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.
FEDERAL CONTRACT TERMINATION OR MODIFICATION
The White House has directed Agency heads to “terminate or modify . . . covered contracts.” With some exceptions, there are […]
Roads & Bridges | Maximizing Damage Recovery
MAXIMIZING DAMAGE RECOVERY
Tracking Costs, Avoiding Duplication in Liquidated and Actual Damage Claims
A County and Contractor contracted for construction of a road and […]
Roads & Bridges | Roadwork, Delays and Disputes
ROADWORK, DELAYS, AND DISPUTES
The Subcontract Case In Pecos County, Texas
“Road construction is ubiquitous in our society. . . .” C&C Road […]
Roads & Bridges | Understanding Sovereign Immunity
UNDERSTANDING SOVEREIGN IMMUNITY| Public Contracts and Lessons from Recent Texas Cases
Generally, governmental entities are immune from lawsuits. One exception is contractual. If […]
Roads & Bridges | Indiana Court Upholds Broad ND4D Clause
INDIANA COURT UPHOLDS BROAD ND4D CLAUSE | Ruling Precludes Subcontractor Claims for Delay and Acceleration Damages
This is the story of an Indiana […]
Roads & Bridges | Some Conditions Apply
SOME CONDITIONS APPLY | The scope of insurance policy coverage and what the terms dictate
At some time or another, many have tried […]
Roads & Bridges | Contract Termination
CONTRACT TERMINATION | An unpredictable case teaches hard lessons to each party involved
Court decisions are “opinions.” There are majority and dissenting (disagreeing) […]
Roads & Bridges | Good Faith and Fair Dealing
GOOD FAITH AND FAIR DEALING | How Do You Prove a Party Has Failed to Act Based Upon an Ulterior Motive?
The duty […]
Roads & Bridges | Not Another Notice Story
NOT ANOTHER NOTICE STORY| This Defensive Argument Seems to be on the Rise
AS I CONSIDERED the subject matter for this column, I […]
