United States v. Purcell Envelope Co.
Headline: Government bidding for stamped envelopes: Court affirmed that an accepted Post Office bid created a binding contract and upheld award of lost profits after the agency canceled the contract, affecting government suppliers.
Holding:
- Allows suppliers to treat accepted government awards as binding contracts.
- Makes government agencies liable for suppliers' provable lost profits when canceling accepted awards.
- Encourages careful review before revoking awarded bids to avoid large damage awards.
Summary
Background
On April 21, 1898, the Post Office invited bids for stamped envelopes and wrappers to be supplied during a four‑year period starting October 1, 1898. The Purcell Envelope Company (referred to in the record as the Envelope Company) submitted the lowest bid, was found financially responsible, and was awarded the contract by formal departmental order. The company signed and returned the contract with a $200,000 surety. After interim communications that suspended action, the Postmaster General who succeeded the original official revoked and canceled the award on July 22, 1898. The Envelope Company had already arranged for materials and production and claimed lost profits of $185,331.76 after the Government later contracted with other firms.
Reasoning
The Court considered whether the department’s acceptance and formal order created a binding contract and what damages followed from revocation. It relied on prior rulings holding that an accepted bid plus the awarding order can complete a contract even if formal signatures or bond approval occur later. The Court rejected the Government’s arguments that the new Postmaster General could undo the award or that the company’s expected profits were speculative. For damages, the Court applied the established measure: the difference between the contract price and the company’s cost to perform, awarding the company its lost profits.
Real world impact
The decision affirms that suppliers who win and accept government bids can treat an awarded contract as binding once the department enters an order. Government agencies that cancel such awards may be liable for the supplier’s provable lost profits. The judgment in favor of the Envelope Company was affirmed.
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