Many people think they have a valid government contract, but most of the litigation in the courts and the Contract Appeals Board revolves around whether the contract is valid. To prove that there is a contract with the government, the contractor must prove four essential elements:
- The mutuality of agreement.
- The offer and explicit acceptance.
- Consideration.
- The actual power to bind the United States Government representative.
See Carl. Federal Reserve. Bank, FSB v. the United States, 245 F.3d 1342, 1346 (Fed. Cir. 2001). In 1200 Sixth Street, LLC v. the United States, No. 12-388C (Fed. Cl. Feb. 14, 2013), the plaintiff (1200 Sixth) accused the government of breaching the contract to purchase real estate in Detroit, but the court found that the facts were insufficient to prove the existence of the contract, so there is no breach of contract.
The court or committee considers that a seemingly good contract is invalid for many reasons, including (but not limited to):
- You have only received a letter from the contracting officer stating that they “plan to grant” you. This is not a reward and should be seen as a good suggestion, not a contract.
- The award you receive includes the fund availability clause in FAR 52.232-18, which stipulates:
“The contract cannot be funded at this time. The government’s obligations under this contract depend on the availability of funds available for contractual purposes. The contractor is provided with the contract’s funding, and the contractor receives such availability notice and the contractor Before the written confirmation, the government will not bear any legal responsibility for any payment.”
Legally responsible for any payment?
If the government is not legally responsible for any payment, there is no contract.
- You will receive a letter from the contracting officer stating that your quotation is “approved in principle,” but specific issues need to be resolved.
- You have received an acceptance of your quotation signed by a contract expert, contract official representative, project manager, or another person who is not a contract official and is not authorized to sign the contract.
- 5. What you received is not the government’s explicit acceptance of your proposal.
1200 Sixth Street is an excellent example of an incorrect contract due to reasons other than express acceptance. The General Services Administration (“GSA”) hopes to create a new field office for the Federal Bureau of Investigation (“FBI”) in Detroit, Michigan, and begin negotiations with the 1200 management member, Mr. Danou, on a specific property.
After the preliminary meeting, the two parties signed the “Real Estate Option Agreement”, which stipulates that GSA can exercise the option regardless of whether GSA chooses the developer or not. Although GSA is not obligated to purchase the property before GSA exercises its option, the option agreement requires both parties to spend money on the project.
1200 The sixth believes that option exercise is imminent. The final burden of the property for sale is the removal of the antenna tower, which the FAA and state police hold under easement at the cost of $114,000. Soon after that, GSA agents contacted 1200 Sixth via email (as with most performance communications that expire under this option) and instructed them to “continue to contact the state government regarding the 90-day antenna removal notice.”
The GSA’s email also stated that “GSA intends to discuss the assignable options further the next day” and that it will “contact 1200 Sixth next week”. 1200 Sixth believed that the email constituted an exercise of the option and immediately proceeded to demolish the tower at the cost of $114,000. However, about 1.5 years later, when GSA could not obtain an acceptable developer (losing the only developer negotiating with it), GSA closed the transaction with 1200 Sixth Street.
1200 Sixth Street was sued, seeking damages of US$4.5 million in breach of contract losses and expenses.
The popular language controls
The court noted the popular language control of the contract and held that the email was far from expressly exercising the requirements contained in the option agreement. These requirements were:
- A non-cost transferable option, which means that if the option owner “chooses not to exercise the rights granted by this agreement, the prospect or receive simple interest, and within the time specified in this agreement If the purchase is completed in the same way, the option will be terminated without any further actions or obligations of either party.
- To exercise the right of choice following the terms and conditions, GSA must “certify or register on [1200 Sixth] by certification or registration, request for return receipt, prepaid postage, U.S. Postal Service, personal delivery, or recognized private overnight courier in writing. “]
The court stated that even if the above service requirements were ignored, GSA’s acceptance in the email was not “clear, accurate and unambiguous-any ambiguity would prevent the creation of the contract, citing Williston on Contracts Sec. 6:10 (2012) ).
The email never exercised the right of option or approved the purchase agreement but only instructed 1200 Sixth to contact the state government regarding removing the antenna. In addition, the email emphasized the continued existence of an option, saying, “We [GSA] will Meet internally to discuss the available options and remaining items. “
The court stated that “at best, the meaning of the email is ambiguous,” and there are not enough facts to prove the existence of the contract. Therefore, 1200 sixth is entirely unlucky.
Tip:
- Always make sure that there are no conditions for accepting your offer or exercising (getting) options. If you have any questions, please write to the contractor, but do not start work unless you have a contract, including signed contract documents.
- Always make sure that a contracted person signs your contract with appropriate authority (authorization letter).
- Make sure to accept your quotation is clear, accurate, and unambiguous to ensure that you have a valid contract.