The opinion of the court was delivered by: John E. Miller, District Judge.
This is an action by the plaintiff, United States of
America, against the defendant, Herman Adams, d/b/a Adams
Manufacturing Company, growing out of a contract between the
parties whereby the defendant undertook to manufacture and
deliver to plaintiff a large number of wooden tent pins.
Plaintiff alleges that the defendant defaulted, and that under
the terms of the contract plaintiff purchased similar tent
pins from another supplier at an excess cost of $4,810.83,
which amount plaintiff is entitled to recover from the
The defendant in his answer raised two defenses: first, that
the default arose out of causes beyond his control and without
any fault or negligence on his part, and under the terms of
the contract he would not be liable for excess costs; and
second, that any excess cost incurred by the Government was
caused by its own negligence and lack of diligence in
purchasing the tent pins after it declared defendant to be in
The plaintiff is the United States of America. The defendant
is a citizen of Arkansas and a resident of the Fort Smith
Division of the Western District of Arkansas.
In 1953 and 1954 the defendant, Herman Adams, was engaged in
the business of manufacturing wooden products, such as wooden
boxes, pallets, and stakes, a large majority of which were
sold to the United States. His place of business was located
in Charleston, Arkansas.
Some of the contracts between Adams and the United States
were negotiated contracts, i. e., contracts which were entered
into after negotiations and discussions between the parties.
Other contracts entered into between Adams and the United
States were the result of successful bids by Adams; i. e., the
United States, through the particular agency involved, would
issue invitations for bids for the particular product involved
and Adams would be the successful bidder.
In the latter part of 1953, Adams negotiated with the
Contracting Officer of the Chicago Quartermaster Depot, United
States Army, for a contract (defendant's Exhibit No. 1) under
which Adams would manufacture wooden tent pins for the Army.
In the course of the negotiations the following letter
(defendant's Exhibit No. 2) was written by Adams' Assistant
Manager, A. R. Schaffer, to the Contracting Officer:
"The pre-award survey of our plant facilities
made by Mr. M.A. Friend, of the St. Louis QM
Office, presented an excellent opportunity for a
detailed study of the bid we submitted on the
captioned proposal. Although we have had ten
years of highly satisfactory production
experience on ammunition boxes and pallets, this
was our first venture on a Quartermaster item
— and it was a welcome pleasure to be enlightened
by a man of Mr. Friend's apparent competence in
such matters. The discovery of two errors of
omission in our bid calculations is proof that his
visit was beneficial.
"We would like to request that our bid be
amended to allow for these oversights, as
discussed below, but first wish to state that we
shall fulfill the entire contract as originally
bid — should you determine that it ought to be
awarded to us on that basis.
"To begin with, we deliberately bid this
proposal at what we thought was the lowest
possible figure, because we honestly believed
that we had worked out a source of raw material
which could save the Government a considerable
amount of money and still make us a reasonable
profit. Our plan was, and still is, to grade the
No. 1 and No. 2 Red Oak needed for this contract
out of the rough hardwood which we buy in
quantities averaging 100,000 bd. ft. per week for
production of pallets. This lumber is delivered
to us at $45 or $50 per M, in almost any quantity
we require, and experience has shown us that as
high as 50% of it would grade out as No. 1 or No.
2. We therefore believed that the production of
tentpins would fit hand-in-glove with our already
scheduled pallet production.
"However, after analyzing the matter with Mr.
Friend, we come to the conclusion that we failed
to make allowance for two important items:
"2. Packing and crating. A three-way conversation
between Mr. Friend, Mr. Adams, and the undersigned
revealed a misunderstanding of instructions within
our plant in calculating this particular item.
Normally, all of our bids for finished products are
figured at so many dollars per M on gross board
footage before cutting and surfacing — and we had
interpreted Mr. Adams' directions to mean that the
figure so calculated would be the FOB plant price
per packaged pin. Actually, he intended it
to be the price per finished pin, before crating.
We are not, therefore, covered for the cost of the
crate, although the weight of the crate was
considered in arriving at shipping expenses.
"Due to the above omissions, we now find it
necessary to request amendment of our 16 November
bids, adding $0.01784 per pin for Item 1 (Type I,
16") and $0.02542 per pin for Item 2 (Type II,
24"). These are additions to FOB plant prices,
there being no change in delivery costs involved.
A complete modified schedule of bids for each
destination is attached, to avoid the need of
your making the individual calculations.
"It is almost needless to say, but we are
greatly indebted to you for initiating the
pre-award survey which brought these matters to
light. We again express our willingness to go
ahead with the contract as originally bid,
absorbing the threatened loss, should you see fit
to demand its performance — but your favorable
consideration of our request for amendment would be
most sincerely appreciated. Should we remain low
bidder despite these increases, you may be assured
of our utmost cooperation throughout the life of
"Adams Manufacturing Company
On December 30, 1953, the negotiated contract was entered
into between Adams and the Chicago Quartermaster Depot, United
States Army, under which Adams was to manufacture 1,369,525
wooden tent pins for a total consideration of $123,391.51.
With respect to inspection of the pins the contract contained
the following provisions:
"Inspection and Acceptance: Saving and
reserving to the Government all rights under the
Inspection provision, the procedure of Inspection
for compliance with contract requirements at
Contractor's plant and inspection (quantity and
condition) and acceptance at destination will be
"Shipment must Not be made prior to inspection by
either the Chief, QM Inspection Division, Chicago
Quartermaster Depot or his authorized
representatives. Contractor must notify the Chief,
QM Inspection Division, Chicago Quartermaster
Depot, 1819 West Pershing Road, Chicago 9,
Illinois, when the items as called for herein are
ready for inspection. Items Should Not Be Packed In
Sealed Containers Prior To Inspection. (If
2 weeks advance notice is requested.) Should
shipping point differ from that which is shown
herein, contractor must so advise both the
Contracting Officer and the Chief, QM Inspection
Division, Chicago Quartermaster Depot.
`"Material Inspection Receiving Reports:
Shipment of the items as called for herein will
be made, utilizing Material Inspection Receiving
Reports to be furnished by this office. Shipment
must not be made without same."
With regard to inspection, paragraph 5(a) of the General
Provisions of the contract provided as follows:
"(a) All supplies (which term throughout this
clause includes without limitation raw materials,
components, intermediate assemblies, and end
products) shall be subject to inspection and test
by the Government, to the extent practicable at
all times and places including the period of
manufacture, and in any event prior to final
After the contract was entered into Adams began purchasing
No. 1 and No. 2 red oak lumber which he intended to use in the
production of the tent pins. Preparations were made for
producing the pins, and on February 1, 1954, an inspection
plan was executed by Leland S. Foster, one of plaintiff's
inspection supervisors, delineating the method of inspection
that would be used on the job (Defendant's Exhibit No. 3).
Among other things the inspection plan provided that the point
of acceptance inspection was "End item"; that the lot size
would be a minimum of 8,001 and a maximum of 22,000; and that
the "presentation" would be stationary. Under the heading
"Special Details Governing Physical Arrangements of Product",
it was provided that "Units, after final machining and before
the treatment, will be stacked on pallets. Samples for visual
and dimensional check will be selected at this point".
At the time this inspection plan was formulated the
inspector on the job was T.T. Flint. About March 1, 1954, a
new inspector, Joe Burkhart, replaced Flint. Burkhart appeared
at approximately the time full-scale production began on the
tent pins. For some reason and under some authority not shown
by the record, Burkhart began making additional requirements
of Adams over and above the requirements stated in the
contract. For one thing, he required Adams to set up four
inspection points rather than the one inspection point
provided in the inspection plan executed by Foster. In
addition to that, Burkhart was extremely strict in his
requirements concerning the grade and quality of the lumber
used to produce the tent pins. In fact, ...