Hugo Black

“ Authority given to make contracts does not imply authority to make unconscionable contracts. Suppose that Congress in authorizing the contracts in question had written into its legislation: 'Provided, that no agency of government shall be authorized to enter into unconscionable contracts.' Can it be that because Congress did not expressly provide that 'unconscionable contracts' are unauthorized it impliedly sanctioned the making of 'unconscionable contracts'? Or suppose the estimated costs in the contracts were so inflated by Bethlehem that its profits were 200% rather than 22%. ”

“ The President has his duties, the Congress its duties, and we ours. What powers the Congress should give the President in order to obtain the most effective production of war supplies, how the President should exercise those powers, whether a system of private contracts for war materials is conducive to unjustifiable waste and profiteering, or whether government production of necessary war supplies is a wiser course-these and like matters are not our business and upon them we should neither express nor intimate views. ”

“ The fact that the representative of the Government entered into the contracts 'with their eyes wide open' does not mean that they were not acting under compulsion. 'It always is for the interest of a party under duress to choose the lesser of two evils. But the fact that a choice was made according to interest does not exclude duress. It is the characteristic of duress properly so called.' Holmes, J., in Union Pac. ”

“ During wartime the bargaining position of Government contracting officers is inherently weak, no matter how conscientious they may be. If they are to deal on equal terms with private contractors, particularly where the subject matter of contracts is so intricate and so specialized as the building of ships, they must have available to them not only detailed information but also the time within which to study the data and the freedom to exercise a real choice. ”

“ For example, addressing a meeting of mine operators and manufacturers on July 12, 1917, he spoke as follows:
'I hear it insisted that more than a just price, more than a price that will sustain our industries, must be paid; that it is necessary to pay very liberal and unusual profits in order to 'stimulate production'; that nothing but pecuniary rewards will do it-rewards paid in money, not in the mere liberation of the world. ”

“ It is not difficult in these days to appreciate the position of negotiators for the Government in time of war and to realize how much the pressures of war deprive them of equality of bargaining power in situations where bargaining with private contractors is the only practicable means of securing necessary war supplies. ”

“ The modes are vast and varied by which the nation obtains its war supplies. What will best supply war needs in amplest measure in the quickest time and least wastefully-whether by private letting and, if so, under what restrictions and safeguards; under what circumstances the Government should do its own supplying either by taking over old plants or building new ones or a combination of the two; to what extent and through what means peacetime habits and traditions may be displaced and disregarded these are questions of policy for the wisdom and responsibility of the Congress and the Executive. ”

“ However, in the absence, as here, of fraud, mistake, or that overreaching which we label 'duress' and 'coercion', contracts should be interpreted as they are written, not as they might or should have been written in the light of after-thought and subsequent experience. The language of the 'savings' clauses does not limit Bethlehem's participation in 'savings' to those attributable only to its own efforts. ”

“ If Bethlehem was to share half of the savings 'however earned', then its right to receive the bonus might well depend on a wholly fortuitous circumstance or it might accrue as petitioner suggests 'simply as a reward for the inaccuracy of its estimate of actual costs.' Under that view Bethlehem would be entitled to $12,000,000 additional compensation merely because the wholesale price index fell. Yet that would be tantamount to a gift by public officers of property of the United States. The same result would follow if the clause be read as containing merely a 'best efforts' provision. ”

“ Nor can I accept the proposition that the 'bonus for savings' clauses are properly interpreted as meaning that Bethlehem was to receive one-half of the 'savings' only insofar as Bethlehem could prove that the 'savings' were due to its increased efficiency. Such an interpretation, it is true, would prevent Bethlehem from benefiting by reason of purely fortuitous 'savings'. ”

“ Because the national interest is represented not by the power of the nation but by an individual professing to exercise authority of vast consequence to the nation, action by Government officials is often not binding against the Government in situations where private parties would be bound. [16] The contracts here were not made by an abstraction known as the United States or by the millions of its citizens. For all practical purposes, the arrangement was entered into by two persons, Bowles and Radford. ”

“ Nor assuming the applicability of the Tompkins case to the contracts before us, would we have to determine whether the law of the District of Columbia or of some particular state is decisive. For in invoking the asserted doctrine of unconscionability claimed to be applicable here, the government relies entirely upon the alleged existence of two elements: duress and profits grossly in excess of customary standards. And for reasons we shall set out, neither of these two elements exists here.
Duress. The word duress implies feebleness on one side, overpowering strength on the other. ”

“ Do they mean that you must be paid, must be bribed, to make your contribution, a contribution that costs you neither a drop of blood nor a tear, when the whole world is in travail and men everywhere depend upon and call to you to bring them out of bondage and make the world a fit place to live in again, amidst peace and justice? ”

“ If the negotiations do not establish duress, the government finds it in the circumstances themselves. The petitioner concedes that the government could have commandeered Bethlehem's plants, but it contends that if the plants had been commandeered, Bethlehem's organization would have been unwilling to serve the government in them. Heavy reliance is placed on an observation in the Master's report that 'the Government did not have power to compel performance by an unwilling organization.' We shall later consider the alleged lack of power. ”

“ But the United States was at war. It needed ships-and it needed them at once. The shipyards and plants of a recalcitrant shipbuilder would not produce the necessary tonnage, at least not in the needed time, without an organization able to operate them at maximum efficiency. The Master found that 'A failure to induce Bethlehem to undertake the shipbuilding program covered by these contracts, followed by the taking possession by the Fleet Corporation of the Bethlehem plants, could not have accomplished the desired result. ”

“ No man or set of men should want to make excessive profits out of the travail of the nation at war, and government officials entrusted with contracting authority, and the Congress bestowing such authority, should be alert to prevent it. ”

“ He was authorized to place orders for such ships or material as 'the necessities of the Government' may require; to modify, suspend, cancel or requisition contracts for the building, production, or purchase of ships or material; and to take over any plants and ships constructed or in the process of construction. If any person owning any ship, plant, or material refused to build or sell ships or material ordered by the Government 'at such reasonable price as shall be determined by the President', he was empowered to take possession of the ships, material, or plant of such person. ”

“ The problem of war profits is not new. In this country, every war we have engaged in has provided opportunities for profiteering and they have been too often scandalously seized. See Hearings before the House Committee on Military Affairs on H.R. 3 and H.R. 5293, 74th Cong., 1st Sess., 590-598. To meet this recurrent evil, Congress has at times taken various measures. It has authorized price fixing. It has placed a fixed limit on profits, or has recaptured high profits through taxation. It has expressly reserved for the government the right to cancel contracts after they have been made. ”

“ If we are to go outside the record, the evidence is confusing and unreliable. It must be borne in mind that Bethlehem took no risk of loss, that under the contracts it was protected from the risks of rising costs of labor, materials, transportation, etc., that under the contracts it was not required to make any capital expenditures, that the Government agreed to advance all sums that should be necessary for the performance of the contracts. ”

“ It was Bethlehem's existing shipbuilding organization that was necessary to insure success to the program of the Fleet Corporation. Consequently the Government representatives, feeling as they did that Bethlehem's organization was necessary to their program, were obliged to accept the terms offered by Bethlehem. This they did with full knowledge, as we have said, that the estimated cost figures included in the contracts did not represent close approximations but were so prepared as to assure to Bethlehem substantial additional profits by way of the bonus of savings. ”

“ Bethlehem was represented throughout the negotiations by Joseph W. Powell, its vice president and operating manager, and Harry Brown, its technical manager, described by the Master as 'two of the ablest and most experienced shipbuilders and estimators of shipbuilding costs in the United States'. On behalf of the Fleet Corporation the active negotiators were Admiral E. T. Bowles, manager of its division of steel ship construction, and G. S. Radford, manager of its contract division. The Master characterized Bowles and Radford as 'equally competent shipbuilding experts'. ”

“ Whether a number of promises constitute one contract or more than one is to be determined by inquiring 'whether the parties assented to all the promises as a single whole, so that there would have been no bargain whatever, if any promise or set of promises were struck out.' Williston on Contracts, Rev.Ed., § 863 and cases there cited. ”

“ Strikingly analogous to the case at bar are the decisions that a salvor who takes advantage of the helplessness of the ship in distress to drive an unconscionable bargain will not be aided by the courts in his attempts to enforce the bargain. ”

“ When a person is incumbered with debts, and that fact is known to a person with whom he contracts, who avails himself of it to exact an unconscionable bargain, equity will relieve upon account of the advantage and hardship.' This was written in 1826. ”

“ The Master found that there was no evidence to support this charge of fraud. The District Judge approved this finding as did the Circuit Court of Appeals which said that it had 'carefully considered the record in the light of this contention (of fraud) ' and concluded that 'the estimates submitted by Bethlehem and prepared for it by its representative Brown were fairly and honestly made and as accurate as could be expected under the uncertain conditions then prevailing.' And in this Court the petitioner accepts these findings. ”

“ Although I am clear that the contracts would not have been made but for the inclusion of the 'savings' provision, I do not believe that there is a 'necessary dependency' between these two sets of promises within the rule of Philadelphia, W. & B.R. Co. ”

“ It would be difficult to draft a more inclusive definition of 'cost' than that contained in this contract. 'Actual cost' was defined to include the following items, as well as 'items similar thereto in principle': (a) the net costs of labor (including bonuses) , materials, machinery, equipment, and supplies furnished by Bethlehem, and all other direct charges, such as insurance on the vessels, etc. ”

“ Its power to draft business organizations to support the fighting men who risk their lives can be no less.
Profits. The general common law rule of unconscionability on which the petitioner relies is said to deny enforcement to contracts when the profits provided for are grossly in excess of a standard established by common practice. ”

“ Therefore, he estimated a total labor cost of $548,000, as compared with the actual labor cost upon Hull 253 of.$326,000. Similarly, the estimates of plant operating expenses were computed on the basis of equally large assumed increases. The total estimated cost of material, labor, operating expenses, and overhead amounted to $1,694,000, to which Brown added a flat 10% allowance to cover items such as armed guard equipment and 'to make allowance for other contingencies', making a total estimated cost of $1,863,000, or approximately $205 per ton. ”