RESPONDENT’S MOTION FOR PARTIAL SUMMARY RELIEF GRANTED;

RESPONDENT’S MOTION FOR PARTIAL SUMMARY RELIEF GRANTED;

APPELLANT’S MOTION FOR PARTIAL SUMMARY RELIEF DENIED:

October 3, 2007

CBCA 440

INVERSA, S.A.,

Appellant,

v.

DEPARTMENT OF STATE,

Respondent.

Jason A. Levine and Ty J. Cottrill of McDermott Will & Emery LLP, Washington, DC,

counsel for Appellant.

Luisa M. Alvarez and Thomas D. Dinackus, Office of the Legal Advisor, Buildings

and Acquisitions, Department of State, Rosslyn, VA, counsel for Respondent.

Before Board Judges BORWICK, DeGRAFF, and GOODMAN.

BORWICK, Board Judge.

Background

This appeal involves two separate claims by appellant, Inversa, S.A., against

respondent, Department of State. The first--the Cerro Corona claim--is for breach of a

purported lease, evidenced by a letter of intent, for United States Embassy employee housing

in the contemplated, but not built, Cerro Corona project in or near Panama City, Panama. The

second--the Torre Miramar claim--is for alleged breach of respondent’s lease 1030-040003

of office space for portions of the Torre Miramar building in Panama City, Panama. By

decision of December 7, 2005, the contracting officer denied both claims.

CBCA 440

2

An appeal was originally docketed at the General Services Board of Contract Appeals

(GSBCA) as GSBCA 16837-ST. On January 6, 2007, pursuant to section 847 of the

National Defense Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163, 119 Stat

3136, 3393 (2006), the GSBCA was terminated and its cases, personnel, and other resources

were transferred to the newly-established Civilian Board of Contract Appeals (CBCA). The

appeal was re-docketed as CBCA 440.

Respondent has submitted a motion for partial summary relief on the Cerro Corona

claim, which appellant opposes because it contends there exist genuine issues of material fact

making summary relief inappropriate. Earlier, respondent had submitted a motion to dismiss

the Cerro Corona claim for lack of jurisdiction, or alternatively for summary relief, which

the GSBCA denied because of the existence of genuine issues of material fact. Inversa, S.A.

v. Department of State, GSBCA 16837-ST, 06-2 BCA ¶ 33,411. That decision continues in

effect in this case. See National Defense Authorization Act for Fiscal Year 2006 § 847(c)(2)

(B).1 Having taken the depositions of the Government official and appellant’s representative

who signed the letter of intent, respondent has submitted a second dispositive motion on that

claim. Appellant opposes respondent’s motion for partial summary relief on the basis that

there remain disputed issues of material fact.

Appellant has also submitted a motion for partial summary relief, but on the Torre

Miramar claim, which respondent opposes for the same reason that appellant opposes

respondent’s motion--the existence of genuine issues of material fact.

We grant respondent’s motion for partial summary relief on the Cerro Corona claim

and dismiss that claim for lack of jurisdiction. Undisputed facts establish that the letter of

intent is not a cognizable procurement contract under the Contract Disputes Act (CDA), 41

1

Section 847(c)(2)(B) provides:

In the case of any such proceedings pending before an agency board of

contract appeals other than the Armed Services Board of Contract Appeals or

the board of contract appeals of the Tennessee Valley Authority, the

proceedings shall be continued by the Civilian Board of Contract Appeals, and

orders which were issued in any such proceeding by the agency board shall

continue in effect until modified, terminated, superseded, or revoked by the

Civilian Board of Contract Appeals, by a court of competent jurisdiction, or

by operation of law.

CBCA 440

3

U.S.C.A. §§ 601-613 (2007). The same is true for a subsequent settlement agreement. We

deny appellant’s motion for partial summary relief on the Torre Miramar claim because there

exist genuine issues of material fact.

The Cerro Corona claim

Appellant’s Cerro Corona claim is based in large part on a letter of intent signed by

Embassy official John Ivie. Appeal File, Exhibit 5(b).2 Appellant claims damages of

$33,500,000 for respondent’s “failing to honor [respondent’s] commitment to give

reasonable and serious consideration to the [Cerro Corona] project.” Complaint, ¶ III.F.

In its motion for partial summary relief, respondent argues, as it did previously, that

respondent did not enter into a lease for embassy housing with appellant, and that the letter

of intent was not a contract for the procurement of goods and services as required by the

CDA. Respondent argues there was no offer and acceptance of goods and services, but

rather, a generalized statement of future intent. Respondent’s Memorandum in Support of

Motion for Partial Summary Relief (Respondent’s Memorandum) at 9-12. Respondent

argues that the letter of intent does not contain all the necessary terms and conditions to be

considered an actual lease and that the letter of intent was only conditional upon the

satisfaction of uncertain future conditions. Respondent’s Memorandum at 15-21.

Respondent also repeats its earlier argument that if the Board should find that the

letter of intent was a procurement contract, it would have been invalid as violative of

statutory prohibitions limiting authority of agency embassy officials from entering into shortterm leases. Respondent’s Memorandum at 37-51.

Appellant does not dispute the following uncontested facts put forth by respondent in

its motion for partial summary relief.

The letter of intent, dated September 23, 1987, provided in pertinent part:

Whereas, the U.S. Government has a legal requirement to provide safe, secure

and comfortable quarters for all U.S. Mission employees and families which

2

Appellant also maintained that respondent breached a subsequent settlement

agreement, but the GSBCA held that the settlement agreement could not be the basis for the

CDA claim, because standing alone, the agreement did not involve a procurement contract,

that is, a contract for the acquisition of goods or services. Inversa, S.A., 06-2 BCA at

165,657. That holding remains the law of the case.

CBCA 440

adhere to current residential security requirements as set forth by the

Department of State Bureau for Diplomatic Security and the fire, life safety

specifications and floor space guidelines of the Department of State Office of

Foreign Buildings Operations [FBO]; and,

Whereas, there are currently no apartment buildings or facilities in the greater

Panama City area known to us which conform to the aforementioned

Department of State security, fire, life safety specifications of the FBO

guidelines; and

Whereas, you have indicated your intention to build an apartment complex in

Altos del La Corona, Betania, consisting of approximately 200 units with

recreational facilities consisting of a swimming pool, tennis courts, children’s

playground and other appropriate appurtenances; and

Whereas, you have expressed the willingness that the buildings should be

designed and constructed to conform to these Department of State Buildings

standards;

The Embassy of the United States in Panama confirms its intention that the

U.S. Diplomatic Mission to Panama will lease and occupy apartments in these

premises immediately upon completion, provided there are no other adequate

apartments available at the time the lease is executed and signed. The

Embassy of the United States is willing to enter into a lease for the requisite

number of U.S. Government-leased residential units when approved

construction drawings and the building permit issued by appropriate municipal

authorities are presented to the Embassy’s Contracting Officer. The lease will

be effective upon execution with rental payments commencing on a unit by

unit basis as each is completed, inspected and declared ready for occupancy.

The U.S. Mission currently leases 125 apartments under its Government-leased

program and this number is not expected to decrease before your project would

be under lease and occupied. The initial period of the lease will be 9 years and

11 months. After the initial lease period of 9 years and 11 months the

Embassy will continue to lease and assign occupants to these apartments

exclusively until such time as other apartments which meet the aforementioned

Department of State Specifications, should become available, at which point

the exclusivity factor would have to be weighed against competitive pricing.

....

4

CBCA 440

5

This letter of intent carries the full weight of a contractual agreement entered

into and adhered to [by] the Embassy of the United States in Panama.

Respondent’s Statement of Uncontested Facts ¶ 1; Appeal File, Exhibit 5(b). The letter of

intent was signed by John Ivie, an employee of the United States Department of State, and

Juan Arias, for appellant. Respondent’s Statement of Uncontested Facts ¶ 1. The project

described in the letter of intent was not constructed and United States Embassy personnel did

not occupy any residential property at the location described in the letter of intent.

Respondent’s Statement of Uncontested Facts ¶ 2; Appeal File, Exhibit 60 at 15-16;

Respondent’s Motion for Partial Summary Relief, Exhibit 1 at 7.

When Mr. Ivie executed the letter of intent, he was serving as the administrative

counselor at the United States Embassy in Panama. Respondent’s Statement of Uncontested

Facts ¶ 4; Appeal File, Exhibits 1, 5(b), 6. Mr. Ivie was never the Secretary of State, the

Deputy Undersecretary of State for Administration, or the Director of the Office of Foreign

Buildings. Respondent’s Statement of Uncontested Facts ¶ 5; Appeal File, Exhibits 356-58.

Mr. Ivie is a former employee of the United States Government. Respondent’s Statement of

Uncontested Facts ¶ 3; Respondent’s Motion for Partial Summary Relief, Exhibit 2.

At his deposition, Mr. Ivie did not recall seeking authorization to execute the letter of

intent, nor did he recall whether the respondent’s Office of Foreign Buildings ratified the

letter of intent. Respondent’s Statement of Uncontested Facts ¶¶ 6-7; Respondent’s Motion

for Partial Summary Relief, Exhibits 3-4. He did not remember sending the letter of intent

to anyone in Washington, D.C., for approval. Respondent’s Statement of Uncontested Facts

¶ 8; Respondent’s Motion for Partial Summary Relief, Exhibit 4.

The parties entered into a settlement stipulation on August 17, 1990, to resolve all

claims and disputes between them. Appeal File, Exhibit 11. As to the Cerro Corona project,

the settlement provided:

It is expressly acknowledged that the United States has no present liability for

or interest in the Cerro Corona Project, and that no person will be misled by

either signatory to this Agreement that such present or potential interest exists.

Notwithstanding the foregoing, because it is within the realm of possibility that

in the future, the Department of State may have a need for housing which

could be met by one or more units which might be constructed at the site of the

Cerro Corona project, the United States will designate a representative to

attend a presentation at which the Owners or their representatives can present

information about the Cerro Corona site and plans as well as any other project

data that they may care to offer.

CBCA 440

6

Respondent’s Statement of Uncontested Facts ¶ 11; Appeal File, Exhibit 11.

The Torre Miramar claim

Appellant claims that respondent breached its obligation to restore premises it

occupied under lease 1030-040003 to its original condition. In its motion for partial

summary relief, appellant argues that respondent does not dispute that it failed to restore the

premises to its original condition as defined in the lease and that respondent owes appellant

$1,016,528.49 as the agreed-upon cost of restoration. Appellant also maintains that because

respondent failed to restore the premises, under article 27(b) of the lease, it is deemed to be

a holdover tenant and liable for two years rent for the ground floor, floors one through five,

six through seven, and fourteen and fifteen. Appellant’s Motion for Partial Summary Relief

at 2-3; Appellant’s Reply Brief at 16-17.

In its opposition to appellant’s motion, respondent agrees that it did not restore the

building to its original condition. However, respondent presents evidence that raises genuine

issues of material fact. Those genuine issues are whether: (1) respondent left the premises

in good tenantable condition; (2) the original condition was defined by attached drawings to

the lease; (3) respondent was ready, willing, and able to restore the premises it occupied; (4)

appellant refused to allow respondent to restore the premises by imposing restoration

conditions upon respondent that were not part of the lease; (5) appellant represented to

respondent that it would restore the occupied premises to its original condition and submit

a claim for restoration costs, but then failed itself to restore the building; and (6) the so-called

restoration amount to which respondent supposedly agreed was only a settlement amount

with attached conditions that appellant rejected. Respondent’s Opposition Memorandum at

6-8, 9-13, 14-16, 17-20.

Appellant itself, in replying to the prevention defense raised in respondent’s

opposition memorandum, raises genuine issues of fact as to whether respondent’s delays in

commencing restoration planning, instead of the restoration conditions imposed by appellant,

prevented respondent from restoring the premises. Appellant’s Reply Memorandum at 9-13.

Discussion

Concerning motions for summary relief, we held recently:

Summary relief is appropriate when the moving party is entitled to judgment

as a matter of law, based on undisputed material facts. The moving party bears

the burden of demonstrating the absence of genuine issues of material fact. All

justifiable inferences must be drawn in favor of the nonmovant. Celotex Corp.

CBCA 440

7

v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242

(1986). A fact is considered to be material if it will affect the Board’s

decision, and an issue is genuine if enough evidence exists such that the fact

could reasonably be decided in favor of the nonmovant after a hearing.

Fred M. Lyda v. General Services Administration, CBCA 493 [07-2 BCA

¶ 33,631]; John A. Glasure v. General Services Administration, GSBCA

16046, 03-2 BCA ¶ 32,284.

George P. Gobble v. General Services Administration, CBCA 528 (Sept. 11, 2007).

Cerro Corona claim

The Board has jurisdiction under the CDA over procurement contracts. 41 U.S.C.

§ 602. The United States Court of Appeals for the Federal Circuit has noted that a

“procurement” includes the “acquisition by . . . lease . . . of property. . . for the direct benefit

or use of the Federal Government,” i.e., “an exchange of property for money.” Wesleyan Co.

v. Harvey, 454 F.3d 1375, 1378 (Fed. Cir. 2006) (purchase orders are procurement contracts,

while unsolicited proposals and bailments are donative, not contractual). In the GSBCA’s

earlier decision in this case, the board held that appellant would have to establish that the

letter of intent was a valid CDA procurement contract:

It is hornbook law that the existence of a Government contract depends upon

an unconditional offer by a purported contractor and an unconditional

acceptance by the Government. Russell Corp. v. United States, 537 F.2d 474,

481-82 (Ct. Cl. 1976), cert., denied, 429 U.S. 1073 (1977).

Inversa, 06-2 BCA at 165,657. An offer must be a promise, and a mere expression of

intention or a general willingness to do something on the happening of a particular event or

in return for something to be received does not amount to an offer. Estate of Bogley v.

United States, 514 F.2d 1027, 1032-37 (Ct. Cl. 1975).

Consequently, an informal agreement, such as a letter of intent, may be considered an

enforceable contract only if the agreement contains the essential terms and conditions, the

agreement is made or approved by an authorized official, and the execution of a formal

agreement is regarded by all parties as a technicality. Penn-Ohio Steel Corp. v. United

States, 354 F.2d 254, 266-67 (Ct. Cl. 1965).

In Essen Mall Properties v. United States, 21 Cl. Ct. 430 (1990), the Government

issued a letter of intent to the plaintiff which stated the Government’s intention to lease space

the plaintiff had offered, conditioned upon the mutual agreement concerning several items,

CBCA 440

8

including “final approval of [plaintiff’s] offer, cost of improvements, . . . and mutual

agreement concerning drawings and construction.” Id. at 433. The Court granted the

Government’s motion for partial summary judgment on whether the letter of intent

constituted a binding contract, holding:

A mere statement of intention, however, is not enough to manifest an

unambiguous acceptance of an offer, especially when coupled with a condition

precedent. The Court of Claims has stated that “the obligation of the

government, if it is to be held liable, must be in the form of an undertaking, not

as a mere prediction or statement of opinion or intention.” Cutler-Hammer,

Inc. v. United States, 194 Ct. Cl. 788, 794, 441 F.2d 1179, 1182 (1971). “‘A

notice of acceptance that is in any respect conditional or that reserves to the

party giving it a power of withdrawal is not an operative notice of

acceptance.’” Uniq Computer Corp. v. United States, 20 Cl. Ct. 222, 231

(1990) (emphasis added by Uniq court) (quoting 1A A. Corbin, Corbin on

Contracts, A Comprehensive Treatise on the Working Rules of Contract Law

§ 264 (1963)). The written correspondence from the [Government] to plaintiff

clearly reflects the fact that no meeting of the minds ever took place, because

the [Government’s] acceptance of plaintiff’s offer to lease space in Essen Mall

was contingent upon the [Government’s] receipt of a bid for tenant

improvements that was acceptable in terms of cost.

Essen Mall Properties, 21 Cl. Ct. at 440.

In this case, the letter of intent merely states appellant’s intention to construct

residences, which is not a binding offer. Bogley. The letter of intent states that respondent

“will lease and occupy apartments in these premises immediately upon completion, provided

there are no other adequate apartments available at the time the lease is executed and signed.”

The letter of intent also states that “the Embassy of the United States is willing to enter into

a lease for the requisite number of U.S. Government-leased residential units when approved

construction drawings and the building permit issued by appropriate municipal authorities

are presented to the Embassy’s Contracting Officer.” Respondent did not agree in the letter

of intent to be immediately bound to lease residences. The stated willingness to lease was

based upon the fulfillment of future conditions--that there is no adequate housing when the

lease is executed and signed, and only when approved construction drawings and the building

permit issued by appropriate municipal authorities are presented to the Embassy’s contracting

officer. Respondent’s conditional willingness to lease space in the future is not a binding

acceptance. Essen Mall Properties.

CBCA 440

9

Furthermore, the letter of intent lacked definite terms and conditions to be properly

considered a fully formed contract. Without sufficiently definite terms, there can be no

contract. Modern Systems Technology Corp. v. United States, 979 F.2d 200, 202 (Fed. Cir.

1992) (basic pricing agreement lacked sufficient terms to be considered a contract). Here,

the letter of intent did not state the number of units to be leased. At most it predicted a

minimum number of units based upon the housing needs of embassy employees as of

September 23, 1987. Nor did the letter of intent state the maximum number of apartments

to be leased, or the configuration, layouts, amenities, or occupancy dates of the apartments

under the purported lease. The letter of intent failed to include provision for utilities and

janitorial services, parking, security of common areas, maintenance, or improvements or

repairs.

In summary, the letter of intent merely records the willingness of the parties to enter

into a lease or leases at a future, but indeterminate, date, for an unknown number of

apartments of unknown design, at undefined rental rates, with undefined rental periods, when

the project was built, if ever. Additionally, there were no binding provisions for amenities,

cleaning, or services stated in the letter of intent. The letter of intent is simply too empty a

vessel from which to conjure up a binding offer and acceptance which would form a

procurement contract cognizable under the CDA.

Appellant opposes respondent’s motion on this ground by stating that there exist

genuine issues of material fact.3 Appellant says that Mr. Ivie was instructed by cable from

respondent early in 1987 and that respondent was required to lease or otherwise occupy

housing that met the residential handbook standards. Appellant’s Statement of Genuine

Issues ¶ 2.4 Appellant also notes Mr. Ivie’s statements that his intent in signing the letter of

intent was to provide appellant with the ability to obtain financing and to make a record that

3

In replying to respondent’s motion, appellant mislabels the Statement of Genuine

Issues required by Board Rule 8(g)(3) as a “Statement of Material Contested Facts.”

Additionally, appellant failed to follow the required format in submitting what should have

been a Statement of Genuine Issues. Appellant neglected to identify by reference to

respondent’s Statement of Uncontested Facts those facts it claimed were genuine issues

which needed to be litigated. Nevertheless, since its statement is usable, we give appellant

the benefit of the doubt and accept its submission as a proper Statement of Genuine Issues.

We use the proper label, however, when referring to individual paragraphs of its “Statement

of Material Contested Facts.”

4

Appellant mis-cites to page 40 of the Ivie Deposition. The citation should be to

pages 49-50 of that deposition. See Appellant’s Opposition, Exhibit 2; Deposition of Mr.

John Ivie (May 10, 2007).

CBCA 440

10

when the project was completed and ready for occupancy respondent would be compelled

to lease the units because only those units would meet security requirements. Appellant’s

Statement of Genuine Issues ¶ 3. These facts, if proven, are not material to our determination

that the letter of intent does not incorporate either a binding offer by appellant or binding

acceptance by respondent for the procurement of residential leases. The fact that all

residences for embassy employees, whether leased or otherwise occupied, were required to

meet Department of State security standards is not material to the question of whether the

letter of intent memorialized a procurement contract. For the same reason, Mr. Ivie’s

intention to bind the agency in the future if the project ever was built is not material to

whether a binding contract for the procurement of goods or services came into existence

when he executed the letter of intent. At best, giving appellant the benefit of every doubt,

those statements establish that the letter of intent was a commitment to consider a

procurement contract in the future, upon the happening of certain conditions.

Even if, by virtue of fertile imagination, the letter of intent was regarded as a

procurement contract, it would have been illegal as violating statutory authority. Mr. Ivie

lacked authority to execute a short-term lease on respondent’s behalf. Statute at the time the

letter of intent was executed provided:

(a) Authority of Secretary of State

The Secretary of State is empowered to acquire by purchase or construction in

the manner hereinafter provided, within the limits of appropriations made to

carry out this chapter, by exchange, in whole or in part, of any building or

grounds of the United States in foreign countries and under the jurisdiction and

control of the Secretary of State, sites and buildings in foreign capitals and in

other foreign cities, and to alter, repair, and furnish such buildings for the use

of the diplomatic and consular establishments of the United States, or for the

purpose of consolidating within one or more buildings, the embassies, legation,

consulates, and other agencies of the United States Government there

maintained. The space in such buildings shall be allotted by the Secretary of

State among the several agencies of the United States Government.

22. U.S.C. § 292 (1984). This authority also included leases. Id. § 297.

Statute also contained a limitation on subordinate officials’ authority to enter into

short-term leases:

(a) Leases

CBCA 440

11

Notwithstanding the provisions of this chapter or any other Act, no lease or

other rental arrangement for a period of less than ten years, and requiring an

annual payment in excess of $25,000 5 shall be entered into by the Secretary of

State for the purpose of renting or leasing offices, buildings, grounds, or living

quarters for the use of the Foreign Service abroad, unless such lease or other

rental arrangement is approved by the Secretary. The Secretary may delegate

his authority under this section only to the Deputy Under Secretary of State for

Administration or to the Director of the Office of Foreign Buildings. The

Secretary shall keep the Congress fully and currently informed with respect to

leases or other rental arrangements approved under this section.

22 U.S.C. § 301. It is undisputed that Mr. Ivie, when he executed the letter of intent, was not

the Secretary of State, the Deputy Under Secretary of State for Administration, or the

Director of the Office of Foreign Buildings, and thus statutorily authorized to execute shortterm leases.

When a contracting officer enters into a contract in violation of statute, the

Government is not estopped from denying the validity of the contract:

It is a well recognized principle of procurement law that the contracting

officer, as agent of the executive department, has only that authority actually

conferred upon him by statute or regulation. If, by ignoring statutory and

regulatory requirements, he exceeds his actual authority, the Government is not

estopped to deny the limitations on his authority, even though the private

contractor may have relied on the contracting officer’s apparent authority to

his detriment, for the contractor is charged with notice of all statutory and

regulatory limitations.

Prestex Inc. v. United States, 320 F.2d 367, 371 (Ct. Cl. 1963) (footnotes omitted); see also

City of Alexandria v. United States, 737 F.2d 1022 (Fed. Cir. 1984) (Government not

estopped from denying existence of contract for sale of land which would violate statutory

“report and wait” provision); Maykat Enterprises, N.V., GSBCA 7346, 84-3 BCA ¶ 17,510

(Government bound by only those agreements of its agents that are within the scope of their

actual authority and not contrary to statutory and regulatory requirements).

5

In 1991, the statutory dollar limit was increased from $25,000 to $50,000. Pub. L.

No. 102-138, 105 Stat. 647 (1991). We refer to the dollar limit in effect when the letter of

intent was signed.

CBCA 440

12

In a case similar to the instant appeal, the United States Court of Federal Claims held

that a purported short-term lease for housing made by the Deputy Chief of Mission of the

United States Embassy in the Bahamas violated the statutory authorities quoted above and

dismissed the breach of lease claim. Sam Gray Enterprises, Inc. v. United States, 43 Fed.

Cl. 596 (1999), aff’d, 250 F.3d 755 (Fed. Cir. 2000) (table).

Appellant argues that unidentified officials in Washington, and certain named

individuals from the Embassy in Panama City, participated in meetings with architects to

review architectural plans for the Cerro Corona project. Appellant’s Statement of Genuine

Issues ¶ 11.

Here, 22 U.S.C. § 301 provided authority to enter into short-term leases only to the

Secretary of State or, through the Secretary’s delegation, to the Deputy Under Secretary of

State for Administration or to the Director of the Office of Foreign Buildings. Appellant has

not persuaded us that a preliminary examination of architectural drawings represents a

ratification of an otherwise unauthorized lease. Further, appellant has not presented any

evidence, in opposition to respondent’s motion for partial summary relief, that the officials

statutorily authorized to enter into short-term leases participated in such an examination.

As the GSBCA earlier held, the subsequent settlement stipulation standing alone does

not provide CDA jurisdiction. The commitment the Government made in that agreement

regarding the Cerro Corona project was to attend within 120 days a presentation on the merits

of the project. Indeed, the stipulation confirmed the understanding of the parties that the

earlier letter of intent was not a binding contract because both parties recognized that the

Government had no present liability or interest in the project.

The Torre Miramar claim

With respect to the Torre Miramar claim, respondent has presented evidence that

establishes genuine issues as to whether respondent was willing and able to restore the leased

premises in accordance with the terms of the Torre Miramar lease, and whether appellant

hindered respondent’s restoration efforts. These issues are relevant to respondent’s defense

of prevention. That defense, which respondent maintains is also found in Panamanian law,

holds that the nonperformance of one party to the contract is excused when the other party

hinders that performance. See Precision Pine & Timber, Inc. v. United States, 75 Fed. Cl.

CBCA 440

13

80, 92 (2006); 13 Richard A Lord, Williston on Contracts § 39:6 (4th Ed. 2000); Panama

Civil Code Art. 985.6

In its reply memorandum to respondent’s opposition, appellant urges the Board to

summarily dismiss respondent’s invocation of the prevention doctrine, by arguing that the

prevention defense “is extra-contractual and is not based on any provision in the lease or the

settlement agreement nor does it require any interpretation or construction of terms in either

document.” Appellant’s Reply Memorandum at 3. Appellant is mistaken in its view that the

prevention defense is extra-contractual, since the defense is based on the other party’s

obligation not to hinder performance. It is an implied obligation of every party to a

government contract not to hinder the other party’s performance. Essex Electro Engineers,

Inc. v. Danzig, 224 F.3d 1283, 1291 (Fed. Cir. 2000).

Appellant, quoting Corbin on Contracts, also argues that the prevention defense does

not apply when the alleged hindrance was necessary to carry on a party’s other business,

Appellant’s Reply Memorandum at 7, implying that the hindrances cited by respondent were

necessary for appellant’s business. Appellant’s quotation is incomplete. Corbin does state

that the prevention doctrine would not apply in that circumstance, but in cases where “both

parties contemplated the possibility of such prevention . . . when the contract was made.”

9 Arthur L. Corbin, Corbin on Contracts § 947. There may be disputed issues of fact as to

whether the parties, when the lease was executed, contemplated the restoration conditions

subsequently imposed by appellant when the time came for restoration. However, the Board

will not summarily deny respondent the opportunity to present that defense.

Additionally there are issues as to the amount of the restoration costs due, if any, and

whether respondent is to be considered a holdover tenant if it left the Torre Miramar lease

premises in habitable condition. For the Torre Miramar claim, the record will be fully

developed at the scheduled hearing on the merits.

6

Article 22B of the lease provides that the lease is to be construed and interpreted in

accordance with the laws of the Republic of Panama. Appeal File, Exhibit 12. Appellant’s

expert in Panamanian law states that there is no explicit statement of the doctrine of

prevention in the Panama Civil Code, but that the under Panama Civil Code article 1109 the

concept of good faith binds each party to perform its own obligation and to allow the other

party to perform its own. Appellant’s Reply Memorandum, Exhibit 2 (Declaration of Eloy

Alfaro, Esq. (Sept. 14, 2007)) ¶ II5.

CBCA 440

14

Decision

RESPONDENT’S MOTION FOR PARTIAL SUMMARY RELIEF on the Cerro

Corona claim is GRANTED. The Cerro Corona claim is dismissed for lack of jurisdiction.

APPELLANT’S MOTION FOR PARTIAL SUMMARY RELIEF is DENIED.

____________________________

ANTHONY S. BORWICK

Board Judge

We concur:

______________________________

MARTHA H. DeGRAFF

Board Judge

_____________________________

ALLAN H. GOODMAN

Board Judge