Barry v. United States

Background

In January 1905 contractors failed to deliver the contracted shipment of high-quality "Wallsend" coal because of a strike at the mine. The Army needed fuel immediately, so a different cargo of mountain coal was bought to meet that demand. Tests later showed the substitute coal had $3,193.32 less fuel value than the same quantity of Wallsend coal. The Chief Quartermaster agreed to accept and pay for the substitute under an emergency open-market purchase rule, and the parties expressly treated that transaction as an "outside purchase," not as fulfillment of the original contract.

Reasoning

The key question was who should bear the loss from the inferior coal: the Government or the contractors who failed to deliver. The Court explained the acceptance was authorized by the emergency purchase law and the Army regulations, but it was not a waiver of the contractors’ contractual obligations. The Chief Quartermaster had warned before delivery that any shortfall would be charged to the contractors. The contractors protested but did not refuse delivery. After testing showed the lower fuel value, the Government charged the difference and retained that amount from money due under a later contract. The Court affirmed that result, noting the Government could also have sued, but properly used the set-off against amounts owed.

Real world impact

This ruling clarifies that when the Government makes emergency substitute purchases because a supplier breaches, it can treat the purchase as separate and still recover the measurable loss in value from the supplier. Acceptance of substitute goods in an emergency does not automatically waive the Government’s right to recoup damages for the supplier’s breach.