Secretary of Army

• Decision Date: 13 June 1957
• Docket Number: B-131671
• Citation: 36 Comp.Gen. 817
• Parties: THE SECRETARY OF THE ARMY
• Court: Comptroller General of the United States

36 Comp.Gen. 817

THE SECRETARY OF THE ARMY

No. B-131671

Comptroller General of the United States

June 13, 1957

Contracts - claims - assignments - validity - delayed approval by government a contract assignment which was conditioned on approval by the government but which was not approved until more than a month after the assignee had given notice that he wished to withdraw from the arrangement does not establish privity of contract between the government and the assignee so that the government can recover excess costs for purchases from another source.

Reference is made to your letter of April 25, 1957, requesting our advice as to whether there exists a legally enforceable contract between the insuline corporation of america and the department of the army by reason of modification no. 2 to contract no. Da-36-039-sc-70422 dated October 5, 1955, with the allied engineering division, allied international, Inc which corporation later changed its name to anal industries inc.

In December 1955 anal industries, Inc., notified the contracting officer that it was in financial difficulties and desired to discuss the possibility of assigning the contract to the insuline corporation of America. Under the terms of an agreement dated January 17, 1956, anal assigned all of its right, title and interest in the contract to insuline in consideration of insuline's agreement to perform the contract work and to pay to anal the sum of $2, 500 when the assignment had been approved by the government. This agreement appears to have been drawn up in accordance with a letter from the legal office, signal corps supply agency advising that such an agreement should be furnished to that office "in order that a novational supplemental agreement May be prepared.'

The proposed " novation supplemental agreement" was drafted as a proposed modification no. 2 to the contract. Although in a letter dated February 22, 1956, insuline referred to a proposed new delivery schedule calling for preproduction samples by May 1, 1956, and completion of deliveries during the period August 31 through December 31 1956, and requested that it be authorized to proceed on or before March 1, 1956, the proposed novation agreement recognizing the assignment, but providing no change in the delivery schedule, was not received by insuline until after March 12, 1956, at which time the contractor was already technically in default. Nevertheless, insuline signed and returned the proposed contract modification to the contracting officer by letter dated March 15,...