ical shovels, locomotive cranes, power saws, engineers' levels and transits, and such other equipment exceeding $300 in value as may be necessary for the proper and economical prosecution of the work. Each contract for the rental of construction plant or parts thereof by the contractor from third parties shall be in a form prescribed by the Secretary of War, shall be subject to approval by the contracting officer, and shall contain the same provisions entitling the Government to acquire title to such plant or any part thereof upon the same conditions as those contained in paragraph 2 of article II of this contract.

(d) Loading and unloading at the site of the work of construction plant, owned or rented by the contractor; the transportation thereof to the place or places where it is to be used in connection with said work and return transportation f. o. b. cars to the point of original shipment or equivalent mileage, except as hereinafter set forth; the installation and dismantling thereof, and such repairs and spare parts as are not included in the rental; provided such repairs or spare parts are not made necessary by defects in such plant, or parts thereof, or by the fault or negligence of the contractor or his employees;

It is the general rule that rental rates for equipment are considered normally to include an allowance for wear and tear incident to the use of the equipment for the purpose rented. See 20 Comp. Gen. 632. However, that general rule is not for application where the equipment rental contracts provide otherwise.

It would appear from the provisions reported to be contained in the contracts for rental of the equipment and the explanation of the contracting officer that it was the intention of all parties concerned that "all routine maintenance and normal running repairs" be made by the prime contractor without expense to the lessors and that the expenses thereof were not included by the lessors in computing rental rates. Since such repairs are not included in the rental, it is evident that the cost thereof is reimbursable to the contractor under the provisions of paragraph 1 (d) of article II of the contract.

Accordingly, in this and similar cases, the prime contractor may be reimbursed for the cost of such repairs to rented equipment as constitute routine maintenance and normal running repairs, when the responsibility for such repairs is upon such contractor. Whether a repair in any particular instance is of the type which is required to be made by the contractor is a matter generally which should be considered by the contracting officer before approving or ratifying the expenditure for reimbursement, in accordance with the applicable terms of the contract, as has evidently been done in this case.

It is noted that in paragraph 5 of his report, the contracting officer refers to other contracts for rental of equipment wherein there was inadvertently omitted "the added provision referred to above which placed responsibility for repairs upon the lessee." As to these contracts, in view of the said report, it may be considered that such contracts are in the same category as those herein discussed.

The vouchers with supporting papers are returned herewith and you are advised that payment thereon is authorized, if otherwise

correct.

(A-73780), (B-5743)

GENERAL ACCOUNTING OFFICE-CLAIM SETTLEMENTS-RIGHTS OF CLAIMANTS AS TO HEARING AND REVIEW

Section 236, Revised Statutes, as amended, under which the General Accounting Office is authorized to settle and adjust claims by and against the United States, does not provide for hearings and prescribes no definite form of procedure for the presentation and settlement of claims, and, therefore, where reasonable notice and opportunity to be heard was given a claimant whose claim against the United States was denied by this office, there has been no denial of an adequate hearing such as is contemplated by the due-process clause of the Fifth Amendment to the Constitution of the United States. There is no statute giving any person a vested right to have a settlement of the General Accounting, Office reviewed by the Comptroller General of the United States, and where a claim against the United States has been disallowed by this office after consideration under the authority in section 236, Revised Statutes, as amended, the refusal of the Comptroller General to grant a review was not a denial of the "due process of law" contemplated by the Fifth Amendment to the Constitution of the United States. Comptroller General Warren to Truscon Steel Co., September 23, 1941:

Reference is made to your letter of August 20, 1941, requesting further consideration of your claim of $2,800, representing liquidated damages deducted for delay in delivery of a quantity of wire staples to the War Department, United States Engineer Depot, New Orleans, La., under contract No. W-1096-eng-3857, dated March 13, 1935.

Under the terms of the contract you agreed to furnish and deliver f. o. b. cars Youngstown, Ohio, for shipment on Government bills of lading to the United Ctates Engineer Depot, New Orleans, La., 22,000,000 galvanized wire staples in accordance with contract specifications at a price of $748 per 1 million staples less commercial freight from your shipping point to destination. Deliveries were to be made as stated in paragraph 2 of the contract specifications, which paragraph provided in pertinent part as follows:

2. Commencement, prosecution, delivery and completion.-The work shall be commenced at such time as will enable the contractor to make shipment at least as rapidly as called for in the schedule below.

In case of failure on the part of the contractor to make shipment as rapidly as called for in the schedule given below and as agreed upon as a part of this contract, the contractor shall pay to the United States as liquidated damages at the rate of $50.00 for each calendar day or fraction thereof of delay until all lost time is made up and shipments are resumed in accordance with the following schedule:

Notice to proceed was received by you on March 25, 1935, thereby fixing April 1, 1935, as the date on which the first shipment was to be made under the schedule contained in paragraph 2 of the specifications. However, it appears that the first shipment of staples was not made until April 15, or after a delay of 14 days, and that there were delays in the other shipments made under the contract, or a total delay of 53 days. Accordingly, in making payments to you for the material, liquidated damages in a total amount of $2,650 were deducted by the disbursing officer on vouchers Nos. 18491 and 116 of the June and July 1935 accounts, respectively, of J. H. Carruth, major, Corps of Engineers.

Claim for the amount thus deducted was made by you on September 23, 1935, to the United States Engineer Office, New Orleans, La., which claim was supported by a brief in which there were set forth in detail the reasons on which was based the contention that the amount deducted should be remitted. First, it was stated in said brief that the formal contract was not executed by the United States until April 11, 1935, and that a copy thereof was not received by you until April 17, 1935. Therefore, it was urged that no binding contract existed until at least April 11, 1935, and, hence, that there was no obligation on your part to commence performance of the contract upon receipt of the notice to proceed on March 25, 1935. Secondly, it was contended by you that the clause of the contract providing for liquidated damages was not within the contemplation of the parties and that it was not intended that such clause should become effective. With respect thereto, you alleged that the liquidated-damage clause would not become operative unless time was of the essence of the contract and that at the time the contract was executed the Government had a substantial supply of staples in stock in its warehouse, and that at the time it was not contemplated that the United States would have any use for the staples prior to August 1, 1935. Thirdly, you contended that, upon your failure to make shipments on time, the Government should have terminated your right to proceed and should have purchased the material against your account in which event the only damage would be any excess cost incurred by the Government. Finally, it was contended that no actual damages were suffered by the United States as a result of the delay in delivery of the staples and, consequently, that the application of the liquidated-damage clause resulted in the imposition of a forfeiture and a penalty contrary to well-established principles of law and equity.

Your claim and the various contentions set forth in your brief were considered by the district engineer, the authorized representative of the contracting officer, who transmitted the claim to the Office of the

Chief of Engineers by letter of October 7, 1935, together with a complete report thereon. With respect to the contentions made in your brief, the district engineer reported as follows:

The delay in furnishing contractor an executed copy of contract until April 11, 1935, was due to bondee omitting the rate and amount of premium in performance bond which necessitated returning bond to surety for insertion of these figures in the document (see copy of letter dated March 26, 1935, enclosed herewith). But this slight discrepancy and the delay in furnishing contractor with a copy of the executed contract did not by any manner whatever affect the status of the contract having been executed as of March 25, 1935, telegraphic notice of which claimant acknowledges having received. Executed copy of contract was mailed April 11, 1935, to contractor's New Orleans office in compliance with personal request of a representative of that office.

4. Contractor's contention that time was not of essence in performance inasmuch as the Government had on hand April 11, 1935, the date contract was executed, a sufficient quantity of staples to enable it to operate for a period of time after August 1, 1935, and that there was no reason or necessity for assessment of liquidated damages prior to that date, is not considered a basis for just complaint since the purpose of inserting liquidated-damage clauses in contracts is to assure delivery of materials sufficiently in advance of actual requirements and likewise to avoid the necessity on the part of the United States of proving the existence of actual damages under such conditions.

5. As to contractor's contention that the United States could have cancelled the contract and purchased the material elsewhere in ample time to meet its requirements, and if this had been done the damages would have been at most the difference between the amount the Government contracted to pay claimant and the amount it would have been required to pay elsewhere, and that the damages would have been definite rather than uncertain. To take these steps would have been equal to placing contractor in involuntary default since he did not at any time during the period of the contract complain of being unable to fulfill delivery requirements under the contract specifications. However, if such action had been taken it would not have mitigated the obligations of contractor as the award would then have to be made to the next lowest bidder at an increased cost plus any liquidated damages due to delay beyond the time fixed for completion under the contract with Truscon Steel Company and liquidated damages would have applied just the same.

Under date of October 18, 1935, the Office of the Chief of Engineers forwarded the claim to this office for settlement and, after consideration of the matter here, the claim was disallowed by settlement of this office dated May 5, 1936. Said settlement is as follows:

Your claim No. 058773 (9) for refund of $2,650 representing liquidated damages deducted from vouchers Nos. 18491 and 116, June and July 1935 accounts, respectively, of J. H. Carruth, major, Corps of Engineers, U. S. A., because of delay in the delivery of 22,000,000 staples to the War Department, U. S. Engineer Office, New Orleans, Louisiana, under contract No. W-1096-eng-3857, dated March 13, 1935, has been carefully examined and it is found that no part thereof may be allowed for the reasons hereinafter stated.

The contract provided in paragraph 2 of the specifications that delivery was to begin within 7 days after notice to proceed, said notice having been telegraphed to you by the district engineer March 25, 1935, thereby establishing April 1, 1935, as the date upon which you were to make the first delivery. Deliveries were to be made in accordance with the Schedule of Shipments appearing in the aforesaid paragraph in the specifications and, in the event of the failure of the contractor to make deliveries as required, liquidated damages in the sum of $50 per day for each calendar day or fraction thereof were to be paid by the contractor until all lost time was made up and shipments were resumed in accordance with said schedule.

It appears that at no time were deliveries made in the quantities and on the dates required by the Schedule of Shipments, nor was the time lost in making deliveries made up, nor were shipments resumed in accordance with said

schedule, therefore, in view of the provisions of the contract, there should have been deducted a total of $2,800 liquidated damages for 56 days' delay instead of $2,650 liquidated damages for 53 days' delay, resulting in an overpayment to you in the sum of $150 since final delivery was not effected until May 27, 1935.

The contention contained in your "Statement of Objections to Deduction for Liquidated Damages *" that there was no valid and binding contract until receipt by you of the executed contract on April 17, 1935, bears no weight as it appears that the delay in furnishing an executed copy to you was due to your omission of the rate and amount of premium of the performance bond from the contract. The contract was sent to your office at New Orleans, Louisiana, on April 11, 1935, and was received at your plant in Youngstown, Ohio, April 17, 1935. On March 25, 1935, you were advised by telegram to proceed with the performance of the contract. On April 15, 1935,

you made the first delivery comprising 8,010,000 staples. This act of itself negates your contention as no doubt can exist that you did not admit the existence of a valid binding agreement. Furthermore, you returned the contract signed by you on March 21, 1935, which deed was sufficient to bind you. See United States of America v. New York and Porto Rico Steamship Company, 239 U. S. 88.

Your statement that a liquidated-damage clause such as is contained in specifications would not be operative unless time was of the essence in the performance is without merit inasmuch as the very terms of delivery to which you assented by becoming a party to the contract evidence the Government's need for the articles which you contracted to deliver, and when in the event of delay actual damages cannot be evaluated the necessity of proving said actual damages is avoided by the inclusion of the liquidated-damage clause contained in the present contract. Therefore, the contention that the United States suffered no damages through delay in the completion of the contract requires no further consideration as it has been repeatedly held that under a liquidated-damage clause in a contract the United States is not required to show actual damage. See United States v. Bethlehem Steel Company, 205 U. S. 105, Foundry and Machine Company v. The United States, 44 Ct. Cls. 178, 19 Comp. Dec. 278, 26 id. 424.

With regard to your contention that inasmuch as no actual damage was suffered by the United States by reason of the delay in shipment by you the application of the liquidated-damage clause resulted in the imposition of a forfeiture and penalty, it, too, must be held without substance as it is consistently held in the doctrine of liquidated damages and penalties that parties may, in a case where damages are of an uncertain nature, estimate and agree upon a measure of damages which may be sustained from the breach of an agreement. The principle that the intention of the parties is to be ascertained by a proper construction of the agreement made between them, and that whether a particular stipulation to pay a sum of money is to be treated as a penalty, or as an agreed amount of damages, is to be determined by the contract, and the intention of the parties thereto. As you agreed to the terms contained in the contract you cannot now be allowed to argue that the terms are inequitable. See Sun Printing and Publishing Association v. Moore, 183 U. S. 642. I therefore certify that no balance is found due you from the United States. With regard to the overpayment of $150, representing liquidated damages for 3 days' delay, it is requested that you forward to this office by check, bank draft, or postal money orders made payable to "The United States," the sum of $150 in order that further action to enforce collection may not be necessary. As the additional sum of $150 found to be due to the United States as liquidated damages in the settlement of May 5, 1936, was not remitted by you, said sum subsequently was withheld from amounts otherwise due you under contract No. W-425-eng-61 and was applied in liquidation of the indebtedness by settlements of this office Nos. 0419122 and 0427429, dated September 11, and November 13, 1936, respectively. By letter of June 23, 1939, you protested the collection of the $150 by set-off against amounts otherwise due to you

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