Interim Internal Purchasing Guidelines > 6 Contract Administration > 6.10 Remedies and Damages

6.10 Remedies and Damages

6.10.1 Remedies

6.10.1.a Postal Service's Security Interest. On rightful rejection or justifiable revocation of acceptance, the Postal Service has a security interest in supplies delivered under the contract for any payments and expenses reasonably incurred in inspection, receipt, transportation, care, and custody (in other words, they can be used to secure payment to cover those incurred costs).

6.10.1.b Repurchase Against Supplier's Account

1. When supplies or services are still required after termination for default, the contracting officer may repurchase the same or similar supplies or services against the supplier's account as soon as practicable. The repurchase price must be reasonable considering the quality and time requirements. Whenever practicable, the contracting officer should make the decision to repurchase before issuing a termination notice.

2. The contracting officer may repurchase a larger quantity than the quantity terminated for default when needed, but the defaulting supplier may be charged for no more than the terminated quantity (including any variations in quantity permitted by the terminated contract).

3. If the repurchase is for a quantity no larger than the terminated quantity, the contracting officer may use any terms and purchase methods appropriate for the repurchase, following normal approval or deviation procedures. If the repurchase is for a larger quantity than the terminated quantity, the entire quantity must be treated as a new purchase.

4. If the repurchase price is higher than the price of the terminated supplies or services, the contracting officer must, after final payment on the repurchase contract, demand the excess amount from the supplier, in writing, taking into account any increases or decreases in cost due to transportation charges, discounts, and other factors.

6.10.2 Damages

6.10.2.a Default. If a contract is terminated for default, or if a procedure is used in lieu of termination for default, the contracting officer must ascertain and demand any damages to which the Postal Service may be entitled. These damages are in addition to any excess repurchase cost.

6.10.2.b Breach Damages for Accepted Supplies

1. When the contracting officer has accepted defective supplies under 6.3.1.b.5, the Postal Service may recover, as damages for any nonconformity, the loss under usual circumstances resulting from the supplier's breach. This may be determined in any reasonable manner.

2. Damages for breach of warranty are the difference, at the time and place of acceptance, between the value of the supplies or services accepted and the value they would have had if they had been as warranted, unless special circumstances show there are proximate damages (damages resulting directly from the breach of warranty) of a different amount.

3. Normally, incidental and consequential damages may also be recovered.

(a) Incidental damages include expenses reasonably incurred in the inspection, receipt, transportation, and care and custody of supplies rightfully rejected; any commercially reasonable charges; expenses in connection with repurchase; and any other reasonable expense incidental to the delay or other breach.

(b) Consequential damages include:

(1) Any loss resulting from contract requirements and needs which the supplier should have been aware of when the contract was signed and which could not be reasonably prevented; and

(2) Injury to people or property resulting directly from a breach of warranty.

6.10.2.c Deduction of Damages from the Price. The contracting officer, on notifying the supplier, may deduct all or any part of the damages resulting from any breach of the contract, or from late delivery or delay not subject to liquidated damages (see 2.2.6), from any part of the price still due.

6.10.2.d Damages for Nondelivery or Repudiation

1. Damages for nondelivery or repudiation by the supplier when repurchase is not possible are the difference between the market price at the time when the contracting officer learned of the breach and the contract price, together with any incidental and consequential damages, but less expenses saved as a consequence of the supplier's breach.

2. Market price is determined at the place of acceptance or, in cases of rejection after arrival or revocation of acceptance, at the place of arrival.