
    JAMES A. MUNDY ET AL v. THE UNITED STATES.
    [No. 19397.
    Decided March 12, 1900.]
    
      On the Proofs.
    
    Claimants sue on a contract for improving the harbor between Philadelphia, Pa., and Camden, N. J. The contention grows out of questions of measurement, the extent of > the work contracted for, and the right of the defendants to annul the contract.
    I. Where a contract provides that' if the contractor shall fail, in the judgment of the engineer in charge, to prosecute the work faithfully and diligently, the'engineer, with the sanction of the Chief of Engineers, may annul the contract, and that retained percentages due shall be forfeited, it is a case of penalty and not of liquidated damages.
    II. Where a contractor fails to perform and the defendants are compelled to relet the work at a higher price, they are entitled to recover the difference; but if there is a substantial difference between the two contracts, the latter does not afford a basis for an estimate of damages.
    III. Where a contract provides that “if the time allowed for such worh is extended at the request of the contractor for any cause whatever, all resulting expenses” “shall be deducted from payments due or to become due,” the contractor will be chargeable with the cost of inspection during the extension.
    
      The Reporters’ statement of the case:
    The following are the facts of the case as found by the court:
    I. James A. Mundy, Joseph Busch, and William B. Johns, the 23d day April, 1891, residing in the State of Pennsylvania, were on said date partners in business, trading under the firm name and style of James A. Mundy & Co. The said William B. Johns has since the institution of this suit departed this life, leaving the said James A. Mundy and the said Joseph Busch as surving partners in their said copartnership.
    II. On said date, April 23, 1891, the said James A. Mundy, Joseph Busch, and William B. Johns, as partners, under the firm name and style of James A. Mundy & Co., entered into a written contract with the United States, through Maj. C. W. Raymond, Corps of Engineers, which contract with the advertisement for the same and specification.thereto are set forth in the petition under the designation of Exhibit A.
    
      III. Tbe claimants commenced the work under said contract within a reasonable time and to the satisfaction of the defendants. They put on the work the plant and machinery as required by the terms of the contract.
    IY. On the 6th of July, 1891, the following correspondence took place between the parties:
    “UNITED States Engineer Office,
    
      “1438 Arch street, Philadelphia, Pa., July 6,1891. “James A. Mundy & Co.,
    
      11211 South 9th street, Philadelphia, Pa.
    
    “GentlemeN: You are respectfully informed that upon my recommendation, made in accordance with your verbal request, the Chief of Engineers has authorized the modification of the plan for the commencement of the work of improving Philadelphia Harbor, provided for in the specifications of your contract, as follows:
    “1. You will be permitted to make a straight cut from the lower end of Windmill Island into the interior- basin and dredge out to the revetments, removing them from within instead of working on the outside.
    “2. You will be permitted to excavate Windmill Island and the adjacent shoal to a depth of twelve (12) feet below mean low water instead of eight (8) feet, as heretofore provided. The total amount of material to be removed is estimated at about 1,075,000 cubic yards.
    “3. This authority is granted subject to the conditions that the spur revetment projecting below the south end of the island shall be removed as soon as possible and before making the cut into the interior basin, and that all the work provided for in the project thus modified shall be completed on or before December 31, 1891.
    “Please notify me in writing of your acceptance of these modifications and conditions at your earliest convenience. “Respectfully, yours,
    “C. W. Raymond,
    
      “Jfajor, Corps of Engineers, U. S. A.n
    
    “James A. MuNdy & Co.,
    
      “211 South Ninth street, Philadelphia, July 10,1891. “Major C. W. Raymond,
    ‘ ‘ Corps of Engineers, U.S.A., Ilf 8 Arch street, Phila., Pa.
    
    ‘ ‘ Dear Sir : Your communication of the 6th instant received and contents noted. In reply, would state we accept the terms therein stated. Thanking you very much for your kindness in this matter, we remain,
    “Yours, very truly, Jas. A. MuNdy & Co.”
    V. The time for the completion of the work under the contract was extended as follows:
    1. Extension of time from December 26, 1891, to June 30, 1892.
    2. Extension of time from Juné 30, 1892, to July 31,1892.
    •3. Extension of time from July 31,1892, to January 1,1893.
    VI. The contract was annulled December 23, 1892, by the engineer in charge of the work, under the Detractions of the Chief of Engineers of the United States Army, for the reason that the contractors failed “to prosecute faithfully and diligently the work in accordance with the specifications and requirements of the contract,” and the claimants were so notified of such annulment. It does not appear from the evidence that the annulment was made in bad faith.
    VII. The work done under the contract- by the claimant is as follows:
    
      (a) Number of cubic yards of material excavated, removed, and deposited at places provided by them, according to scow measurements made by Government inspectors, as shown hereafter, 160,197.
    (5) Number of cubic yards of material excavated and removed by them for deposit on League Island, according to scow measurements made by the Government inspectors, 611,961.
    The measurement for the above amounts is an average between the measurement when the material was first deposited and the arrival at the place of deposit; the difference between such average and the measurement when placed in the scow does not satisfactorily appear from the evidence.
    (io) Number of linear feet of piling timber, wharfing, and revetment removed, 7,825.
    VIII. The defendants have paid claimants on said work the sum of $126,587.27 and charged to their account the sum of $5,191.16 for the extra expenses of inspection during the different extensions of the contract as set forth in former findings. The amount of such charges is the amount of extra expense incurred by the defendants in the inspection of the work during the periods covered by such extensions, and the amount is a reasonable charge. The work performed bjr the claimants at the price specified in the agreement amounts to the sum of $157,587.83, for which the defendants have paid the sum of $126,587.27. The amount of expense incurred by defendants in extra inspection is $5,191.16, which being added to amount of payment makes the sum of $131,778.43, which being subtracted from $157,587.83 leaves $25,809.40.
    IX. No borings were made by defendants prior to the letting of bids, except such as are set forth and described in the contract, nor was any guaranty or representation made by the defendants concerning the character of the material to be excavated, except such as are shown bjr the specifications and contract. The claimants were not hindered in their work by the War Department, or requirements of the officers in charge, but failed to perform the allotted work within the time of the contract and its extensions.
    X. After the annulment of the contract the defendants made a contract with the American Dredging Company, the material portions of which are as follows:
    “ U. S. ENGINEER Office,
    
      U1J$8 Arch Street, Philadelphia, Pa., December 30,1898.
    
    “ Sealed proposals, in triplicate, will be received at this office until 11 a. m., Tuesday, January 31, 1893, and then publicly opened, for dredging and removal of wharfing in Philadelphia Harbor and the depositing and spreading of material on League Island.
    “Specifications, blank forms, and all available information will be furnished on application to this office.
    “C. W. Raymond,
    
      “Major, Corps of Engineers, U. S. Army.
    
    
      “Specifications.
    
    “General instructions for bidders, omitted.
    “ General conditions.
    
    * * * * -X-
    “33. It is understood and agreed that the quantities given are approximate only, and it must be understood that no claim shall be made against the United States on account of any excess or deficiency, absolute or relative, in the same. Bidders are expected to examine the drawings, and are invited to make the estimate of quantities for themselves.
    “ 34. When appropriations are-made available by law, payments will be made monthly, subject to the condition that no payment will be made for the excavation and deposit of a quantity of material, or the removal of a length of revetment, less than the quantity or length required by the engineer officer in charge to be removed during the calander month next preceding the month of payment. Ten (10) per cent will be reserved until the total amount thus retained is equal to ten (10) per cent of the cost of completing the work remaining to be done under the contract, as estimated by the engineer officer in charge. When this amount has been retained, no further reservation shall be made from the monthly payments; and at the last monthly payment of each fiscal year such portion of the total amount retained as will then reduce it to ten (10) per cent of the cost of completing the work remaining to be done under the contract, as estimated by the engineer officer in charge, shall be paid to the contractor. Should payments be discontinued for a period of one year, owing to lack of funds, the total amount reserved from previous payments shall be paid to the contractor.
    “ 35. The contractor must be prepared to carry on the work as rapidly as may be required by the engineer officer in charge, provided funds are available for payment therefor; but he will not be required to remove by dredging more than 400,000 cubic yards of material, scow measurement, during any one calendar month. The engineer officer in charge shall from time to time indicate to the contractor in writing the work which is to be done and assign a date for the completion thereof, subject to the condition expressed in the preceding paragraph. Should the time allotted for the completion of such work be extended, all expenses for inspection and superintendence during the period of the extension, the same to be determined by the engineer officer in charge, shall be deducted from payments due or to become due to the contractor: Provided, however, That if the party of the first part shall, in the exercise of his discretion, because of freshets, ice, or other force or violence of the elements, allow the contractor additional time in writing, as provided for in the form of contract, there shall be no deduction for the expenses for inspection and superintendence for such additional time so allowed: Provided further, That nothing in these specifications shall affect the power of the party of the first part to annul the contract, as provided for in the form of contract adopted and in use by the Engineer Department of the Army. Other work, additional to that thus assigned, may be executed when authorized by the engineer officer in charge. On or before the last day of each calendar month during the working season the engineer officer in charge may prescribe to the contractor in writing the minimum amount of material to be excavated and deposited and the minimum length of revetment to be removed during the calendar month next following.
    “36. In case the available funds become exhausted before the completion of the contract, the engineer officer in charge will give thirty (30) days’ written notice to the contractor that work may be. suspended; but if the contractor so elects he may continue work under the conditions of the specifications after the time set by such notice, with the understanding, however, that no payments will be made for such work until additional funds have been provided in sufficient amount. When additional funds become available for continuing the work, the engineer officer in charge will give thirty (30) days’ written notice to the contractor that work must be resumed.
    -x- * * -X- -X-
    “ Special conditions.
    
    
      “ General project. — The work under these specifications contemplates the formation of- a channel about 2,000 feet in width, with a cross section not far from 55,000 square feet at mean tide along the Philadelphia shore from Kaighn Point to Fishers Point, at a distance far enough from the present wharf line to permit the extension of the wharves and the widening of Delaware avenue at their shore ends.
    “For this purpose it is proposed to remove Windmill and Smith islands and the .adjacent shoals so as to form a 26-foot channel, about 1,000 feet wide, or wider if found practicable during the progress of the work, along the front of the revised Philadelphia wharf line from Kaighn Point to the foot of Petty Island. It is further proposed to widen the Pennsylvania channel at Petty Island so as to give the Pennsylvania channel in this locality a width of about 2,000 feet, a depth of 26 feet over a width of about 1,000 feet, more or less, the channel sloping to a depth of 12 feet in the remaining width, and a resulting cross section of about 55,000 square feet.
    “The material removed is in part to be deposited and spread on League Island, and.the balance is to be placed where it will not be an injury to the river.
    * -X- -X- -X- -X-
    “The plan involves the excavation and removal of an estimated amount of about 17,000,000 cubic yards, place measurement, but it is expressly understood and agreed that no guarantee is given as to the quantity of material to be removed. Bidders are invited to make the estimates for themselves. Should any of the material requiring removal be removed by the action of the currents, no claims shall be made by the contractor in respect of'the same.
    “The working season for dredging in this locality is generally considered to extend from about April 1 to December 31, but in an open season work may often be prosecuted to advantage during the winter and early spring. The mean range of the tide is about 6 feet.
    “The principal articles on the islands, which are to be removed by the contractor and become his property, as hereinafter specified, are as follows:
    “Smith Island—10 buildings, consisting of hotel, 3 dwelling houses, gas house, ice house, blacksmith shop, bowling alley, and pavilion; also fencing.
    “Windmill Island—1 small frame building.
    
      ‘ ‘ Petty Island—6 buildings, consisting of 3 dwelling houses, 2 sheds, and one carpenter shop.
    “ Conditions of the work.—The work required for the complete execution of this project is as follows:
    “1. The removal of all trees, structures, machinery, and other artificial material of whatever nature upon the islands, and belonging to the United States, except the pile and timber wharfing or revetment. This material shall become the propertyr of and be removed by the contractor without expense to the United States, and upon the execution of the contract the responsibility of the United States for its care and preservation shall cease. Notice will be given by the engineer officer in charge to all persons to remove private property from the islands without delay, and all such property remaining upon the islands after the execution of the contract will be at the owner’s risk.
    ‘ ‘ 2. The removal of the pile and timber warfing or revetment at Smith and Windmill islands and along the northern shore of Petty Island, and the removal of the timber of the dikes which form the cross channel north of Smith Island. The aggregate length of this timberwork is about 16,200 feet. The material is to be entirely removed by the contractor and so disposed of as not to injure vessels or obstruct navigation, and will be paid for at a fixed price per linear foot, measured along the line of the work, the material removed to become the property of the contractor.
    “3. The removal by dredging and by the natural scour of the tidal currents of 17,000,000 cubic yards of material, more or less, place measurement. If any material is deposited in the channel during the progress of the work at any point between Fishers Point and the mouth of the Schuylkill River, or on the bar of the latter, the contractor shall remove it at the contract rate, if directed to do so by the engineer officer in charge.
    “Dredged material shall be deposited and spread on League Island at such times and in such quantities as may be required by the engineer officer in charge. The positions and extent of .League Island upon which such deposits are to be made are shown upon the accompanying sketch marked B. These deposits must bo evenly graded by the hydraulic process, or any other method agreeable to the contractor, over the spaces to bo covered, and the top surface shall be brought to a grade not to exceed the top of the water table of the steam engineering building. It is estimated that some 2,000,000 cubic yards, place measurement, will be required for filling the spaces designated on the aforesaid sketch; but the Government reserves the right to require an additional amount of dredged material, not exceeding 5,500,000 cubic yards, place measurement, to be deposited and spread within the limits of League Island Navy-Yard, in locations to be indicated by the engineer officer in charge.
    “ Dredged material of a hard character and the stone filling behind the revetments and in the dikes north of ¿Smith Island (which will bo paid for as dredged material) shall be deposited at such places within the limits of the waterway at such times and in such quantities as may be required by the engineer officer in charge. A portion of the material to be dredged along the line limiting the excavation on Petty Island shall be deposited along the shore of the islaird above high water if required by the engineer officer in charge, at such times and in such quantities as may be designated by him.
    “All dredged material not otherwise provided for is to be deposited by the contractor at localities provided by him, and subject to the approval of the engineer officer in charge. The contractor will be permitted to deposit dredged material behind the Mifflin Bar Dike and in the back channel of the League Island Navy-Yard east of Broad street, subject to regulations made by the engineer officer in charge, who shall designate the places and determine the amount of such deposit. Mifflin Bar Dike is about ten miles below Windmill Island.
    “The contractor will be permitted to deposit on League Island material obtained from the back channel of the navy-yard east of ■ Broad street, provided that the excavations thus made in the back channel shall be filled with an equivalent amount of material obtained from other localities, subject to the approval of the engineer officer in charge.
    “Dredging will be paid for by the cubic yard, as measured in the scows, except when the material is placed on Petty Island, when it will be paid for by the cubic yard as measured in the dipper. The measurement shall be made at the place of deposit, unless otherwise directed by the engineer officer in charge.
    “The deposit and spreading at League Island will be paid for by the cubic yard, as measured in place in the fill above the present surface of the ground, and no allowance will be made for shrinkage or settlement. The monthly payments will be based upon approximate determinations of the amount ot material deposited and spread, which will be corrected from time to time by surveys and measurements made under the direction of the engineer officer in charge. Such surveys and measurements shall be made at least' once in each fiscal year, and the determinations thereby made of the amount of material deposited and spread on League Island shall be final. If the approximate determinations upon which the monthly payments were based do not agree with the final determinations, the proper correction will be made for the differences in the first subsequent payment.
    * * -X* * * -X-
    “Bidders shall further state, on the form hereto appended, the kind, capacity, number, and condition of the dredges, scows, and other appliances which they propose to use in the execution of the work; the location of the plant thus specified, and that it is under their control and will be available for use on the date fixed for the commencement of the work. The engineer officer in charge will have the right to make a thorough examination of this plant previous to the award of the contract. Should the proposal be accepted, these statements will constitute a part of the contract; and any disadvantageous alteration in the working plant made without the consent of the engineer officer in charge will be considered a violation thereof.
    * * * * *
    “ Commencement of the worlt. — The amount of money now available for the work is §585,000, from which such sum as may be necessary for contingent expenses will be reserved. The work of excavation will be commenced on or before April 1, 1893, and at least 3,000,000 cubic yards, as measured in scows, must have been excavated and deposited on or before December 31,1893. The contractor will be required to carry on this work at the following rates: At least 250,000 cubic yards, scow measurement, must have been excavated and deposited on or before April 30, 1893; at least 300,000 cubic yards, scow measurement, must be excavated and deposited during the month of May, 1893; and at least 350,000 cubic yards, scow measurement, must be excavated and deposited during each month from June to December, 1893, inclusive.
    “ The work of depositing and spreading material on League Island will be commenced on or before June 1, 1893, and at least 700,000 cubic yards, as measured in place, must have been deposited and spread on or before December 31, 1893. The contractor will be required to carry on this work until completed at the rate of at least 80,000 cubic yards, as measured in .place, per calendar month.
    “The work to be completed on or before December 31, 1893,- will be as follows:
    , “1. A portion of the Pennsylvania channel north of Petty Island, to be indicated by the engineer officer in charge, will be dredged to a depth of 26 feet below mean low water. The amount of material to be removed will not exceed 75,000 cubic yards, as measured in scows. This material is believed to be coarse gravel mixed with bowlders. This work will be commenced on or before April 1, 1893, and continued without interruption until its completion.
    ‘‘ 2. Windmill Island and the adjacent shoal will be removed to a depth of 12 feet below mean low water, and its revetments will be removed, the work ending with the removal of the revetment on the south side of the canal between the islands. The approximate amount of material to be removed by dredging is 212,000 cubic yards, as measured in scows. The approximate length of revetment to be removed is 1,500 feet. This work will be commenced on or before April 1, 1893, and continued without interruption until its completion.
    “3. Smith Island will be removed to a depth of 12 feet below mean low water, and the revetment around it will be removed during the progress of the work. The approximate amount of material to be removed by dredging is 390,000 cubic yards, as measured in scows. The approximate length of revetment to be removed is 2,500 feet. This work will be commenced as soon as the dredging at Windmill Island, above specified, is completed, and continued without interruption until its completion.
    “4. The portion of the northern shore of Petty Island north of the existing meadow bank will be excavated to a depth of 12 feet below mean low water, the excavation extending to the existing 12-foot contour. The revetment along the shore will be removed during the progress of the work. The approximate amount of material to be removed by dredging is 2,150,000 cubic yards, as measured in scows. The approximate length of revetment to be removed is 10,500 feet. This work may be done at any time previous to December 31, 1893.
    
      “ 5. The remaining work will be done at locations indicated by the engineer officer in charge during the progress of the work. The revetments of the cross channel north of Smith Island will be removed, if required by the engineer officer in charge.
    “Articles of agreement entered into this 1st day of June, eighteen hundred and ninety-three (1893), between Major C. W. Raymond, Corps of Engineers, U. S. Army, of the first part, and American Dredging; Company, incorporated, L. Y. Schermerhorn, president, doing business under the firm name of American Dredging Company, of Philadelphia, of the county of Philadelphia, State of Pennsylvania, of the second part.
    “This agreement witnesseth that,'in conformity with the advertisement and specifications hereunto attached, and which form a part of this contract, the said Major C. W. Raymond, for and in behalf of the United States of America, and the said American Dredging Company, for themselves, their heirs, executors, and administrators, have mutually agreed, and by these presents do mutually covenant and agree, to and with each other, as follows:
    “The said American Dredging Company shall furnish the necessary plant and do all. the work required for the improvement of the harbor between Philadelphia, Pennsylvania, and Camden, New Jersey, in strict accordance with and subject to all the conditions and requirements-of the specifications as hereinafter modified, which specifications are attached to this contract and form á part thereof: Provided, That said specifications shall be and are hereby modified so that the part included under the head of “Commencement of the work” shall read as follows:
    “ Commencement of the work. — The amount of money now available for the work is $1,080,000, from which such sum as may be necessary for contingent expenses will be reserved. The work of excavation will be commenced on or before July 1, 1893, and at least 3,000,000 cubic yards, as measured in scows, must have been excavated and'deposited on or before June 30, 1894. The contractor will be required to carry on this worlc at the following rates: At least 250,000 cubic yards, scow measurement, must have been excavated and deposited on or before July 31, 1893; at least 300,000 cubic yards, scow measurement, must be excavated and deposited during the month of August, 1893, and at least 350,000 cubic yards, scow measurement, must be excavated and deposited during each working month from September, 1893, to J une, 1894, inclusive.
    
      “The work of depositing and spreading material on League Island will be commenced on or before September 1, 1893, and at least 700,000 cubic yards, as measured in place, must have been deposited and spread on or before June 30, 1894. The contractor will be required to carry on this work until completed at a rate of at least 80,000 cubic yards, as measured in place, per calendar month.
    “The work to be completed on or before June 30, 1894, will be as follows:
    “1. A portion of the Pennsylvania channel north of Petty Island, to be indicated by the engineer officer in charge, will be dredged to a depth of 26 feet below mean low water. The amount of material to be removed will not exceed 75,000 cubic yards, as measured in scows. This material is believed to be coarse gravel mixed with bowlders. This work will be commenced on or before July 1, 1893, and continued without interruption until its completion.
    “2. Windmill Island and the adjacent shoal will be removed to a depth of 12 feet below mean low water, and its revetments will be removed, the work ending with the removal of the revetment on the south side of the canal between the islands. The approximate amount of material to be removed by dredging is 212,000 cubic yards, as measured in scows. The approximate length of revetment to be removed is 1,500 feet. This work will be commenced on or before July 1, 1893, and continued without interruption until its completion.
    “3. Smith Island will be removed to a depth of 12 feet below mean low water, and the revetment around it will be removed during the progress of the work. The approximate amount of material to be removed by dredging is 390,000 cubic yards, as measured in scows. The approximate length of revetment to be removed is 2,500 feet. This work will be commenced as soon as the dredging at Windmill Island, above specified, is completed, and continued without interruption until its completion.
    “4. The portion of the northern shore of Petty Island north of the existing meadow bank will be' excavated to a depth of 12 feet below mean low water, the excavation extending to the existing 12-foot contour. The revetment along the shore will be removed during the progress of the work. The approximate amount of material to be removed by dredging is 2,150,000 cubic yards, as measured in scows. The approximate length of revetment to be removed is 10,500 feet. This work may be done at any time previous to June 30, 1894.
    ‘ ‘ The plant described in the following statement or such other plant as may be authorized by the engineer officer in charge shall be employed by the said American Dredging Company in the execution of the work.
    
      
      
    
    OTHER APPLIANCES.
    Such tugs and deck scows as may be required for the work.
    “The said American Dredging Company shall receive in full payment for said work, in accordance with the conditions of this agreement, the following prices, to wit:.
    “(1) Fourteen and two-tenths (14ttt) cents per cubic yard, measured in scows or dippers, for all material excavated and depositéd at places approved by the engineer officer in charge, for the entire improvement of Philadelphia Harbor, as per plan approved by Congress.
    “ (2) One dollar and ninety cents ($1.90) per linear foot for all pile and timber wharfing or revetment removed.
    “(3) Sixteen (16) cents per cubic yard, measured in place, for all dredged material deposited and spread upon League Island, said price to be in addition to the price paid per cubic yard under item (1).
    “Payments shall be made to the said American Dredging Company monthly for work actually executed, subject to the reservations provided for and the conditions contained in the specifications hereunto attached.
    “All materials furnished and work done under this contract shall, before being accepted, be subject to a rigid inspection by an inspector appointed on the part of the Government, and such as shall not conform to the specifications set forth in this contract shall be rejected. The decision of the engineer officer in charge as to quality and quantity shall be final.
    ‘ ‘ The said American Dredging Company shall commence the woi’k herein contracted for on or before the first day of July, eighteen hundred and ninety-three (1893), and shall complete the same in accordance with the requirements of the specifications hereunto attached.
    “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 work in accordance with the specifications and requirements of this 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 to the party (or parties, or either of them) of the second part; and upon the giving of such notice all money or reserved per centage 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 section 3709 of the Revised Statutes of the United States: Provided, however, That if the party (or parties) of the second part shall, by freshets, ice, or other force or violence of the elements, and by no fault of his or their own, be prevented either from commencing or completing the work, or delivering the materials at the time agreed upon in this contract, such additional time may, in writing, be allowed him or them for such commencement or completion as, in the judgment of the party of the first part, or his successor, shall be just and reasonable; but such allowance and extension shall in no manner affect the rights or obligations of the parties under this contract, but the same shall subsist, take effect, and be enforceable precisely as if the new date for such commencement or completion had been the date originally herein agreed upon.
    “If at any time during the prosecution of the work it be found advantageous or necessary to make any change or modification in the project, and this change or modification should involve such change in the specifications as to character and quantity, whether of labor or material, as would either increase or diminish the cost of the work, then such change o’r modification must be agreed upon in writing by the contracting parties, the agreement setting forth fully the reasons for such change, and giving clearly the quantities and prices of both material and labor thus substituted for those named in the oiiginal contract, and before taking effect must be approved by the Secretary of War: Provided, That no payment shall be made unless such supplemental or modified agreement was signed and approved before the obligation arising from such modification was incurred.
    “No claim whatever shall at any time be made upon the United States by the party or parties of the second part for or on account of any extra work or material performed or furnished, or alleged to have been performed or furnished, under or by virtue of this contract, and not expressly bargained for and specifically included therein, unless such extra work or materials shall have been expressly required in writing by the party of the first part or his successor, the prices and quantities thereof having been first agreed upon by the contracting parties and approved by the Chief of Engineers.
    “The party of the second part shall be responsible for and pay all liabilities incurred in the prosecution of the work for labor and material.
    “It is further understood and agreed that 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 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.
    
      Mr. L. T. Michener and Mr. J. G.- Ohcmey for the claimants:
    The amount named as forfeiture is not liquidated damages. It is a mere penalty. It does not measure the damages. Such damages as may be sustained by the failure to fulfill the contract is susceptible of proof. The law of the case seems to be well settled on these points. Vcm Bivren v. Begges, 11 Howard, 461; Dmis case, 17 C. Cls. R.., 201, 215; /Spicer v. Hoop, 51 Ind., 365; Davis v. Gillette, 52 N. H., 126; Ilenry v. Dmis, 123 Mass., 345; Pierce v. Jimg, 10 Wis., 30; Lampmcm v. Gochran, 16 N. Y., 275; Pennypaclcer v. Jones, 106 Penn., 237; Golmell v. Lawrence, 38 N. Y., 71, 72.
    
      Even in a case of a “penal sum of $10,000 lawful money, liquidated damages,” as in the case of Bignall v. Gould, 119 U. S., 495, it was held that “the sum of $10,000 must be regarded simply as a penalty to secure the payment of such damages as the obligee may suffer from breach of the bond.”
    Even in a case of liquidated damages, “unless the penaltjr is a sum agreed to be paid and received absolute^ in lieu of performance, the actual damages [only] may be recovered.” (Graham v. Bichham, 4 Dallas, 149. See also Watts v. Oamors, 115 U. S., 353; Gay Mf'g Go. v. Oa/m/p., 25 U. S. App., 134; United States v. Catay cm-, 35 U. S. App., 133.)
    In all instances where a sum named in a contract is construed to be a penalty, the actual damage, and not the amount made in the instrument, is to be regarded. In the case of Lowev. Beers, 4 Burr, 2229, the coux’t say: “It majr therefore be laid down as a settled rule that no other sum can be recovered under a penalty than that which shall compensate the plaintiff for his actual loss. ” (See also Lord v. Gaddis, 9 Iowa, 265; Biclcetson v. Richardson, 19 Cal., 330.)
    In the case of Dehlm- v. Held, 50 Ills., 491, the court held that liquidated damages are damages agreed upon by the parties as and for a'compensation for and in lieu of the actual damages arising from such breach.
    In the case of Streeper v. Williams, 12 Wright (Pa.), 454, the court said: “ The real question in this class of cases will be found to be not what the parties intended, but whether the sum is in fact in the nature of a penalty; and this is to be determined by the magnitude of the sum, in connection with the subject-matter.” (See also Watts v. Sh&ppard, 2 Ala., 425; Ilosmerv. True, 10 Barb. (N. Y.), 106.)
    The tendency and preference of the law is to consider a sum payable for breach of contract as a penalty, over which it has control, rather than as liquidated damages. {Lansing v. Dodd, 45 N. J. Law, 525.)
    The rescinding of a contract when it does not appear that any actual damage was sustained does not constitute a ground for damages. {Grant's Oase, 1 C. Cls. B., p. 61.)
    The 10 per cent reserved until completion of the work, though declared forfeited by the agreement in case of its annulment, must be treated as penalty and not as liquidated damages. {Kennedy’s Case, 24 C. Ols. R., 122.)
    “Forfeitures and estoppels are not favored defenses, and are always subordinated to the equity of the right, if possible.” {Cape Ann G. Co. v. United States, 20 C. Cls., R. 12; Andrews v. Lyons, 11 Allen, 349; Louensberry v. Popen, 28 Barbour, 44; Water’s appeal, 35 Penn. S., 523; Babcock v. Parry, 8 Ohio St., 270; State v. Pepper, 31 Ind., 76.)
    In line with all this, although the case was not one of an actual annulment of contract, is the opinion of Attorney-General Devens in the per diem forfeiture case, in 15 Atty. Gen. Ap., page 418.
    
      Mr. George H. Gorman (with whom was Mr. Assistant Attorney-General Pradt) for the defendants:
    By reference to the contract it will be observed that this material was to be paid for at a certain rate per cubic yard, “measured in scows, for all material excavated, removed, and deposited,” and of course unless the material excavated was also deposited there was to be no payment at all. In other words, depositing the material was as essential a prerequisite to payment as was the excavation of it. The method pursued by the Government engineer with reference to the measurement of this material was as follows:
    • The material was first measured immediately upon its excavation. After the material had been transmitted from the place of excavation to the place of deposit it was again measured by the engineer, both measurements being made while the material was still in the scow, and after allowing a reasonable and proper percentage for • shrinkage in transit, the estimates of the engineer, which the contract provides shall be final, were made up and formed the basis of the payments. to the contractors. There was, however, very considerable shrinkage in this material; that is to say, the material, when it arrived at the place of deposit, was oftentimes very considerably less than when it started from the- place of excavation, which could not be accounted for at all upon the notion of shrinkage, but could only be accounted for by the fact that on the journey thither large quantities of this material had been slid down out of tbe pockets of tbe scow and dumped into tbe river. Whether this was accidentally done or purposely done is immaterial, and we need not pause to inquire. The fact remains that large quantities of this material were so lost in transit, and Major Raymond states the quantitjr to be 56,876 cubic yards. For this material thus lost and not deposited of course there can be no payment made whatever.
    Equally true, of course, are the defendants entitled to charge against the claimants the cost which the United States was required to pay out for the inspection of, this work during the extension of time for the completion thereof, in accordance with the provisions of the contract. This amount is stated by Major Raymond to be the sum of 15,191.16, and is to be deducted from any sum due to the contractors.
    It is contended that this amount ($25,809.40) is to be regarded not as liquidated damages settled and determined by the contract, but merely as a penalty, which the courts will not enforce unless it be shown that the defendants have suffered damages by reason of the claimants’ failure to comply with the provisions of their contract in that or a greater amount.
    If this principle be conceded, we submit that the record abundantly shows that the Government has suffered damages in an amount far greater than this sum. The amount of material which the claimants agreed to excavate and properly deposit was 18,000,000 cubic yards. The amount which they actually did excavate and properly deposit was 775,161 cubic yards, leaving a difference of 17,224,839 cubic yards still unexcavated and undeposited. This additional amount, of course, should have been excavated and deposited by the claimants under their contract at a cost to the United States of 10í cents per cubic yard. Their failure to do so, however, rendered it necessary for the United States to readvertise for bids for this work, and after this had been.done and after the work had been let to the lowest bidder at the lowest otainable price it was found that the cost to the Government, instead of being 10| cents per cubic yard, was 14.2 cents per cubic yard, making a net loss to the Government, by reason of the failure of these claimants to carry out their contract, of 3.325 cents per cubic yard, and we therefore have 17,224,839 cubic yards at 3.325 cents to be paid for, amounting to the sum of <$572,725.90, which represents the total damages sustained by the defendants by reason of the failure of the claimants to carry out the provisions of their contract.
   WeldoN, J.,

delivered the opinion of the court:

On an amended petition, filed February 9, 1899, the claimants, James A. Mundy and Joseph Busch, prosecute this suit as surviving partners of William B. Johns, on a contract dated on the 23d day of April, 1891, made between the claimants, their deceased partner, and the defendants, for certain improvements of the harbor between Philadelphia, Pa., and Camden, N. J., as described in certain specifications attached thereto. The contract and specifications are annexed to and made a part of the petition as Exhibit A.

The general project of the work contemplated in the improvement is shown by the following extracts from the specifications:

“The work under these specifications contemplates the formation of a channel about 2,000 feet in width, with a cross section not far from 55,000 square feet at mean tide, along the Philadelphia shore from Kaighns Point to Fishers Point at a distance far enough from the present wharf line to permit the extension of the wharves and the widening of Delaware avenue at their shore ends.

“For this purpose it is proposed to remove Windmill and Smiths islands and the adjacent shoals, so as to form a 26-foot channel, about 1,000 feet wide, or wider if found practicable during the progress of the work, along the front of the revised Philadelphia wharf line from Kaighns Point to the foot of Pettys Island. It is further proposed to widen the Pennsylvania channel at Pettys Island, so as to give the Pennsylvania channel in this locality a width of about 2,000 feet, a depth of 26 feet over a width of about 1,000 feet, more or less, the channel sloping to a depth of 12 feet in the remaining width, and a resulting cross section of about 55,000 square feet.

“The material removed is in part to be deposited and spread on League Island and the balance is to be placed where it will not be an injury to the river.”

The contract, among other matters, provides that the claimants shall receive for said work, in accordance with the conditions of the agreement, the following prices, to wit:

“ (1) Ten and seven-eighths (10&) cents per cubic yard, measured in scows, for all material excavated, removed, and deposited at places provided by the said James A. Mundy & Company and approved by the engineer officer in charge, for the entire improvement of Philadelphia Harbor as per plan approved by Congress.

“ (2) One dollar and ninety cents ($1.90) per linear foot for all pile and timber wharfing or revetment removed.

“ (8) Nine and one-half (9i) cents per cubic yard, measured in scows, for all dredged material deposited and spread upon League Island, this price to be in addition to the price per cubic yard paid under item (1).”

The amended petition is the pleading on which plaintiffs rely as a statement of their claim in the following sums, to wit:

Due for materials deposited at sea. $4,411.44

And for materials deposited on League Island. 17, 782.07

Retained percentages.-. 14,584.52

Withheld on revetment work. 1,031. 70

Withheld as inspection expenses. 5,191.16

43,000. 89

The contract is substantially a contract for dredging, and the principal contentions are as to how the work is to be measured, the extent of the agreement as to the amount of labor to be performed, and the right of the defendants to annul the contract.

The plaintiffs, by the allegations of the petition and by their contention upon the facts, claim that they diligently and faithfully performed the agreement, and that there is now due them the said sum; while the defendants insist that the plaintiffs did not faithfully perform their contract within the extensions of the same, that they failed and neglected to commence the work on time; failed and neglected to put on the work the necessaiy plant and machinery; that extensions were made from time to time in order to accommodate the plaintiffs and to insure the completion of the work; and that in consequence of such neglect and failure on the part of plaintiffs the defendants were compelled to annul the contract on the 23d day of December, 1892, and that by reason of such failure and annulment a large part of the work which the contract called for was left unperformed by plaintiffs; that in consequence of such failure the defendants were compelled to contract with other parties at a higher rate; that the contract required the plaintiffs to excavate and remove 18,000,000 cubic yards, and they only excavated and deposited 775,161, leaving a difference of 17,724,839, which the defendants had to remove by and through other contractors at a higher rate of compensation, and that in consequence thereof the defendants were damaged in the sum of $572,725.90, being the difference between the contract price of plaintiffs and the price paid the new contractors.

One of the important contentions'in this proceeding is as to the scope of the agreement in the amount of work to be done. Is it a contract for the entire work contemplated by the general plan, or is it limited in its extent to what was substantially performed by the claimants?

In the view which the court has taken of the legal questions involved in this proceeding, it is not necessary to determine whether the obligation of the claimants as to the amount of work to be done is to the extent of the 18,000,000 cubic yards as provided in the general plan, or limited by the provisions of the specifications under the head of “commencement of the work,” in which the approximate amount of excavation in Windmill Island is stated, and which by the contention of the claimants limits the extent of the work to be performed.

If the claimants substantially failed to perform the amount . of labor of Windmill within the extended time, it is immaterial whether the contract contemplated the 18,000,000 cubic yards or only the approximate amount contained in Windmill Island. Having determined that the issues of the cause are not affected by the questions of the extent of the work contemplated by the agreement, we proceed to consider the rights of the parties on the other points of dispute.

As will be seen by the findings of fact, there was an extension of time from December 26, 1891, to June 30, 1892, and from June 30, 1892, to July 31, 1892, and then from July 31, 1892, to January 1, 1893. The engineer in charge of the wprk being dissatisfied with its progress, on the 23d day of December, 1892, by the authority of the Chief of Engineers, notified the claimants that the contract was annulled, and thereafter all work ceased.' A contention has arisen as to the right and propriety of the anulment of the contract under the circumstances.

Whatever may be said of the alleged default of the claimants in December, 1892, it is shown bj^ the findings that for some reason or other not appearing they were not able to perform the specified work within the limits of the original contract, nor within the three extensions, and about the 1st of December, 1892, the claimants having made application for a further extension, the proper authorities of the Department not only refused to extend the time, but, upon the contrary, annulled the contract, and thereby prevented the claimants from doing any further work.

By one of the provisions of the agreement it is specified that “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 work in accordance with the specifications and requirements of this 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 to the party or parties, or either of them, of the second part; and, upon the giving of such notice, all money or reserved percentage due or to become due to the party or pai’ties 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 section 3709 of the Revised Statutes of the United States.”

Under a further clause of the agreement it is within the discretion of the engineer in charge to permit further time for the completion of the work, provided the failure to perform shall arise from causes over which the party of the second part has no control.

It is shown by the findings, that in the exercise of the power and authority of annulment the officer in charge of the work and the Chief of Engineers, acting in good faith and for causes which to them were reasonable and satisfactory at the time, annulled the contract. It has been held in numerous cases that bad faith or the exercise of capricious and wanton power upon the part of the engineer in the annulment of a contract vitiates such annulment, and the party is not deprived of the rights which have accrued to him in the performance of the agreement and the right to a compensation for whatever he may have done in the execution of the contract. It is indicated by the fact of three extensions that for reasons which do not satisfactorily appear the claimants were not sufficiently diligent in the'prosecution of the work to perform it within the time of the original contract, nor within the time of the several extensions; so that when the annulment was made it indicates that it was an exercise of power founded upon the just conditions of the work with reference to its performance and execution.

It is insisted on the part of the defendants, that the claimants not having performed the agreement as required by its terms, the}’" are subject to the infliction of the consequence of that portion of the agreement which forfeits to the United States “all sums due and percentage retained.” It is clearly evidenced from the terms employed in the contract that the claim of the defendants to the percentage is incident to and dependent upon a penalty; and that the parties have not bjr the terms of their agreement made such percentage the representative of liquidated damages, but the same is contemplated by the terms of the agreement as a penalty. This being true, the defendants are remitted to such claim for damages as necessarily grow out of the failure upon the part of the claimants to substantially perform the agreement.

This court has in many cases passed upon the question as to whether a clause in a contract is to be taken as a mere penalty or as liquidated damages; and the court has held that it will be regarded as a penalty unless the contrary expressly and clearly appears.

In the case of Kennedy (24 C. Cls. R., 122) it is said:

“ Courts are loath to enforce penalties or forfeitures, and will not do so except in clear and’ imperative cases. Forfeitures and estoppels are not favored defenses, and are always subordinated to the equity of the right if possible.”

It was held in the case of Quinn v. United States (99 U. S. R., 30) that the retain of percentage, in a case very much like the one at bar, was simply an indemnity for whatever damages the United States might suffer from a failure to perform the contract on the part of the claimants. It is said in that case, “ under such circumstances the United States no longer has a right to the money withheld for indemnity and security.”

In consequence of the annulment of the contract the defendants, on December 30, 1892, advertised to be let before January 31, 1893, a large amount of labor for dredging and removal of wharfing in Philadelphia Harbor and the depositing and spreading of material on League Island. As a result of that advertisement the American Dredging Company, on the 1st day of June, 1893, entered into an agreement with the defendants, the material portions of which are set forth in the findings.

The law is well settled that if the defendants were compelled to relet the same work at a higher price, and the claimants had failed to perform their agreement, the defendants are entitled to claim the difference between the prices which they were compelled to pay and the contract prices with the claimants. In order to determine the contentions of the parties upon this point, it is necessary to compare the work specified in the contract of- the claimants and the contract of the defendants. If there is a substantial difference, then the contract of the American Dredging Company does not afford a proper basis upon which any estimate of damages can be predicated.

Without discussing in detail tne different portions of the agreement made by the claimants and the American Dredging Company, it is sufficient to state that, in the opinion of the court there is such a difference as to constitute them in substance distinct in fact and in law, and therefore the contract of the American Dredging Company does not afford the defendants a correct basis upon which to predicate a claim for damages.

It is contended upon the part of the defendants that the claimants are legally chargeable with an item of $5,191.16 which accrued as cost of inspection incurred by the United States during the extension of time for the completion of the work embraced in the agreement. The time of an inspector is charged to the claimants during the period of the extension of the contract. In order to determine the validity of this claim upon the part of the defendants, it is necessary to refer to the terms of the agreement upon that subject. It is provided that “if the party or parties of the second part shall by freshets, ice, or other force or violence of the elements, and by no fault of his or their own, be prevented either from commencing or completing the work, or delivering the materials at the time agreed upon in this contract, such additional time may, in writing, be allowed him or them for such commencement or completion as in the judgment of the party of the first part or his successor, shall be just and reasonable; but such allowance and extension shall in no manner affect the rights or obligations of the parties under this contract, but the same shall subsist, take effect, and be enforceable precisely as if the new date for such commencement or completion had • been the date originally herein agreed upon.”

It is insisted by the claimants, that by that provision of the contract they are relieved from the payment of the charge for the increased price of inspection because of the different extensions. In reply to that contention our attention is called to an antecedent provision of the agreement having special 'reference to the subject of extension, which is as follows: “If the time allowed for such work is.extended at the request of the contractor for any cause whatever, all resulting expenses to the United States , incurred after the date thus assigned shall be deducted from payments due or to become due the contractor.” The clause of the agreement relied on by the claimants is general, intending only to preserve the terms of the agreement in case of an extension, w^hile the latter clause is specific on the question of the effect of extensions, and must govern and determine the rights and obligations of the parties.

The controversy has arisen between the parties as to the amount of labor performed in the removal of Windmill Island and the amount of piling, timber, wharfing, and revetment removed. It is insisted by the claimants that they did not receive by the estimate of the engineer in charge their proper credits for the amount of work performed by them. In the contract it is provided, “all materials furnished and work done under this contract shall, before being accepted, be subject to a rigid inspection by an inspector appointed on the part of the Government, and such as shall not conform to the specifications set forth in this contract shall be rejected. The decision of the engineer officer in charge as to quality and quantity shall be final.”

In pursuance of the power conferred upon the engineer in ■charge, he has allowed 161,809 cubic yards, scow measurement, for excavation and deposit of materials at places provided by the claimants; he has allowed 614,964 cubic yards, scow measurement, for material excavated and removed by claimants and deposited on League Island; he has also credited them in his final statement with 7,825 linear feet of piling, timber, wharfing, and revetment removed. The contention between the parties is as to the manner adopted by the engineer in charge in the measurement of the material. It is insisted by claimants that the measurement should be made as soon as the material is deposited in the scow. The theory of the engineer in charge is, and upon that basis he has allowed claimants, that the measurement is to be made, not at the time of the deposit of the material in the scows, but at the time the material reaches the place of deposit.

During the performance of the work this controversy arose between the parties as to the proper time of measurement, and the engineer in charge adopted the plan of making an average between the amount of scow measurement at the time it was loaded into the scow and at the time it reached its destination for deposit. The difference between measurement immediately upon the deposit of the material in the scow and the measurement adopted by a general average can not be determined. The court has therefore adopted the report made by the engineer in charge as the proper basis for an allowance. It is not shown that the engineer in charge acted in bad faith nor in violation of his duty as to the rights of the parties in the measurement by a general average; and the findings show the work performed by the claimants and the credits to which the defendants are entitled for the different payments made to the claimants during the progress of the work.

Computing the amount of work performed by the claimants at the prices specified in the agreement it amounts to the sum of §157,587.83, for which the claimants have been paid the sum of $126,587.27; that the amount of expense incurred by the defendants in consequence of the increased cost of inspection amounts to the sum of $5,191.16, making in the aggregate the sum of $131,778.43, which being deducted from the amount due claimants for work performed leaves a balance of $25,809.40, and for that amount a judgment will be entered for the claimants.  