Freund v. United States

Background

A pair of contractors contracted in 1911 to carry mail on a seven-circuit route beginning at a new St. Louis Post Office. The new Post Office was not ready on July 1, 1911, so the Post Office Department substituted a very different city-wide route that required more vehicles, more hours, and hauling far heavier mail. The contractors protested, were warned they might be sued on their bond, performed the substituted route for sixteen months, and sued to recover unpaid sums once they suffered heavy losses.

Reasoning

The main question was whether the Department could force a materially different route under broad contract language. The Court examined the schedules and found the substituted service was a different kind of work, with different mileage pay rules, equipment needs, and hours. The Court held the substitution was not within the original contract’s reasonable scope. It also found the contractors’ performance under threat of suit did not bar recovery because they had been pressured into beginning the work and suffered real loss. The Court reversed the Court of Claims judgment, dismissed the Government’s cross appeal, and directed the Court of Claims to determine the reasonable value of the work actually performed, including a fair profit.

Real world impact

The ruling requires the lower court to calculate how much the contractors should be paid for the substituted route. It limits the Government’s ability to impose a radically different task on an existing contract without fair compensation, and it allows contractors forced into such work to recover reasonable value rather than being bound to an unfair adaptation of the original price.