Freund v. United States
Headline: Court reverses and orders payment after finding the Government improperly forced a different St. Louis mail route, allowing contractors to recover reasonable value for sixteen months of substituted service.
Holding:
- Limits agencies from forcing contractors into fundamentally different work without fair compensation.
- Allows contractors to recover reasonable value and profit for compelled substitute work.
- Requires the Post Office to pay fairly for substituted route services.
Summary
Background
A group of contractors bid in 1911 to carry mail by wagon on a seven-circuit route beginning at a new St. Louis Post Office, signed a four-year contract to start July 1, 1911, and gave a $25,000 bond. The new Post Office was not ready for 16 months. The Post Office Department, citing broad contract clauses and a notice to bidders, substituted a very different route that moved incoming and outgoing city mail from railroad stations to the old post office. The contractors protested, were warned they might be sued on their bond, and performed the substituted work. Their cost for the substituted 16 months was $43,726.89 and the Government paid $24,289.62, leaving a loss of about $19,500.
Reasoning
The Court examined the contract language and the schedules and found the substitute route was not to "like" stations and could not be fairly paid by applying the original per-mile method. The Court concluded that the Department had gone beyond what the contract reasonably allowed, and that the contractors performed only after pressure and late assurances from Post Office officials. Because the substituted service was fundamentally different and inadequately paid, the Court held the contractors were entitled to recover the reasonable value of the substituted work for the 16 months, including a fair profit. The Court reversed the judgment of the Court of Claims and dismissed the Government’s cross appeal.
Real world impact
The case was sent back to the Court of Claims for a new finding of the value of the substituted service and entry of judgment for the unpaid balance. Contractors who are compelled to perform markedly different government work may recover its reasonable value when substitution exceeds the contract’s fair scope.
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