to elect with whom he will contract, it can prevent the foreign insurers from sheltering themselves under his freedom in order to solicit contracts which otherwise he would not have thought of making. It may prohibit not only agents of the insurers, but also brokers, from soliciting or intermeddling in such insurance, and for the same reasons.' 175 Mass. 156, 78 Am. St. Rep. 485, 55 N. E. 895."

The ruling thus made is particularly pertinent to the subject of intoxicating liquors and the power of the state in respect thereto. As we have seen, the right of the states to prohibit the sale of liquor within their respective jurisdictions in and by virtue of the regulation of commerce embodied in the Wilson act is absolutely applicable to liquor shipped from one state into another, after delivery, and before the sale in the original package. It follows that the authority of the states, so far as the sale of intoxicating liquors within their borders is concerned, is just as complete as is their right to regulate within their jurisdiction the making of contracts of insurance. It hence must be that the authority of the states to forbid agents of nonresident liquor dealers from coming within their borders to solicit contracts for the purchase of intoxicating liquors which otherwise the citizen of the state "would not have thought of making" must be as complete and efficacious as is such authority in relation to contracts of insurance, especially in view of the conceptions of public order and social

even although such orders may only contemplate a contract to result from final acceptance in the state where the liquor is situated. The distinction between the two is not only obvious, but has been foreclosed by a previous decision of this court. That a state may regulate and forbid the making within its borders of insurance contracts with its citizens by foreign insurance companies or their agents is certain. Hooper v. California, 155 U. S. 648, 39 L. ed. 297, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207. But that this power to prohibit does not extend to preventing a citizen of one state from making a contract of insurance in another state is also settled. Allgeyer v. Louisiana, 165 U. S. 578, 41 L. ed. 832, 17 Sup. Ct. Rep. 427. In Nutting v. Massachusetts, 183 U. S. 553, 46 L. ed. 324, 22 Sup. Ct. Rep. 238, the court was called upon to consider these two subjects,—that is, the power of the state, on the one hand, to forbid the making within the state of contracts of insurance with unauthorized insurance companies, and the right of the individual, on his own behalf, to make a contract with such insurance companies in another state as to property situate within the state of residence. The case was brought to this court to review a conviction of Nutting, a citizen of Massachusetts, for having negotiated insurance with a company not authorized to do business in Massachusetts, contrary to the statutes of that state. Briefly, the facts were that Nutting, an insurance broker, solicited in Massachusetts 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 outside of that state. The contention of the plaintiff in error was that, as the contract was consummated outside of Massachusetts, the conviction was repugnant to the 14th Amendment, because the acts done did not fall within the general principle announced in Hooper v. California, supra, but were within the ruling in Allgeyer v. Louisiana. The conviction was affirmed, not because the contract was consummated in Massachusetts, but upon the ground that the right of an individual to obtain insurance for himself outside of the state of his residence did not sanction the conduct of Nutting, as an insurance broker, in carrying on the business in Massachusetts of soliciting unauthorized insurance. After reviewing 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.gotiations between the parties, where it is 1. Recourse may be had to the prior ne558, L. ed. p. 327, Sup. Ct. Rep. p. 240): 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 damages for its nonfulfilment.

3. The contention that the law of South Dakota was a taxing law, and not a police regulation, and therefore not within the purview of the Wilson act, is in conflict with the purpose of that law as interpreted by the supreme court of South Dakota. State ex rel. Grigsby v. Buechler, 10 S. D. 156, 72 N. W. 114. Besides, the contention is foreclosed by the ruling of this court in Pabst Brewing Co. v. Crenshaw, supra. Affirmed.

The CHIEF JUSTICE dissents.

UNITED STATES, Appt.,

V.

BETHLEHEM STEEL COMPANY.

Damages-liquidated or penalty.

sum of $31,000 each, the first to be deliv

same number for the sum of $33,000 each, the first to be delivered within five months from date of contract, to be followed at the rate of one carriage every month thereafter. By the third proposal the offer was to fur

2. 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, providing for a deduction of $35 from the purchase price for each day's delay in delivery, where the government had accepted the proposal at the highest price for delivery in the shortest time, and the sum named was arrived at, to the knowledge of the bid-nish the same number for the sum of $35,der, by computing the average difference in time of delivery between the price bid for slow delivery of the carriages and the price under the accepted bid.

[No. 188.]

000 each, the first to be delivered within four months, and the second within five months of date of contract; the remaining carriages to follow at the rate of three carriages every two months thereafter. By the fourth proposal the offer was to furnish 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.

APPEAL from the Court of Claims to re

view a judgment for the recovery from the United States of a sum deducted, as a penalty for delay in delivery, from the contract price for certain disappearing gun carriages. Reversed and remanded with directions to dismiss the petition.

See same case below, 41 Ct. Cl. 19.

Statement by Mr. Justice Peckham: The Bethlehem Steel Company recovered a judgment in the court of claims (41 Ct. Cl. 19) for the sum of $21,000 against the appellant, from which judgment the United States has appealed to this court.

The company filed its petition in the court of claims, seeking to recover a balance which it alleged was due from the United States on a contract, which had been entered into by the company with Brigadier General Flagler, Chief of Ordnance, in behalf of and for the United States, for the construction of certain gun carriages which the company alleged had been constructed according to the contract, and for which the government had failed to pay the full amount which became due upon its performance.

The facts were found by the court of claims, from which it appears that the government, on the 8th day of March, 1898, ad

vertised for proposals for the construction of six disappearing gun carriages, and the specifications accompanying the advertisement set forth the character and extent of the work. The claimant, in response to the advertisement, submitted four distinct sealed proposals to the War Department for the construction of such carriages. By the first proposal the company agreed to furnish five or more gun carriages for the

remaining carriages at the rate of two carriages every month thereafter.

These alternative proposals were made in consequence of a letter written the company by the Chief of Ordnance, dated March 11, 1898, of which the following is a copy:

Office of the Chief of Ordnance,
United States Army,
Washington, March 11, 1898.

Gentlemen:

It is suggested that in making bids for carriages you estimate, first, on the price of carriages under the supposition that the works will run for twenty-four hours; second, that later, if it be found advantageous, the ordinary working hours may be observed. It is considered best that bids should be made for carriages by numbers; as, for instance, so much for five 8-inch carriages, for six, eight, etc. Therefore it is considered judicious that bids should be made for rapid delivery of a certain number of carriages or for less rapid delivery of the same. It should be understood, however, that time will be considered very important. Respectfully,

D. W. Flagler,

Brig. Gen., Chief of Ordnance.

The following are the further findings of the court of claims:

4. The defendants, through the War Department, accepted proposal No. 4 of the claimant company.

5. In drawing up the contract between the United States and the claimant company a slight modification of proposal No. 4 was decided upon, which was as follows:

Whereas in proposal No. 4 claimant company was to deliver five or more carriages, the first in four months, the second in five months, and the remaining ones to follow

at the rate of two carriages per month. In drawing up the contract this was changed so as to provide for the delivery of one carriage in four months (as proposed) and five carriages in six months from the date of contract, thus reducing the time of delivery of all the carriages from seven to six months, this reduction of the total delivery being offset by the increased latitude given claimant company as to intermediate deliveries.

formed by the Chief of Ordnance, by letter
of April 9, 1898, as follows:
"Office of the Chief of Ordnance,
United States Army,
Washington, April 9, 1898.

The Bethlehem Iron Company,
South Bethlehem, Pa

"Gentlemen:

"In reply to your letter of April 5, 1898, returning contract forms, I have the honor 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:

Capt., Ord. Dept., U. S. A." To this letter the claimant company made reply on April 5, 1898:

"The Bethlehem Iron Company, South Bethlehem, Pa., April 5, 1898. Chief of Ordnance, U. S. A.,

War Department, Washington, D. C. "Sir:

"We have examined the contract forms, covering six disappearing gun disappearing gun carriages, model 1896, for 12-inch B. L. rifles, for which we submitted proposals under the date 19th ultimo, and write to call your attention to the third clause, relating to our liability on account of any patent rights granted by the United States, is not struck out, as has been done in the case of previous contracts for carriages.

"In regard to the penalty for delay in delivery being $75 per day instead of $10 per day, I have to state that the former amount is the average average difference in time of delivery between your price recently bid for slow delivery of these carriages and the price under the accepted bid. The Department feels it to be just that this average difference should be the prescribed penalty; but, if you should prefer, instead of taking the average difference, that the exact difference per day for each particular carriage should be prescribed, the forms will be altered accordingly.

"The contracts are returned, hoping this explanation will be satisfactory. Respectfully,

D. W. Flagler, Brigadier General, Chief of Ordnance." Thereafter it was found that an error had

been made in the above computation, in that the $75 per day deduction provided for should have been $35 instead, and the claimant company was duly informed of this by letter dated April 16, 1898, which is as fol

lows:

"Office of the Chief of Ordnance, United States Army, Washington, April 16, 1898. The Bethlehem Iron Company,

South Bethlehem, Pa. (Through the Inspector of Ordnance, U. S. A. "Gentlemen:

"We also note that the penalty mentioned in the contract for each day of de"Referring to my letter, No. 21985, of the lay in delivery of each carriage is $75 in9th instant, I would invite your attention 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 be $10 per day, and we respectfully request that the contract forms may be modified in accordance with this understanding. “We return herewith the contract forms, and remain,

12-inch disappearing carriages, L. F., model
of 1896, recently ordered from you, and to
inform you that the contract should read
that such deduction in price should be $35
per day of delay in delivery, in accordance
with principle stated in my above-men-
tioned letter.

Respectfully,
D. W. Flagler,
Brigadier General, Chief of Ordnance."
Before signing the contract in its present

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:

(Through Inspector of Ordnance, U. S. A.) great delay or other serious default has oc"Gentlemen:

shall be offset against any payments falling | court to ascertain and determine whether due to the said party of the first part.

Of the above days of delay, which amounted in the aggregate to 1,096 days, the United States, through the Chief of its Bureau of Ordnance, decided that the Bethlehem Iron Company was responsible for delays to the extent of 100 days upon each of the six disappearing gun carriages, or 600 days in all, but did not charge said company with the balance of said days, or 496 days in all; which, at the stipulated sum of deduction at $35 per day for each day of delay in the delivery of each gun carriage, amounted to the sum of $21,000, which sum was deducted from the payments made the claimant company, and the balance, or the sum of $195,000, was paid over to the claimant company, who receipted for said payment under protest.

the defendants should be charged with a
greater proportion of the delays set forth in
the foregoing table in Finding 7 than those
assumed by the defendants' officers, to wit,
496 days out of the total amount of delays,
to wit, 1,096 days.

It does not appear that the defendants
were ready to use the gun carriages herein-
before described at the time when they were
finally delivered by the claimant; nor does
it appear that they could have used them
on their fortifications if they had been de-
livered at an earlier day. Nor does it ap-
pear that the defendants suffered any injury
or damage whatever by the delay of the
claimant in delivering the said gun carriages
herein before set forth.

Conclusion of Law.

Upon the foregoing findings of fact the court decides, as a conclusion of law, that the claimant recover judgment in the sum of twenty-one thousand dollars ($21,000).

Assistant Attorney General Van Orsdel, Attorney General Bonaparte, and Mr. Franklin W. Collins for appellant.

Mr. James H. Hayden for appellee.

Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court:

It is objected on the part of the company that, as the contract in question is, as asserted, plain and unambiguous in its terms, no reference can be made to other evidence or to documents which do not form part of the contract. The general rule that prior negotiations are merged in the terms of a written contract between the parties is referred to, and it is insisted that, under that rule, the various letters passing between the parties prior to the execution of the contract are not admissible.

The rule that prior negotiations are merged in the contract is general in its nature, and, we think, does not preclude reference to letters between the parties prior to the execution of the contract in this case. The language employed in this contract for

8. The court finds as the ultimate fact that the defendants' officers hindered and delayed the claimant in the performance of 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 complete it within the time prescribed in the contract and by taking other work to the exclusion of that referred to in these findings; and the court further finds that the transactions in the process of manufacture were so involved and intermerged that it is impossible, on the evidence produced, for the

taken in connection with the subject-matter
of the contract, leaves room for the con-
struction of that language in order to deter-
mines which was intended, a penalty or
liquidated damages. While it is claimed
that there is really no doubt as to the prop-
er construction of the contract, even if the
contract alone is to be considered, yet we