234 U. S.

Argument for Plaintiffs in Error.

complete work by the time agreed on, whether such failure be due to (1) a repudiation or refusal amounting to an anticipatory breach or (2) abandonment after doing some work or (3) mere failure to complete though still working at the expiration of the contract period, then in either such event, the United States may recover the excess cost of completing the work. Farrelly v. United States, 159 Fed. Rep. 671; United States v. O'Brien, 163 Fed. Rep. 1022; S. C., 220 U. S. 321.

When the United States annulled the contract and retained the $6,206.69 money or reserved percentage due the contractor (which clause A authorized it to retain), then ipso facto the United States exercised the sole, exclusive and entire right it had under the contract; and it cannot hold the contractor liable for the excess cost of completing the work, which it had, by annulment, prohibited the contractor from further trying to perform.

Clause A calls for liquidated damages. United States v. O'Brien, 220 U. S. 321; Sun Printing Ass'n v. Moore, 183 U. S. 642, 669; United States v. Bethlehem Steel Co., 205 U. S. 105, 119.

As clause A fixed the forfeiture of retained pay as the penalty to a contractor upon an annulment under the conditions specified in clause A, the United States cannot claim an inherent right to further damages under clause A. United States v. O'Brien, 220 U. S. 321, 327.

Clause B (which is the only clause in the contract permitting the United States to recover the excess cost of completion) never came into operation against the contractor; and hence no recovery can be had under its provisions. The petition does not declare upon a breach of clause B. There is no "failure to complete" when the contractor is stopped from further work by an annulment of his contract. Cases supra.

There were two independent grounds why there could be no recovery in the O'Brien Case, both of which exist here.

Argument for Plaintiffs in Error.

· 234 U.S. See also Quinn v. United States, 99 U. S. 30; Sparhawk v. United States, 134 Fed. Rep. 720; United States v. McMullen, 222 U. S. 460; Graham v. United States, 231 U. S. 474; United States v. Maloney, 4 App. D. C. 505.

The American Surety Company was released by reason of the 50 days' extension of time, which the United States granted to the contractor without the knowledge or consent of the surety; which extension was not made pursuant to any reserved power in the contract.

The time of beginning was material and was of the essence of the contract.

The extension of time for beginning was permissible only for freshets, ice, etc. United States v. Gleason, 175 U. S. 588, 604.

The extension was not granted on account of freshets, ice, etc.

The contractor gave a valuable consideration for the extension; it was not a mere forbearance by the Government.

The surety never consented in advance to the extension except on account of freshets, ice, etc.

The surety was released by the extension. Reese v. United States, 9 Wall. 13; Earnshaw v. Boyer, 60 Fed. Rep. 528; United States v. Freel, 186 U. S. 309. United States v. McMullen, 222 U. S. 460, and Graham v. United States, 231 U. S. 474, distinguished.

Even if defendants are liable for all the damages suffered by the Government, the excess cost of completing the work under the Atlantic Gulf and Pacific Co. contract, is not the proper measure of damages, owing to vital differences between the original contract and the relet contract.

Excess cost of completion is the proper measure of damages, but it must be for doing substantially the same work, under substantially the same conditions as the original

234 U. S.

Argument for the United States.

contract called for. United States v. McMullen, 222 U. S. 460, 467; Graham v. United States, 231 U. S. 474, 481; United States v. Weisburger, 206 Fed. Rep. 641, 645; United States v. U. S. F. & G. Co., 194 Fed. Rep. 611, 615, 617; Am. Bonding Co. v. United States, 167 Fed. Rep. 910, 915, 922; Chesapeake Transit Co. v. Walker, 158 Fed. Rep. 850, 856, 858; United States v. Walsh, 115 Fed. Rep. 697; City of Goldsboro v. Moffat, 49 Fed. Rep. 213, 216.

The relet contract contained five new and more onerous conditions, which increased the cost of the work, and hence destroyed the value of the excess cost as a true measure of damages.

Clause A was changed to impose the excess cost of completion as a penalty for being slow; indemnity was required against patents; definite time limit imposed; cost of superintendence was imposed; the United States retained the right of rejection, and compelled the contractor to guarantee work as a whole.

The Solicitor General, with whom Mr. Francis H. McAdoo, Special Assistant to the Attorney General, was on the brief, for the United States:

The Government's right of action on the breach was not lost by annulling the contract. United States v. McMullen, 222 U. S. 460; United States v. O'Brien, 220 U. S. 321.

The measure of recovery for the breach was the excess cost of completing the work and was not limited by Clause A to liquidated damages. United States v. Maloney, 4 App. D. C. 505.

The Government had a right to repudiate the contract on common-law principles, and is entitled to recover actual damages for the breach. Bollman v. Burt, 61 Maryland, 415; Cleveland Rolling Mill v. Rhodes, 121 U. S. 255; Johnson v. Allen, 78 Alabama, 387; Norrington v. Wright, 115 U. S. 188; Pope v. Porter, 102 N. Y. 366.

VOL. CCXXXIV-18

The defendant surety company was not discharged by the extension of time.

The surety consented in advance to the extension which was granted to the contractor. Graham v. United States, 231 U. S. 474; United States v. McMullen, supra.

Even if the surety did not so consent, it was not discharged by the extension, since it suffered no damage thereby. Atlantic Trust & Deposit Co. v. Town of Laurinburg, 163 Fed. Rep. 690; Baglin v. Title Guaranty & Surety Co., 166 Fed. Rep. 356; Guaranty Co. v. Pressed Brick Co., 191 U. S. 416 (and other cases cited in brief).

The contract with the Atlantic, Gulf & Pacific Company was competent evidence to show the excess cost of completing the work. Baer v. Sleicher, 153 Fed. Rep. 129; Graham v. United States, supra, 481; New York v. Second Ave. R. R. Co., 102 N. Y. 572; United States v. McMullen, supra, 471.

MR. JUSTICE LURTON delivered the opinion of the court.

This was an action by the United States against the Stone, Sand and Gravel Company, a corporation, hereinafter styled the contractor, and its surety, the American Surety Company of New York, to recover the excess cost of completion of a certain contract for excavating 7,500,000 cubic yards of earth within certain designated localities in the work of improving the harbor of Vicksburg, Mississippi. For this work the United States agreed to pay 8.49 cents per cubic yard as the work progressed and the contractor agreed to begin active work on or before December 5, 1899, with sufficient force and plant for an output of not less than 260,000 cubic yards per month, to be increased on or before June 5, 1900 to a plant adequate for an output of 330,000 cubic yards per month. Subsequently, upon application of the contractor, the time for beginning was extended to January 24, 1900. While by

January 24 the contractor had made large expenditus in preparing to commence work it had not on that day assembled the necessary force or plant. For this reason the Chief of Engineers on the following day confirmed a prior, anticipatory, recommendation of the engineer in charge that the contract should be annulled. An application for an extension of time was denied by the Secretary of War and on March 7, 1900 formal notice was given to the contractor, as required by the contract, that it had failed to prosecute the work of excavation, etc., "in accordance with specifications and requirements and the said contract is hereby annulled." The work was relet at price of 12.4 cents per cubic yard, making an excess cost of $228,201.91, and an action was brought and judgment had against the contractor for that sum, minus a credit of $6,206.69, on account of certain voluntary work of an experimental character, which sum had been retained by the United States. There was also judgment against the Surety Company for $75,000, the full penalty of the bond.

The only breach of contract alleged was the failure to begin active operations on the day stipulated with a plant and force adequate to produce the monthly output required. The breach is confessed, but the error insisted upon here is that the contract, for such a breach, limits the measure of recovery to liquidated damages, namely, a forfeiture of all money or retained percentages due or to become due under the contract, and that the court below erred in allowing as damages the excess cost of the work under the reletting.

The clauses of the contract which give rise to this contention occur in the standard form of contract used by the War Department, known as form 19, and are the same clauses construed by this court in United States v. O'Brien, 220 U. S. 321. The clauses involved for purposes of reference may be described as clauses A and B. In clause A