Reading Steel Casting Co. v. United States

Background

A manufacturer agreed on September 4, 1918 to make two fly-wheels for a U.S. government quartermaster, each cast in halves “in the rough.” The contract required delivery by September 28, 1918 in Reading, Pennsylvania for shipment to a machine company in New York, and said the government would inspect and approve the castings on delivery; rejected items had to be removed by the supplier. The supplier shipped the castings to the machining company. The smaller casting was inspected and rejected within a reasonable time; the larger casting was inspected and rejected only years later after suit was filed.

Reasoning

The Court addressed whether the supplier had performed and whether the government had accepted the work. The Court found the small wheel had checks (cracks) that the supplier did not fully weld and therefore could not recover for that piece. For the large wheel, the Court found the extent of defects could not be known before machining, the supplier had shipped as agreed, and the government did not inspect or reject within a reasonable time. Under ordinary sales rules, failure to reject in reasonable time amounts to acceptance. The Court therefore held the government accepted the large wheel and the supplier was entitled to the contract price for it, reversing the lower court judgment.

Real world impact

The ruling means suppliers who deliver under similar inspection-conditional contracts may recover payment if the government delays inspection and does not timely reject goods. It also confirms that suppliers who fail to fix known defects cannot recover for defective items. Government buyers should inspect and notify promptly to avoid being treated as having accepted goods.