The following article was prepared by Mike Taylor, C.P.M.


Contract Law Review
May 2005

An extreme example of contract law at its worst (or best - if you are on the winning side).

http://www.doecaa.org/Docs/pit%209%20decision.pdf

This document describes the findings of fact, and conclusions of law, surrounding a contract dispute. Of course, it's a complex issue. Sure it contains some government contract law. Obviously both sides used every legal trick they could dredge up. It's the first time I've seen my favorite legal term used in a case; (promissory estoppel)

I suggest you glance through this document. 

(you can probably skip all the technical talk and jump to about section 178 where the contract was definitized.)

The next few lines discuss the nature of the contract as being "turnkey" instead of "specification" project. Up to about section 198 it shows that the buyer did a good job of not altering the risk profile of the contract. (that is the contractor remained primarily at risk for failure to perform) 

Section 202 summarizes a key point about unilateral contract changes.

Section203-206 describes boilerplate contract language requiring a contractor to keep working even if they have submitted a claim. Section 207 is a key principle against the contractor. Then things degenerate a lotů

Skip ahead to the Cure Notice at section 420- 426. The contractor screws up big time by failing to respond adequately to the cure notice.

On about page 76, the termination elements are reviewed.

Section 128 discusses the promissory estoppel argument by the contractor.

Important to note.... the Buyer prevailed because he understood and mitigated the potential legal issues.

Now a few question for purchasing people:

Aren't interested? Did you think your career was going |o plateau with the purchase of office supplies or are you serious about advancing in the field of contracting?

For those of us who want to continue to advance, cases like this can be valuable lessons. Here are some suggestions for using them to advantage:


1- Round up a small group of colleagues.
2- Use cases like this as a discussion tool.
3- Take a few pages each time you get together and discuss the findings, conclusions and legal terms.
4- Reach an agreement on what they mean - if necessary have each person pick a term, do some research and report back.
5- Discuss; "If I was the contracting officer what would I have done?" "Could I have some of the problems from taking so long to resolve?" "Could I have done a better job of administering the contract?"

BTW: Promissory Estoppel; (here is one non-legal onion about it - I'm sure your legal staff will do a much better job of explaining it) We have a contract that relies on exchange of a promise instead of consideration. I told Bob, if he gets that contract to paint a house, I will supply all of the paint at $10.00/gal. Relying on my promise, Bob bids on the house contract and wins. Do I have a contract obligation to supply paint at 10.00/gal?  Even though we didn't exchange consideration, Bob relied on my promise. Under the principle of promissory estoppel, the court may decide we did have a contract even though no money changed hands.

Mt


Read more articles about negotiation and creative contract solutions in the Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm


 

MLTWEB is assembled and maintained by Michael L. Taylor, C.P.M. 
Materials and articles prepared by Mike may be shared for purchasing education provided that this source is cited and no fee is charged. The rights for any other use are withheld.
Copyright;  Michael L. Taylor, C.P.M.
Last Updated: 11/26/2016