Opinion
Page __
__ Cal.App.2d __ 220 P.2d 560 GONSALVES v. HODGSON et al. Civ. 17038. California Court of Appeals, Second District, Second Division July 12, 1950.Hearing Granted Sept. 7, 1950.
Subsequent opinion 237 P.2d 656.
Rehearing Denied July 28, 1950.
[220 P.2d 561] Hansen & Sweeney, Victor R. Hansen, J. E. Simpson, Los Angeles, for appellants.
Roland G. Swaffield, Long Beach, for respondents
McCOMB, Justice.
From judgments in favor of plaintiffs after trial before a jury in an action to recover (a) damages for breach of a written contract to build a fishing vessel, (b) damages for fraud in inducing the contract, and (c) damages for loss of profits which would have been earned had the vessel been built according to the terms of the contract, defendants appeal.
Facts: December 21, 1943, defendants, under the firm name of Hodgson-Greene-Haldeman Shipbuilders, entered into a contract with plaintiffs to build for the latter a tuna fishing vessel to be name 'Liberty Bell'. So far as material here the contract contained these provisions:
This agreement read as follows:
'It is estimated that the cost of the construction of said vessel 'Liberty' hereunder will be approximately One Hundred Ninety Thousand Dollars ($190,000.00). It is expressly understood, however, that the Builder does not guarantee the correctness of this estimate and if said cost exceeds or is less than said sum of One Hundred Ninety Thousand Dollars ($190,000.00) Buyers shall nevertheless be bound and obligated to pay to Builder the cost of said construction as herein set forth and all other money agreed to be paid to Builder as herein set forth. * * *
'Should any part of the vessel fabricated by Builder fail through defects in workmanship or through defective lumber within thirty (30) days after delivery of said vessel, Builder will replace such parts as may so fail, provided that said vessel be brought to Builder's Long Beach shipyard for such replacement. Builder shall not be liable for damages or delays caused by such defective workmanship or defective parts of lumber, and in this connection it is agreed that the liability of Builder under all guarantees, either express or implied, is specifically limited to the replacement free of charge for labor and defective lumber at Builder's Long Beach shipyard of parts as may fail through defective workmanship or lumber within said thirty (30) days period as aforesaid. Builder shall not be responsible for defects in any machinery, equipment or fittings manufactured and supplied by others and Buyers shall look to the manufacturers and suppliers thereof for any redress.
'Buyers shall have the right at any time to inspect the said vessel and the progress being made in the construction thereof and shall further have the right to have any person of their choosing make inspection and examination of the vessel in its various states of construction, said person to be such as will meet with the requirements of the United States Government for admission into Builder's shipyard. Should Buyers [220 P.2d 562] or any of them or said person, if any, so chosen not be satisfied with the construction, he shall immediately so notify Builder in writing setting forth the nature and character of the complaint in sufficient detail so as to fully communicate the same to Builder. If the parties cannot settle the dispute between theniselves, the same shall be referred to P. Banning Young and his decision thereon shall be final and binding upon all parties hereto. Should said P. Banning Young not be living, or should he be unable to act, said dispute shall be immediately referred to any other competent marine surveyor, engineer or architect mutually acceptable to all parties hereto. Unless and complaint is so reduced in writting, it shall be conclusively presumed that said vessel is being constructed in a manner satisfactory to Buyers and Buyers shall be precluded from thereafter raising any objections thereto; provided, however, passage of tests provided for herein shall not be excused.' (Italics added.)
The vessel was constructed, delivered to plaintiffs, and on its voyage to San Diego it was found that certain repair work was necessary, which repairs were made by plaintiffs in San Diego. The vessel was not returned to defendants for repair as provided in the contract. Also it is to be noted that the contract specifically provided that if the plaintiff did not call to defendants' attention in writing claimed defects in the construction of the vessel during the time the same was being built any such defects were deemed waived.
Thereafter plaintiffs instituted the present action. After a trial which consumed many days, the judge instructed the jury as follows:
I
'You are instructed as a matter of law that since the contract for the construction of the boat 'Liberty Bell' is not between the plaintiffs and the defendants Frank W. Hodgson, Burch E. Greene, Manola H. Greene, Henry F. Haldeman, Clara B. Haldeman and M. R. Mackaig, co-partners doing business under the firm name of Hodgson-Greene-Haldeman Shipbuilders, that said defendants are not liable under any of the causes of action of plaintiffs' complaint and your verdict will be in favor of the defendants, and all of them, on all three causes of action of plaintiffs' complaint. (Given at request of defendants)'
In addition to the foregoing instruction the court gave numerous other instructions which cover 92 pages of the Reporter's Transcript on appeal and which instructions included the following:
II
'* * * Where compliance with such provisions is a condition precedent to the right to sue for breach of contract, the plaintiffs are barred from recovering if they have not submitted such matters to such arbitrator. In the present case there is no evidence that the plaintiffs submitted any matters or disputes as to whether the vessel 'Liberty Bell' was being constructed in accordance with the contract to P. Banning Young, the arbitrator named in the contract, and you will therefore find a verdict in favor of the defendants. (Given at request of defendants)'
This instruction was directly contrary to the following instruction which was also given:
III
'* * * You are instructed that none of the parties to this litigation have made any demand for any arbitration of any of the issues involved in this action and by reason thereof the parties have waived any arbitration which may have been provided by the contract and none of the parties to this action can now claim any right of arhitration provided for in said contract. The issues involved in this action must be determined by the Court and jury. (Given at request of plaintiffs)'
The evidence disclosed that defendants affirmatively pleaded the right to arbitration and that plaintiffs never sought an arbitration or took any steps to have their dispute submitted to arbitration in accordance with the terms of the contract. The jury returned a verdict in favor of plaintiffs on each count of the complaint. Thereafter the trial judge denied defendants' motion for a new trial.
[220 P.2d 563] Question: Were the instructions prejudicially conflicting?
This question must be answered in the affirmative and is governed by these rules:
1. An order denying a motion for a new trial may be reviewed on appeal from the judgment. (Caldwell v. Caldwell, 80 Cal.App.2d 378, 384, 182 P.2d 258; Litvinuk v. Litvinuk, 27 Cal.2d 38, 42, 162 P.2d 8; Bramble v. McEwan, 40 Cal.App.2d 400, 416, 104 P.2d 1054.)
2. Where instructions are inconsistent or contradictory a new trial should be granted. (Buttrick v. Pacific Elec. Ry. Co. 86 Cal.App. 136, 141, 200 P. 588; Galway v. Guggolz, 117 Cal.App. 639, 643, 4 P.2d 290; Southern Pacific L. Co. v. Dickerson, 65 Cal.App. 722, 726, 225 P. 5; Ellis v. Jewett, 18 Cal.App.2d 629, 634, 64 P.2d 432. Cf. Sebrell v. Los Angeles Ry. Corp., 31 Cal.2d 813, 817, 192 P.2d 898; Van Fleet v. Heyler, 51 Cal.App.2d 719, 734, 125 P.2d 586; Pittam v. City of Riverside, 128 Cal.App. 57, 67 et seq., 16 P.2d 768.)
Clearly instruction I, directing a verdict for each of the defendants on each count, was inconsistent and contrary to other instructions permitting the jury to return verdicts in favor of plaintiffs. Likewise instruction II directing a verdict in favor of defendants because plaintiffs had not submitted the dispute to arbitration was directly contrary to instruction III which told the jury that the parties had waived the right to demand arbitration and that the jury could determine the issues involved between the parties.
The rule that a party may not complain that instructions are inconsistent where it appears that the inconsistency arises through the giving of instructions at his request which are inconsistent with instructions given at the request of the other party, if the latter are pertinent to the issues of the case and are correct statements of the law, (Treadwell v. Nickel, 194 Cal. 243, 271, 228 P. 25; Barkhaus v. Producers Fruit Co., 192 Cal. 200, 210, 219 P. 435; Ketcham v. Modesto Irrigation District, 135 Cal.App. 180, 194, 26 P.2d 876) is not applicable in the present case for two reasons:
First: In the cases just cited the rule was applied on appeal from a judgment. In the instant case different rule is applicable since the ruling here being considered is a ruling of the trial court in denying a motion for a new trial, and in such case if the instructions are conflicting and inconsistent a new trial should be granted regardless of who requested the instructions be given. (Cf. cases cited under rule 2, supra.)
Second: The rule announced in Treadwell v. Nickel, Barkhaus v. Producers Fruit Co., and Ketcham v. Modesto Irrigation District, supra, is applicable only when the instruction requested by respondent (in this case plaintiffs) is a 'correct statement of the law.' (Sampson v. Hughes, 147 Cal. 62, 64, 81 P. 292.) In the present case the third instruction quoted above which was in conflict with the second instruction hereinbefore set forth was not a correct statement of the law. Where a contract provides for an arbitration, arbitration or an unsuccessful attempt to secure one is a condition precedent to the right to maintain an action for breach of the contract. (Clogston v. Schiff-Lang Co., Inc., 2 Cal.2d 414, 416, 41 P.2d 555; Collier & Wallis, Ltd. v. Astor, 9 Cal.2d 202, 206, 70 P.2d 171.)
In the case at bar the sixth paragraph of the contract of the parties specifically provided for arbitration of a dispute between them, and the evidence discloses that there was not any such arbitration, nor any attempt upon the part of plaintiffs to obtain one. Hence instruction III was not a correct statement of the law.
In view of the fact that it was prejudicial error not to grant defendants' motion for a new trial, the judgments must be reversed and it becomes necessary to a final determination of the case (Sec. 53, Code Civ. Proc.) to consider two additional questions:
First: Can plaintiffs maintain their first and third causes of action and also the second cause of action?
This question must be answered in the negative. Counts one and three were predicated upon an affirmance of the contract [220 P.2d 564] and sought damages for breach thereof, while count two was predicated upon damages for fraud for inducing the contract. These remedies are inconsistent and plaintiffs were required to make an election as to which remedy they would pursue. (House v. Piercy, 181 Cal. 247, 251, 183 P. 807; Fulmele v. Los Angeles Inv. Co., 51 Cal.App. 417, 420, 196 P. 923. Having elected to sue on counts one and three, this constituted a waiver of their rights to rescind the contract and recover damages for fraud in inducing the contract. (Carter v. Carr, 139 Cal.App. 15, 26 et seq., 33 P.2d 852; Merrill v. Merrill, 103 Cal. 287, 290, 35 P. 768, 37 P. 392. Cf. Murphy v. Hellman Commercial etc. Bank, 43 Cal.App. 579, 587, 185 P. 485; also Connelly v. J. D. Millar Realty Co., 131 Cal.App. 67, 70, 20 P.2d 781. Therefore the trial judge should have directed a verdict in favor of each defendant on count two of the complaint.
Second: Did the record show a total absence of proof of an essential element of plaintiffs' alleged cause of action in count one and also count three of the complaint?
This question must be answered in the affirmative. As shown above the contract which was the basis of the cause of action alleged in counts one and three provided that a dispute between the parties should be referred to P. Banning Young, and that his decision thereon should be final and binding. The evidence disclosed that though defendants had insisted upon compliance with this provision of the contract, plaintiffs had not complied with it nor attempted to do so. As compliance with the provision for arbitration or an unsuccessful attempt to procure arbitration was a condition precedent to plaintiffs' right to maintain an action for breach of the contract, there was a total absence of proof of an essential element of the causes of action attempted to be alleged in counts one and three of the complaint, and a judgment should have been directed in favor of defendants and each of them. (Clogston v. Schiff-Lang Co., Inc., and Collier & Wallis, Ltd. v. Astor, supra.)
In view of our conclusions it is unnecessary to determine other questions argued by counsel.
The judgments are reversed with directions to the trial court to enter a judgment in favor of each defendant on each count in the complaint. All other appeals are dismissed.
MOORE, P. J., and WILSON, J., concur.
'Agreement
'This Agreement, made and entered into this 21st day of December, 1943, by and between
'Hodgson-Greene-Haldeman Shipbuilders, a copartnership of which Frank W. Hodgson, Burch E. Greene, Manola H. Greene, Henry F. Haldeman and Clara B. Haldeman are copartners, hereinafter referred to as 'Builder'.
'and
'Frank Gonsalves Jr., Francisco Gonsalves, Salvador Carlos, Ernest G. Andrade, Frank Hodgson, Frederic Strumm, and Rudi F. Kettler jointly and severally, all citizens of the United States and qualified to enter into this agreement and to own the hereinafter described vessel, hereinafter referred to as 'Buyers'.
'Whereas, the aforesaid Frank W. Hodgson heretofore at his then shipyard constructed a 'tuna clipper' or 'bait boat' which is now called 'Viking' and owned by Anthony D. Madruga and other co-owners; and
'Whereas, it is the desire of Buyers that Builder construct for them a fishing vessel similar in type and construction to said 'Viking', which said vessel, for the purpose of this contract, is herein called 'Liberty', provided that said 'Liberty' shall be about one hundred five feet long; and
'Whereas, Builder is engaged in the business of constructing vessels and operating a shipyard at Long Beach, California.
'Now, Therefore, It Is Hereby Mutually Agreed by and between the parties hereto as follows:
'1. Builder agrees to construct for Buyers at the Long Beach shipyard of Builder a fishing vessel (herein called 'Liberty') similar in type and construction as the aforesaid 'Viking', provided however, that said 'Liberty' shall be about one hundred five feet long. Said 'Liberty' shall be complete in all respects, including the installation of propelling machinery and shall be built in accordance with the best shipbuilding practices followed in the construction of 'tuna clippers' and all work shall be done in a proper and workmanlike manner, and shall pass the customary inclination test and customary approval by a competent marine insurance surveyor for insurance purposes.
'The size, shape, and details of construction of the 'Liberty' shall be under the direction and control of Frank W. Hodgson. If any dispute arises during construction concerning whether or not said 'Liberty' is similar to said 'Viking', said dispute shall be referred to P. Banning Young, and his decision thereon shall be final and binding upon all parties hereto. Should said P. Banning Young not be then living or should be be unable to act, said dispute shall be referred to any other competent marine surveyor mutually acceptable to all parties hereto. The charges of any such marine surveyor in settling any disputes hereunder shall be paid for equally by the parties hereto.
'No plans and specifications were prepared or used in the construction of said 'Viking' and inasmuch as said 'Viking' is not now and will not be continuously available for inspection, and the parties hereto realize that they must rely upon the memory of Frank W. Hodgson to construct a vessel similar to the 'Viking', and agree that any deviation in the construction of the 'Liberty' from that of the 'Viking' will not be deemed a dissimilarity unless such deviation would materially alter the general outlines, type, location of machinery, compartments, and superstructure. Changes in details of construction shall not be deemed a dissimilarity if said construction is in accordance with the best shipbuilding practices followed in the construction of 'tuna Clippers' as aforesaid.
'Builder is to prepare working plans during the construction of said 'Liberty' and said Frank W. Hodgson shall certify thereto that if said 'Liberty' is built in accordance with said plans that she will satisfy the requirements of this agreement as to similarity with the 'Viking' as above set forth. Rudi F. Kettler and Frank Gonsalves, Jr. shall also certify said plans. These plans are always to remain in the possession of Builder and are only to be used in the case of the death or incapacity of Frank W. Hodgson for the completion of said 'Liberty'.
'Builder shall furnish a completion bond to be issued by a reliable surety company acceptable to Buyers provided such a bond can be obtainable. Buyers shall pay Builder upon request the amount of premium or cost of said bond, the amount of which premium or cost shall be in addition to the cost of construction of said vessel, but Buyers shall not pay Builder a sum of money equal to ten percent (10%) of cost of said bond.
'2. It is understood and agreed between the parties hereto that said Vessel 'Liberty' is to be constructed by Builder and paid for by Buyers on a cost plus a ten per cent (10%) of cost basis.
'Buyers agree to pay Builder for the construction of said vessel 'Liberty', her engines, tackle, furniture and apparel, the following sums of money.
'(1) the amount paid by Builder for direct labor; and
'(2) the burden for overhead expenses of Builder which shall be fifty per cent (50%) of the amount of the direct labor, and
'(3) the cost to Builder delivered at its yard of all material, equipment and machinery of every kind and description ordered by Builder for the construction and testing of said 'Liberty', but all rebares, discounts and refunds, if any, obtained by Builder in the purchase thereof shall be applied in reduction of the cost thereof; and
'(4) a sum of money equal to ten per cent (10%) on the aggregate of the above three items.
'The term 'amount paid by Builder for direct labor' as used herein shall include all wages and salaries paid by Builder prior to any deductions or withholds to those certain of its employees who perform work or services on and chargeable to the construction, completion and delivery of the vessel, her engines, tackle, furniture and apparel, including the prefabrication and preparation of materials, launching, inclination test, trial trips, drafting and lofting, wages of foreman and assistant (hull) superintendent in charge of any part of the construction of said vessel, wages of timekeepers and cleanup men, all in accordance with the present accounting practices of Builder, as explained in book published by Builder, dated January 1, 1943, and entitled: 'How to Charge Your Time'. Wages of Cranemen, lumber carrier, drivers and truckmen while actually engaged in work pertaining to the construction of said vessel as aforesaid shall be charged to direct labor but the use of equipment and tools shall not be so charged.
'In addition to the above cost of construction, Buyers shall also pay to Builder Old Age Benefit and Social Security Taxes, Unemployment Insurance Taxes, excise taxes, transportation taxes, personal property taxes, and any and all other taxes of whatsoever nature which may be incurred by Builder in the construction of said vessel under any existing laws or any law enacted and effective during and before the completion of this agreement, provided, however, that Buyers shall not pay Builder a sum of money equal to ten per cent (10%) of these taxes.
'As an aid in the determination of the cost of said direct labor Builder agrees to establish and keep a separate time clock and set of time cards that will be used only in connection with recording the amount of time and direct labor used in the construction of said vessel 'Liberty' and a fishing vessel known as 'Viking No. 2' and a fishing vessel known as 'Monarch No. 2', and each of said time cards must be countersigned each day by the foreman in direct charge of the construction of said vessel. Buyers may appoint a timekeeper who may be selected at the option of the Buyers from among the employees of the Builder, or may be hired by the Buyers and placed on the Builder's payroll.
'It is estimated that the cost of the construction of said vessel 'Liberty' hereunder will be approximately One Hundred Ninety Thousand Dollars ($190,000.00). It is expressly understood, however, that the Builder does not guarantee the correctness of this estimate and if said cost exceeds or is less than said sum of One Hundred Ninety Thousand Dollars ($190,000.00) Buyers shall nevertheless be bound and obligated to pay to Builder the cost of said construction as herein set forth and all other money agreed to be paid to Builder as herein set forth.
'3. Buyers agree to pay to Builder upon the execution hereof the sum of Five Thousand Dollars ($5,000.00), receipt of which is hereby acknowledged by Builder. This Five Thousand Dollars ($5,000.00) is an advance payment on the money to be due Builder under the terms of this agreement and shall be credited by Builder on the final payment or payments owed by Buyers to Builder hereunder.
The Builder shall render to Buyers monthly an itemized statement showing the money expended hereunder during said month by Builder for material, machinery, and equipment used in the construction of said vessel. At the time of submitting said itemized bill, Builder shall also deliver to Buyers a duplicate bill of all materials, equipment and machinery purchased by Builder, which bill shall state upon the face thereof that the same has been paid by Builder. Buyers agree to pay said bill within five (5) days after the presentation thereof.
'Builder shall render to Buyers weekly an itemized statement showing the money expended during said week for direct labor, and said bill shall also show and include the amount of burden. Buyers agree to pay said bill within five (5) days after the presentation thereof.
'In the event Builder furnishes a completion bond the above statements shall also show and include the amount of ten per cent (10%) of the costs of said material, machinery and equipment and of said direct labor and burden as above provided for which amount shall be paid concurrently with the payments of said statements for material, machinery, equipment, direct labor and burden.
'In the event Builder does not furnish a completion bond the said amount of said ten per cent (10%) shall be paid by Buyers to Builder upon completion of the construction of said vessel and before or simultaneously with delivery of said vessel to Buyers; provided, however, that delivery to Buyers shall not be evidenced or taken to mean that Builder has been so paid.
'4. Copies of all purchase orders for material and equipment shall be furnished by Builder to Rudi F. Kettler weekly but his approval thereon shall not be required with the exception, however, that purchase orders for the main and auxiliary engines, ice machines, heat exchanger, all generators pumps and motors, switchboard and voltage regulator, shall be first approved in writing by said Rudi F. Kettler before said orders are placed. Provided, further, that should said Rudi F. Kettler disprove in writing any purchase order for any material or equipment before said purchase order has been dispatched by Builder, said purchase order shall not be placed until approved by Rudi F. Kettler, provided that Builder shall not be liable for any damage or loss due to any delay resulting therefrom. Said purchase orders shall show that the material specified therein is ordered specifically for 'Liberty' and shall show the price thereof.
'It is agreed that the lumber to be used in the construction of said 'Liberty' shall be purchased locally unless Buyers direct otherwise in writing.
'It is understood that if Buyers so desire Builder will purchase such fishing gear as may be designated in writing by Buyers if obtainable, and that Buyers will pay Builder the cost of said fishing gear plus ten per cent (10%) of said cost for so doing.
'Builder further agrees to place in charge of the construction of said vessel a person satisfactory to Buyers, if requested so to do by Buyers, it being understood, of course, in this connection that said Frank W. Hodgson will have general supervision and control of all stages of construction of said vessel to her completion.
'5. During all the time that said vessel is under construction and until it has been finally accepted by Buyers, Builder agrees to carry Builders' Risk Insurance and War Risk Insurance each in the amount of not less than $190,000.00. Unless included in said Builders' Risk Insurance, Builder shall obtain Collision Liability and Protection and Indemnity Liability Insurance. Such insurance shall include risk of loss or damage on the trial run. Said policies of Insurance shall be issued for the benefit and protection of the parties hereto. Builder shall also carry Workmen's Compensation Insurance. In addition to the above costs of construction Buyers shall pay Builder upon request the amount of the premiums on or costs of said insurance, provided, however, that Buyers shall not pay Builder a sum of money equal to ten cent (10%) of these premiums or costs.
'6. Builder will conduct an inclination experiment on said vessel. The result of said inclination experiment shall be given to the Buyers before Builder holds the trial run and before delivery of the vessel is offered to Buyers. Builder shall conduct a trial run of said vessel on which trial run Buyers, or such of them as desire to attend, shall be present, and on or after said inclination test and trial run the Buyers may demand such changes in said vessel as may be necessary to comply with the terms of this agreement.
'Upon completion of said vessel, she shall be delivered to Buyers at the Builder's shipyard at Long Beach, California. Builder shall execute and deliver to Buyers at the time of delivery of said vessel a Carpenter's Certificate to Buyers, Buyers shall pay Builder all money due Builder by reason of and under this agreement, provided, however, that delivery to Buyers shall not be evidence or taken to mean that Builder has been so paid in full. Upon delivery of said vessel to Buyers, and acceptance thereof, Builder shall be relieved of all liability and responsibility, if any, thereto, except as may otherwise be herein provided.
'Should any part of the vessel fabricated by Builder fail through defects in workmanship or through defective lumber within thirty (30) days after delivery of said vessel, Builder will replace such parts as may so fail, provided that said vessel be brought to Builder's Long Beach shipyard for such replacement. Builder shall not be liable for damages or delays caused by such defective workmanship or defective parts of lumber, and in this connection it is agreed that the liability of Builder under all guarantees, either express or implied, is specifically limited to the replacement free of charge for labor and defective lumber at Builder's Long Beach shipyard of parts as may fail through defective workmanship or lumber within said thirty (30) days period as aforesaid. Builder shall not be responsible for defects in any machinery, equipment or fittings manufactured and supplied by others and Buyers shall look to the manufacturers and suppliers thereof for any redress.
'Buyers shall have the right at any time to inspect the said vessel and the progress being made in the construction thereof and shall further have the right to have any person of their choosing make inspection and examination of the vessel in its various states of construction, said person to be such as will meet with the requirements of the United States Government for admission into Builder's shipyard. Should Buyers or any of them or said person, if any, so chosen not be satisfied with the construction, he shall immediately so notify Builder in writing setting forth the nature and character of the complaint in sufficient detail so as to fully communicate the same to Builder. If the parties cannot settle the dispute between themselves, the same shall be referred to P. Banning Young and his decision thereon shall be final and binding upon all parties hereto. Should said P. Banning Young not be living, or should he be unable to act, said dispute shall be immediately referred to any other competent marine surveyor, engineer or architect mutually acceptable to all parties hereto. Unless any complaint is so reduced in writing, it shall be conclusively presumed that said vessel is being constructed in a manner satisfactory to Buyers and Buyers shall be precluded from thereafter raising any objections thereto; provided, however, passage of tests provided for herein shall not be excused.
'It is agreed and understood that Builder warrants that the place of construction of said vessel shall be available until the said vessel is fully completed unless such building site is condemned, destroyed or made useless by any acts of war, God, or the elements, such as set forth in paragraph 8 hereof.
'Builder agrees to comply with all the laws, statutes, ordinances, rules and regulations of the United States of America, State of California or any political subdivision thereof as may be applicable to or effect the construction of said vessel hereunder and to pay and discharge, when due, all taxes as herein provided.
'It is further understood that upon completion of said vessel, Builder shall give a warranty that said vessel, her engines, tackle, furniture and apparel, and every part thereof, is free and clear of and from any and all debts, encumbrances, claims and liens, charges, assessments and levies of whatsoever kind or nature, maritime or otherwise, all of which shall be paid and discharged when due, in accordance with the terms hereof, provided, however, that failure of Buyers to pay Builder the money agreed to be paid hereunder, at the time and in the manner set forth, shall be sufficient to excuse Builder from paying all costs then incurred in the construction of said vessel until Buyers have paid Builder therefor in compliance with this agreement.
'7. Builder shall keep separate books of account in which shall be entered all items pertaining to direct labor charges and material costs which shall reflect all charges to Buyers and receipts of money from Buyers under the terms hereof. Said books of account shall be kept in accordance with good accounting practices and shall be open at all reasonable times during business hours to the inspection of Buyers, their attorney or agents, and to the auditor of French Sardine Company or to whomsoever said corporation may designate in writing, addressed to Builder. Builder shall deliver to said corporation, or its auditor, a monthly statement of disbursements and charges hereunder including payroll and burden.
'8. Said vessel 'Liberty' shall be completed by September 1, 1944, provided, however, Builder shall not be liable for any default hereunder or delay in the construction of said vessel or the performance of the terms, covenants, and conditions on Builder's part to be performed hereunder if such default, delay or nonperformance is caused by or is due to any contingency beyond Builder's control, or caused by the delay or default or nonperformance of any supplier or manufacturer with whom Builder may contract to furnish and deliver any material, equipment or machinery necessary in the construction of said vessel, including war, acts of war, sabotage, bombing, fires, strikes, riots, floods, earth-quakes, acts of God, delays in transportation, blockades, embargoes, acts, demands or requirements of the United States Government or any state or political subdivision thereof, or occasioned by command, restraint, condemnation or requisition of the United States Government, or any political subdivision thereof; provided, however, that as soon as any such cause is removed and no longer exists, Builder shall thereupon continue to carry out and perform the terms, covenants and conditions of this agreement on Builder's part to be performed.
'9. It is understood that this agreement is to be executed by Rudi F. Kettler and Frank Gonsalves, Jr. as agent of the Buyers, and each of them, and said agents warrant that they have authority so to do and that they have authority to act for and represent Buyers and each of them, in all things hereunder.
'10. All parties hereto agree that this agreement, or any interest herein, shall not be assigned by any party hereto without the written consent of all the parties executing this agreement, nor shall this agreement be modified except by a memorandum in writing executed by all the parties executing this agreement.
'In Witness Whereof the parties hereto have hereunto set their hands and seals the day and year first above written.
'Hodgson-Greene-Haldeman Shipbuilders.
'By Burch E. Greene
'Burch E. Greene
'By Frank W. Hodgson
'Frank W. Hodgson
"Builders'
'Frank Gonsalves Jr., Francisco Gonsalves, Salvador Carlos, Ernest G. Andrade, Frank Hodgson, Frederic Strumm, and Rudi F. Kettler
'By Frank Gonsalves Jr.
'Frank Gonsalves Jr.
'By Rudi F. Kettler
'Rudi F. Kettler
"Buyers"