WAIVER OF CONTRACT DUE DATE

A recent Armed Services Board of Contract Appeals (ASBCA) opinion by Judge Craig Clarke reminds us of the rule in DeVito v. United States, 413 F.2d 1147 (Ct. Cl. 1969) that failure of the government to terminate within a reasonable time and reliance by the contractor results in waiver of default.

We also are reminded of FAR 49.402-3 which states:

[I]f the Government has taken any action that might be construed as a waiver of the contract delivery or performance date, the contracting officer shall send a notice to the contractor setting a new date for the contractor to make delivery or complete performance.

Judge Clarke begins his decision with the axiom that the government bears the burden of proof in a termination for default case.  He then concludes that a series of communications between the government and the contractor was confusing, contradictory and consistently encouraged the contractor to continue performance. At the same time, the government failed to establish a new delivery date after the old one had expired.  The contractor, although resistant, never manifested an unequivocal and definite intent not to continue performance and therefore did not anticipatorily repudiate the contract. (Repudiation requires evidence of unequivocal intention not to proceed.)

Judge Clarke went on to say the government was in control of the situation but failed to act to protect its right to terminate for default.  The fact that the government failed to reestablish a delivery date, waited 21 months to terminate while at the same time encouraging performance leads to the inevitable conclusion that the government waived its delivery date and its right to terminate for default. The contractor remained sufficiently "engaged" to minimally establish detrimental reliance on the governments behavior.

The lesson:  Heed FAR 49.402-3.  If the governments actions could even be construed as a waiver of the delivery or performance date, the contracting officer shall establish a new date.

http://www.pubklaw.com/rd/boards/asbca57667.pdf

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