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any written charter or contract had been signed. The failure of the agreement caused the Government additional storage, handling, and shipping costs, in the amount of $40,309.67.

In November 1971 the United States brought suit in District Court for the additional costs of $40,309.67 plus interest from May 1966. This dormant claim was thus revived 5 1/2 years after the oral agreement had been breached, and several months after ARL had won a suit against the Government in the U.S. District Court for the Eastern District of New York on an unrelated admiralty action in the amount of $43,421.00. ARL answered the government complaint and sought a judgment on the pleadings, in part on the ground that the CCC could not enforce a government charter agreement made orally only. After denial of the motion by the District Court, ARL moved for reconsideration or alternatively certification of the oral contract question to the Court of Appeals for an interlocutory appeal. The District Court did not grant the substantive motion but did grant certification. We allowed the appeal by order of 13 October 1972.



[1] The issue before this court is limited to the question whether the CCC, a government agency, can obtain damages for an unperformed oral contract for carriage. We believe that both the relevant statutes and regulations require that government contracts such as the charter agreement here be written in order to be enforceable by the Government. Hence, in answer to the certified question we hold that this oral contract is unenforceable.

A. The Statute

In 1955 the Congress, troubled by executive spending, enacted 8 1311 (a)(1) of the Supplemental Appropriation Act. This section provided that

After August 26, 1954 no amount shall be recorded as an obligation
of the Government of the United States unless it is supported by
documentary evidence of-

(1) a binding agreement in writing between the parties thereto, including Government agencies, in a manner and form for a purpose authorized by law, executed before the expiration of the period of availability for obligation of the appropriation or fund concerned for specific goods to be delivered, real property to be purchased or leased, or work or services to be performed.

The original purpose of the statute was to prevent executive officials from excessive or inappropriate spending.

In fact, if the Government's position of no mutuality were accepted, the agreement would not meet the basic contractual prerequisite of consideration from each contracting party. For if the Government could avoid its part of the bargain by asserting lack of a written contract, the Government would be making merely an illusory promise: the Government would pay the agreed price for the services only if it had complied with the statute (and regulations, infra). The Government could avoid payment by citing the statute and its own failure to follow its own regulations, and then the private party would be limited to quantum meruit. Such an arrangement clearly would not satisfy the requirement of mutual consideration.

The Supreme Court decision in 1915 of United States v. New York and Porto Rico SS Co. can be distinguished from the present case.

In that earlier case, the Government sought to recover from a private steamship company which had not performed its written agreement to ship coal. The company raised as a defense the failure of the Government to comply with the exact writing requirements of the same statute as involved in Clark, by not producing proper copies and seals. The Court held that the Government could waive the requirements because it was the only intended beneficiary of the protection. The private company "needs no such protection against a written undertaking signed by himself. In the case at bar, however, what is lacking is not simply the proper form or seal but a written contract in its entirety. Such of the entire agreement as was made orally, and no writing was sent until after the agreement was repudiated. ARL claims that vital provisions were never agreed upon, and disputes the CCC version of what was actually agreed to, e. g., whether long or short tons were meant is still in controversy. Protection for the private company, as well as the Government, is necessary under these circumstances.

A somewhat related issue was considered by the Court of Claims in Escote Manufacturing Co. v. United States. There the court stated that an oral contract to buy surplus government property was as binding on the private party as if it had been in writing. However, the facts in Escote are markedly different from this case. In Escote the private bidder had sent a written bid and check for deposit in response to the Government's invitation to bid for surplus goods. The Government then sent the bidder a letter containing three copies of a form headed "Invitation, Bid, and Acceptance" for signature by the bidder. The bidder sought to avoid the contract on the ground that the contracting officer of the Government had not signed the form but his name was only type-written. Thus, the issue was not whether there was a written agreement, but simply whether the signature of the contracting officer was required.

Although Escote was decided after the 1955 statute requiring written contracts, the Court of Claims stated that the parties had not identified any statute requiring a writing. The court felt that the contract forms sent by the Government to the private buyer, which were not signed were merely part

of the Government's bookkeeping system. At no time in its opinion did the court give consideration to the statute or regulations in effect here. Consequently, the Escote opinion is of limited value in deciding this case.

We view the statute as establishing a requirement that a government contract as involved here be in writing before either party may be allowed to obtain court enforcement of the agreement. The Statute admittedly is not phrased as the typical statute of frauds. It is more specific, in that it requires that the contract be supported by documentary evidence of a binding agreement in writing. Although the statute simply bars recording oral contracts as obligations of the Government, this does not mean that recordation is the only purpose or effect of the statute. If the Government does not fulfill the recordation requirements, it can neither automatically take the benefit of an agreement it has allegedly made, nor can it be hurt by another party alleging an agreement. Mutuality of protection is thus provided, and we do not see by the Government's interpretation of the statute anything but one-sided protection would be afforded.

We believe that this interpretation of the statute is in accordance with the legislative intentions. The House Conference Report on the provision offers a succinct summary of the legislative view:

Section 1311(a)(1) precludes the recording of an obligation unless it
is supported by documentary evidence of a binding agreement between the
parties as specified therein. It is not necessary, however, that this
binding agreement be the final formal contract on any specified form.
the primary purpose is to require that there be an offer and an accept-
ance imposing liability on both parties. For example, an authorized or-
der by one agency on another agency of the Government, if accepted by
the latter and meeting of specificity, etc., is sufficient. Likewise,
a letter of intent accepted by a contractor, if sufficiently specific
and definitive to show the purposes and scope of the contract finally
to be executed, would constitute the binding agreement required.

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Several regulations of the Executive branch further support our view that a written contract is necessary to bind ARL here. The regulations include general Federal Procurement Regulations and regulations specific to the CCC.

The Federal Procurement Regulations (FPR's] were promulgated pursuant to the Federal Property Act to regulate all government agency procurement. Specifically FPR 8 1-1.208 provides a definition of contract:

"Contract" means establishment of a binding legal relation basically obligating the seller to furnish personal property or non personal services (including construction) and the buyer to pay therefor. It includes all types of commitments which obligate the Government to an expenditure of funds and which except as otherwise authorized, are in writing. In

addition to a two-signature document, it includes all transactions resulting from acceptance of offers by awards or notices of awards: agreements and job orders or task letters issued thereunder; letter contracts; letters of intent; and orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance. It also includes contract modifications. (Emphasis added.)

FPR 8 1-1.219 defines "contract modification" to be "written alteration."

The Government urges that å l-1.208 merely says that a contract is the "establishment of a binding legal relation" and is broadly defined to include oral agreements. We believe that the Government has misinterpreted the definition. The regulation requires a writing, except as otherwise authorized. It does not require a formal two-signature document, but it does require some form of writing, whether letter of intent, or purchase orders, or some other written manifestation.

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We conclude that an oral agreement for charter of a ship, such as involved in this case is not sufficient to allow the Government to recover in a damage action for breach of contract. The applicable statute and regulations require a written agreement. We reach this conclusion not only on the basis of the statute and regulations, but also on two additional factors.

First, the parties themselves seem to have contemplated a written agreement, as indicated by the incomplete USDA Grain Charter Party which was to be used. Given the extent of the unfilled blanks in the form, it appears that the oral agreement did not represent a final meeting of the minds of the two parties.

Second, the nature of the contract at issue here is lengthy and complex. The parties do not agree now on all of the proposed terms of the agreement. Where such complex transactions are involved, there is a policy favoring written agreements.

Recapitulating our analysis of the position of the parties in regard to the statute, we can readily see that the wording of the 1955 Act, cast as it is in the phraseology "no amount shall be recorded as an obligation of the Government," and enaeted for the primary purpose of keeping free-spending officials in check, does not carry an inescapable interpretation as a statute of frauds. Yet the 1955 statute does call for "documentary evidence of a binding agreement in writing between the parties thereto," and the impact of this requirement does fall inescapably on both the Government and the private party to the contract. Most persuasively perhaps, it appears impossible to give effect to the avowed primary objective of Congress without construing the 1955 Act as a statute of frauds. We have here the Government seeking damages on the basis of a purely oral agreement, admittedly incomplete or confused on some terms argued to be vital to the obligations of the parties, intended to be but never reduced to writing before repudiation. If we enforce the Government's claim here on a purely oral charter contract, the next case arising may well be similar to Clark v. United States, i. e., a claim by the private party likewise based on a purely oral agreement, in which the facts hypothetically might show that the government official, blithely ignored all the required written safeguards of the 1955 Act. If we adopt the Government's theory here, the very restricted interpretation of the 1955 Act, in our hypothetical next case the Government could not successfully urge the unenforceability of a purely oral charter-it would have been stripped of this external defense and concomitantly of protection against the very internal abuses which even the Government here agrees was Congress' primary objective in the 1955 statute.

It is thus dubious that the Government would want to contract orally, or that it should. This decision, by requiring that the Government comply with statutes and its own regulations by requiring a writing before an agreement of this type may be enforced by the courts, is in the long-range interest of the Government and the public.

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