Maryland Dredging & Contracting Co. v. United States

Background

A contractor made a government contract in 1908 to dig a channel from Beaufort Inlet to Pamlico Sound and had to start and finish the work within set deadlines. After excavating through Core and Adams Creeks, the contractor encountered a submerged forest of stumps and roots that he says made ordinary machinery useless and prevented timely completion. The government withheld $7,320 as liquidated damages and $210.50 for inspection and superintendence, totaling $7,530.50. The contractor asked for more time; the local engineer recommended an extension but the Chief of Engineers denied it, and the contractor sued to recover the withheld money.

Reasoning

The Court focused on the contract language. The contract made time “an essential feature,” fixed liquidated damages at $20 per division per day, and said extra time could be allowed only with the Chief of Engineers’ prior sanction for reasons like strikes or “abnormal force” of the elements. The specifications warned bidders to inspect conditions and said special payment rules for rock did not cover roots. The Court held that the contractor had to abide by the plain words: the Chief’s denial controlled, the engineer’s recommendation could not override that denial, and the withheld amount was a valid liquidation, not an unenforceable penalty. The government therefore prevailed.

Real world impact

The judgment, affirming the Court of Claims’ dismissal, lets the government keep the withheld sums and underscores that contractors are bound by express contract terms and warnings to inspect job sites. Contractors face the risk of liquidated damages unless the contract’s formal procedures for extensions are followed and approved.