United States v. Gleason
Headline: Contractors lose claim for lost profits as Court reverses lower court and holds Army engineer’s decision on time extensions final, limiting recovery to retained payments for accepted work (affects public works contractors).
Holding:
- Limits contractors' ability to recover lost profits when an officer denies extra time absent bad faith.
- Allows government engineers to weigh past delinquencies when denying further extensions.
- Contractors can recover retained percentages for accepted work.
Summary
Background
A firm of contractors agreed with officers of the Army Corps of Engineers to perform specified public-works work by set dates. The contractors did not finish on time or ever complete the work. They said floods, ice, and other natural forces stopped them, and that Army officers later prevented completion without cause. They sued to recover the full contract price for work done and damages for the uncompleted balance.
Reasoning
The key question was who decides whether extra time should be allowed when weather or other forces prevent completion. The contract said additional time could be allowed “as, in the judgment of the party of the first part” (the engineer) “shall be just and reasonable.” The Court held that this language gives the engineer authority to decide both whether the delay was caused by the elements and how much extra time to allow, and that his decision is final unless shown to be made in bad faith or with gross mistake. The Court rejected the lower court’s reading that the phrase “may be allowed” created a right for the contractors to have the courts decide the issue.
Real world impact
Because the record showed no allegation or proof of bad faith by the engineer, the Court reversed the award of expected profits for the uncompleted work. It affirmed that the contractors may recover retained percentages for the work actually done and accepted. The case reinforces that public-contract officers’ discretionary decisions about time extensions are respected absent proof of dishonest or grossly mistaken conduct.
Dissents or concurrances
Three Justices dissented, disagreeing with the Court’s construction of the contract language about the engineer’s power to decide extensions.
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