Barrett Co. v. United States
Headline: Court reverses lower court and sends case back, allowing a contractor to seek compensation for extra construction costs after the Government cancelled a wartime plant contract.
Holding:
- Allows contractors to recover reasonable extra construction costs after cancellation.
- Lets the Government contest costs as unnecessary to limit recovery.
- Sends the case back for new findings, so the award is not final.
Summary
Background
A New Jersey company (the Barrett Company) contracted with the United States Navy to build and operate a plant in Frankford, Pennsylvania, to distill xylol. The Navy advanced half the approved construction estimate and supplied solvent naphtha; the plant and production were to belong to the Navy. The company’s estimates totaled $253,321.12, but it spent $337,780.19. After the World War I armistice, the Navy stopped work and supplies and made a supplemental agreement in which the company bought the plant for $110,000 while reserving its right to assert claims for termination.
Reasoning
The Court faced whether the December supplemental purchase barred the company’s claims and whether the company could recover expenditures beyond its approved estimate. The Court rejected the view that the purchase settled all claims, noting a clause preserving claims. It held the contract must be read as a whole and that just compensation for cancellation should restore the contractor for expenditures reasonably necessary to perform the contract. The Court said the Government may show particular extra costs were not required. Because factual questions remained about the necessity and amount of the excess $84,459.07, the Court reversed and remanded for further findings. The Court left the separate question of interest undecided.
Real world impact
The decision allows a contractor whose government contract is canceled to seek recovery of reasonable outlays made to fulfill the contract, even if they exceeded government estimates. The Government can try to limit recovery by proving extra costs were unnecessary. The case is returned to the lower court to determine the proper award.
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