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U.S. Supreme Court

United States v. Bethlehem Steel Corp., 315 U.S. 289 (1942)

United States v. Bethlehem Steel Corporation

No. 8

Argued December 9, 1941

Decided February 16, 1942*

315 U.S. 289


1. Contracts made in the emergency of war between the Fleet Corporation and a shipbuilding company, for the construction of ships for the United States, provided that the price to be paid the builder should include the actual cost of the ships and two elements of profit, (1) a fixed amount calculated on an agreed chanroblesvirtualawlibrary

Page 315 U. S. 290

estimate of cost and (2) a "bonus for savings," of one-half the amount by which the actual cost turned out lower than the estimate; but no obligation of the builder to make special effort to effect such savings by increasing its efficiency was expressed in the contracts.


(1) There is no ground to imply such an obligation. P. 315 U. S. 297.

(2) The savings clause was a nonseverable part of the contract. P. 315 U. S. 298.

2. 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 whole, so that there would have been no bargain whatever if any promise or set of promises were struck out. P. 315 U. S. 298.

3. With respect to contracts for the building of ships, entered into by the Fleet Corporation, on behalf of the Government, and a shipbuilding company while the country was at war, and which netted the company a very large profit partly by reason of the clause granting it the right to one-half of the amounts by which the cost of construction should be lower than the liberal estimate provided by the contracts, held:

(1) The Government's present claim that in the negotiations the officials acting for the Fleet Corporation were subjected to pressure amounting to duress by the representatives of the company, so that they accepted the price stipulations against their will, is without support in the evidence. P. 315 U. S. 300.

(2) The circumstances that the Government stood in great need of the ships and that it was obliged to rely upon the company's capacity to produce them could not have coerced the Fleet Corporation's representatives to make the contracts, since the Fleet Corporation could have compelled the shipbuilding company to undertake the work at a price set by the President, with the burden of going to court, if it considered the compensation unreasonably low, and since the Fleet Corporation had the power to commandeer the shipbuilding company's plants and facilities, in accordance with authority delegated by the President pursuant to the Acts of Congress, and it is not to be assumed that the company or its trained organization would have been unwilling to serve the Government in the plants if the power to take them over were exercised. P. 315 U. S. 303.

(3) Under its powers to raise and support armies, to provide and maintain a navy, and to make all laws necessary and proper chanroblesvirtualawlibrary

Page 315 U. S. 291

to carry these powers into execution, Congress has authority to draft business organization to support the fighting men in war. P. 315 U. S. 305.

4. A policy of granting the measures of profits common at the time, adopted by the Fleet Corporation when letting contracts for the construction of ships under authority delegated by the President in accordance with an Act of Congress, is not subject to be, in effect, nullified by the courts by refusal to enforce such contract on the ground that the profits granted are too high. P. 315 U. S. 308.

113 F.2d 301, affirmed.

Certiorari, 311 U.S. 632, to review judgments affirming two judgments of the District Court. See 23 F.Supp. 676; 26 id. 259.

No. 8 was a suit in equity brought by the United States against Bethlehem Steel Corporation, Bethlehem Shipbuilding Corporation, et al., for an accounting and to recover sums paid under contracts for construction of ships. The District Court dismissed the bill.

In No. 9, which was an action at law by the Bethlehem Shipbuilding Corporation against the Fleet Corporation, the former recovered a balance found due under "bonus for savings" clauses in the contracts. chanroblesvirtualawlibrary

Page 315 U. S. 292

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