Chesapeake & Potomac Telephone Co. v. United States

Background

A private telephone company installed a very large switchboard for the War Department during the late war and then sued under the Dent Act to recover its installation costs, minus salvage. The Court of Claims found the suit should be dismissed because a written contract was already in force setting rates and obligations, and the Supreme Court granted review of that dismissal.

Reasoning

The key question was whether the preexisting written contract covered the large switchboard or whether the Government had agreed later to pay extra. The Court looked at the contract language, which required the company to install, equip, and maintain telephone equipment and listed rates for switchboards. The Court concluded those words, taken literally, covered the unusually large installation. The company’s statements to lower-level War Department employees that it expected extra payment did not bind the Government because those employees had no authority to agree, and higher officials never assented or knew of the claim.

Real world impact

Because the Court affirmed the dismissal, contractors cannot recover extra payment for government work unless an authorized agreement exists. The Government’s continued use of the installation and earlier payments at the contract rates did not create a new obligation. The ruling leaves the written contract controlling and denies recovery for the additional installation costs.

Dissents or concurrances

The Court noted that two judges of the Court of Claims dissented below, but their disagreement appeared aimed at the factual findings rather than the legal rule, and those findings were treated as final and not open to review.