground that permitting engineers or other
persons to make final determinations of contractual disputes would
wrongfully deprive the parties of a right to have their
controversies decided in courts.
See cases collected in
Note, 54 A.L.R. 1270-1271. In the
McShain case, we
rejected a contention that this Court should adopt a rule like
Indiana's and we reject it now. It is true that the intention of
parties to submit their contractual disputes to final determination
outside the courts should be made manifest by plain language.
Mercantile Trust Co. v. Hensey, 205 U.
S. 298,
205 U. S. 309. But
this does not mean that hostility to such provisions can justify
blindness to a plain intent of parties to adopt this method for
settlement of their disputes. Nor should such an agreement of
parties be frustrated by judicial "interpretation" of contracts. If
parties competent to decide for themselves are to be deprived of
the privilege of making such anticipatory provisions for settlement
of disputes, this deprivation should come from the legislative
branch of government.
Second. We turn to the contract to determine whether
the parties did show an intent to authorize final determinations by
the Secretary of War or his representatives in this type of
controversy. If the determination here is considered one of fact,
Art. 15 of the contract clearly makes it binding. But while there
is much to be said for the argument that the "interpretation" here
presents a question of fact, we need not consider that argument.
For a conclusion that the question here is one of law cannot remove
the controversy from the ambit of Par. 2-16 of the specifications.
That section expressly covers
Page 338 U. S. 463
all claims by a contractor who, like respondent here, "considers
any work demands of him to be outside the requirements of the
contract. . . ." The parties incorporated it into the
specifications and made the specifications part of the contract,
all of which they had a legal right to do. The section is neither
in conflict with nor limited by Art. 15, for the latter expressly
excepts from its coverage such special methods of settlement
"otherwise specifically provided in this contract."
The oft-repeated conclusion of the Court of Claims that
questions of "interpretation" are not questions of fact is ample
reason why the parties to the contract should provide for final
determination of such disputes by a method wholly separate from the
fact-limited provisions of Art. 15. To hold that the parties did
not so "intend" would be a distortion of the interpretative
process. The language of Par. 2-16 is clear. No ambiguities can be
injected into it by supportable reasoning. It states in language as
plain as draftsmen could use that findings of the Secretary of War
in disputes of the type here involved shall be "final and binding."
In reconsidering the questions decided by the designated agent of
the parties, the Court of Claims was in error. Its judgment cannot
stand.
Reversed.
MR. JUSTICE DOUGLAS took no part in the consideration or
decision of this case.
[
Footnote 1]
"If the contractor considers any work demanded of him to be
outside the requirements of the contract, or if he considers any
action or ruling of the contracting officer or of the inspectors to
be unfair, the contractor shall without undue delay, upon such
demand, action, or ruling, submit his protest thereto in writing to
the contracting officer, stating clearly and in detail the basis of
his objections. The contracting officer shall thereupon promptly
investigate the complaint and furnish the contractor his decision,
in writing, thereon. If the contractor is not satisfied with the
decision of the contracting officer, he may, within thirty days,
appeal in writing to the Secretary of War, whose decision or that
of his duly authorized representative shall be final and binding
upon the parties to the contract. . . ."
Paragraph 2-16 of the specifications.
[
Footnote 2]
"
Disputes. -- Except as otherwise specifically provided
in this contract, all disputes concerning questions of fact arising
under this contract shall be decided by the contracting officer
subject to written appeal by the contractor within 30 days to the
head of the department concerned or his duly authorized
representative, whose decision shall be final and conclusive upon
the parties thereto. In the meantime, the contractor shall
diligently proceed with the work as directed."
Article 15 of the contract.
[
Footnote 3]
These and other representations in the petition for certiorari
in this case are substantially identical with representations made
by the Solicitor General in asking this Court to review a former
Court of Claims judgment reported in
McShain, Inc. v. United
States, 88 Ct.Cl. 284. The case there, it was urged, seemed to
be the
"culmination of a recent tendency in the Court of Claims to
whittle away the authority of designated officers of the United
States to make final decisions under contracts."
It was insisted that,
"At least, we submit, the power of the Government to make
effective contracts of this character should not be so
circumscribed except by decision of this Court."
We granted that petition and reversed the judgment without oral
argument in a per curiam opinion.
United States v. McShain,
Inc., 308 U.S. 512.
[
Footnote 4]
United States v. McShain, Inc., 308 U.S. 512.