stating that constructive resort to a termination clause “occurs in situations in which the government has stopped or curtailed a contractor’s performance for reasons that turn out to be questionable or invalid”
How later courts described this case
- stating that constructive resort to a termination clause “occurs in situations in which the government has stopped or curtailed a contractor’s performance for reasons that turn out to be questionable or invalid”
- observing that while “parties to a contract may freely agree to various forms of risk allocation, . . . it is just as clear that parties may not agree that one or both may walk away from all obligations without rendering the contract unenforceable” as illusory
- stating that in a requirements contract, the “question is whether it is implicit in these [contract] terms ... that the [buyer] promised to gives all of its work” to plaintiff
- stating that “the government, unlike private parties, is assumed always to act in good faith, subject only to an extremely difficult showing by the plaintiff to the contrary”
Written by the judges who cited it.
Distinguished
Distinguished by Vila & Son Landscaping Corp. v. Posen Construction, Inc., 2012 Fla. App. LEXIS 15741 (2012)
Not only has the court of claims disavowed much of Torncello, the case is factually inapposite.
The opinion
DAVIS, Judge
concurring in the result:
Although I fully concur with the end-result of Judge Bennett’s opinion — that a convenience termination clause could not be properly used to end this requirements contract where the Government knew, at the time it entered into the agreement, that it could obtain a better price from another person 1 — I cannot join in much of the opinion which seems to me unnecessarily broad (reaching out toward different cases not now before us) and, on some points, incorrect. I do agree that (a) the contract was of the requirements type, (b) there is, for this case, no statute or regulation absolving this contract from the normal requirement of being supported by consideration, (c) if the convenience-termination clause is used, in this instance of preexisting knowledge, as the defendant would do, then this *50 requirements contract would be without proper consideration, (d) accordingly, the contract should be construed otherwise in order to sustain it as valid, and (e) Colonial Metals Co. v. United States, 204 Ct. Cl. 320 , 494 F.2d 1355 (1974), should be overruled. That is sufficient to reach the correct result, and nothing else need be said in this case.
There is, however, much else in Judge Bennett’s opinion — unnecessary discussion which I cannot accept. For one thing, I do not agree at all with the suggestion that the scope of the convenience-termination clause is narrower today than during World War II. In my view, the type of emergency procurement conditions experienced in World War II can be, and not infrequently are, present in the postwar period — and the convenience-termination clause was deliberately continued into the present era for that precise reason.
Second, I do not agree that "abuse of discretion” is an inadequate or unsatisfactory general standard for gauging the contracting officer’s use of the termination clause. The clause in the contract before us calls for use of the termination device only "when it is in the best interest of the Government.” That is comparable to the "public interest” standard often used to control administrative rulings in the regulatory field, and is likewise parallel to the criterion by which several other procurement decisions are measured. 2 In the present instance, I would have no difficulty in holding that it was an abuse of discretion to use the clause to end the contract because lower prices could be obtained elsewhere when the contracting officer already knew that very fact before he consummated the contract with plaintiff.
Third, I do not agree that "bad faith” is as narrow as Judge Bennett says it is. In Kalvar, supra — the case he cites — this court said, without in any way seeking to modify our prior holdings: "* * * many of our prior decisions seem implicitly to accept the equivalence of bad faith, abuse of discretion, and gross error.” 211 Ct. Cl. at 198, note 1, 543 *51 F.2d at 1301, note 1. Kalvar expressly held that that contractor had failed to show either bad faith or abuse of discretion {see footnote 2, supra) and the limited definition of bad faith quoted in the opinion gave merely one aspect of the concept of "bad faith.” Here, too, I would be ready to hold that a contracting officer acted in bad faith when he terminated a contract for convenience to get a better price of which he had full knowledge (and which was available) at the time when he deliberately entered into the contract with plaintiff.
Finally, I consider it wrong and a mistake to intimate, even provisionally or gratuitously, that the convenience termination clause cannot be utilized when a better price appears after the contract is made. As Judge Bennett recognizes, the prime purpose of the clause is to take account of changed conditions occurring after the agreement is consummated, and a better price appearing at that time appears to be such a change in significant conditions. Yet his opinion cites, with apparent acquiescence or approval, extra-judicial commentary suggesting that a post-contract change in the price situation should not be enough to trigger the convenience termination clause.
As I have already pointed out, all the portions of the opinion to which I object are unnecessary to the result. At very best they will prove troublesome in future cases which are not now before us.
This lower price is the only reason given for defendant’s refusing to order pest-control services from plaintiff.
In Kalvar Corp. v. United States, 211 a. Cl. 192, 197, 543 F.2d 1298, 1301 (1976), cert. denied, 434 U.S. 830 (1977), this court expressly asked the parties, in a convenience-termination case, to discuss "bad faith or a clear abuse of discretion,” and then found that that plaintiff had "failed to make a sufficient showing of bad faith or abuse of discretion by the Government.”