Written by James Crowley, Esq., Bureau of Municipal Finance Law
The U.S. Court of Appeals for the 1st Circuit ruled against a company which supplied road salt to the City of Boston in the winter of 2004-2005 and then disputed with the City over the amount owed for the deliveries. The decision is International Salt Company, LLC v. City of Boston, (1st Circuit. Mass., December 18, 2009).
In August 2004 the City of Boston sought bids for 75,000 tons of road salt for the upcoming winter season. The City accepted the bid of International Salt Company, LLC (ISCO) and a contract was executed. Under the terms of the contract, ISCO agreed to supply 75,000 tons of road salt at $36.42 per ton for a total price of $2.7 million. In October 2004 the City Auditor certified the appropriation of funds. A week later the Mayor approved the contract in writing.
ISCO delivered about 71,000 tons of road salt to the City by February 2005 at the agreed price of $36.42 per ton. It was a very snowy winter, however, and the City officials demanded additional deliveries through the end of the contract term on June 30, 2005 so as to ensure public safety. ISCO contended that it was obligated to supply only 75,000 tons at $36.42 per ton. The company informed the City that shipping costs had risen sharply and any deliveries in excess of 75,000 tons would have to be paid for at a price to be negotiated or later determined by a court. Under protest, ISCO delivered an additional 27,000 tons in excess of the 75,000 ton contract figure. Although ISCO wanted a price increase for the 27,000 additional tons of road salt, the City paid the vendor at the $36.42 contract rate. ISCO attempted to negotiate with the City and argued that the City by placing orders in excess of the contractually established 75,000 ton figure had implicitly agreed to pay the fair market price for the extra deliveries. ISCO’s position was that the City should be expected to pay the market rate of $56.37 per ton instead of the contract price of $36.42 per ton. Consequently, ISCO asserted that the City of Boston should pay $1.5 million for the additional 27,000 tons instead of the $984,000 amount as calculated by the City.
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