Davis Sewing MacHine Co. v. United States
Headline: Affirms denial of contractor’s claim for lost future profits after government suspended wartime contract and signed a supplemental settlement that excluded profit recovery.
Holding: Because the original contract excluded prospective profits and the contractor expressly waived such claims in a supplemental agreement, the Court affirmed the denial of recovery for future profits on uncompleted work.
- Contracts and settlement waivers can bar later claims for lost future profits.
- Contractors who accept supplemental payments and waivers generally cannot recover prospective profits.
Summary
Background
A private manufacturer agreed to make many Very pistols for the United States. The contract let the Government change specifications or terminate the work and did not promise payment of future profits on unfinished items. After the Armistice, the Government asked the company to suspend work while parties negotiated a settlement. The company took an advance payment and signed a partial-payment supplemental agreement. It agreed not to do further work, not to incur more expenses, and expressly waived any claim to prospective profits. A lower court found a remaining balance of $14,192.25 but refused to award profits the company claimed it would have made.
Reasoning
The Court addressed whether delays or changes by the Government entitled the company to recover lost future profits. It relied on two clear facts from the written records: the original contract defined the available remedies and did not include recovery of prospective profits, and the supplemental agreement explicitly released any such profit claims. The Court noted the appeal arose under the law as it stood before a 1925 statute, but that did not change the outcome. Because the contract terms and the express waiver controlled, the Court affirmed the denial of profit recovery.
Real world impact
The decision enforces the written terms of government contracts and signed settlement agreements. Contractors who accept supplemental payments and expressly waive future-profit claims generally cannot later recover those lost profits. Companies working on government wartime contracts should be aware that termination and change clauses and any settlement waivers can foreclose later profit claims.
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