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even although such orders may only con- | to elect with whom he will contract, it can template a contract to result from final ac- prevent the foreign insurers from sheltering ceptance in the state where the liquor is themselves under his freedom in order to situated. The distinction between the two solicit contracts which otherwise he would is not only obvious, but has been foreclosed not have thought of making. It may proby a previous decision of this court. That hibit not only agents of the insurers, but a state may regulate and forbid the making also brokers, from soliciting or intermedwithin its borders of insurance contracts dling in such insurance, and for the same with its citizens by foreign insurance com- reasons.' 175 Mass. 156, 78 Am. St. Rep. panies or their agents is certain. Hooper 485, 55 N. E. 895." v. California, 155 U. S. 648, 39 L. ed. 297, The ruling thus made is particularly per5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. tinent to the subject of intoxicating liquors 207. But that this power to prohibit does and the power of the state in respect therenot extend to preventing a citizen of one to. As we have seen, the right of the states state from making a contract of insurance to prohibit the sale of liquor within their in another state is also settled. Allgeyer v. respective jurisdictions in and by virtue of Louisiana, 165 U. S. 578, 41 L. ed. 832, 17 | the regulation of commerce embodied in the Sup. Ct. Rep. 427. In Nutting v. Massa- Wilson act is absolutely applicable to liquor chusetts, 183 U. S. 553, 46 L. ed. 324, 22 shipped from one state into another, after Sup. Ct. Rep. 238, the court was called upon delivery, and before the sale in the original to consider these two subjects,—that is, the package. It follows that the authority of power of the state, on the one hand, to for the states, so far as the sale of intoxicating bid the making within the state of con- liquors within their borders is concerned, is tracts of insurance with unauthorized in- just as complete as is their right to regusurance companies, and the right of the in- late within their jurisdiction the making of dividual, on his own behalf, to make a con- contracts of insurance. It hence must be tract with such insurance companies in an- that the authority of the states to forbid other state as to property situate within agents of nonresident liquor dealers from the state of residence. The case was brought coming within their borders to solicit conto this court to review a conviction of Nut tracts for the purchase of intoxicating liting, a citizen of Massachusetts, for having quors which otherwise the citizen of the negotiated insurance with a company not state "would not have thought of makauthorized to do business in Massachusetts, ing” must be complete and efficacontrary to the statutes of that state.cious as is such authority in relation to Briefly, the facts were that Nutting, an in- contracts of insurance, especially in view surance broker, solicited in Massachusetts of the conceptions of public order and social a contract of insurance on property belong. well-being which it may be assumed lie at ing to McKie situated in that state. The the foundation of regulations concerning the proposal was accepted outside of the state traffic in liquor. of Massachusetts and the policy also issued 3. The contention that the law of South outside of that state. The contention of Dakota was a taxing law, and not a police the plaintiff in error was that, as the con- regulation, and therefore not within the tract was consummated outside of Massa- purview of the Wilson act, is in conflict chusetts, the conviction was repugnant to with the purpose of that law as interpreted the 14th Amendment, because the acts done by the supreme court of South Dakota. did not fall within the general principle an- State ex rel. Grigsby v. Buechler, 10 S. D. nounced in Hooper v. California, supra, but 156, 72 N. W. 114. Besides, the contention were within the ruling in Allgeyer v. Louis- is foreclosed by the ruling of this court in iana. The conviction was affirmed, not be- Pabst Brewing Co. v. Crenshaw, supra. cause the contract was consummated in Affirmed. Massachusetts, but upon the ground that the right of an individual to obtain insur- The CHIEF JUSTICE dissents. ance for himself outside of the state of his residence did not sanction the conduct of Nutting, as an insurance broker, in carry

UNITED STATES, Appt., ing on the business in Massachusetts of soliciting unauthorized insurance. After re- BETHLEHEM STEEL COMPANY. viewing the Hooper and Allgeyer decisions and pointing out that there was no conflict Contracts—construction-prior negotiations. between the two cases, the court said (p.

1. Recourse may be had to the prior ne558, L. ed. p. 327, Sup. Ct. Rep. p. 240):

gotiations between the parties, where it is.

doubtful whether a penalty or liquidated “As was well said by the supreme judicial damages were meant by a clause in the court of Massachusetts: “While the legis- written contract relating to the payment of lature cannot impair the freedom of McKie I damages for its nonfulfilment.

as

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Damages-liquidated or penalty.

sum of $31,000 each, the first to be deliv2. Liquidated damages, and not a pen-ered within six months of the date of conalty, must be deemed intended by the clause tract, to be followed by two carriages every in a contract with the government for the three months thereafter. By the second proconstruction of certain disappearing gun car-posal the company offered to furnish the riages, executed when war was imminent, same number for the sum of $33,000 each, providing for a deduction of $35 from the the first to be delivered within five months purchase price for each day's delay in deliv: from date of contract, to be followed at the ery, where the government had accepted the rate of one carriage every month thereafter. proposal at the highest price for delivery in the shortest time, and the sum

named By the third proposal the offer was to furwas arrived at, to the knowledge of the bid-nish the same number for the sum of $35,der, by computing the average difference in 000 each, the first to be delivered within time of delivery between the price bid for four months, and the second within five slow delivery of the carriages and the price months of date of contract; the remaining under the accepted bid.

carriages to follow at the rate of three carriages every two months thereafter. By

the fourth proposal the offer was to furnish [No. 188.]

the same number for the sum of $36,000

each, the first to be delivered in four Argued January 28, 29, 1907. Decided months, the second in five months, and the March 11, 1907.

remaining carriages at the rate of two car

riages every month thereafter. PPEAL from the Court of Claims to re- These alternative proposals were made in

view a judgment for the recovery from consequence of a letter written the company the United States of a sum deducted, as a by the Chief of Ordnance, dated March 11, penalty for delay in delivery, from the con- 1898, of which the following is a copy: tract price for certain disappearing gun carriages. Reversed and remanded with di- Office of the Chief of Ordnance, rections to dismiss the petition.

United States Army, See same case below, 41 Ct. Cl. 19.

Washington, March 11, 1898. Gentlemen :

It is suggested that in making bids for Statement by Mr. Justice Peckham:

carriages you estimate, first, on the price The Bethlehem Steel Company recovered of carriages under the supposition that the a judgment in the court of claims (41 Ct. works will run for twenty-four hours; secCl. 19) for the sum of $21,000 against the ond, that later, if it be found advantageous, appellant, from which judgment the United the ordinary working hours may be obStates has appealed to this court.

served. It is considered best that bids should The company filed its petition in the court be made for carriages by numbers; as, for of claims, seeking to recover a balance which instance, so much for five 8-inch carriages, it alleged was due from the United States for six, eight, etc. Therefore it is considon a contract, which had been entered into ered judicious that bids should be made for by the company with Brigadier General rapid delivery of a certain number of car. Flagler, Chief of Ordnance, in behalf of and riages or for less rapid delivery of the same. for the United States, for the construction It should be understood, however, that time of certain gun carriages which the company

will be considered very important. alleged had been constructed according to

Respectfully,

D. W. Flagler, the contract, and for which the government

Brig. Gen., Chief of Ordnance. had failed to pay the full amount which became due upon its performance.

The following are the further findings of The facts were found by the court of

the court of claims: claims, from which it appears that the government, on the 8th day of March, 1898, ad

4. The defendants, through the War Devertised for proposals for the construction partment, accepted proposal No. 4 of the of six disappearing gun carriages, and the

claimant company. specifications accompanying the advertise

5. In drawing up the contract between ment set forth the character and extent of the United States and the claimant comthe work. The claimant, in response to pany a slight modification of proposal No. the advertisement, submitted four distinct 4 was decided upon, which was as follows: sealed proposals to the War Department Whereas in proposal No. 4 claimant comfor the construction of such carriages. By pany was to deliver five or more carriages, the first proposal the company agreed to the first in four months, the second in five furnish five or more gun carriages for the months, and the remaining ones to follow at the rate of two carriages per month. In, formed by the Chief of Ordnance, by letter drawing up the contract this was changed of April 9, 1898, as follows: so as to provide for the delivery of one car- "Office of the Chief of Ordnance, riage in four months (as proposed) and five

United States Army, carriages in six months from the date of

Washington, April 9, 1898. contract, thus reducing the time of delivery The Bethlehem Iron Company, of all the carriages from seven to six

South Bethlehem, Pan months, this reduction of the total delivery “Gentlemen:being offset by the increased latitude given "In reply to your letter of April 5, 1898, claimant company as to intermediate deliv- returning contract forms, I have the honor eries.

to inform you that your request in regard 6. On April 4, 1898, the Ordnance Depart- to your liability on account of patent rights ment transmitted a form of contract of even has been complied with and the third paradate to the claimant company for execution graph has been stricken out. and return by letter, as follows:

“In regard to the penalty for delay in de"Office of the Chief of Ordnance, livery being $75 per day instead of United States Army,

$10 per day, I have to state that the Washington, April 4, 1898.

former amount is the average differThe Bethlehem Iron Co.,

ence in time of delivery between your South Bethlehem, Pa.

price recently bid for slow delivery of “Gentlemen :

these carriages and the price under the “I am instructed by the Chief of Ord accepted bid. The Department feels it to nance to transmit herewith contract, in be just that this average difference should quintuplicate, dated the 4th instant, for six be the prescribed penalty; but, if you should 12-inch disappearing gun carriages, model prefer, instead of taking the average differ1896, for execution and return to this office. ence, that the exact difference per day for Respectfully,

each particular carriage should be preR. Birnie,

scribed, the forms will be altered accordCapt., Ord. Dept., U. S. A.” ingly. To this letter the claimant company made

“The contracts are returned, hoping this reply on April 5, 1898:

explanation will be satisfactory. "The Bethlehem Iron Company,

Respectfully,

D. W. Flagler, South Bethlehem, Pa., April 5, 1898. Chief of Ordnance, U. S. A.,

Brigadier General, Chief of Ordnance." War Department, Washington, D. C.

Thereafter it was found that an error had “Sir:

been made in the above computation, in “We have examined the contract forms, that the $75 per day deduction provided for covering six disappearing gun carriages, should have been $35 instead, and the claimmodel 1896, for 12-inch B. L. rifles, for which ant company was duly informed of this by we submitted proposals under the date 19th letter dated April 16, 1898, which is as fol.

lows: ultimo, and write to call your attention to

“Office of the Chief of Ordnance, the third clause, relating to our liability on

United States Army, account of any patent rights granted by

Washington, April 16, 1898. the United States, is not struck out, as has been done in the case of previous contracts The Bethlehem Iron Company,

South Bethlehem, Pa. for carriages. “We also note that the penalty men

(Through the Inspector of Ordnance, U. S. A.

"Gentlemen :tioned in the contract for each day of delay in delivery of each carriage is $75 in 9th instant, I would invite your attention

"Referring to my letter, No. 21985, of the stead of $10, as is stipulated in the instruc- to the fact that an error was made in the tions to bidders and specifications.

computation in the amount of the deduc“We made our bid under the understand- tion in price per day of delay in delivery of ing that the penalty for nondelivery was to 12-inch disappearing carriages, L. F., model be $10 per day, and we respectfully request of 1896, recently ordered from you, and to that the contract forms may be modified in inform you that the contract should read accordance with this understanding.

that such deduction in price should be $35 “We return herewith the contract forms, per day of delay in delivery, in accordance and remain,

with principle stated in my above-menRespectfully,

tioned letter.
The Bethlehem Iron Company,

Respectfully,
R. W. Davenport,

D. W. Flagler, Second Vice President." Brigadier General, Chief of Ordnance." Whereupon the claimant company was in- Before signing the contract in its present 189 ,

form the claimant company, by communi- | the second carriage, be accepted in lieu of cation on April 20, 1898, requested that the the schedule in the contract, without ensame should be modified in some respects, forcement of penalties which would result which request is contained in the following from the change of schedule. communication:

“The amount of the penalty for delay in “The Bethlehem Iron Company, delivery is changed from $75 to $35 per day South Bethlehem, Pa., April 20, 1898. in accordance with my letter of the 16th inChief of Ordnance, U. S. A.,

stant, and the contract forms are returned War Department, Washington, D. C. herewith for execution. “Sir:

Respectfully, "Referring to the forms of contract for

D. W. Flagler, six 12-inch disappearing gun carriages, car- Brigadier General, Chief of Ordnance.” rying the date of April 4, 1898, which have The above correction was therefore made recently been received, but not yet executed, in the said contract, and the same was duly and to the conversation which the writer signed and executed by the claimant comhad with you on Thursday last, we beg to pany and immediately transmitted to the state that on further carefully considering War Department. A copy of said contract the possibilities of the case we do not be- is annexed to and made part of the petilieve that we will be able to deliver the six tion. carriages within six months, as called for The following are the material portions of by the proposed contract. We will, how the contract: ever, undertake to complete, in accordance “Under advertisement dated with our bid, the delivery of the first car- the said parties of the first part do hereby riage in four months, the second within five contract and engage with the said United months, and the remaining four at the rate States to manufacture, for the Ordnance of two per month, thus making the total time Department, U. S. Army, in accordance with of delivery of the six carriages seven instead said instructions to bidders, as amended, of six months, it being understood that no specifications, and drawings, all of which penalty will be charged against us for the are hereto attached and form part of this one month of delay which will thus accrue contract. on the fifth and sixth carriages.

“Six (6) disappearing gun carriages, mod“By agreeing to this proposition the De- el 1896, for 12-inch B. L. rifles, drawings partment will be the gainer, in that the dated April 27 and June 19, 1896 (latest resecond carriage will be due at the end of vision July 14 and December 30, 1897), at the fifth month, while, as the contract now thirty-six thousand dollars ($36,000) each, reads, it would not be due until the end of free on board cars at South Bethlehem, Pa. the sixth month.

"The first carriage to be delivered within “With the above understanding confirmed, four (4) months from date of this contract, we will execute the contract as it now and the remaining five (5) carriages within stands, except as to the amount of penalty six (6) months from date of this contract. for delay in delivery, which, in accordance "It is further stipulated and agreed that with your letter of April 16, will be $35 in the party of the first part will furnish such stead of $75 per day.

limited additional number of these car“We return the contract forms in order riages, at the price and rate of delivery that the change as regards penalty may be stated, as the party of the second part may made.

desire, under available appropriations.
“We remain, respectfully,

The Bethlehem Iron Company, “It is further stipulated and agreed that
R. W. Davenport,

if any carriage herein contracted for is not Second Vice President." delivered by the party of the first part at To which letter the following reply was the times specified herein, there will be demade:

ducted, in the discretion of the Chief of Ord“Office of the Chief of Ordnance, nance, thirty-five ($35) dollars per day from

United States Army, the price to be paid therefor for each day

Washington, April 25, 1898. of delay in delivery of each carriage, reThe Bethlehem Iron Company,

spectively. But if at any time the Chief of South Bethlehem, Pa.

Ordnance shall decide that continuous and (Through Inspector of Ordnance, U. S. A.) great delay or other 'serious default has oc“Gentlemen :

curred, he may, to protect the interests of "In reply to your letter of the 20th in the United States, apply the provisions of stant, I have the honor to inform you that the 5th section of the regular contract form the schedule of deliveries of 12-inch dis- and waive further per diem deduction in appearing carriages contained therein will, price. in view of the earlier resulting delivery of "All penalties incurred under this contract shall be offset against any payments falling court to ascertain and determine whether due to the said party of the first part. the defendants should be charged with a

“The work must pass the required inspec- greater proportion of the delays set forth in tion at all stages of its progress, and be the foregoing table in Finding 7 than those approved by the officers of the Ordnance assumed by the defendants' officers, to wit, Department before being accepted and paid 496 days out of the total amount of delays, for by the United States.

to wit, 1,096 days. (Signed by the parties.)” It does not appear that the defendants

were ready to use the gun carriages herein7. Thereupon the Bethlehem Iron Com- before described at the time when they were pany proceeded to manufacture the said gun finally delivered by the claimant; nor does carriages, and ultimately delivered them to it appear that they could have used them the United States, and they were accepted on their fortifications if they had been deby the latter. The following table gives, livered at an earlier day. Nor does it apo first, the date fixed by the said contract for pear that the defendants suffered any injury the delivery of each one of said carriages; or damage whatever by the delay of the second, the date of its delivery, and, third, claimant in delivering the said gun carriages the extent of the delay in its delivery. herein before set forth.

Conclusion of Law.

Upon the foregoing findings of fact the No. of carDate for d’liv'ry Date of delivery Extent court decides, as a conclusion of law, that

(actual) fix'd by c'ntract riage

of delay

the claimant recover judgment in the sum

of twenty-one thousand dollars ($21,000). 16 Aug. 4, 1898 Jan. 28, 1899 17 Sept. 4, 1898 Mar. 6, 1899. 18 Oct. 4, 1898 Apr. 13, 1899 191 19 Oct. 4, 1898 Mar. 18, 1899

Assistant Attorney General Van Orsdel, Nov. 4, 1898. Apr. 29, 1899

Attorney General Bonaparte, and Mr. Frank. 21 Nov. 4, 1898. ... May 27, 1899

lin W. Collins for appellant. Total delay

1096 days

Mr. James H. Hayden for appellee.

177 days

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Of the above days of delay, which amount- Mr. Justice Peckham, after making the ed in the aggregate to 1,096 days, the United foregoing statement, delivered the opinion of States, through the Chief of its Bureau of the court: Ordnance, decided that the Bethlehem Iron It is objected on the part of the company Company was responsible for delays to the that, as the contract in question is, as asextent of 100 days upon each of the six dis- serted, plain and unambiguous in its terms, appearing gun carriages, or 600 days in all, no reference can be made to other evidence but did not charge said company with the or to documents which do not form part of balance of said days, or 496 days in all; the contract. The general rule that prior newhich, at the stipulated sum of deduction gotiations are merged in the terms of a at $35 per day for each day of delay in the written contract between the parties is redelivery of each gun carriage, amounted ferred to, and it is insisted that, under that to the sum of $21,000, which sum was de rule, the various letters passing between ducted from the payments made the claim the parties prior to the execution of the conant company, and the balance, or the sum tract are not admissible. of $195,000, was paid over to the claimant

The rule that prior negotiations are company, who receipted for said payment merged in the contract is general in its naunder protest.

8. The court finds as the ultimate fact ture, and, we think, does not preclude ref

8. The court finds as the ultimate fact erence to letters between the parties prior that the defendants' officers hindered and to the execution of the contract in this case. delayed the claimant in the performance of The language employed in this contract for the work by changes in the plans of construction, as alleged in the petition, and in a deduction, in the discretion of the Chief various other ways; but the court also finds of Ordnance, of $35 per day from the price that the claimant contributed to the delay to be paid for each day of delay in the dein the completion of the work by being in. livery of each gun carriage, respectively, sufficiently equipped and prepared to com- taken in connection with the subject-matter plete it within the time prescribed in the of the contract, leaves room for the concontract and by taking other work to the struction of that language in order to deterexclusion of that referred to in these find mines which was intended, a penalty or ings; and the court further finds that the liquidated damages. While it is claimed transactions in the process of manufacture that there is really no doubt as to the propwere so involved and intermerged that it is er construction of the contract, even if the impossible, on the evidence produced, for the I contract alone is to be considered, yet we

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