(e) That in the event the United States Shipping Board before the time for the beginning of performance under this contract refuse to authorize a construction loan for the building of the new vessels which under section 1, paragraph (h) hereof, the contractor may be required to operate, upon written notice of the fact and the request of the contractor before said time, the Postmaster General shall take the necessary steps to relieve the contractor of all obligation under this contract, and the same shall be deemed null and void.

(f) That in the event vessels which the contractor is required to employ in the performance of this contract be taken by authority of the United States for national defense or during any national emergency as provided in the merchant marine act, 1928, or such vessels become unavailable for operation under the terms of this contract because of force majeure, the Postmaster General and the contractor may agree upon the suspension of the service herein stipulated or the termination of this contract, without penalty for failure of performance or liability upon either party.

5. It is further understood and agreed

(a) That the contractor shall be answerable in damages to the United States for any loss or damage resulting to the mails or any part thereof by reason of any failure on its part, or of its officers, agents, or employees, to exercise due care in the custody, handling, or transportation thereof.

(b) That for repeated failures in the service for which provision is made herein; or for subletting the said service or any part thereof without permission of the Postmaster General; or assigning or transferring this contract; or for combining to prevent others from bidding for the performance of any postal service; or failure to provide and operate any vessel in accordance with the provisions of the advertisement and this contract; or any violation by the contractor, its officers, agents, or employees of the provisions of the merchant marine act, 1928, or of the postal laws and regulations applicable to the service specified herein; or for failure by the contractor to perform the service specified herein; or any other default on its part in the performance of this contract; the Postmaster General, in his discretion, may impose a fine or fines or other penalties upon the contractor, or annul this contract, and the annulment thereof shall not impair the right of the United States to claim damages from the contractor for the said failure or defaults.

(c) That this contract is subject to all of the provisions of the merchant marine act, 1928, and of the advertisement of the Postmaster General herein before mentioned, and to the provisions of the Postal Laws and Regulations applicable to the ocean-mail service; and the same are hereby made a part of this contract; (d) That no Member of or Delegate to Congress, or resident commission shall be admitted to any share or part of this contract or to any benefit that may arise therefrom, but this provision shall not be construed to apply to any case wherein the contract is for the general benefit of the contracting corporation;

(e) That the contractor warrants that it has not employed any person to solicit or secure this contract upon any agreement for a commission, percentage, brokerage, or contingent fee. Breach of this warranty shall give the Government the right to terminate this contract, or, in its discretion, to deduct from the contract price or consideration the amount of such commission, percentage, brokerage, or contingent fees. This warranty shall not apply to commissions payable by contractors upon contracts or sales secured or made through bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business.

6. It is further understood and agreed—

(a) That the term of this contract shall be 5 years beginning on a date optional with the contractor but not later than 3 years from the date of the award of this contract; provided, however, that this contract shall be automatically extended for an additional period of 5 years, if the contractor shall within 6 months prior to the expiration of the first 5 year period furnish the Postmaster General with satisfactory evidence of its intention and ability within the ensuing 3 years to provide and place in operation the vessels specified in section 1, paragraph (h) hereof;

(b) That this contract, upon agreement of the Postmaster General and the contractor, may be terminated 5 years from the date of the beginning thereof or at any time thereafter.

In witness whereof, the parties hereto have executed this contract as of the day and year first above written.

THE UNITED STATES OF AMERICA,
By WALTER F. BROWN, Postmaster General.

Signed April 24, 1930, in the presence of ALICE MUMMENHOFF.

Signed April 23, 1930.

Witnesses:

J. E. ANDREWS.

UNITED STATES LINES (INC.), By P. W. CHAPMAN, President.

K. J. HANEKE.

BOND

Know ali men by these presents that the United States Lines (Inc.), of 45 Broadway, New York, N. Y., principal, and Federal Surety Co., of Davenport, Iowa, as surety, are held and firmly bound unto the United States of America in the just and full sum of $100,000 lawful money of the United States, to be paid to the United States of America or its duly appointed or authorized officer or officers; to the payment of which, well and truly to be made and done, we bind ourselves, our heirs, executors, administrators, successors, and assigns, jointly and severally, firmly by these presents.

Whereas the aforesaid United States Lines (Inc.), has entered into the foregoing contract with the United States for ocean mail service on the route designated as No. 44, from New York, N. Y., by Plymouth to London, England, and for the placing in service and operation of certain vessels specified therein;

Now, the conditions of this obligation are such that if the said United States Lines (Inc.), principal, shall, in the event the term of the said contract is extended beyond the initial 5-year term for an additional 5-year period upon the condition therefor named in the contract, place in service the two new vessels of class 3, or two vessels rebuilt or reconditioned to the satisfaction of the Postmaster General having not less than the characteristics specified for the two new vessels, within three years of the beginning of the period of the extended service, as required, and otherwise perform the service according to its said contract to the time of the placing in service of the said two new or rebuilt or reconditioned vessels of class 3, thereafter this obligation shall diminish to $50,000 and if the said United States Lines (Inc.), principal, shall perform the full service according to its said contract including the placing in service and operation of the vessels required, then this entire obligation shall be void; otherwise to be in full force and obligation in law.

In witness whereof we have hereunto set our hands and seals this 23d day of April, 1930.

[SEAL.]

UNITED STATES LINES (INC.),
By P. W. CHAPMAN, President,

Principal.

Witness:

J. E. ANDREWS.

[SEAL.]

Witness:

G. R. SNIDER.

FEDERAL SURETY CO.,

By SYLVESTER G. WHITON, Surety,
Attorney in Fact.

I, W. B. Rogers, certify that I am secretary of the corporation named as contractor herein; that P. W. Chapman who signed this contract and bond on behalf of the contractor, was then president of the said corporation; that said contract and bond were duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers.

W. B. ROGERS, Secretary. [SEAL.]

CERTIFICATE OF OATH OF CONTRACTOR

I, the undersigned, being employed in the care, custody, and conveyance of the mail as contractor on the route named in the foregoing contract, do solemnly swear that I will faithfully perform all the duties required of me, and abstain

108642-32-43

‣ from everything forbidden by the laws in relation to the establishment of post offices and post roads within the United States; and that I will honestly and truly account for and pay over any money belonging to the said United States which may come into my possession or control; and I also further swear that I will support the Constitution of the United States; so help me God.

Sworn to and subscribed before me a notary public this 23d day of April, 1930. SUSAN L. BIRMINGHAM, Notary Public.

Contract and bond approved as to fact.

W. IRVING GLOVER, Second Assistant.

Contract, bond, and execution approved as to form and legal sufficiency.
J. C. WISE,

Special Assistant to the Attorney General.

Senator DICKINSON. I thought that was in the correspondence.
Senator MCKELLAR. No, sir.

Senator DICKINSON. I want to ask you a question with regard to this. I would like to ask the chairman of the Shipping Board whether if this provision is adopted, it would in any way affect such changes and alterations as might be required under existing contracts with reference to the extension of the service or the contraction of the service between the department and the contractor.

Mr. O'CONNOR. I do not think the passing of that law would in any way interfere with contracts already made. Those contracts are already made.

Senator DICKINSON. It says, however

that no part of this sum shall be used for the purpose of awarding, after March 1, 1932, an ocean mail contract under the merchant marine act, 1928, to or for extending or increasing an ocean mail contract now held by any person, firm, corporation, or association which directly or indirectly, through any associate, affiliate, subsidiary, or holding company, or otherwise, operates as owners, agents or charterer, any foreign-flag ships in competition with any Americanflag ships.

That means that you could not use any of this money to increase the revenues due a contractor under an existing contract, as I understand that provision.

Mr. O'CONNOR. I would not take it that way. There have been contracts extended, that the contracts did not suffer. There have been contracts changed that the contract, original contracts, did not suffer. I believe it would cover those cases, but take the United Fruit Co., they have got a contract for six ships to be made available under a contract. I do not think that that would interfere with that.

Senator DICKINSON. I want to suggest to the chairman of the committee that in my judgment one of the serious phases of this amendment is whether or not that second proviso here will affect existing contracts, and if it does, and we put this in the law, we are just setting up here a beautiful bunch of claims against the Government for violation of contracts now in existence. To me, that is very important.

Mr. O'CONNOR. Did not Congressman Davis make the statement that this in no way interferes with contracts now in existence? Senator McKELLAR. Yes.

Senator TRAMMELL. That is his statement?

Senator DICKINSON. That is his statement. Whether that is the law or not is a different matter.

Senator TRAMMELL. It is a matter of interpretation.
Mr. CAMPBELL. May I make a statement?

Senator TRAMMELL. Excuse me for just a minute. Wait until I have finished and then I will give you the floor.

Mr. Davis's construction was that it would not affect the terms of any of the now existing contracts, but upon a careful reading of it, I think it is very doubtful construction, because it says that these funds shall not be paid for extending or increasing ocean mail contracts now held by any person, firm, and so on.

Senator MCKELLAR. That would be a new contract, if you extended a contract, that is a new contract to the extent of the extension, and if you increase an ocean mail contract, that is a new contract to the extent of the increase.

Senator TRAMMELL. A contract may, within its terms, provide for an increase.

Senator MCKELLAR. I know, but there has got to be a meeting of the minds before it can be done.

Senator TRAMMELL. If you do increase the contract, if that is authorized and provided for by the contract itself, you might make that increase, but you have done it in conformity with the terms of the contract, and that would not be a new contract. But, he says that you can not increase the contract. Now, what does he mean? He does not say that you can not alter, or you can not change the terms of a contract, but you can not increase a contract. So, what does that increase refer to, unless it refers to the amount and volume of mail, amount of business to be carried?

I think that that provision is of very doubtful construction, myself. Mr. O'CONNOR. Mr. Chairman, the only thing is, we make a mail contract, or a construction loan contract for the construction of ships, and there is a clause in some of those contracts; they say that they have got 10-knot boats, but there is a clause in that contract to the effect that if they put on a different class of ships that they can get in a different class of mail pay.

Now, that is a part of the contract. I do not think that is an extension of contract.

Senator DICKINSON. Is not that extending or in creasing the contract?
Mr. O'CONNOR. No; because the contract takes care of it.
Senator DICKINSON. I do not know about that.

Senator TRAMMELL. I think that would be a new condition written into the contract.

Senator DICKINSON. I think we should hear Mr. Campbell. I understand he is one of the authorities in legal lines in the shipping game. If he would like to make a statement at this time, I think we should hear him.

Senator ODDIE. Mr. Campbell, we will be glad to hear you.

Senator DICKINSON. Just your interpretation of this provision.

STATEMENT OF MR. IRA A. CAMPBELL, REPRESENTING THE UNITED STATES LINES AND MUNSON LINE

Mr. CAMPBELL. I am counsel for the United States Lines Co. and also for the Munson Steamship Line.

It is with some reluctance that I differ with Judge Davis, because I know the sincerity of his desire to build up the American merchant marine; but he is no more sincere than the rest of us are in that

respect. However, this amendment, in my judgment, is dangerous, and it may prove more destructive than constructive in building up our merchant marine under the conditions with which we are confronted to-day in world trading.

It does not require any new law to provide that a new mail contract can not be made, except by advertisement in the usual way. The Attorney General has long since ruled that a new contract, even though it may supplement or replace an existing mail contract, must be advertised the same as the old contract. If it is necessary, therefore, to put in the law such a provision as this, it must refer only to existing contracts; but the danger of it is that Judge Davis, sincere as he may be in his belief that he is not affecting existing contracts, will not be the man who is going to determine the question. The man who will determine that will be the Comptroller General, Mr. McCarl. He is an independent thinker and may or may not agree with Judge Davis.

If conditions should arise whereby it was necessary to make some changes, extensions of service, or additional service, put in additional ships or higher-speed ships, on these various trade routes, and if the Comptroller General held up the mail pay for such service, he might be wielding a destructive blow to our ambition for an American merchant marine.

Now, let us see what that amendment proves.

Senator MCKELLAR. You are representing the International Mercantile Corporation that has 43 foreign flagships, and 3 American flagships?

Mr. CAMPBELL. No, I am representing here the United States Lines Co.

Senator MCKELLAR. Well, that line's stock is half owned by the International Mercantile Marine?

Mr. CAMPBELL. All right; about 35 per cent of preferred stock; and a portion of the common stock of the United States Lines Co. is owned by the International Mercantile Marine Co. The balance of the preferred stock is owned by the Dollar-Dawson interests, the Tidewater Oil Co., Frank B. Hall & Co., and I think Lord & Thomas or the Lasker interests, of Chicago.

Senator ODDIE. Is the Anglo-London-Paris Bank of San Francisco the fiscal agency, for those companies?

Mr. CAMPBELL. I can not say. I think it is.

Senator MOSES. That is a contract for the purchase of stock?
Mr. O'CONNOR. Here it is all worked out.

Mr. CAMPBELL. All right. That is $3,500,000 of first preferred stock; $1,200,000 is owned by the International Mercantile Marine; $750,000 is owned by the Tidewater Oil Co.; $250,000 is owned by Frank B. Hall & Co., or its associated interests that is an insurance brokerage company in New York; $100,000 is owned by the Lasker interests; and $1,200,000 is owned by the Pacific coast interests. Senator MOSES. That gives you too much capital.

Senator BROUSSARD. It is all worked out there, Mr. Campbell, in print.

Mr. CAMPBELL. Well, they have it worked out there.
Senator MCKELLAR. You also represent the Munson Line?
Mr. CAMPBELL. Yes, sir.