Hollerbach v. United States

Background

A pair of contractors doing business as Hollerbach & May contracted with the United States to repair Dam No. 1 on the Green River in Kentucky. The written specifications explicitly stated the dam was backed for about 50 feet with broken stone, sawdust, and sediment and required excavation to the bottom. As the contractors removed material they found soft, slushy sediment near the top and, below seven feet, a log crib filled with stone. The contractors claimed extra costs and damages; the Court of Claims estimated some damages but denied full recovery, citing general contract clauses that told bidders to inspect the site themselves and rely on their own estimates.

Reasoning

The Supreme Court considered whether the Government’s specific statement about the dam’s backing was a binding representation despite those general warning clauses. The Court distinguished prior cases and held paragraph 33’s definite description was a positive statement by the Government that contractors could reasonably rely on. The Court explained that when the Government makes an unequivocal factual assurance in the specifications, that statement should be taken as true and binding on the Government, and general language urging bidders to investigate does not override such a clear representation. The Court reversed the Court of Claims and directed entry of judgment for the contractors for the damages caused by the mistaken description.

Real world impact

The decision means contractors can rely on clear, specific factual statements in government contract specifications and seek recovery when those statements are false. It reduces the ability of general “inspect the site” warnings to shield the Government from liability for explicit misstatements in its own specifications. Government agencies will face greater risk of paying for added costs when they affirmatively describe site conditions that later prove incorrect.