When Massachusetts’ highest State court rejected Federal law on termination for convenience (T4C) a public entity’s “sole discretion . . . for any reason” ended a supplier’s contract. Is this too much governmental power or good stewardship of public resources?
Under a public contract, a Supplier agreed to provide fuel to the Massachusetts Bay Transportation Authority. About eleven months into the two-year contract, the Authority terminated the contract because it could get the same fuel for a cheaper price from a different supplier.
Upon 30-days written notice, termination by the Authority was within its “sole discretion . . . for any reason.” The terminated party was expressly entitled to payment for: demobilization, contract closeout, and costs of and profit on work performed.
The Massachusetts State Supreme Judicial Court held the termination was proper and made several points:
- Federal law on termination for convenience was not binding on the Commonwealth;
- General principles of contract interpretation under State law applied;
- The termination language was unambiguous and broad; and
- The requirement for pre-termination written notice was enough consideration for a contract.
The Court expressly stated it was not deciding whether a T4C would be proper to rebid the contract in search of a lower price. But, the roadmap of this decision would make it easy for a Court to find even such a T4C was OK.
Trick or Treat in Government Contract Claims
Without a request for a contracting officer’s final decision, claimants may seek treats, but get tricked instead.
Owner Nonpayment is No Defense to Miller Act Claim
As if you needed confirmation that the Federal Miller Act is a powerful tool for unpaid subcontractors, this is it. Even when a Prime ordered and accepted the Sub’s work, but didn’t have to pay under the Subcontract, the Subcontractor still. . . .
Trust, but Verify
Rely at your own risk upon a Contracting Officer’s statements when statutes or contract provisions may conflict.
Payment for Verbal Changes When a Writing was “Required”
Even if your agreement can only be modified by a writing, you may still have a good argument to be paid for extra work.
Pirates and Arbitration
How does a pirate solve a dispute (besides walking the plank)?
Bases Covered?
Contractors, will your current insurance policy cover “your work” as a joint venture partner? The typical answer is NO.
Two Paths at the Same Time to the Same Place
“Two roads diverged in a wood, and . . .” the Prime Contractor had to take both roads at the same time to the same place.
Rules, Which Rules?
Good Idea: Include a choice of law clause in your contract to promote consistency and predictability (while reducing potential costs and risk).
Government Liability for Third-Party Delays
Generally, the Government is not responsible for delays caused by third parties, even other contractors at its own project site, unless the Government affirmatively indicates the site will be ready and available.
