UNITED STATES SUPREME COURT DECISIONS ON-LINE

S agreed, for a lump sum, to build a dry-dock in a Navy Yard in accordance with plans and specifications prepared by the government and which provided, inter alia, for reconstructing a sewer which intersected the site, and prescribed the new location, dimensions, and materials therefor. S rebuilt the sewer as so required, and it was accepted by the government, but owing to a dam, unknown to both parties, existing in a connecting sewer, within the Yard but beyond the limits of the operations, and to general conditions of drainage, known to the government but not to S, back waters burst the new sewer, during heavy rain and high tide, and flooded the dry-dock excavation, causing damage and menacing the work. S, having declined to proceed unless the government paid or assumed the damage and made safe the sewer system or assumed responsibility for future damage due to insufficient capacity, location, and design, the government annulled the contract.

Held:

(1) The provision for reconstructing the sewer was part of the dry-dock contract, and not collateral to it. P. 248 U. S. 136.

(2) The articles prescribing the character, dimensions, and location of the sewer imported a warranty that, if so constructed, the sewer would prove adequate. P. 248 U. S. 137.

(3) Such warranty was not overcome by general clauses requiring the contractor to examine the site, check up the plans, and assume responsibility for the work until completion and acceptance. Id.

(4) Neither Rev.Stats. § 3744, providing that contracts with the Navy Department shall be reduced to writing, nor the parol evidence rule precluded reliance on such warranty, implied by law. Id.

(5) The contractor, upon breach of the warranty, was not obliged to reconstruct the sewer and proceed at his peril, but, upon the government's repudiation of responsibility, was justified in refusing to resume work on the dry-dock. P. 248 U. S. 138.

(6) Having annulled the contract, the government was liable for all damages resulting from the breach, including the contractor's proper clubjuris

Page 248 U. S. 133

expenditure on the work (less receipts from the government) and the profit he would have earned if allowed fully to perform. Id.

51 Ct.Clms. 155 affirmed.

The case is stated in the opinion.