Custom and Usage in Trade Compels Payment of Excess Reprocurement Costs

June 28, 2007 on 12:30 pm | In Contract Interpretation | Comments Off

In one of the first cases to come out of the newly constituted Contract Appeals Board the key issue was how to interpret a contract that used a particular acronym to describe the required paper quality. In brief, the Government Printing Office ordered some tags to be printed using the designation “CSU” for the paper stock. When the awarded contractor (FWG) delivered the tags, they were deemed to be of poor quality and not printed on “White CSU Tag, 13 pt.” as required by the purchase order. As the facts developed it appears that the printer actually had no idea what the “CSU” designation meant, but at one point contended that is stood for “Card Stock Uncoated.” The term was not defined in the purchase order and the contractor never requested clarification.

Before the Board, the contractor presented evidence from paper manufacturers that they had never heard of the term, but nothing to support its contention that it stood for “Card Stock Uncoated.” For the Government, the GPO provided evidence from The Printing Service Specialist’s Handbook and Reference Guide (1994, Rev.1997) published by the Society for Service Professionals in Printing which, the Board noted, indicated “that ‘CSU’ is a standard term used throughout the tag printing industry to define ‘clay-coated sulphite tag stock.’” This was further supported by vendor website print-outs, vendor catalogs, and other materials from six separate vendors.

The Board first noted that the “language of a contract must be given the meaning that would be derived from the contract by a reasonably intelligent person acquainted with the contemporaneous circumstances” citing Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972, 975 (Ct. Cl. 1965). The Board then ruled that FWG failed to demonstrate that its interpretation was either correct or reasonable, and FWG was therefore not entitled to any payment. The Board also held that the reprocurement costs had been properly assessed. Its reasoning was that a contract must be interpreted in accordance with the language common to the trade. Citing US Claims Court decisions, the Board noted that it is often said that “a court in construing the language of the parties must put itself into the shoes of the parties. [But] That alone will not suffice; it must adopt their vernacular.” (cites omitted). Despite FWG’s argument that the government should have used clearer specifications, the Board held that “the record establishes that the term ‘CSU Tag’ was commonly used and understood in the printing industry, and in particular the tag printing industry – the industry to which this contract related. Trade usage evidence can be used in interpreting a contract where ‘there was a well-defined usage generally adopted by those engaged in the business to which the contract relates, at the place where the contract was made or was to be performed.’” Citing William Clairmont, Inc., ASBCA No. 15447, Feb. 9, 1973, 73-1 BCA para. 9927 at 46, 459 which quoted 5 Williston on Contracts section 650 (3rd ed.).

While the Board acknowledged that a more detailed description in the purchase order could have avoided the issue in this case, the Board held that the terminology was a proper use of a trade term that is well understood in the industry and its clear meaning can be easily ascertained through the Internet or reference to industry literature.

So what are the take-away lessons here? First, be certain to read and understand every word and term in your contract, even if it is only a purchase order. Any acronyms that are not clear place a burden on the contractor to find out what is intended. If you hold yourself out as a vendor in a particular product or service, you will be expected to understand the commonly accepted usage of terms used in the trade. For example, many people will make reference to lumber that is 2 by 4. Such lumber is not, however, two inches by four inches – it is closer to 1 ½ by 3 ½ inches, depending on the drying and finish planning applied! Failure to understand such jargon of the trade can cause very significant performance problems. Imagine the problems that would result if an inspector required the removal of all boards that were not exactly 2 inches by 4 inches in a project!

Second, there is another common rule of interpretation that says that an ambiguous contract will be construed against the drafter, which would be the Government in this case. In the present situation the Board did not have to reach this rule because there was no finding that the contract was ambiguous. The questioned term was abundantly clear to those in the trade, thus, absent an ambiguity, the use of trade terms will trump the argument that contracts are construed against the drafter.

Appeal of Far Western Graphics, Inc. CAB No. 2006-5, June 8, 2007.



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