United States v. Moorman, 97

• Citation: 70 S.Ct. 288,338 U.S. 457,94 L.Ed. 256
• Decision Date: 09 January 1950
• Docket Number: No. 97,97
• Parties: UNITED STATES v. MOORMAN et al
• Court: United States Supreme Court

338 U.S. 457

70 S.Ct. 288

94 L.Ed. 256

UNITED STATES

v MOORMAN et al.

No. 97.

Argued Dec. 6, 1949.

Decided Jan. 9, 1950.

Mr. Morton Lixtin, Washington, D.C., for petitioner.

Mr. V. J. Bodovitz, Oklahoma City, Okl., for respondents.

Mr. Justice BLACK delivered the opinion of the Court.

The questions presented relate to the interpretation and validity of terms in a government construction contract providing that in contractual disputes the decisions of the Secretary of War or his authorized representative shall be final and binding.

The respondent partnership entered into a standard form contract with the United States to grade the site of a proposed aircraft assembly plant. Article 1 of the contract provided for payment of 24 cents per cubic yard of grading, satisfactorily completed 'in strict accordance with the specifications, schedules, and drawings, all of which are made a part hereof * * *.' A proposed taxiway was shown on the drawings but was not located within the plant site as described in the specifications. The present controversy concerns the question of whether the contract required respondent to grade this taxiway.

On demand of the Government, respondent graded for the taxiway at the point shown on the drawings. It then filed a claim with the contracting officer asking extra compensation, 84 cents per cubic yard instead of the 24 cents specified in the contract. Upon investigation the contracting officer made findings of fact which led him to reject respondent's claim. Appeal was taken to the Secretary of War, whose authorized representative also considered the facts and denied the claim. According to Par. 2 16(a) of the specifications, such a denial is 'final and binding upon the parties' when a contractor claims as here that work demanded is 'outside the requirements of the contract.'¹

Notwithstanding the foregoing provision that the Secretary of War's decision is final and binding, respondent brought this action in the Court of Claims to recover the extra compensation. He there contended that his right to challenge such administrative findings was measured by Art. 15 of the contract not by Par. 2—16 of the specifications. Article 15 makes a department head's decision 'final and conclusive upon the parties' only when such disputes are over 'questions of fact.'² Respondent, alleging that the dispute here was over the proper 'interpretation' of the contract, argues that how a contract shall be interpreted is not a 'question of fact' but a 'question of law.' Adding this premise to his assumption that Art. 15 alone governed finality of this administrative decision, respondent contended that the Court of Claims could reconsider the facts, make new findings as a basis for its 'interpretation,' and then overturn the administrative decision. The Court of Claims did all three. On the basis of its new findings and 'interpretation,' the court entered a money judgment for respondent computed at 59.3 cents per cubic yard for the taxiway grading. 82 F.Supp. 1010, 113 Ct.Cl. 159.

In petitioning for certiorari the Solicitor General represented that this decision plus previous ones of the Court of Claims had 'weakened and narrowed the effectiveness of the well-established policy of the Government to settle without expensive litigation, disputes arising under its contracts'; and that the total effect of the decisions was to 'add further doubt and confusion to the authority of designated officers of the United States to make final decisions under government contracts.'³ We granted certiorari. 338 U.S. 810, 70 S.Ct. 58.

First. Contractual provisions such as these have long been used by the Government. No congressional enactment condemns their creation or enforcement. As early as 1878 this Court emphatically authorized enforcement of contractual provisions vesting final power in a District Quartermaster to fix distances, not clearly defined in the contract, on which payment for transportation was based. Kihlberg v. United States, 97 U.S. 398, 24 L.Ed. 1106. Five years later Sweeney v. United States, 109 U.S. 618, 3 S.Ct. 344, 27 L.Ed. 1053, upheld a government contract providing that payment for construction of a wall should not be made until an Army officer or other agent designated by the United States had certified after inspection that 'it was in all respects as contracted for.' And in Martinsburg & Potomac R. Co. v. March, 114 U.S. 549, 5 S.Ct. 1035, 29 L.Ed. 255, this Court enforced a contract for railroad grading which broadly provided that the railroad's chief engineer should in all cases 'determine the quantity of the several kinds of work to be paid for under the contract, * * * decide every question which can or may arise relative to execution of the contract, and 'his estimate shall be final and conclusive". Id., 114 U.S. at pages 551—552, 5 S.Ct. at page 1036. In upholding the conclusions of the engineer the Court emphasized the duty of trial courts to recognize the right of parties to make and rely on such mutual agreements. Findings of such a contractually designated agent, even where employed by one of the parties, were held 'conclusive, unless impeached on the ground of fraud, or such gross mistake as necessarily implied bad faith.' Id., 114 U.S. 555, 5 S.Ct. 1038.

The holdings of the foregoing cases have never been departed from by this Court. They stand for the principle that parties competent to make contracts are also competent to make such agreements. The Court of Claims departed from this established principle in McShain, Inc., v. United States, 88 Ct.Cl. 284, where it refused to recognize as final the decision of a contracting officer, even though the Government and contractor had agreed that his decision should be final. The Court of Claims' holding was based on its conclusion that the contracting officer's decision had been reached by 'interpretation of the contract, drawing, and specifications,' and that parties were incompetent to make such decisions binding except as to questions of fact. Its holding was considered such a departure from established contract law that this Court summarily reversed in a per curiam opinion⁴ citing only two of the many prior cases on the subject. One of the cited cases had enforced a contract provision that 'the decision of the supervising architect as to the proper interpretation of the drawings and specifications shall be final.' Merrill-Ruckgaber Co. v. United States, 241 U.S. 387, 393, 36 S.Ct. 662, 665, 60 L.Ed. 1058.

Similar agreements have been held enforceable in almost every state. See cases...