
    BADGER MANUFACTURING CO. v. THE UNITED STATES.
    [No. 30499.
    Decided January 1, 1914.]
    
      On the Proofs.
    
    Tiie plaintiff company entered into a contract witli the United States to manufacture khaki uniform coats for the Army, the Government to supply the cloth. Later two supplementary contracts were entered into by the parties, by the terms of which the full number of coats to be manufactured and delivered remained as stated in the original contract, the price only of certain specified sizes being increased.
    I. Where all work under several contracts is abandoned by the mutual agreement of the parties thereto, no recovery can be had in an action for anticipated profits on the work so abandoned.
    II. Where, after the abandonment of several contracts by mutual agreement of the parties thereto, the same parties enter into another contract under which all the unperformed work covered by the abandoned contracts is delivered to and paid for at an increased contract price by the other party to the contract, a breach, if any, of the original or abandoned contracts is cured by the later agreement of the parties.
    
      III. Where delays on the part of the Government in furnishing the contractor material in proper quantities which may have interfered with the prompt execution of the work covered by the plaintiff’s contract, the closing of the contract by agreement and compromise of the parties thereto precludes the recovery for damages resulting from such delay and absolves the Government from any liabilities or further compensating the contractor thereunder.
    
      The Reporter's statement of tbe case:
    The following are the facts of the case as found by the court:
    I. A contract between the claimant, a corporation organized under the laws of the State of Wisconsin and the United States by Lieut. Col. Medad C. Martin, Deputy Quartermaster General, United States Army, was signed on September 12, 1905, and approved by the Quartermaster General on October 5, 1905, in the form annexed to the claimant’s amended petition.
    The advertisement and specifications attached to said contract are also annexed to the claimant’s amended petition, as are likewise the two supplemental agreements bearing dates of February 21 and May 10, 1906.
    II. The contract between the same parties, signed on January 30, 1906, and the circular attached thereto are also made a part of the petition. The specifications attached to this contract and made a part thereof are the same as those attached to the contract dated September 12, 1905.
    III. The acceptance of the lay of the patterns on the material under the contract of September 12, 1905, was on October 10, 1905.
    IV. The number of coats required under the two contracts was:
    Contract of Sept. 12, 1905- 60,000
    Contract of Jan. 30, 1906- 20, 000
    Total_ 80,000
    The number of yards of cloth to a coat was 4.5347.
    
      The number of yards of cloth needed was:
    Yards.
    Contract of Sept. 12, 1905_ 272, 082
    Contract of Jan. 30, 1906_ 90, 694
    •Total___ 362,776
    To make 5,000 coats, as required for the first two months’ deliveries, needed_ 22, 673J
    To make 10,000 coats, as required for later deliveries, needed_ 45, 347
    V. Deliveries of cloth were made by the Government as follows:
    
      
    
    
      VI. The claimant company was behind in the manufacture and delivery of coats under its first contract with the Government in that whereas up to January 27, 1906, it had material for 12,669 coats its total deliveries to that date amounted to only 1,305; also that whereas up to February 26, 1906, it had material on hand for the manufacture of 18,795 coats its total output and deliveries to the Government up to that time were 3,105 coats; also that whereas up to March 31, 1906, it had material for the manufacture of 20,576 coats its total output and deliveries to the Government amounted to 4,856 coats; also that whereas up to April 30, 1906, it had material on hand for the manufacture and delivery of 25,826 coats it actually made and delivered to that date 17,851 coats; also that whereas up to May 29, 1906, it had material on hand for the manufacture and delivery of 38,523 coats its total output and deliveries to the Government amounted to 28,386 coats; that whereas it had on hand up to June 29, 1906, material for the manufacture of 49,806 coats up to that date it had made and delivered 34,461 coats; also up to July 30, 1906, it had on hand material for 64,285 coats, whereas'it had manufactured and delivered 41,593 coats. Extending the foregoing figures to the last delivery under the contract in suit up to August 24, 1906, it had cloth for the manufacture and delivery of 79,144 coats, whereas it had manufactured and delivered 48,308.
    VII. During the execution of the first contract difficulty was experienced by the Quartermaster Department in obtaining cloth from the manufacturers of the same in sufficient quantities and of the proper shade to supply the contractor. This delayed the execution of the work on the part of the contractor to some extent, particularly in the latter part of April and the early days of May, 1906, when for the period of about 12 days there was insufficient material on hand to work on.
    VIII. Claimant was delayed in the early part of the work under the contract by certain exactions in regard to the details of finishing the coats, this continuing until after the early part of April. Claimant repeatedly protested against these exactions. In the end these were relaxed and coats were accepted which had been previously rejected as not coming up to the requirements of the specifications.
    
      IX. Coats were accepted by the department under the contract of September 12, 1905, as follows:
    
      
    
    
      X. On June 30, 1906, the Quartermaster General notified the claimant that the lay approved for the contract of September 12, 1905, was accepted for the contract of January 30, 1906, and that deliveries must begin August 23, 1906.
    XI. On August 30, 1906, Maj. Thomas Cruse, chief quartermaster, then stationed at Eacine, reported to the head office that the contractor was holding 2,025 accepted coats at the factory, refusing to ship the same to the Chicago depot under contract of September 12, and demanding that they be applied to the contract of January 30,1906.
    The coats were already stamped for contract of September 12, 1905.
    The contractor informed the officer in charge at the time that he did not intend to complete the contract of September 12, 1905, and that his object in holding the coats was to secure 3 cents additional upon each coat over the price of the contract of September 12, 1905.
    This information was at once communicated to the head office in Washington on September 3,1906, and the Quartermaster General telegraphed the Chicago office to suspend all payments to the claimant company and wire report of number of the coats in arrears on contract of September 12 and supplementary contracts, and the Chicago office was asked to notify the contractors and sureties on bond of action contemplated in event of its failure to make full deliveries: also to demand immediate delivery of accepted coats then in the possession of the contractor.
    On September 4 a letter from the Quartermaster General at Washington was sent to Maj. Cruse, then at Eacine, informing him of the intention of the department to require the delivery of all the khaki coats contracted for under the contract of September 12, 1905, and to insist upon it before accepting any coats on the contract of January 30, 1906. This information was communicated to the contractor by Maj. Cruse.
    On September 5 Maj. Cruse reported that the contractor was then holding 3,603 coats inspected, stamped, and prepared for shipment, and had on hand 33 untouched cases of khaki cloth, which contained 32,075 yards, and in addition thereto had on hand about 4,000 coats in various stages of manufacture in the workroom.
    Of the foregoing the Quartermaster General was advised on September 5,1906, and that all payments to the claimant company had been suspended, as instructed on September 3.
    Under date of September 5 a letter was sent by the Quartermaster’s Department to the claimant company informing said company that its deliveries were in arrears at the close of business of that day to the extent of 11,388 coats and directed that the delivery of 3,603 coats, then held at the factory, be made at once.
    Said company was also informed of the suspension of payments, and that, regarding further failures to make full deliveries under its contract, the department would readver-tise for the manufacture of coats in accordance with article 7 of the contract.’
    A copy of this communication was likewise furnished the sureties of the contractors.
    On September 6, 1906, Mr. Ellinger, president of the claimant company, called at the Quartermaster General’s office in Washington, and discussed matters in connection with contracts with Col. John T. Knight, who had charge of clothing contracts under the direction of the Quartermaster General.
    While in the office he prepared and presented a letter in which he stated that it was though no fault of his company but through the nondelivery of khaki material that the contract of September 12 had expired before the completion of the deliveries thereon.
    That it was the company’s purpose to make deliveries under the second contract (Jan. 30, 1906) so as not to be in arrears and then continue deliveries under the first contract if satisfactory to the department.
    Request was also made by said Ellinger, of the claimant company, for the immediate payment of retained percentages on coats delivered, amounting to some $3,100.
    Upon consideration of the foregoing by the officer in charge, the contractor was informed that under the rules and regulations of the office and of the auditor’s office the 10 per cent retained payments and the payments on all future deliveries under the contract of September 12 must be withheld until deliveries were completed; that the department had no option in the matter and no authority to let the first contract lapse or sleep until the contractor had completed deliveries under the contract of -January 30,1906, and then resume deliveries under the first contract, and that, unless he could clearly forward both contracts, the department would be compelled to take steps to secure the garments still due upon the first contract.
    As a result of the discussion had between said Ellinger of the claimant company and Col. John T. Knight (Col. Pond, the officer in charge in the absence of the Quartermaster General, being consulted in connection with these matters from time to time) it was agreed between the parties, in order to avoid any further complication and trouble, to compromise and close the first contract with the understanding that the 10 per cent retentions should be paid over to the contractor and that he was to be allowed to deliver the coats manufactured for delivery under the contract of September 12, 1905, upon the contract of January 30, 1906.
    This understanding and agreement made and entered into as aforesaid was made subject to the approval of the quartermaster, and later in the same day a telegram was sent to said officer in San Francisco of the following tenor and effect:
    “ Sept. 6, 1906.
    “ Brig. Gen. C. F. Humphrey,
    “ San Francisco, Gal.
    
    “(Care Major C. A. Devol):
    “ Reference my telegram August thirtieth and your reply thereto, relative to contract with Badger Mfg. Co., recommend that contract of September, nineteen hundred five, be closed with about eleven thousand three hundred eighty-eight in arrears. This due to failure our department to supply material as stipulated to enable contractor to complete deliveries prior to expiration, August eighteenth last. Judge Advocate General confirms legality of this action. This leaves contract of January thirtieth, nineteen hundred six, for twenty thousand coats, in full force; with material on hand to complete. Any failure will be entirely on part of contractor. Badger Mfg. Co. agrees to tbis closing of September, nineteen hundred five, contract. Do you approve? I recommend this. Bequest instructions.
    “ POND,
    
      “Acting Quartermaster General.”
    Likewise a telegram was sent at the same time to the chief quartermaster at Chicago, of the following tenor and effect:
    “ Sept. 6, 1906.
    “ Chief Quartermaster,
    “ Chicago, III.:
    
    “Badger Mfg. Co. will begin deliveries of coats at once. Take no action reference to vouchering same until further advised by this office.
    “ POND,
    “ Acting Quartermaster General.”
    The action of the Quartermaster General’s Office at Washington was subsequently approved by the Quartermaster General.
    Both parties to this latter agreement understood that the first contract — that of September 12, 1905 — was to be and was finally and fully closed upon the consideration that the Government should pay claimant the amount of the retained percentage, being 10 per cent, and would accept deliveries of the coats on hand made for delivery under the first contract and pay for them the price fixed by the second contract, that of January 30, 1906. Both parties agreed to this settlement, the claimant company was paid and received the said retained percentage of $3,100, and thereafter deliveries were made and payments were made at the price mentioned in the second contract, which was a higher price than was fixed by the first contract.
    XII. If the claimant had delivered the eleven thousand six hundred and ninety-two (11,692) coats still remaining undelivered under its contract of September 12, 1905, it would have made a profit on each coat of thirteen and three-quarter cents ($0.13f), a total of one thousand six hundred and seven dollars and sixty-five cents ($1,607.65).
    XIII. The claimant company met with difficulty in connection with attaching the bellows strap to the pocket of the coat, which it first attached to the coat itself, instead of attaching said strap to tbe pocket in the first instance and afterwards to the coat, which should have been done. This process was used upon 1,680 coats and resulted in imperfect workmanship, which led to their rejection by the officer in charge. The patterns of said bellows strap which were supplied to the claimant company by the Government were the standard patterns which were supplied by the department, not only to the claimant company, but to the various branches of the Qartermaster Department which manufactured coats for the use of the Army, but also to other manufacturers, by all of whom the said pattern was used without trouble or complaint. The cost to the claimant of fixing them was fifteen cents ($0.15) per coat, a total of two hundred and fifty-two dollars ($252).
    XIY. Claim for the losses herein set forth, both for anticipated profits and damages for delays, was made by claimant during the pendency of the contract and immediately thereafter, and was rejected by the Quartermaster General and the Comptroller of the Treasury.
    
      Mr. William B. King for the plaintiff. King <& King were on the briefs.
    The contract says that the deliveries are to begin forty-five days "after receipt of material, patterns, and acceptance of lay.” It says "material,” not a part of the material. The reference is to Article I, page 33, saying, "all khaki material.” The material was not received until July 23, 1906. Consequently the seven months’ time did not begin to run until forty-five days after that date. All the work done by the claimant in advance of that was voluntary, with a view to expediting the completion of the contract.
    The Supreme Court has said, Merriam v. United States, 107 U. S., 441:
    "It is a fundamental rule that in the construction of contracts the court may look not only to the language-employed, but to the subject-matter and the surrounding circumstances, and may avail themselves of the same light which the parties possessed when the contract was made.”
    Another contention is also clearly decisive. On June 25, 1906, the earliest date upon which any contention may be plausibly made that the contract should have been completed, the Government had furnished a quantity of material far less than the amount necessary. It was therefore made impossible by the act of the Government for the claimant to complete the contract within its limit of time. Under these circumstances, what becomes of the time limit ? This court has laid down in lüner v. United States, 43, C. Cls., 336, the rule that the default of the Government, preventing a contractor from doing the work in the time fixed by the contract, wholly avoids the express limit of time fixed in the contract and leaves the contractor to the obligation to complete the contract in a reasonable time. It was there said:
    “It is well settled that where one of the parties to a contract demands strict performance as to time by the other party, he must comply with all oi tho conditions requisite to enable the other party to perform his part, and a failure on the part of the one demanding performance to do all the preliminary work within the time limit, operates as a waiver of the time provision in the contract.”
    This is affirmed in New Jersey Foundry Go. v. United States, 44 C. Cls., 178, and United Engineering Company, 47 C. Cls. See also the following authorities: Van Burén v. Digges, 11 How., 461; Manufacturing Go. v. United States, 17 Wall., 592; District of Columbia v. Camden Iron Works, 181 U. S., 453; Crocker v. United States, 21 C. Cls., 255,261; Moore v. United States, 46 C. Cls., 139; King Bridge Co. v. St. Louis, 43 Fed. Rep., 768; Standard Gas Light Co. v. Wood, 61 Fed. Rep., 74; Weeks v. Little, 89 N. Y., 566; Dennat v. Fuller, 120 N. Y., 554; Holmes v. Guppy, 3 Meeson & Welsby-, 386; Kemp v. Bose, 1 Giffard, 258; Bussell v. Bandeira, 13 Com. Bench (new series), 149; Dodd v. Churton (1897), 1 Q. B., 562.
    The rule has been repeatedly followed by the Comptroller and it is now a part of the settled executive law of the United States. See 14 C. D., 824; 15 C. D., 77, 256, 362, 874.
    Contracts of the War Department must, under Rev. Stat., section 3744, be in writing. The Government claims that a written contract was abrogated by a verbal agreement.
    
      In. Lind v. United States, 49 C. Cls., tbtis court spoke of this statute as "stricter than the statute of frauds,” and said that oral agreements made by officers of the War Department are ‘ ‘ absolutely void.” The Government can therefore predicate no rights upon such a supposed verbal agreement.
    
      Mr. F. W. Collins, with whom was Mr. Assistant Attorney General Huston Thompson, for the defendants.
    It has been held, both by this court and the highest court, that where a second contract is tendered as a substitute for the first upon condition that the contractors would perform what it required for the compensation to be paid and waive the first contract, they can not avail themselves of the performance and repudiate the condition. In such case there could be no recovery under the first contract. Parish v. United States, 2 Ct. Cls., 366; 8 Wall., 489.
    Likewise it was held in Braden v. United States, 16 Ct. Cls., 389, that "a voluntary substitution of one building contract for another must be regarded as a relinquishment of any damage incurred by a party under an abandoned contract.”
    In the case of Little v. District of Columbia, 19 Ct. Cls., 328, where the Board of Public Works of the District of Columbia, having determined to discontinue work under a certain contract, ordered that it be canceled and a new one executed, and the contractor brought his action on the new contract, it was held that he assented to the cancellation of the first contract.
    Here, then, was a full and final closing of one contract and a supplemental agreement to substitute therefor the conditions and provisions of another contract under which the parties were to act and by which they were to be bound in the future.
    The second contract therefore superseded the first, if not expressly, certainly by fair implication. The action of the parties at the time (Sept. 6) and subsequently supports this view. Sutton v. Griebel, 118 Iowa, 78; Evans v. Jacowitz, 67 Kans., 249; Page on Contracts, §1339.
    
      A subsequent contract which, does not by express terms, abrogate an earlier contract will nevertheless operate as a discharge thereof if it is inconsistent with the earlier contract. Fox v. Tyler, 109 Fed., 258; Cleveland City Ry. Co., v. Cleveland, 94 Fed., 385.
    The authorities are numerous and in substantial accord upon the proposition that between private parties who contract together it is entirely competent for the parties to cancel or annul the same by mutual agreement to that effect. The agreement may assume any one of several forms, such as waiver, recision, novation, accord and satisfaction, award upon a submission to arbitrators or release. Am. & Eng. Cyc. of L., 7 vol., p. 145, 2d ed.
    The authorities hold that if one party to a contract has led the other party to believe that he will not exact it, he thereby waives his right to strict performance and forfeits all remedies except damages for defective workmanship. Robinson v. Lake Shore Ry. Co., 103 Mich., 610; Casey v. Holmes, 10 Ala., 776; Ailcin v. Bloodgood, 12 Ala., 221; Moore v. Detroit Locomotive Works, 14 Mich., 266; Button v. Russell, 55 Mich., 478; McFadden v. Netherbee, 63 Mich., 390; Hollinsead v. Mactier, 13 Wend., N. Y., 276.
    Here the waiver of the breaches complained of has been clearly established, if not by specific agreement had and made between the parties to the contract, certainly by the strongest implication, for here, as in many other places, the maxim, “Actions speak louder than words” is applicable.
    Waiver may be proved by conduct as well as by language. Texas, etc., Ry. Co. v. Rush, 19 Fed. Hep., 245; Shaw v. Lewistoum, etc., Turnpike Co., 2 P. & W., Pa., 414; Smith v. Gugerty, 4 Barb., N. Y., 614.
   AtkiNSON, Judge,

.delivered the opinion of the court:

Claimant company entered into a contract with the United States on September 12, 1905, to manufacture 60,000 khaki uniform coats for the United States Army, the Government agreeing to supply the cloth therefor, subject to an increase of ÍQ per cent, at 51f cents each. Deliveries of the manufactured coats were to begin 45 days after the receipt of material, patterns, and the acceptance of the lay, and to continue at tbe rate of 5,000 coats per month for the first two months, and 10,000 each month thereafter until the contract was completed. The lay was accepted October 10 of said year, from which date the contract was to begin to run.

Two supplementary agreements were thereafter entered into on February 21 and May 10, 1906, the first of which was for the manufacture of 6,500 coats of certain size, applying on the foregoing contract, for 10 cents extra, and the second was for the manufacture and delivery of 17,000 coats, at 63|- cents each, delivery to begin March 25,1906, and be completed by July 17 of said year. The reason for making these supplementary agreements was because the contractor declined to make coats of different sizes when ordered by the Government, but insisted on making coats of one size until all that were called for by the contract of said size were made before taking up and making coats of other sizes. By the terms of said supplementary agreements, however, the full number of coats to be manufactured and delivered remained at 60,000, the price only of certain specified sizes being increased.

The total number of coats made and delivered to the United States under the original and the two supplemental agreements was 48,308.

As shown by Finding XI, all work was abandoned, under these several contracts by mutual agreement, the amount then due claimant was paid in full, including the 10 per cent that had been withheld by the Government, which it was authorized to do by a provision in the contract; thus accord and satisfaction are shown so far as anticipated profits and • damages are concerned. And yet claimant contends that the contract was breached by the defendants, and thereupon it files a claim for anticipated profits for the sum of $1,607.65 for unmanufactured coats which claimant company said it' stood ready to manufacture under the contract, which coats were then on hand and not taken by the Government, thus denying accord and satisfaction for anticipated profits as contended by defendants and as shown by the findings.

In the meantime another contract, dated January 30,1906, had been made with the claimant company calling for the manufacture and delivery of 20,000 khaki coats at 54f cents each, subject to an. increase of 100 per cent, the coats to be delivered at the rate of 5,000 for the first two months and 10,000 each month thereafter, as hereinbefore stated, and work thereunder was resumed. All of the coats that claimant company had previously manufactured and had on hand were deliveréd and accepted under this latter contract. We therefore must hold that if there was a breach of the original or supplemental contracts by the defendants, it was cured by the agreement of the parties as hereinafter set forth; consequently this item of the petition for recovery of anticipated profits must be dismissed.

In respect of the claim of $252 growing out of the use of an alleged imperfect bellow strap in the pockets of the coats, there can be no allowance. It is true that the Government furnished the pattern, and the same was used in the manufacture of 1,680 coats which were condemned and were required to be done over and adjusted for both appearance and service. Said patterns were of the standard supplied by the department, not only to the claimant but to the various branches of the Quartermaster’s Department that manufactured coats and to other manufacturers for the use of the Army, as shown by Finding XIII. A slight'change in the form of the straps, however, and experience in placing or manipulating them seemed to be all that was necessary in using them successfully and without embarrassment or loss to the manufacturer.

This brings us to a consideration of the claim of $1,017.50 for unliquidated damages growing out of the failure of the . Government to furnish the material in proper quantities to keep claimant’s factory in operation to enable it to comply with its contract. As shown by the findings, delays occurred in the delivery of the cloth to the claimant by the Government, the material not being all delivered until July 23, 1906, which may have interfered with the prompt manufacture of the coats. Nevertheless the closing of the contract by agreement and compromise of the parties, whereby the claimant company was to receive immediate payment of all sums theretofore retained by the Government and was enabled to deliver 3,603 coats at a higher price, which were made for.delivery at a lower price, precludes the claimant company from any additional recovery and absolves the Government from any obligation to further compensate said, company on account of this of any other claim involved herein. We can not otherwise interpret the agreement and understanding of September 6, set out in Finding XI.

It follows from what we have above said that the claimant company is not entitled to recover judgment upon any of the three items for which suit was instituted, and its petition must be accordingly dismissed.

It is so ordered.  