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Government Warranted Drug-Free Vehicle

The auction sale of a vehicle with marijuana concealed inside constituted a breach of an implied-in-fact warranty because the government represented the vehicle was free of illegal substances and the contractor reasonably assumed the government removed all contraband, according to the Court of Federal Claims. The contractor purchased a sport utility vehicle at an auction of vehicles forfeited to the Customs and Border Protection agency, which had seized the vehicle after a border inspection revealed the SUV was being used to smuggle marijuana into the United States. Following the purchase, the contractor and a passenger took the vehicle to Mexico where they were arrested at a checkpoint for transporting contraband found in the SUV's panels and upholstery. Following a year in prison and multiple appeals, the individuals were released from custody by the Mexican authorities. The contractor and passenger sued for damages, alleging a breach of contract for the government's failure to inspect the vehicle properly before the sale. At the summary judgment stage, the passenger's third-party beneficiary claim was denied (50 CCF ¶78,539), but the contractor established genuine issues of fact regarding the existence of an implied-in-fact warranty. At issue in the trial was whether the government's policy to search seized vehicles before sale constituted an affirmative representation the vehicles were free of contraband, and whether the government violated this implied-in-fact warranty when it sold the SUV to the contractor.
Remove All Contraband

The uncontroverted evidence revealed government procedures for seized vehicles called for the removal of "all" contraband from a vehicle before a sale. In particular, the fact the government provided no warning about the possible presence of illegal drugs in vehicles demonstrated the government's own belief that it had successfully carried out its policy of removing all contraband before placing a vehicle up for auction. The contractor also established he believed the SUV was free of contraband when he bought it. The court found this belief to be reasonable because only the government may possess illegal narcotics and the government actively works to seize illegal drugs. It was therefore reasonable for the contractor to assume the government would not sell a vehicle containing marijuana to a private individual. Thus, both parties had the same expectation: the government was selling the vehicle free of all contraband. This mutual expectation resulted in a "meeting of the minds" on the existence of the implied-in-fact warranty, which the government violated when it sold the vehicle with 17 kilograms of marijuana hidden inside. For the government's violation of the implied-in-fact warranty, the contractor was awarded damages to place it in "as good a position" as it would have been in had the government not breached the contract. The damages covered legal fees, the contractor's lost income, additional expenses of family members directly related to the contractor's arrest, and the costs of the medical treatment for the contractor's injuries and illnesses caused by the imprisonment. (Agredano v. U.S., FedCl, 52 CCF ¶78,975)

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )

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