Subcontractor Claimed Its Communications with Government Created an Implied Contract. Were Those Communications Just Coy Flirtation or a Real Commitment?

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After terminating a contract with a primce contractor, the government spoke with a subcontractor on the project about purchasing the materials and equipment the subcontractor had provided. The subcontractor alleged that these communications resulted in an implied-in-fact contract. Not so, said the ASBCA. While the government had expressed interest in purchasing the materials and talked about a possible purchase, it never came out and formally offered to purchase. Any implied contract failed for lack of offer and acceptance.

Appeal of ASCT Group, Inc., ASBCA 61955

Background

Advanced Constructors International (ACI) had a contract with the Army Corps of Engineers to build a police training center in Afghanistan. ACI subcontracted with ASCT Group for some the project.

Shortly into performance, ASCT and other subcontractors notified the Corps that ACI was not paying them. The subcontractors stopped working.. The Corps terminated ACI’s contract for default due to ACI’s failure to pay the subcontractors.

Following the termination, the Corps held a meeting with subcontractors to discuss the future of the project. The parties disputed what was said at the meeting. ASCT said the government promised to purchase the equipment and materials that ASCT had furnished for the project. The government claimed it had merely talked about purchasing the materials as a possibility but that it never formally agreed to go through with the purchase.

Over the next few months, the Corps continued to communicate with ASCT, purchasing the materials from ASCT still a possibility. Meanwhile, ACI and the Corps settled the termination. They agreed to a no-cost in termination for conveniences with ACI receiving no compensation for the termination. Instad, the parties agreed the Corps would hold the termination settlement in trust and use it to pay subcontractors.

After the settlement with ACI, the Corps decided it would not seek a new prime contractor for the project. The Corps canceled the solicitation and the project ended.

ASCT sued ACI in Delaware state court seeking the amounts still owed under the subcontract. The parties settled, and ACI paid ASCT $430,000. But the settlement included a carve-out for any possible claim that ASCT had against the government in connection with the work on the police facility in Afghanistan.

ASCT made a last ditch effort to sell the Corps the materials from the abandoned construction project. The Corps wasn’t interested. ASCT submitted a claim, alleging the Corps breached an implied-in-fact contract to purchase the materials. The Corps granted a small portion of the claim, reasoning that an agreement may be interpreted to exist. ASCT appealed to the ASBCA.

Legal Analysis

Elements of Implied Contract

ASCT argued it had an implied-in-fact contract by which the government agreed to purchase its equipment and materials. A party claiming an implied contract must establish four elements:(1) mutuality of intent, (2) consideration, (3) unambiguous offer and acceptance, and (4) actual authority on the part of the government.

No Offer and Acceptance

The board found that ASCT could not establish the offer and acceptance element. The Corps did not make an offer at the meeting with  subcontractors. The Corps merely noted that purchasing the supplies was a possibility but it never actually offered to buy the materials from ASCT. The communications following the meeting were also too equivocal to constitute an offer. The Corps expressed interest in purchasing the materials, but the Corps’ statements were conditional.

ASCT Didn’t Accept By Performance

ASCT contended that it accepted the Corps’ offer by performance by leaving materials at the work site. But the board reasoned there was no acceptance by performance because the Corps never made an offer. Rather, it appeared that ASCT offered to sell the materials, The government, however, never accepted that offer.

ASCT is represented by David J. Murchow of Murchow Law. The government is represented by Michael P. Goodman, James D. Stephens, and Rebecca Bockmann of the Army Corps of Engineers.

ASBCA - ASCT Group